STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF THE COMPTROLLER, )

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF SECURITIES, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4818

)

GUY STEWART, JR., Robert Parker, ) and MATTHEW V. RIGG, )

)

Respondents. )

)

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the hearing Officer designated by the Division of Administrative Hearings, in Miami, Florida, on January 2, 1991.

APPEARANCES

For Petitioner: Randall L. Rubin

Assistant General Counsel Office of Comptroller

401 Northwest 2nd Avenue, Suite 408-North Miami, Florida 33128

For Respondent: Guy Stewart, Esquire, pro se

Ferrel, Cardenes, Fertel Rodriguez & Mishael

Suite 1290, Miami Center

201 South Biscayne Boulevard Miami, Florida 33131-2305

STATEMENT OF THE ISSUES

The issue is whether Guy Stewart, as author of a private placement memorandum for an offering of preferred stock in an entity known as Hemisphere Capital Limited, should be disciplined through the imposition of a fine and an order to cease and desist from violations of the Florida Securities Code for failure to make a disclosure in the private placement memorandum which the department contends was necessary in order to make the memorandum not misleading to potential investors.

PRELIMINARY STATEMENT

The Department filed this proceeding against Respondents on May 18, 1990. All had been involved in at least one of two securities

offerings. The first offering was for limited partnership interests in an entity known as Lucayan Tropical Groves Partners, Ltd., a Florida limited partnership. After defalcations in the handling of money invested in Lucayan Tropical Groves Partners, Ltd., others, including Guy Stewart, Jr., became involved in the offering of preferred stock in Hemisphere Capital, Ltd. The proceeds of that offering were designed to save or rescue the investment of those who had participated in the Lucayan Tropical Groves Partners, Ltd. Those involved in the second or rescue deal had not been involved in the original offering of limited partnership interests in Lucayan Tropical Groves Partners, Ltd. As the result of settlements or the severance of claims against other Respondents, this matter was heard as to Guy Stewart, Jr.

In preparation for the final hearing, a prehearing conference was held by telephone with counsel for the Department of Banking and Finance, Mr. Rubin, and Respondent, Mr. Stewart, on December 24, 1990, where the parties agreed that the only charge made in the Administrative Complaint against Mr. Stewart was that found in paragraph 31 of the Complaint (Transcript of Hearing of January 2, 1991, at 11 and 23). The parties had also prepared a prehearing stipulation which was presented at the opening of the hearing. That stipulation did not resolve all of the factual issues in the case, however. At the hearing, the Department presented the testimony of Marilyn Blumberg Cane, a professor of law at Nova University, and offered into evidence six exhibits, which included the private placement memorandum for the Hemisphere Capital, Ltd., 12 percent cumulative preferred stock authored by Mr. Stewart; the response to a request for admissions dated October 26, 1990; the resume of Professor Cane; a letter dated February 17, 1987, which Mr. Stuart wrote to the Chairman of the Grand Bahama Port Authority, Ltd., Mr. Edward St.

George; and what the Department identified as the subject matter index of its orders which had been given to Mr. Stewart on December 24, 1990. Mr. Stewart offered the testimony of two witnesses, L. Reginald Wagner, and Michael D. Harris, and testified in his own behalf. He submitted as exhibits the resume of Mr. Wagner, and of Mr. Harris. During the hearing, counsel for the Department attempted to expand the claims against Stewart, but Stewart's objection to this was sustained. A transcript of the proceeding was filed, and the parties submitted proposed recommended orders. Rulings on proposed findings of fact are made in the Appendix to this Recommended Order.

FINDINGS OF FACT

The Lucayan Tropical Groves Partners, Ltd., Partnership.

1. Guy Stewart, Jr., is a graduate of Princeton University, of the University of Virginia Law School, and is a former attorney for the Securities and Exchange Commission. The charges against Mr. Stewart cannot be understood without first reviewing the transaction which failed, and which the private placement memorandum which Mr. Stewart authored for Hemisphere Capital, Ltd., was designed to rescue. That transaction began with a private placement memorandum offering limited partnership interests in Lucayan Tropical Groves Partners, Inc. Global Investor, Inc., a registered broker/dealer, was the underwriter for that offering. Stewart was counsel to Global. He did not prepare the private placement memorandum for the Lucayan Tropical Groves Partners

   offering. It had been prepared by the Washington, D.C., law firm of Graham and James.

   
   

2. Lucayan Tropical Groves Partners, Ltd., was a Florida limited partnership, the general partner of which was Lucayan Groves, Ltd., a Bahamian corporation qualified to do business in Florida. The business of the limited partnership was to lease 280 acres of land on Grand Bahama Island, irrigate it, plant it with lime trees and market the limes. To accomplish this, the money raised by the sale of limited partnership interests in Lucayan Tropical Groves Partners, Ltd., was to be used to develop land which had been leased from the Grand Bahama Port Authority by the general partner, Lucayan Groves, Ltd. The general partner was to serially select 40 acre sections from among the

   280 acres leased, install irrigation systems, and plant lime trees, which the general partner would guarantee for a period of one year after planting. The general partner would then produce certificates from an independent licensed surveyor that each 40 acre section had been developed. Upon presentation of the surveyor's certificate to the escrow agent, the Northern Trust Bank of Florida, N.A., the escrow agent would release to the general partner $200,000 draws of the

   $1,600,000 planned to be raised through the sale of limited partnership interests in the Lucayan Tropical Groves Partners, Ltd. Thereafter, the general partner, Lucayan Groves, Ltd., would manage the groves.

   The general partner would receive no fee during the first year of operation, but thereafter would receive a management fee equal to its actual management costs, plus 20 percent. It was anticipated that the trees would bear fruit in marketable quantities one year after planting. The limited partnership would then pay to the general partner the costs of harvesting the lime crop and delivering it to a packing and processing facility. The fruit would then be marketed by the general partner on behalf of the limited partnership in the United States, Canada, and western Europe.

   
   

   Defalcations

   
   

3. All did not go well in the offering of limited partnership interests in Lucayan Tropical Groves Partners, Ltd. Although a substantial amount of money was raised by the sale of limited partnership interests at a minimum investment of $16,000 per unit, with a maximum sale of 100 units, the funds were not applied as its private placement memorandum had disclosed. The general partner, Lucayan Groves, Ltd., was controlled by Robert Parker. Mr. Parker apparently secured, from a Bahamian surveyor, John Doughtery, blank certificates addressed to the Northern Trust Bank of Florida, N.A., describing 40 acre sections of the 280 acres to be developed, certifying that the surveyor had inspected them, and that they had been fully and completely developed, planted in limes, and equipped with an installed and operational irrigation system in accordance with the grove development contract of June 6, 1984, between Bahama Groves Partners, Ltd., and Lucayan Groves, Ltd. The surveyor provided Parker with at least six of these certificates, which were presented to the Northern Trust Bank over a period of months, which then paid over to Parker

   $1,200,000. At that point, 240 acres should have been prepared, irrigated, and planted. In fact, only 40 acres had been planted. Moreover, on August 31, 1984, shortly after signing the certificates which Parker used to make the six draws of $200,000 each from the Northern Trust Bank of Florida, the surveyor died. At that point, the

   limited partnership interests in Lucayan Tropical Groves, Ltd., were at great risk of becoming worthless.

   
   

   The rescue or bailout transaction, Hemisphere Capital, Ltd.

   
   

4. A group, which included Guy Stewart, Jr., became interested in attempting to put together a transaction to save the groves and the investment which had been made in them. For that purpose, Stewart authored the private placement memorandum for the sale of 12 percent cumulative preferred stock of Hemisphere Capital, Ltd. This is the private placement memorandum at issue. The underwriter for this offering was also Global Investor Securities, Inc. Hemisphere Capital, Ltd., was organized under the laws of the Cayman Isles. Stewart was a director and president of Hemisphere Capital, Ltd. It, in turn, had organized a Bahamian corporation known as Freeport Fruit Company, Ltd. (Freeport Fruit). It was the intent of the offering that Freeport Fruit would become the substitute general partner for Lucayan Groves, Ltd., and for another limited partnership, Bahama Groves Partners, Ltd. Bahama Groves Partners was an earlier partnership which had planted lime groves in the Bahamas in a transaction structured similarly to that of Lucayan Tropical Groves Partners, Ltd. So far as the evidence shows, however, the $1,800,000 in money invested in that partnership had been properly applied, and 320 acres of land had been irrigated and planted, and were already producing limes. That older partnership required working capital to continue its operations, however.

   
   

5. The summary of the offering prepared by Stewart disclosed at page 13 the following:

   
   

   The Lucayan Limited Partnership was capitalized during 1985 and in 1986 to clear and develop 240 acres of land and to cultivate lime groves on said acreage. Although

   $1,200,000 was placed in escrow to be drawn down in increments of $200,000 as each 40 acre parcel of land was cleared and planted, as of October 24, 1986, only 40 acres were planted. It is anticipated that $225,000 of additional funds will be required to complete the development and planting of the remaining Acres, and accordingly, $225,000 of the funds raised hereby have been designated for that purpose.

   The remaining funds will be used to satisfy debt and for working capital. In order to accomplish the foregoing, the company will loan funds to Freeport Fruit at the rate of

   12 percent per annum.

   
   

6. The private placement memorandum also contained a section entitled "Detailed Description of the Project." The most pertinent paragraph is found on page 17 and reads:

   
   

   Pursuant to an Escrow Agreement entered into between the Lucayan General Partner and the Lucayan Limited Partnership and the Northern Trust Bank of Florida, N.A., Miami, Florida,

   the Lucayan General Partner and the Lucayan Limited Partnership represented to investors that upon certification to the Bank by a licensed independent surveyor that a series of defined 40 acre sections of land were planted in accordance with the specifications of the Grove Development Contract on June 6, 1984, $200,000 would be distributed to the Lucayan General Partner for its fee for developing and planting. However, Robert Parker, the Chief Executive Officer of said Corporate General Partner, has stated that although $1,200,000 has been released by the Bank upon certification to it that 240 acres

   were planted in accordance with specifications, in fact only 40 acres have been planted.

   Thus, of the 240 acres allegedly certified as being planted, 200 remain to be planted. Not withstanding the foregoing Mr. Parker maintains that all of the aforesaid $1,200,000 was used to prepare the 240 acres, and that none of the funds received from the Escrow

   Agent [the Northern Trust Bank] were converted, improperly used, or co-mingled. However,

   since the records of the two corporate general partners and of the two limited partnerships are not complete, an audit has not been performed.

   
   

7. In the section of the private placement memorandum describing the use of the proceeds of the sale of the preferred stock in Hemisphere Capital, Ltd., it was disclosed that $225,000 would be used for clearing and planting. (Private Placement Memorandum, page 20.) This is consistent with the statement made in the summary of the offering, at page 13, that it was "anticipated that $225,000 of additional funds will be required to complete the development and planting of the remaining acres. . ." The Hemisphere Capital, Ltd., private placement memorandum had appended to it, as supplemental material, the private placement memorandum for the failing Lucayan Tropical Groves Partners, Ltd. Investors were also notified that a copy of the private placement memorandum for the earlier partnership, Bahama Groves Partners, Ltd., was available for review. The potential investors were told:

   
   

   These two earlier private placement memoranda were prepared by persons other than the placement agent of this offering, and, although the placement agent believes them to be accurate, no such assurance can be or is given. (Hemisphere Private Placement Memorandum at 11).

   
   

8. A fair reading of the Hemisphere Capital, Ltd., private placement memorandum put potential investors on notice that the management of Hemisphere Capital, Ltd., would be completely distinct from that of the troubled Lucayan Tropical Groves Partners, Ltd., or

   its general partner Lucayan Groves, Ltd., and that that Mr. Parker would have nothing to do with management of Hemisphere Capital, Ltd.

   
   

   The due diligence file.

   
   

9. It is common for those who author private placement memoranda to keep a file, often known as a due diligence file, to demonstrate the investigation they have undertaken to assure themselves of the correctness of statements addressed to potential investors in a private placement memorandum. Mr. Stewart did not maintain such a file in this case.

   
   

10. Mr. Stewart knew, before October 24, 1986, when the Hemisphere private placement memorandum was issued, that Mr. Parker had submitted the certificates of the surveyor to the Northern Trust Bank to draw down the $1,200,000 which had been invested in the Lucayan Tropical Groves Partners, Ltd., after the surveyor had died on August 31, 1984, and at a time when the groves had not been appropriately irrigated and planted. Stewart had been informed by Parker that only

    40 acres had been planted, and Stewart knew Parker had used bogus certificates to draw money from the Northern Trust Bank. When the use of the $1,200,000 withdrawn from the bank was discussed, Parker claimed that all funds withdrawn were used for planting, and that no funds were converted, improperly used or co-mingled.

    
    

11. The rescue group, of which Mr. Stewart was a member, invested

    $125,000 in the groves while attempting to interest other investors in shares of Hemisphere Capital, Ltd., in order to maintain the 320 acres of producing lime groves which had been created with the money raised through the Bahama Groves Partners, Ltd., Partnership (the first limited partnership) and the 40 acres which had actually been planted with the money derived through the Lucayan Tropical Groves Parners, Ltd., (the second limited partnership).

    
    

    Withdrawal of the Hemisphere Capital offering.

    
    

12. Stewart later found that certain representations made to him by Mr. Parker were erroneous, and as a result the offering for Hemisphere Capital, Ltd., was suspended, and checks which had been received from three investors were returned to them uncashed. The private placement memorandum for Hemisphere Capital, Ltd., had contained a limitation that if subscriptions were not received for 90,000 shares the offering would be terminated. The money received from the three investors had been placed in an interest bearing account at Sun Bank of Miami, pursuant to an escrow agreement as represented to potential investors in the Hemisphere Capital private placement memorandum. (Hemisphere Private Placement Memorandum at 35).

    Apparently the $125,000 invested by Stewart and his associates was lost. The record is not clear on this point, but it is not essential to the decision in this case.

    
    

    Other significant disclosures found in the Hemisphere private placement memorandum.

    
    

13. The Hemisphere private placement memorandum had highlighted for investors the riskiness of the investment, including lack of diversification, possible under capitalization of the venture, and that

    there would be a limited market for shares (Private Placement Memorandum at 25), as well as low initial yields, which meant that in any scenario, an investor's capital would not be fully repaid until before the fifth year, and that Freeport Fruit had limited assets and limited capacity to raise additional working capital should it be needed (Private Placement Memorandum at 27).

    
    

14. At a portion of the memorandum entitled "Summary of Considerations for Prospective Investors" it was stated that:

    
    

    Due to the nature of agriculture operations and markets, any investment in the shares is highly speculative, involves a high degree of risk and is not suitable for many potential (investors. Accordingly, an invest ment in the shares [of] this private placement should be entered into only by persons who have read and understood the Memorandum and who understand the nature and extent of their rights and obligations and the risks involved in all transactions described herein.

    Investment is only suitable for investors of substantial net worth, who are willing and have the financial capability to purchase a high-risk investment which cannot be easily liquidated and may not provide any immediate cash return. An investor should be able to bear the burden of a complete loss of an investment in the Company. (Private Placement Memorandum at 8)

    
    

    As noted in Finding 12 above, no investor actually lost any money because the money placed in escrow by three potential investors was returned when that offering was withdrawn.

    
    

15. In the section entitled "Investor Suitability", it was disclosed that individual investors in Hemisphere Capital, Ltd., would be required to represent in the subscription agreement for shares that they had a net worth at the time of purchase of $1,000,000 or more, that they were purchasing $150,000 or more of shares, which would not exceed 20 percent of that net worth at the time of purchase, or that their income for the two previous years exceeded $200,000, and that they reasonably expected their income for the current year to exceed

    $200,000. (Private Placement Memorandum at 10.)

    
    

16. The issue framed by the Administrative Complaint is limited by the concession of counsel for the Department at the prehearing conference. The issue for hearing was whether Stewart violated the anti-fraud provision of the Florida securities laws by failing to disclose in the Hemisphere private placement memorandum that the surveyor had died on August 31, 1984.

    
    

17. The surveyor's death is not disclosed in the private placement memorandum, but it is difficult to understand why the Department has seized on this fact in an effort to assert that the prospectus thereby became false and misleading. Obviously the private placement memorandum is addressed to a sophisticated audience, given

    the requirements for investor suitability contained at pages 10-11, see Finding 15 above.

    
    

18. A disclosure that the surveyor had died before the certificates were presented to the Northern Trust Bank would have given investors additional reason to doubt the integrity of Mr. Parker. But Parker's integrity had no direct bearing on an investment in Hemisphere Capital, Ltd. Parker would have nothing to do with its management, he was part of the management team which would be replaced. Even so, the disclosures in the private placement memorandum placed potential investors on notice of the questionable integrity of Mr. Parker given these two significant facts: 1) Although six draws of $200,000 had been made from the escrow account at the Northern Trust Bank, on the representation that 240 acre parcels of land had been cleared and planted, only 40 acres had actually been planted (Private Placement Memorandum page 13), and 2) although Parker maintained that all of the

    $1,200,000 were used to prepare the 240 acres and none of the funds had been converted, improperly used, or co-mingled, the records of the general partners and of the limited partnerships were incomplete and therefore could not be audited. Any reasonable person reading the private placement memorandum had abundant cause to doubt Parker's integrity.

    
    

19. What is most significant is the representation of the proposed new management team that would come in with Hemisphere Capital, Ltd., that:

    
    

    It is anticipated that $225,000 of additional funds will be required to complete the development and planting of the remaining acres, and accordingly, $225,000 of the funds raised hereby have been designated for that purpose. (Private Placement Memorandum at 13, see also the disclosure of the use of proceeds, at page 20.)

    
    

    There is no evidence at all in the record that this representation was either unreasonable or incorrect.

    
    

20. In view of all the disclosures Stewart included in the Hemisphere private placement memorandum, only three persons were willing to make an investment in Hemisphere Capital, Ltd. Sufficient investments were not received so that any of the money deposited with the escrow agent, the Sun Bank, was released to Hemisphere Capital, Ltd. Stewart and the others who attempted to put the deal together withdrew it themselves after becoming convinced that Mr. Parker had misrepresented matters which had been incorporated in the Hemisphere Capital, Ltd., private placement memorandum, and consequently, the three checks received were returned uncashed to those three people who had submitted money.

    
    

21. The question is not whether the additional disclosure that the surveyor had died before Parker submitted the certificates to the Northern Trust Bank might have affected, or could affect, the decision of any investor about whether to invest in Hemisphere Capital, Ltd., but whether there is a substantial likelihood that this additional fact would have assumed actual significance in the investment decision of

    potential investor. In view of all the facts disclosed, I find that that additional fact would have made no difference. It would not have altered significantly the total mix of information available to potential investors. They knew the problem: $1,200,000 from the Lucayan Tropical Groves Partners offering was gone, and had been given to Parker, who had planted only 40 acres, and the money could not be accounted for. The Department has not proven that it is likely investors would have evaluated investment decisions differently if the additional detail of Parker's defalcations (viz., the surveyor's death) had been disclosed more specifically.

    
    

    Past conduct by Stewart

    
    

22. There is no evidence showing that Mr. Stewart had violated any securities laws in the past. There is insufficient proof, based on the record made, to infer from the failure to disclose in the private placement memorandum for Hemisphere Capital, Ltd., that the surveyor had died before the certificates were presented to the Northern Trust Bank by Mr. Parker,that Mr. Stewart is likely to engage in any future violations of Florida securities laws. As a result, no cease and desist order directed to Mr. Stewart is appropriate.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes. Under Section 517.301(1)(a), Florida Statutes:

    
    

    It is unlawful and a violation of the provisions of this chapter for a person:

    1. In connection with the offer, sale, or purchase of any investment or security, including any security exempted under the provisions of s. 517.051 and including any security sold in a transaction exempted under the provisions of s. 517.061, directly or indirectly:

       1. To employ any device, scheme, or artifice to defraud;

       2. To obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary

          in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

       3. To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a person.

          * * *

          (c) In any matter within the jurisdiction of the department, to knowingly and willfully falsify, conceal, or cover up, by any trick, scheme, or device, a material fact, make any false, fictitious, or fraudulent statement or representation, or make or use any false writing or document, knowing the same to contain any false, fictitious, or fraudulent

          statement or entry.

          
          

24. There is no doubt that the private placement memorandum which Mr. Stewart authored was, by its very design, an offer for the purchase of securities. The evidence simply does not sustain a finding or conclusion that the private placement memorandum was a device, scheme or artifice to defraud under Section 517.301(1)(a)1, or that it was a transaction, practice or course of business which would operate as a fraud or deceit upon anyone, as proscribed by Section 517.301(1)(a)3. The pertinent portion of the statute focuses on whether the private placement memorandum operated directly or indirectly as a means to obtain money through "any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading." Section 517.301(1)(a)2., Florida Statutes.

    This formulation of the duty of disclosure is similar to the one imposed under federal law through rules promulgated pursuant to Section 14(a) of the Securities Exchange Act of 1934 [15 U.S.C. Section 78n(a)] by the Securities and Exchange Commission, governing disclosures in proxy statements, 17 C.F.R. Section 240.14a-9 (1990).

    
    

25. The Department argues in its proposed recommended order that the Hemisphere Capital, Ltd., Private Placement Memorandum "indicated to its readers a rather hopeful situation with the possibility of a high return on the initial investment." (Proposed order, paragraph 24, at page 21.) I simply cannot accept that as an accurate characterization of what the private placement memorandum discloses.

    It proposed a highly risky investment which only a person with a substantial net worth, income and ability to lose the entire investment should even consider. As expressed in Finding 21, the total mix of information available to investors would not have changed if the death of the surveyor had been disclosed. See TSC Industries, Inc. v.

    Northway, Inc., 426 U.S. 438, 449, 96 S.Ct 2126, 2132 (1976); Virginia

    Bankshares, Inc. v. Sandberg, U.S. , 111 S. Ct. 2749, 2757 (1991) (applying the requirements for disclosure of material facts in proxy statements).

    
    

26. The Department also maintains in its proposed order that there were additional factors which should have been disclosed in the private placement memorandum based on the testimony of Mr. Stewart at the hearing. The Department cannot, as a matter of law, use the proposed recommended order as a means of amending paragraph 31 of its Administrative Complaint and raise additional points which it asserts should have been disclosed in the private placement memorandum. The Department's expert never relied on those facts in expressing an opinion that the private placement memorandum was inadequate. The issue here is much more narrow: Whether the failure to disclose the death of the surveyor in the private placement memorandum rendered that memorandum misleading. In this, the Department's proof failed. Any reasonable person, much less any sophisticated investor, would have understood the highly risky nature of the investment proposed from the disclosures made in the private placement memorandum. Perhaps the best proof of this is the very thin response which the private placement memorandum generated.

    
    

27. The Department has in no way countered the testimony of Mr. Stewart that after determining that statements from Parker, which they

    had relied on, turned out to be untrue, they withdrew the offering, after having spent $125,000 on the groves. If Mr. Stewart had been engaged in any knowing or willful misrepresentation by omission, it is unlikely he and his associates would have willing withdrawn the offer and suffered the loss of their own investment.

    
    

28. At most, what the evidence shows is that Mr. Stewart and others attempted to arrange a transaction designed to save the investment which had been made in Parker's two prior lime grove limited partnerships, but that it was simply impossible to do so.

    
    

29. No doubt the Department, on the basis of this record, has good reason to investigate the doings of Mr. Parker. Mr. Stewart seems to have been ensnared in the investigation because of his involvement in the rescue attempt. The evidence does not, however, demonstrate that he is guilty of misleading investors by the statements or omissions in the Hemisphere Capital, Ltd., Private Placement Memorandum.

RECOMMENDATION

It is RECOMMENDED that a final order be entered by the Department of Banking and Finance dismissing the allegations in the Administrative Complaint as they relate to Guy Stewart.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of August 1992.

WILLIAM R. DORSEY, JR.

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 5th day of August 1992.

APPENDIX TO RECOMMENDED ORDER

Rulings on Findings proposed by the Department:

1. Adopted in Finding 1 as to Global Investor Securities, Inc.

2. Adopted in Finding 1 as to Stewart, though his use of the office is not relevant to any claims made in this proceeding.

3. Rejected as irrelevant. Whether Global Investor Securities, Inc., was or was not named as underwriter of the offering on the Bahama Groves and Lucayan Groves is not relevant to any of the charges made against Stewart which were set for hearing.

4. Adopted in Findings 1 and 4.

5. Generally adopted in Finding 3.

6. It is not clear when Stewart received the surveyor's death certificate so no finding can be made that he received it on October 9, 1986. He did know of the death before the issuance of the private placement memorandum on October 24, 1986. See Finding 10. It is simply not true that the private placement memorandum made no mention of Parker's withdrawals from the Northern Trust Bank based on the certificates from the surveyor. See Finding 6. It is true, however, that the private placement memorandum does not state that the surveyor had died before the certificates were presented to the bank.

7. Rejected because these facts were not alleged in the Administrative Complaint. At the prehearing conference, specific inquiry was made of the Department about which allegations pertained to Mr. Stewart, since the Department had reached a settlement with respect to many of those originally named in the Administrative Complaint. These facts were not among those the Department stated it would pursue at the final hearing, and consequently no findings can be made on them.

8. See the ruling on the foregoing proposed finding of fact.

Rulings on Findings proposed by Respondent:

1. Generally accepted, the findings in the stipulation are incorporated where appropriate.

2. Adopted in Finding 21.

3. Adopted in Finding 18.

4. Adherent in Finding 20.

5. Implicit in the finding of no violation.

6. Adopted in Finding 22.

7. Implicit in Finding 20.

8. Implicit in Finding 20.

9. Rejected as unnecessary.

10. Rejected as unnecessary because in the absence of a finding of a violation there is no need to consider the issue whether a cease and desist order should be entered against Mr. Stewart. In any case, the findings on this issue are made in Finding 22.

11. Adopted in Finding 22.

12. To the extent necessary, addressed in Finding 22.

COPIES FURNISHED:

Randall L. Rubin Assistant General Counsel Office of Comptroller Suite 408-North

401 N.W. 2nd Avenue Miami, Florida 33128

Guy Stewart, Esquire Ferrel, Cardenes, Fertel

Rodriguez & Mishael Suite 1290, Miami Center

201 South Biscayne Boulevard Miami, Florida 33131-2305

The Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

William G. Reeves General Counsel

Department of Banking and Finance The Capitol

Plaza Level, Room 1302 Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-004818

Orders for Case No: 90-004818