STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BANKING AND FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 91-2462

) SANTA CRUZ MARKETING, INC., d/b/a )

SMI, a Delaware corporation; JIM ) WINDERS, individually and as Vice ) President and Owner of SANTA CRUZ ) MARKETING, INC., d/b/a SMI; and )

CECIL BUTLER, individually and as ) account representative of SANTA ) CRUZ MARKETING, INC., d/b/a SMI, )

)

Respondents. )

)

)

RECOMMENDED ORDER

Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on January 7-8, 1992, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Bridget L. Ryan, Esquire

H. Richard Bisbee, Esquire Department of Banking and

Finance

Office of the Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

For Respondents: Jan Peter Weiss, Esquire

Parkway Plaza-Suite 21 1280 South Powerline Road

Pompano Beach, Florida 33069 STATEMENT OF THE ISSUE

The issue presented is whether Respondents are guilty of the allegations contained in the Amended Complaint for Entry of a Cease and Desist Order and Imposing Penalties filed against them, and, if so, what action should be taken against them, if any.

PRELIMINARY STATEMENT

On March 21, 1991, Petitioner served on Respondents Jim Winders, individually and as vice president and owner of Santa Cruz Marketing, Inc.,

d/b/a SMI, and Cecil Butler, individually and as account representative of Santa Cruz Marketing, Inc., d/b/a SMI, an Administrative Complaint for Entry of a Cease and Desist Order and Imposing Penalties alleging that they had violated statutes regulating credit service organizations. Respondents timely requested a formal hearing regarding the allegations contained in that Administrative Complaint, and this cause was subsequently transmitted to the Division of Administrative Hearings for the conduct of that formal proceeding. On August 13, 1991, Petitioner filed its Amended Complaint for Entry of a Cease and Desist Order and Imposing Penalties adding Santa Cruz Marketing, Inc., d/b/a SMI, a Delaware corporation, as an additional Respondent and adding allegations that all three Respondents had also violated statutes regulating loan brokers and retail installment sales. Petitioner's Motion to Amend Complaint was subsequently granted.

Petitioner presented the testimony of Cheryl A. Holmes, Katherine Cronk Collins, Respondent Cecil Butler, Edward Wong, Respondent Jim Winders, Edward A. Winders, and Lynn Chang. Respondents presented the testimony of Respondent Jim Winders and of Edward A. Winders. Additionally, Petitioner's Exhibits numbered 1-19 and 21-30 and Respondents' Exhibits numbered 1 and 2 were admitted in evidence.

Petitioner and Respondents submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A specific ruling of each proposed finding of fact can be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Santa Cruz Marketing, Inc., d/b/a SMI (hereinafter referred to as SMI), a Delaware corporation, is located at Suite 29, 1280 South Powerline Road, Pompano Beach, Florida 33069. Although SMI began operating as a business in Florida in December of 1988, it was not authorized to do business in Florida until December of 1991.

   
   

2. At all times material hereto, Edward Winders has been the president/secretary, Jim Winders has been the vice president/treasurer, and Cecil Butler has been the general manager for SMI. Edward Winders and Jim Winders each own 50% of the stock of SMI. Cecil Butler has no ownership interest in SMI and is simply a salaried employee.

   
   

3. Edward Winders and Jim Winders are responsible for the day-to-day operation of the business. Although Cecil Butler has some unidentified level of supervisory responsibility over some of the other employees, no evidence was offered that he in any way participates in management decisions regarding the operation of the business itself.

   
   

4. SMI advertises by placing ads in newspapers throughout the United States. Its ad reads as follows: "Easy credit card, cash advance, $5000 credit line, no credit check! Call 1-800-347-0773."

   
   

5. SMI's business operations consist of the following units: the origination department, the customer service department, the clerical section, and the shipping section.

   
   

6. When a call is placed using the toll-free number, that telephone call is answered by an account representative in the origination department. A written script called a credit card presentation is utilized by the account representative. The account representatives do not deviate from that script.

   The account representative obtains basic information from the caller, gives a brief program description, and then causes to be sent a packet of information called the first mailer to the caller. The script utilized by the account representative, however, does not tell the account representative how to answer questions from the callers. No evidence was offered as to any procedures SMI may have in place for assuring the correctness of answers given to callers' questions.

   
   

7. The credit card presentation script tells the caller that he or she has reached the "easy credit card division," advises the caller that "our credit card offers a $5,000 line of credit which includes cash advance availability, now our major credit cards are also available regardless of credit history!", advises the caller that there are no annual fees and that the lifetime membership is a "one time processing fee," advises the caller that he or she is participating in a "limited membership drive," and advises the caller that "all the information on our credit card will be in your package along with our customer service number."

   
   

8. The first mailer greets the "prospective member," refers to SMI's credit card program, encloses a pre-approved application, sets forth the amount of SMI's "lifetime membership fee," encloses a "100% money-back guarantee certificate," encourages the recipient to return his or her application and membership fee within 10 days, and promises a $100 gift certificate usable on the charge balance. The lifetime membership fee is $75 if paid by money order or cashier's check and $85 if paid by personal check or C.O.D. No further information is given regarding the details of SMI's "credit card program."

   
   

9. An enclosure in the first mailer is a one-page sheet entitled "Special Notice." It features a facsimile of a Visa card and a facsimile of a MasterCard card. The short text includes the following language:

   
   

   Mail today and receive all these privileges.

   
   

   *CASH ADVANCES

   *VISA CARD AVAILABLE

   *MASTERCARD AVAILABLE

   *$100.00 MERCHANDISE CERTIFICATE

   *ADD POSITIVE INFORMATION ON YOUR CREDIT REPORT

   HAPPY SHOPPING!!!!

   
   

   The enclosed return envelope is directed to Santa Cruz Marketing, Inc. The line underneath that states that the envelope is going to "SMI Card Distribution Center."

   
   

10. If the recipient does not immediately comply, a second mailer is sent five days later. The enclosures are the same as in the first mailer. The "dear prospective member" letter is different and is "just a friendly reminder that we have not received your lifetime membership fee for your pre-approved $5,000 credit card." It encourages the recipient to "take advantage of this unique credit card offer!" and advises the recipient that if the recipient's deadline has already expired, then a call should be placed to SMI's customer service department at a non-toll-free number.

    
    

11. After the recipient submits the pre-approved application and pays the membership fee, he or she then receives the membership package. That package

    begins with a letter greeting the "new card member" and contains the following introductory paragraph:

    
    

    Welcome to the wonderful world of home shopping with your SMI credit card. As a preferred card member, you are offered the opportunity to purchase merchandise from our fantastic color catalogues filled with a wide variety of items.

    
    

    Attached to the letter is an SMI credit card. That letter is the first advice given by SMI to its new "lifetime member" that he or she has paid $75 to join a home shopping club.

    
    

12. The letter further advises the recipient that purchasing merchandise from SMI's catalogues will "enable you to establish that A+ credit rating you have always desired, but which may have been denied to you in the past." The letter further advises that SMI will submit monthly statements to the member and that the member can then pay 10% of the balance (with a minimum payment of $15) or the balance can be paid in full. The letter also advises that the new member will pay no interest charges on his or her purchases, "but please remember in order to help you establish your A+ credit rating, your payments must be made on time."

    
    

13. The membership packet also contains two merchandise catalogues, an order form, and a price list. According to the price list and the terms of SMI's home shopping program, two prices are available to an SMI member. For each item, the member may pay a specified cash price and a specified shipping charge. Alternatively, the member can pay a credit price, which is higher than the cash price. If the member chooses to purchase the item on credit, the member will pay the higher price as follows: the member includes with his or her order form a specified portion of the credit price as a down payment on the item, with the balance of the credit price being charged to the member's charge account. The member paying the higher credit price will also pay the specified shipping charge.

    
    

14. The promised $100 merchandise certificate is included in the membership packet. The certificate specifies that it can only be applied to the credit portion of an order after the down payment for that order is paid and that the certificate is void after 30 days from the date on which the membership was issued.

    
    

15. The membership packet includes, for the first time, a description of SMI's cash advance program. The description of that cash advance program begins as follows:

    
    

    Once you have established a sufficient credit record with SMI, you will be extended 'cash advance privileges'. Simply prove your credit worthiness by shopping with your SMI credit card.

    All you have to do is, charge and pay for at least $500.00 of purchases of your unpaid balance. Once you have done that, you have qualified for a cash advance of $250.00.

    CASH ADVANCES OFFERS

    • Immediate cash

    • No interest charge

    • Low monthly payments

    • No processing fee

    • Cash advances up to $2,500.00

    
    

    According to the program, a cash advance of $2,500 would only be available if a member had charged and paid for $5,000 worth of purchases. The flyer also recites that the $100 merchandise certificate does not apply to cash advances.

    
    

16. The next flyer contained in the membership packet is entitled "Qualify for a Visa or MasterCard." That flyer features facsimiles of both a MasterCard and a Visa card. The description of that portion of SMI's program begins as follows:

    
    

    Simply prove your credit worthiness by using your SMI Credit card. Just charge and pay for at least $750.00 of your unpaid balance.

    It's as simple as that! Once you have established a sufficient credit record, you will be sent a 'GOOD CREDIT REFERENCE LETTER'

    that you can use when applying for credit elsewhere. Plus, you will receive a 'MAJORITY APPROVED' application for a visa or mastercard with 'NO SECURITY DEPOSIT REQUIRED.'

    • UNSECURED - NO SECURITY DEPOSIT REQUIRED

      (WE WILL DO IT FOR YOU)

    • A $380.00 IMMEDIATE CREDIT LINE

    • CASH ADVANCES

    • COMPETITIVE INTEREST RATES

    • ONE TIME PROCESSING CHARGE

    • ONLY $35.00 ANNUAL CHARGE

    • MAJORITY APPROVED

    WE ARE SO SURE THAT YOU WILL BE APPROVED THAT WE WILL SEND YOU A 'CASHIERS CHECK FOR $380.00' IF YOU DO NOT QUALIFY.

    
    

    The flyer points out that the $100 merchandise certificate does not apply to this part of the program.

    
    

17. Another flyer contained in the membership packet explains a second way in which a member can qualify for a Visa or MasterCard as follows:

    
    

    New Collateralized Credit Card Program You Can Now Obtain a

    Major Bank Credit Card

    even though you may have previously been turned down! Under the 'collateralized credit card program' the member may obtain a

    secured major bank credit card which 'requires a security deposit equal to your initial credit limits.'

    
    

    If the member returns the coupon requesting details, SMI provides the name of another company, Access Credit Card Company, which company would charge an additional fee to provide the member with an application from New Era Bank. If the member followed that procedure, he or she would most likely obtain a Visa or

    MasterCard bank card from New Era Bank with a credit limit equal to the amount of money the member was willing to deposit in New Era Bank since that bank approves the majority of such applications.

    
    

18. The membership packet contains three additional flyers. The first one relates to the SMI jewelry catalogue and explains that most gold items are sold by weight at current gold market prices, that prices fluctuate daily with the market, and that the member should check with SMI's ordering department by phone to receive current market prices. The second flyer gives the member information on joining the Select Coupon Club by paying a membership fee of $19.95 and receiving coupons for use at the supermarket. The third flyer describes a program whereby the member can pay $14.95 postage and handling and receive a Hotel Express Membership Directory and membership discount at participating hotels and resorts.

    
    

19. A customer cannot obtain an SMI credit card prior to payment of the

    $75 membership fee. A customer cannot obtain credit for purchasing products from SMI's catalogues prior to payment of the membership fee. The SMI catalogues, received after payment of the fee, are not available to the general public.

    
    

20. The customer is not informed prior to paying the membership fee, either during telephone conversations with SMI account representatives or from the first two mailers, that the credit card which the customer would receive can only be used to purchase goods from the two SMI catalogues.

    
    

21. Although prospective members are advised in the first and second mailers that Visa and MasterCard cards are available, they are not told how they can obtain such cards until after they have paid their fee. Until after payment of the fee, they are not told that they can obtain a secured, i.e., a fully collateralized bank card by depositing in that bank monies equivalent to the credit limit then extended to them by the bank. Customers are not told prior to the payment of their membership fee, either by SMI account representatives during telephone conversations or in the first or second mailers, that the obtaining of a secured Visa or MasterCard card from New Era Bank will also require the payment of a processing fee and will carry a minimum $500 deposit requirement. Until after payment of the fee, they are not told that the alternative is to charge and pay for $750 worth of merchandise from SMI's two catalogues (not including the amount paid as a down payment on each item purchased) which amounts to $850 worth of charged merchandise if the customer uses the $100 gift certificate, in exchange for SMI then giving the customer a letter saying the customer is a good credit risk, which the customer can then present in applying for credit elsewhere. No evidence was offered that any other organization considers SMI's letter of recommendation meaningful.

    
    

22. Prior to the payment of the fee, the prospective member is not advised that the cash advances which he or she would become entitled to receive are limited to an amount of one-half of the total balance the member has paid on the member's SMI charge account balance. No member has received a cash advance from SMI.

    
    

23. No members have obtained a Visa or MasterCard card by charging and then paying for $750 worth of products from SMI's catalogues.

    
    

24. Other than those documents previously described, no other documents, contracts, or statements are provided by SMI to prospective members or members.

25. SMI purchases the products found in its catalogues at the distributorship cost, a lower price than members pay for the products when they purchase from SMI.

    
    

26. As of July 1, 1991, SMI had 12,567 members. By the time of the final hearing in this cause, SMI had over fifteen thousand members. Eighty-four members had purchased items from the SMI catalogues.

    
    

27. Petitioner received a consumer complaint regarding SMI in February of 1990. On June 28, 1990, Petitioner served on SMI a subpoena requesting that SMI provide to Petitioner the following information:

    
    

    Name of surety bonding company, location of surety bond and copy of surety bond; location and account number of Florida escrow account, proof of account; copy of information statement and consumer contract.

    
    

28. SMI was unable to respond to the subpoena by providing that information because it did not have those items. SMI did respond to the subpoena, however, by providing copies of its advertising and the materials used in its mailers and membership packages. SMI further obtained a bond pursuant to Petitioner's direction to do so. In a series of letters from SMI's attorney to Petitioner, SMI submitted revised advertising and revised informational documents requesting Petitioner's approval of the revisions to bring SMI in compliance with the Department's requirements. The Department failed to respond to SMI's requests.

    
    

29. Rather, on March 21, 1991, the Department served on Jim Winders and Cecil Butler an Administrative Complaint for Entry of a Cease and Desist Order and Imposing Penalties, alleging that Jim Winders and Cecil Butler were operating as a credit service organization without fully complying with Chapter 817, Florida Statutes. Jim Winders and Cecil Butler timely requested a formal hearing, and this cause was transferred to the Division of Administrative Hearings. While this administrative proceeding was pending, on July 1, 1991, the activities of loan brokers became regulated, and responsibility therefor was assigned to the Department. On August 12, 1991, the Department filed its Amended Complaint for Entry of a Cease and Desist Order and Imposing Penalties which included the allegations in the original Administrative Complaint, named SMI as a Respondent for the first time, added allegations that the three Respondents were operating as loan brokers, and further added allegations that the three Respondents were operating as retail sellers.

    
    

    CONCLUSIONS OF LAW

    
    

30. The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.

    
    

31. Part III, Chapter 817, Florida Statutes, regulates credit service organizations. As to what constitutes a credit service organization, Section 817.7001(2)(a) provides as follows:

    
    

    'Credit service organization' means any person who, with respect to the extension of credit by others, sells, provides, performs, or represents that he or she can or will sell,

    provide, or perform, in return for the payment of money or other valuable consideration, any of the following services:

    1. Improving a buyer's credit record, history, or rating;

    2. Obtaining an extension of credit for a buyer; or

    3. Providing advice or assistance to a buyer with regard to the services described in either subparagraph 1. or subparagraph 2.

       
       

32. While SMI is a catalogue buying club, it has clothed itself with the indicia of a credit service organization. Its first mailer lists as privileges of membership that Visa and MasterCard cards are available and that its members can "add positive information on your credit report." That same information is provided in its second mailer if a second mailer is sent. Its cover letter and membership packet which are sent after the membership fee is received by SMI advises members that its program will enable the members to "establish that A+ credit rating you have always desired" by making payments on time. Further, as one of the membership benefits, SMI will provide members with the name of a bank from which they are likely to obtain a collateralized Visa or MasterCard and further offers members a letter stating that the member is creditworthy after certain conditions have been met.

    
    

33. Therefore, SMI does meet the definition of a credit service organization because it, with respect to the extension of credit by others, represents that it can perform, in return for the payment of the membership fee (and the performance of other conditions), improving the member's credit record or rating or obtaining an extension of credit for the member. SMI advises its members how to obtain a secured bank card and offers its members a method for obtaining an unsecured bank card.

34. Section 817.7005, Florida Statutes, provides, in part, as follows: 817.7005 Prohibited acts.--A credit

    service organization, its salespersons, agents, and representatives, and independent contractors who sell or attempt to sell the services of a credit service organization shall not do any of the following:

    (1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services the credit service organization has agreed to perform for the buyer, unless the credit service organization has obtained a surety bond of $10,000 issued by a surety company admitted to do business in this state and has established a trust account at a federally insured bank or savings and loan association located in this state; however, where a credit service organization has obtained a surety bond and established a trust account as provided herein, the credit service organization may charge or receive money or other valuable consideration prior to full

    and complete performance of the services it

    has agreed to perform for the buyer but shall deposit all money or other valuable consideration received in its trust account until the full and complete performance of the services it has agreed to perform for the buyer.

    * * *

    (4) Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a credit service organization or engage, directly or indirectly, in any act, practice, or course of business that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a credit service organization, notwithstanding the absence of reliance by the buyer.

    
    

    When contacted by the Department as to its existence as a credit service organization, SMI obtained a surety bond and provided proof of the existence thereof to the Department. No evidence was offered that SMI has ever established a trust account. Since SMI did not fully and completely perform the credit services it offered incident to membership in SMI before receiving the membership fee, SMI has violated the provisions of Section 817.7005(1), Florida Statutes.

    
    

35. SMI has also violated the provisions of Section 817.7005(4), Florida Statutes, by making misleading statements and omitting material facts in its offer regarding the performance of credit services. SMI was truthful in its representation that making timely payments could add positive information to a member's credit report. However, the information provided by SMI prior to receipt of the membership fee as to the availability of Visa and MasterCard cards was misleading in that SMI omitted telling prospective members that other conditions in addition to paying the membership fee would have to be fulfilled in order to obtain those bank cards.

    
    

36. Section 817.704, Florida Statutes, requires that certain information be contained in any contract between a buyer and a credit service organization. That section further requires that buyers be notified of their right to cancel a contract with a credit service organization within five days and specifies the exact language to be contained within that notice of cancellation. SMI has failed to comply with Section 817.704, Florida Statutes.

    
    

37. Section 817.702, Florida Statutes, requires that a credit service organization provide the buyer with a statement in writing containing all of the information required by Section 817.703 and maintain on file for five years a copy of the statement signed by the buyer acknowledging receipt of such a document. Section 817.703 establishes the content of the required information statement which includes providing the buyer with information on his or her right to review and dispute any file maintained on him or her by any consumer reporting agency and further requires the provision of information on how the buyer can proceed against the credit service organization's bond or trust account. Although SMI has violated Section 817.702 by failing to provide its members with the required information statement, SMI has not violated Section 817.703, as alleged in the Amended Complaint, which section simply sets forth

    the information to be contained in the statement required to be provided and kept by Section 817.702, Florida Statutes.

    
    

38. Part III of Chapter 817, Florida Statutes, does not grant to the Department any enforcement authority but rather grants civil remedies to buyers of the services of credit service organizations and also provides criminal penalties. However, Chapter 516, Florida Statutes, the Florida Consumer Finance Act, provides in Section 516.07(1)(g) that any violation of Part III of Chapter 817 constitutes a violation of Chapter 516. Section 516.07(2) provides that the Department may impose an administrative fine not to exceed $1,000 for each such act upon a finding that a person has committed any of the acts set forth in Subsection (1). Similarly, Section 516.23(2)(b), Florida Statutes, authorizes the Department to issue an order requiring any person who is violating, has violated, or is about to violate any provision of Chapter 516 to cease and desist and take corrective action. Additionally, Section 516.23(2)(c) authorizes the Department to impose an administrative fine against any person found to have violated Chapter 516, in an amount not to exceed $1,000 for each violation. The $1,000 administrative fine authorized by Section 516.23(2)(c) is not in addition to the $1,000 fine authorized in Section 516.07(2); rather, those sections are simply two separate statutory authorizations for the Department to impose an administrative fine for a violation of Chapter 516.

    
    

39. On July 1, 1991, while this proceeding was pending before the Division of Administrative Hearings, the Department was given regulatory authority over loan brokers. Section 687.14, Florida Statutes, contains definitions as follows:

    
    

    1. 'Loan broker' means any person, except any bank or savings and loan association, trust company, building and loan association, credit union, consumer finance company, retail installment sales company, securities

       broker-dealer, real estate broker or salesperson, attorney, federal Housing Administration or Veterans' Administration approved lender, credit card company, installment loan licensee, mortgage broker or lender, or insurance company, provided that the person excepted is licensed by and subject to regulation or supervision of any agency of the United States or this state and is acting within the scope of the license; and also excepting subsidiaries of licensed or chartered consumer finance companies, banks, or savings and loan associations; who:

       1. For or in expectation of consideration arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit;

       2. For or in expectation of consideration assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit, or related guarantee, enhancement, or collateral of any kind or nature;

       3. Acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or

       4. Holds himself out as a loan broker.

    2. 'Principal' means any officer, director, partner, joint venturer, branch manager, or other person with similar managerial or supervisory responsibilities for a loan broker.

    
    

    Since the language defining a loan broker is substantially the same as the language defining a credit service organization, SMI also meets the technical definition of a loan broker for the same reason that it meets the technical definition of a credit service organization.

    
    

40. Section 687.141 provides as follows:

    
    

    Loan brokers; prohibited acts.--No loan broker shall:

    1. Assess or collect an advance fee from a borrower to provide services as a loan broker.

    2. Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker, notwithstanding the absence of reliance by the buyer.

    3. Make or use any false or deceptive representation in its business dealings or to the department or conceal a material fact from the department.

    
    

    Since the activities prohibited for loan brokers are, essentially, the same activities prohibited for credit service organizations, SMI is guilty of violating Section 687.141, Florida Statutes.

    
    

41. Section 687.143, Florida Statutes, authorizes the Department to order a loan broker to cease and desist from violations of Chapter 687 and further authorizes the Department to impose an administrative fine against any person violating Chapter 687 in an amount not to exceed $5,000 for each such violation, all fines to be deposited in the Division of Finance Regulatory Trust Fund.

    
    

42. The Amended Complaint filed in this cause alleges that Jim Winders, individually and as vice president and owner of SMI, and Cecil Butler, individually and as account representative of SMI, have also violated the statutes regulating credit service organizations and loan brokers and, therefore, should be sanctioned individually. There is no evidence that Jim Winders, individually, or Cecil Butler, individually, represented to anyone that he was able to improve a caller's or a member's credit record or rating or that he was able to obtain an extension of credit for a buyer. Further, there is no evidence that either Jim Winders, individually, or Cecil Butler, individually, charged or received money from any caller or member in regard to SMI's catalogue shopping club. Neither Jim Winders, individually, nor Cecil Butler, individually, operated as a credit service organization or as a loan broker or represented to anyone that he was so operating. Lastly, the Amended Complaint

    filed in this cause makes no allegations as to any individual conduct by either Jim Winders or Cecil Butler separate from the allegations made against SMI.

    
    

43. Section 687.142, Florida Statutes, provides that "Each principal of a loan broker may be sanctioned for the actions of the loan broker, including its agents or employees, in the course of business of the loan broker." It is stipulated that Jim Winders is the vice president and fifty per cent stockholder of SMI. Subsection (5) of Section 687.14, Florida Statutes, includes an officer within the definition of "principal." Although the evidence in this cause did not delineate the day-to-day responsibilities for operating SMI which were performed by Jim Winders rather than by Edward A. Winders, the evidence is clear that Jim Winders was involved in the day-to-day operations of SMI. It is appropriate, therefore, that he be sanctioned for causing or permitting SMI to operate after July 1, 1991, in violation of the statutes regulating the conduct of loan brokers. Similarly, Section 817.7005, Florida Statutes, which prohibits credit service organizations from charging or receiving advance fees without first obtaining a surety bond and establishing a trust account and which further prohibits making misleading representations or omitting material facts in the sale of the services of the credit service organization, applies not only to a credit service organization but also to its salespersons, agents, and representatives. Since it is not controverted that Jim Winders as vice president of SMI is an agent of that corporation, then Jim Winders has violated those statutes regulating the conduct of credit service organizations which SMI has violated.

    
    

44. As to Cecil Butler, the Department charged him, in its original Administrative Complaint, individually and as account representative. It did not seek sanctions against Cecil Butler in his capacity as general manager of SMI. The same is true for the allegations contained in the Amended Complaint-- Butler is charged individually and as an account representative. He is not charged as the general manager of SMI. The Department never notified Butler that he was defending himself in his capacity as general manager since he was not charged as such. Further, although the parties stipulated that Butler was the general manager, and Butler so testified at the final hearing, no evidence was offered as to the date on which he became the general manager. Further, no evidence was offered to show that Butler indeed had general manager responsibilities and not just that title. The only evidence offered regarding his duties was that he supervised some of the employees and was himself supervised by Jim Winders and Edward Winders. No evidence was offered that Butler had managerial and supervisory responsibilities "similar" to an officer, director, partner, joint venturer, or branch manager of a loan broker in order to meet the statutory definition of being a principal of a loan broker as defined in Section 687.14(5), Florida Statutes.

    
    

45. As to alleged misrepresentations made by Cecil Butler when he was answering the telephone as an account representative before becoming SMI's general manager, the Department offered the testimony by way of deposition of nine consumers, some of whom alleged they had spoken with Cecil Butler. One of those persons whose deposition was admitted in evidence also testified at the final hearing in a cumulative fashion. The Department also offered affidavits of four additional consumers. Those affidavits are hearsay evidence only, and no findings of fact can be based on those affidavits. They are corroborative only of the manner in which SMI conducted its business affairs but are not corroborative of any of the specific allegations regarding telephone conversations had by any other consumer. Regarding the deposition testimony, that evidence has been accepted in establishing how SMI operated but the specific allegations of each alleged conversation that each of those consumers

    had have not been given much weight. It is clear that some of their testimony is not accurate: some misrepresented the contents of the newspaper ad to which they responded, some clearly had preconceived notions into which the conversations fit, and some relied on implications. All were angry because they were unable to obtain a refund from SMI upon request when they discovered they had joined a catalogue buying club and were not simply buying a Visa card or a MasterCard for $75. Lastly, the Department has not charged Cecil Butler in its Amended Complaint with specific violations as to any of those specific transactions but rather with engaging in a course of conduct as a method of doing business.

    
    

46. Section 520.31 of The Retail Installment Sales Act contains the following definitions:

    
    

    1. 'Retail installment contract' or 'contract' means an instrument or instruments reflecting one or more retail installment transactions entered into in this state pursuant to which goods or services may be paid for in installments. It does not include a revolving account or an instrument reflecting a sale pursuant thereto.

    2. 'Retail installment transaction' or 'transaction' means a contract to sell or furnish or the sale of or the furnishing of goods or services by a retail seller to a retail buyer pursuant to a retail installment contract or a revolving account.

    3. 'Retail seller' or 'seller' means a person regularly engaged in, and whose business consists to a substantial extent of, selling goods to a retail buyer. The term also includes a seller who regularly grants credit to retail buyers pursuant to a retail installment contract or a revolving account for the purpose of purchasing goods or services from any other person.

    
    

    The record in this cause indicates that SMI is a retail seller engaging in retail installment transactions pursuant to a retail installment contract. By way of its catalogues and price list, SMI offers to sell merchandise to its members. Its members accept that offer when they submit an order form together with the down payment or the full cash price in accordance with the terms of SMI's offer.

    
    

47. Section 520.32(1), Florida Statutes, provides as follows:

    
    

    (1) A person may not engage in or transact the business of a retail seller engaging in retail installment transactions as defined in this part or operate a branch of such business without a license, except that a license is not required for a retail seller whose retail installment transactions are limited to the honoring of credit cards issued by dealers in oil and petroleum products licensed to do business in this state.

    The parties stipulated that SMI had received eighty-four purchase orders for merchandise from its catalogues. No evidence was offered that SMI is licensed as a retail seller. Accordingly, SMI has violated Section 520.32, Florida Statutes, eighty-four times.

    
    

48. Section 520.331(1)(a) provides that failure to comply with any provision of Part II of Chapter 520 is a violation for which disciplinary action may be taken including, according to Section 520.331(2)(f), the imposition of an administrative fine not to exceed $1,000 for each such act. Similarly, Section

    520.332 authorizes the Department to issue a cease and desist order for violations of Part II of Chapter 520 and further authorizes the Department to impose an administrative fine in an amount not to exceed $1,000 for each violation. The administrative fine provided for in Section 520.332(4) is not in addition to that provided in Section 520.331(2)(f) but is simply an additional statutory authorization for the imposition of fines for violations of Part II of Chapter 520.

    
    

49. Unlike the statutes regulating credit service organizations and loan brokers, the statutes regulating retail sellers engaged in retail installment transactions do not provide that owners or officers of corporate retail sellers may be sanctioned for the acts of the corporate retail sellers. No allegation has been made, and no evidence has been offered, that Jim Winders, individually or as vice president or as owner of SMI, sold goods to retail buyers or that Cecil Butler, either as an individual or as an account representative, engaged in retail installment transactions. It was SMI's offer to sell which was accepted by some of SMI's members. Payments for goods purchased were made to SMI. There is simply no basis, factually or legally, for the Department's contention that either Jim Winders or Cecil Butler acted as a retail seller pursuant to a retail installment contract.

    
    

50. This is not a license revocation proceeding which is penal in nature, where the law is well settled that the prosecutor's burden is clear and convincing evidence. See, for example, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). However, the Department seeks the equivalent of the remedies available in a license revocation proceeding. The Department seeks to restrict Respondents' right to earn a livelihood by issuance of a cease and desist order, seeks a finding that Respondents have violated statutes which carry criminal penalties, and seeks the imposition of administrative fines of almost one-half million dollars against all three Respondents jointly and severally. The weight of the evidence must be viewed in light of the penalty the Department seeks to extract. See, for example, Bowling v. Department of Insurance, 394 So.2d 165 (Fla. 1st Dist. 1981), and Anheuser-Busch v. Department of Business Regulation, 393 So.2d 1177 (Fla. 1st Dist. 1981).

    
    

51. The action to be taken by the Department must also be viewed in the context of the chronology of this proceeding. The Department received its first complaint against SMI in February, 1990. It issued its Administrative Complaint in March, 1991, against only Jim Winders and Cecil Butler, doing nothing to stop SMI from continuing to engage in the business practices which the Department believed to be in violation of the credit service organization statutes. After an additional regulatory scheme went into effect, the Department, as of August 12, 1991, for the first time brought charges against SMI for the identical conduct alleged against Jim Winders and Cecil Butler. Yet, the Department now seeks to exact substantial monetary fines based on transactions occurring during the time that the Department impliedly permitted SMI to continue to engage in improper activity, i.e., from February, 1990, through August, 1991.

52. In its proposed recommended order the Department recommends an administrative fine of $459,000. The Department recommends the maximum fine for each violation of each statutory section although the same conduct violates several sections and further multiplies some of the violations by fifteen thousand members. The Department's recommendation is inappropriate. For example, SMI's requirement that an advance fee be paid violates both Section 817.7005(1) and Section 687.141(1), Florida Statutes. Yet, the Department recommends that that same act be penalized by a $1,000 fine pursuant to Section 817.7005(1) and the maximum fine of $5,000 pursuant to Section 687.141(1), Florida Statutes. There is no basis for suggesting that SMI's conduct in violating the loan broker's statutes is more severe than the same conduct when it violated the credit service organization statutes. The Department further breaks down and recommends a fine for each individual misleading representation or omitted fact; yet, it is SMI's overall program presentation made before the payment of the membership fee which constitutes a misleading representation of what SMI is offering and omits to disclose what it is in fact offering.

    
    

53. It is appropriate that a cease and desist order be entered against SMI. It is also appropriate that SMI be required to pay an administrative fine as follows: The sum of $4,000 for its violations of Section 817.702 (failure to provide the required information statement), Section 817.704 (failing to provide the required contract form and cancellation notice), Section 817.7005(1) (collecting an advance fee without a bond and a trust account), and Section 817.7005(4) (including misleading representations and omitting material facts in its program presentation); the sum of $2,000 for its violations of Sections 687.141(2) and (3) (misrepresentations and omissions in its program presentation) and Section 687.141(1) (collecting an advance fee); and the sum of

    $84,000 for its violations of Section 520.32(1) (engaging in retail installment transactions without a license). Accordingly, SMI should be fined the total sum of $90,000.

    
    

54. It is also appropriate that a cease and desist order be entered against Respondent Jim Winders and that he be required to pay an administrative fine as follows: The sum of $4,000 for his violations of Section 817.702 (failure to provide the required information statement), Section 817.704 (failing to provide the required contract form and cancellation notice), Section 817.7005(1) (collecting an advance fee without a bond and a trust account), and Section 817.7005(4) (including misleading representations and omitting material facts in SMI's program presentation); and the sum of $2,000 for his violations of Sections 687.141(2) and (3) (misrepresentations and omissions in SMI's program presentation) and Section 687.141(1) (collecting an advance fee). Accordingly, Respondent Jim Winders should be fined the total sum of $6,000.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered

1. Finding Respondents SMI and Jim Winders guilty of the allegations contained in the Amended Complaint for Entry of a Cease and Desist Order and Imposing Penalties as described in this Recommended Order;

   
   

2. Finding Respondent Cecil Butler not guilty of the allegations contained within the Amended Complaint for Entry of a Cease and Desist Order and Imposing Penalties;

3. Ordering Respondent SMI to cease and desist from violations of the statutes regulating the operation of credit service organizations, loan brokers, and retail sellers;

   
   

4. Ordering Respondent Jim Winders to cease and desist from violations of the statutes regulating the operation of credit services organizations and loan brokers;

   
   

5. Imposing an administrative fine against Respondent SMI in the sum of

   $90,000 to be paid by a date certain; and

   
   

6. Imposing an administrative fine against Respondent Jim Winders in the sum of $6,000 to be paid by a date certain.

DONE and ENTERED this 12th day of March, 1992, at Tallahassee, Florida.

LINDA M. RIGOT

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675 SC 278-9675

Filed with the Clerk of the Division of Administrative Hearings this 12th day of March, 1992.

APPENDIX TO RECOMMENDED ORDER

1. The Department's proposed findings of fact numbered 1-30, 34-46, 56, 57, 59- 66, 71-83, 85-89, and 91 have been adopted either verbatim or in substance in this Recommended Order.

   
   

2. The Department's proposed findings of fact numbered 31, 32, 95, and 96 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony.

   
   

3. The Department's proposed findings of fact numbered 33 and 97 have been rejected as being contrary to the evidence in this cause.

   
   

4. The Department's proposed findings of fact numbered 84, 90, 92-94, and 111 have been rejected as being irrelevant to the issues under consideration in this cause.

   
   

5. The Department's proposed findings of fact numbered 47-55, 58, and 67-70 have been rejected as being unnecessary to the issues involved herein.

   
   

6. The Department's proposed findings of fact numbered 98-106 have been rejected as being subordinate to the issues herein.

   
   

7. The Department's proposed findings of fact numbered 107-110 have been rejected as not being supported by any competent evidence in this cause.

8. Respondents' proposed findings of fact numbered 1-3 have been adopted either verbatim or in substance in this Recommended Order.

   
   

9. Respondents' proposed findings of fact numbered 4-11 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony.

   
   

10. Respondents' proposed findings of fact numbered 12-19 have been rejected as being subordinate to the issues herein.

COPIES FURNISHED:

Bridget L. Ryan, Esquire

1. Richard Bisbee, Esquire Department of Banking and Finance Office of the Comptroller

   The Capitol, Suite 1302 Tallahassee, Florida 32399-0350

   
   

   Jan Peter Weiss, Esquire Parkway Plaza-Suite 21 1280 South Powerline Road

   Pompano Beach, Florida 33069

   
   

   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 Room 1302, The Capitol 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.

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

   AGENCY FINAL ORDER

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

   
   

   STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

   DIVISION OF FINANCE

   
   

   DEPARTMENT OF BANKING AND FINANCE,

   
   

   Petitioner, Administrative Proc.

   No. 2070-Fi-1/91

   vs. DOAH CASE NO. 91-2462

   
   

   SANTA CRUZ MARKETING, INC., d/b/a

   SMI, a Delaware corporation, JIM WINDERS, individually and as Vice President and Owner of SANTA CRUZ MARKETING, INC., d/b/a SMI; and

   CECIL BUTLER, individually and as Account Representative of SANTA CRUZ MARKETING, INC., d/b/a SMI,

   
   

   Respondents.

   /

   
   

   FINAL ORDER AND NOTICE OF RIGHTS

   
   

   This cause came on before Gerald Lewis, the undersigned, as Statutory Head of the Department of Banking and Finance, (the "Department") , for the purpose of issuing a Final Order. Pursuant to Notice, a Formal Hearing was conducted in this matter on January 7-8, 1992, in Ft. Lauderdale, Florida, before Linda M. Rigot, a duly designated Hearing Officer of the Division of Administrative Hearings. On or about March 12, 1992, Hearing Officer Rigot submitted a Recommended Order to the Department, a copy of which is attached hereto as "Exhibit A", and incorporated herein by reference as if set forth at length, and counsel for Petitioner timely filed Exceptions to the Recommended Order, a copy of which is attached hereto as "Exhibit B." The Department being author- ized and directed to administer and enforce Chapters 817, Part III, Florida Statutes, The Credit Service Organization Act; Chapter 687, Florida Statutes, The Loan Broker Act; and Chapter 520, Florida Statutes, The Retail Installment Sales Act, hereby rules on the Exceptions and having reviewed the entire record of this proceeding enters this Final Order regarding Santa Cruz Marketing, Inc., d/b/a SMI, a Delaware corporation, Jim Winders, individually and as Vice President and Owner of Santa Cruz Marketing, Inc., and Cecil Butler, individually and as Account Representative of Santa Cruz Marketing, Inc.

   
   

   RULING ON EXCEPTIONS

   
   

   1. Petitioner takes exception to the Hearing Officer's ultimate Findings and Conclusion of Law which find Cecil Butler ("Butler"), not liable as a principal for violations of Chapters 817, 687, and 520, Florida Statutes, by Santa Cruz Marketing, Inc., d/b/a SMI ("Santa Cruz"), nor for his own actions as

alleged in the Amended Complaint. In her Recommended Order the hearing officer had found co-Respon- dents, Santa Cruz and Jim Winders liable for numerous violations of Chapters 817, 687 and 520, Florida Statutes.

The testimony presented at the hearing established that Butler was not an owner, director, nor officer of Santa Cruz. (Tr, pp. 135-136.) Jim Winders, an owner and officer of Santa Cruz, testified that Butler was a salaried employee who did not own any of the corporation's stock and did not participate in corporate profits. (Tr, pp. 224-225.) Based on this evidence the hearing officer found as fact that Butler was "simply a salaried employee." (R.O., Findings of Fact No.2.) The hearing officer further found as fact that although Butler held the title of "General Manager", no evidence was presented to demonstrate that he participated in management decisions involving the day to day operation of the business; i.e., there was no evidence to show that Butler had "general manager responsibilities" and not just the title. (R.O., Findings of Fact No.3; C.L. pp. 21-22.) Furthermore, the hearing officer asserted that no evidence was provided as to when Butler assumed the position of General Manager. Consequently the hearing officer concluded the evidence was insufficient to impute liability to Butler for Santa Cruz's actions in violation of Chapters 687, 817, or 520, Florida Statutes.

The findings on which this conclusion is based are inconsistent with the parties' prior Stipulated Agreement that at all times material, Butler was the General Manager for Santa Cruz. (Stip. p. 12, No. 7.) Furthermore, it fails to consider Butler's testimony in which he admitted that he had been employed by Santa Cruz as an Account Representative in both the Origination and Customer Service Departments; that he was presently employed by Santa Cruz as its General Manager; that as a General Manager, it was Butler's responsi- bility to "oversee the operation"; and that Butler supervised ten Santa Cruz employees in three of four Operations Divi- sions: Origination, Customer Service, and Shipping. (Tr,

p. 118.) It overlooks the fact that, as a party, Butler's testimony constitutes factual admissions.

At the hearing, Petitioner also presented the testimony of Edward Wong ("Wong") a Santa Cruz employee, who testified that he was an Account Representative for Santa Cruz in the Origination Department, that Wong was a supervisor for the Origination Department, and that Wong was supervised by Butler. (Tr, pp. 130-131.) Moreover, Cheryl Holmes ("Holmes") testified that she had been employed by Santa Cruz as an Account Representative in the Customer Service Depart- ment where she was supervised by Hector Ramos, who in turn was supervised by Butler. (Tr, p. 54.) Contrary to the hearing officer's conclusion (R.O. p. 21-12.) , it is apparent from Butler's, Wong's, and Holmes' testimony that Butler exercised substantial supervisory and managerial responsibil- ity within Santa Cruz, and was in fact a part of management, rather than simply a salaried employee exercising an "unidentified level of supervisory authority." The Hearing Officer's specific aforesaid Findings of Fact are therefore rejected as not based upon competent, substantial evidence. Based on his supervisory and managerial responsibilities within Santa Cruz, Butler meets the technical definition of a "principal" of a loan broker as contained in Section 687.14(5), Florida Statutes. Pursuant to Section 687.142 each principal of a loan broker may be sanctioned for the actions of the loan broker, its agents and employees. It is therefore appropriate that Butler be sanctioned for causing or permitting Santa Cruz after July 1, 1991, to act in

violation of Chapter 687, Florida Statutes. similarly, as general manager for the corporation, Butler is an agent of Santa Cruz and has also violated those statutes regulating the conduct of credit service corporations

which Santa Cruz was found to have violated. He is therefore subject to sanctions for violating Chapter 817, Florida Statutes.

The Petitioner takes exception at Paragraph 8 to the hearing officer's assertion that the Department failed to adequately notify Butler of the charges against him in the Amended Administrative Complaint. This exception misstates the hearing officer's assertion. The hearing officer stated that "the Department never notified Butler that he was defending himself in his capacity as General Manager since he was not charged as such." (R.O. Conclusions of Law, Page 21). At issue is not notice of the charges but rather notice of the capacity in which Butler was being charged, and therefore whether or not liability for the corporation's violations could be imputed to Butler. It is a well settled principle of administrative law that "although a Complaint filed by an administrative agency is not required to fulfill the technical niceties of a legal pleading, it must be specific enough to inform the accused with reasonable cer- tainty of the nature of the charges." Hunter v. Depart- ment of Professional Regulation, 458 So. 2d 842, (Fla. 2d DCA 1984) , citing Seminole County Board of County Commission- ers

1. Long, 422 So. 2d 938 (Fla. 5th DCA 1982); Maddox v. Department of Professional Regulation, 17 F.L.W. D104 (Fla. 1st DCA 1991). In this instance the Amended Administrative Complaint was specific enough to notify Butler of the charges against the corporation. Butler stipulated to being the general manager for Santa Cruz and testified as to his managerial responsibilities at Santa Cruz. He knew or should have known when he became general manager for Santa Cruz that he could be held liable for the actions of the company. Furthermore, evidence on issues not pleaded may be admitted if no objection is made. Butler did not object to testimony regarding his managerial status; he in fact stipulated and testified to that effect. Therefore, the fact that Butler was named as an account representative in the Amended Complaint rather than as general manager is an insufficient reason for failing to hold him responsible for the company's actions.

   
   

   The Petitioner urges at Paragraphs 15 through 20 that Butler be found personally liable for violations of Chapters 817 and 687, Florida Statutes, based on its conclusions that Butler was acting as a loan broker and a credit service organization. Petitioner states that the hearing officer erroneously failed to reach this conclusion. Section 687.14(4) (c), Florida Statutes, defines as a loan broker, any person who "acts for or on behalf of a loan broker for the purpose of soliciting borrowers...." Similarly, Section 817.7001(2)(a)3. defines as a credit service organization any person who, in return for consideration, provides advice or assistance to a buyer to improve his credit record or to obtain an extension of credit.

   
   

   In support of its position; Petitioner cites the deposition testimony it offered into evidence from nine (9) consumers, one of whom testified at the hearing, regarding their telephone conversations with Butler and other account representatives from Santa Cruz. The hearing officer consid- ered this testimony but did not accord much weight to it. (R.O. Concl. of Law, Page 22) . The hearing officer accepted the deposition testimony only as evidence of the manner in which Santa Cruz conducted its business, and not for the specific allegations of each conversation. As a result, she concluded there was no evidence of any solicitation or other advice by Butler individually as to any customer. p.20.) Because it is the hearing officer's function to weigh the evidence and to judge the credibility of the witnesses, an agency does not have the authority to reweigh the evidence or otherwise reinterpret the evidence. Heifetz v. Department of Business Regulation, 4.75 So. 2d. 1277 (Fla. 1st DCA 1985). Consequently, there was no competent, substantial evidence

   offered at the hearing to demonstrate that Butler solicited or provided advice and assistance to any particular customer. Furthermore, the "consideration" for services paid by the consumer was paid directly to Santa Cruz. Therefore, Butler does not meet the technical definition of either a credit service organization nor a loan broker.

   
   

   However, the Petitioner did present evidence at the hearing in the form of Butler's admission that he had been employed as an Account Representative by Santa Cruz. Holmes testified that account representatives sent prospective members a mailer containing a letter specifically advising the prospective member of all the steps necessary in order to obtain a credit card. One such letter, Petitioner's Exhibit #26, was signed by Butler.

   
   

   Santa Cruz was specifically found to be a credit service organization by the hearing officer. The "Dear Prospective Member" letter was specifically found by the hearing officer to be misleading and to contain omissions. (R.O., Concl. of Law, p.16.) Butler's testimony established that Butler had been an account representative for Santa Cruz. The deposition testimony presented at the hearing, which was accepted as competent substantial evidence of Santa Cruz' normal course of business, established that Santa Cruz' account representatives used this letter in the offer and sale of Santa Cruz' services as a credit service organiza- tion. Section 817.7005(4) prohibits a credit service organ- ization, its salespersons, agents and representatives from making or using any false or misleading representations or omitting any material facts in the offer or sale of the services of a credit service organization or from engaging in any act, practice or course of business that operates as a fraud or deception in connection with the offer or sale of the services of a credit service organization. This letter, signed by Butler, was admitted into evidence pursuant to a Prehearing Stipulation in wi~ich the parties admitted the genuineness and authenticity of the document. There was no objection to its admission. Thus, the hearing officer erroneously failed to reach the conclusion that Butler, individually, violated Section 817.7005(4) by engaging in a deceptive practice or course of business which operated as a fraud on Santa Cruz' customers.

   
   

   Therefore, Petitioner'S Exception to the hearing offi- cer's conclusions finding Butler not guilty of violating Chapters 687 and 817, Florida Statutes, as a corporate principal and individually are accepted.

   
   

   The Petitioner excepts to the hearing officer's state- ment that the Department impliedly permitted Santa Cruz to continue to engage in improper activity during the period of time elapsing between the filing of the Department's first Complaint in February, 1990, and the filing of the Amended Complaint in August, 1991. This conclusionary statement is not supported by the mere fact that Santa Cruz continued its business from February, 1990, through August, 1991. The record clearly reflects that Santa Cruz was notified that it was being charged as a party in the pending enforcement action as soon as it was determined to be an entity capable of being sued. Furthermore, due process requires that any party charged in an enforcement action have the opportunity to defend against the charges before final agency action is taken. Therefore the Petitioner's exception is accepted. However this erroneous conclusion does not affect the deter- mination of liability. It was simply one factor in the determination of the dollar amount of the sanctions to be imposed against Santa Cruz.

   
   

   PRELIMINARY STATEMENT

   1. The Department adopts and incorporates by reference the preliminary statement contained in Pages 1-2 of the Recom- mended Order entered in this proceeding as if set forth at length.

      
      

      FINDINGS OF FACT

      
      

   2. The Department adopts and incorporates by reference (except as modified in the Rulings on Exceptions), the Findings of Fact contained in Paragraphs 1-29 of the Recom- mended Order as if set forth at length.

      
      

      CONCLUSIONS OF LAW

      
      

   3. The Department adopts and incorporates by reference, (except as modified in the Rulings on Exceptions), the Conclusions of Law found on Pages 13-28 of the Recommended Order as if set forth at length.

FINAL ORDER

Having ruled on the Exceptions filed by the Petitioner and based on the foregoing findings of fact and conclusions of law, it is ORDERED:

1. That a Cease and Desist Order be and hereby is entered against SMI to cease and desist from all violations of Chapters 520, 687, and 817, Florida Statutes.

   
   

2. That SMI pay an administrative fine in the amount of ninety thousand thousand dollars ($90,000.00) , payable to the Division of Finance Regulatory Trust Fund within thirty (30) days from the date hereof.

   
   

3. That Jim Winders cease and desist from all violations of Chapters 520, 687, and 817, Florida Statutes.

   
   

4. That Jim Winders pay an administrative fine in the amount of six thousand dollars ($6,000.00) , payable to the Division of Finance Regulatory Trust Fund within thirty (30) days from the date hereof.

   
   

5. That Cecil Butler shall cease and desist from all violations of Chapters 687 and 817, Florida Statutes.

DONE AND ORDERED in Tallahassee, Florida, this 26th day of May, 1992.

GERALD LEWIS, as Comptroller

and Head of the Florida Department of Banking and Finance

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 PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE

DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

CERTIFICATE OF SERVICE

I hereby certify that a true copy of the foregoing Final Order with Notice of Rights has been furnished by U.S. mail to SMI, Jim Winders, and Cecil Butler, c/o Jan Peter Weiss, P.A., Parkway Plaza, Suite 21, 1280 - South Powerline Rd., Pompano Beach, Florida 33069, this 26th day of May, 1992.

MARGARET S. KARNIEWICZ

Assistat General Counsel

Department of Banking and Finance Suite 1302, The Capitol

Tallahassee, Florida 32399-0350

Copies furnished to:

Randall Holland, Director Division of Finance Office of the Comptroller The Capitol

Tallahassee, Florida 32399-0350

Bridget L. Ryan, Assistant General Counsel Office of the Comptroller Legal Division

The Capitol

Tallahassee, Florida 32399-0350

Clerk

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Docket for Case No: 91-002462

Orders for Case No: 91-002462