STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE AND ) TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 91-6302

)

KENNETH EL PASCO JENKINS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on January 14, 1992, in West Palm Beach, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: David D. Hershel, Esquire

Department of Insurance and Treasury

Larson Building, Room 412 Tallahassee, Florida 32399-0300

For Respondent: Franklin Prince, Esquire

Northbridge Centre, Suite 300-P

515 N. Flagler Drive

West Palm Beach, Florida 33401 STATEMENT OF THE ISSUE

The issue in this case is whether disciplinary action should be taken against the Respondent's insurance licenses and limited surety agent license because of the misconduct and violations of the Florida Insurance Code alleged in the Administrative Complaint.

PRELIMINARY STATEMENT

In a one count Administrative Complaint dated August 9, 1991, Petitioner, Department of Insurance and Treasurer (the "Department",) alleged that the Respondent, Kenneth El Pasco Jenkins, failed to timely return collateral placed with him by Earnest Justice for a bail bond written for Kim Whitford.

Petitioner charges that Respondent's conduct constitutes a violation of several separate subsections of Sections 648.442, 648.45 and 648.571, Florida Statutes. By letter dated August 30, 1991, Respondent admitted the allegations of paragraphs 1 through 8 of the Administrative Complaint, but contested the remaining allegations and requested a formal proceeding on the charges pursuant to Section 120.57(1), Florida Statutes. The case was referred to the Division of Administrative Hearings which noticed and conducted the hearing.

Respondent did not retain counsel until January 10, 1992. On that day, Respondent's counsel contacted the Division of Administrative Hearings requesting a continuance. A telephone conference hearing was conducted on that request on Monday, January 13, 1992, at which time Hearing Officer William J. Kendrick denied the request for a continuance and the case proceeded to hearing as scheduled on January 14, 1992.

Petitioner did not call any witnesses to testify at the hearing.

Petitioner offered four exhibits into evidence, all of which were accepted without objection. Petitioner's Exhibit 2 was a copy of a deposition of Earnest Justice. That deposition was accepted into evidence in accordance with Florida Rule of Civil Procedure 1.330(a)(3)(B).

Respondent testified on his own behalf and also presented the testimony of Gerald Michael Sandy, a licensed bondsmen in the State of Florida and the current president of the Florida Surety Agents Association. Respondent offered three exhibits into evidence at the hearing, all of which were accepted without objection.

As discussed in more detail in the Findings of Fact below, Respondent arranged a wire transfer of the cash collateral at issue in this case to the indemnitor, Earnest Justice, on the day of the hearing. At the hearing, it was not clear whether that money was actually received by the indemnitor.

Respondent requested that the record in this proceeding be left open in order to submit evidence documenting receipt of the refunded collateral by the indemnitor. Petitioner's objection to this request was overruled. The parties were directed to attempt to verify whether in fact the indemnitor received the refund. As set forth in Petitioner's Proposed Recommended Order filed on February 3, 1992, counsel for Petitioner contacted an individual at the indemnitor's home who identified himself as the indemnitor's son. That individual confirmed that his father received the refund. Similarly, as set forth in an affidavit filed by counsel for Respondent on February 3, 1992, Respondent's counsel personally contacted the indemnitor's son and advised him as to the availability of the money. Respondent's counsel received verbal verification that the wire transfer was received by the imdemnitor on or about January 29, 1992.

Respondent also requested the opportunity to supplement the record in this case with testimony from his current general agent. In view of the short time that Respondent's counsel had to prepare for the hearing and arrange for the attendance of witnesses, Petitioner's objection to this request was overruled. Respondent was granted ten days from the conclusion of the hearing to submit the sworn statement or affidavit of the general agent. The affidavit of Russell Faibish was filed on February 3, 1992. As discussed at the hearing, Petitioner was granted leave to further supplement the record to address the issues raised by the statements from Respondent's general agent within ten days after its filing. No such additional evidence has been submitted. Petitioner has objected to the affidavit as being untimely filed. While Respondent's Exhibit 4 was not submitted within the timeframe established at the conclusion of the hearing, Respondent submitted a Notice of Compliance dated January 23, 1992 (filed on January 27, 1992) advising of difficulty in obtaining the Affidavit and requesting additional time to file it of record. No objection was voiced by Petitioner and no prejudice to Petitioner has been demonstrated. Therefore, Respondent's Exhibit 4, the affidavit of Russell Faibish, has been reviewed and considered in the preparation of this Recommended Order.

A transcript of the hearing has been filed. Both parties have submitted proposed recommended orders. A ruling on each of the parties' proposed findings of fact is included in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made.

1. At all times pertinent hereto, Respondent has been licensed in the State of Florida as a limited surety agent (bail bondsman), a life and health agent and a general lines agent.

   
   

2. Respondent has been licensed as an insurance agent for more than eleven years. He has been a licensed limited surety agent for more than ten years. Pursuant to Section 648.442(3), Florida Statutes, all collateral received by Respondent or others acting under his supervision or control in transactions under his surety agent license constituted trust funds received in a fiduciary capacity.

   
   

3. At all times pertinent to this proceeding, Respondent has been doing business as Protective Insurance Center, Jenkins Bail Bonds.

   
   

4. Until early February of 1991, Respondent's general agent was Banker's Insurance Company. However, in early February, Respondent's relationship with that company was terminated. Respondent's current general agent is American Bankers Insurance Company of Florida. Russell Faibish, Respondent's general agent with American Bankers since February of 1991, has expressed via affidavit that Respondent is in good standing with that company and the company has been satisfied with his performance to date.

   
   

5. On January 25, 1991, Respondent, while acting in his capacity as a limited surety agent for Banker's Insurance Company, posted a surety bond, No. 339658, (the "Bond") in the amount of $752.00 to obtain the release of Kim Reinhold Whitford from custody in Clay County, Florida. In connection with the posting of the Bond, Respondent received from Earnest R. Justice (the "Indemnitor") a $75.00 premium payment and a $350.00 cash collateral payment.

   
   

6. At the time the Indemnitor arranged with Respondent for the issuance of the bond, the Indemnitor was advised that his collateral would be returned within twenty one days of the receipt of written notice of the discharge of the bond.

   
   

7. Respondent was provided with a notice from the Clerk of Court that Ms. Whitford was scheduled for a court appearance on April 3, 1991 for a "plea." Respondent never made any inquiry as to the results of that April 3, 1991 hearing. On April 3, 1991, the Bond was discharged and the obligation of the surety, Banker's Insurance Company, was released in writing by the County Court of Clay County, Florida.

   
   

8. Respondent contends that he never received notification of the discharge of the Bond.

   
   

9. While the Court document indicates that a notice of the discharge of the Bond was sent to Respondent at the time the requirements for the discharge were satisfied on or about April 3, 1991, no conclusive evidence was presented

   to establish that the notice of discharge was actually sent to or received by Respondent. Respondent denies ever receiving that document.

   
   

10. After Ms. Whitford was released from jail, the Indemnitor contacted Respondent's office several times in April and May of 1991 trying to arrange the return of his collateral. Respondent denies receiving any messages from the Indemnitor. The failure to receive the messages may have been due to office staff turnover. In any event, the evidence was sufficient to establish that the Indemnitor attempted to arrange for the return of his collateral on numerous occasions without success.

    
    

11. On August 9, 1991, the Petitioner filed the Administrative Complaint which is the basis for this proceeding against Respondent alleging that he failed to return the Indemnitor's collateral. Upon receipt of the Administrative Complaint, Respondent contacted the Clerk of Court, in Clay County, Florida to determine the status of the bond.

    
    

12. On August 30, 1991, the Clerk of Court, Clay County, Florida, sent Respondent a certified copy of the bond discharge.

    
    

13. Respondent claims that he first became aware of the discharge of the Bond and the Indemnitor's right to the return of the collateral when he received the August 30 certification from Clay County. Because an Administrative Complaint had already been filed, Respondent did not immediately refund the collateral for fear that such action could be construed as an attempt to influence a witness in the case. In order to avoid the appearance of attempting to influence a witness, Respondent waited until the day of the hearing to arrange to make a refund of the collateral available to the Indemnitor.

    
    

14. On January 14, 1992, Respondent sent a Western Union Money Transfer, control no. 7395574746, payable to the Indemnitor in the amount of $350.00 as return of the collateral.

    
    

15. Although the Indemnitor did not receive the return of his collateral until approximately eight to nine months after it was due, the collateral was ultimately returned and there is no other evidence in this case of any other financial loss to any member of the public.

    
    

16. On average, Respondent has between 100 to 150 active bond cases per month. Most of those bonds are written in Palm Beach County, where Respondent's business is located. In this case, Respondent arranged for a "teletype bond" whereby the arrangements for the bond were made in Palm Beach County and notification of the posting of the bond and authorization for the release of the prisoner were transmitted via teletype to Clay County.

    
    

17. Respondent contends that he reviews his active cases on a quarterly basis to confirm the status of the bonds. Nevertheless, it took almost six months for Respondent to determine that the requirements of the Bond in this case had been fully satisfied. No justifiable excuse was given for this delay. However, in mitigation, it does appear that the long distance nature of the transaction, the change in Respondent's general agent and office staff turnover all contributed to the delay in refunding the Indemnitor's collateral.

    
    

18. Respondent has had three Administrative Complaints filed against him since 1985. The first Administrative Complaint was filed on June 26, 1985 and alleged that Respondent failed to provide required documentation of his assets to the Department. Pursuant to a Consent Order entered on August 6, 1985,

    Respondent was fined $200 and placed on probation for one year as a result of this charge. The most serious and pertinent prior administrative proceeding against Respondent was commenced by an Administrative Complaint dated November 17, 1987. That complaint alleged, among other things, that Respondent failed to return collateral to at least two clients. In April of 1989, the parties entered into a settlement stipulation regarding these charges pursuant to which Respondent was suspended for one year and fined $1,000.00. He was also required to make resitution to several individuals who had not been identified in the Administrative Complaint in that case. No explanation has been provided regarding the "restitution" required to be made to those individuals. The third case involved an Emergency Suspension Order entered on March 16, 1988. That Order was dissolved on September 20, 1988 when the underlying criminal charges were nolle prosequi.

    
    

19. Respondent has had several IRS liens filed against him and there is currently a foreclosure action pending against his house. However, no specific information was provided regarding the status of those cases. Respondent contends that he is vigorously contesting all of those matters and he believes they will be favorably resolved.

    
    

20. The evidence in this case suggests that Respondent is currently involved in disputes with some other customers regarding the return of collateral. The evidence did not establish the exact number or the facts surrounding those disputes. Respondent contends that all of those disputes are related to problems with or caused by his prior General Agent. No conclusions as to the merits of those complaints can be drawn from the evidence presented in this case.

    
    

21. Gerald Michael Sandy, a licensed bondsman in the State of Florida and the current president of the Florida Surety Agents Association, testified on behalf of the Respondent in this matter. He indicated that on approximately 40% of the bonds that are executed, the Courts do not provide written notice of the discharge. However, Mr. Sandy conceded that even if written notification from a court is not received, the bail bondsman is primarily responsible for determining whether a bond has been discharged and a bail bondsman must immediately respond to the inquiries of an indemnitor regarding the return of collateral.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

23. The Petitioner has the burden to prove by clear and convincing evidence all essential allegations made against Respondent. See, Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

    
    

24. The Administrative Complaint alleges that Respondent violated sections 648.442(1), 648.442(4), 648.45(2)(e), 648.45(2)(g), 648.45(2)(h), 648.45(2)(j), 648.45(2)(n), 648.45(3)(b), 648.45(3)(d), and 648.571, Florida Statutes. Those provisions provide as follows:

    
    

    648.442(1) Collateral security or other indemnity accepted by a bail bondsman, except a promissory note or an indemnity agreement,

    shall be returned upon final termination of liability on the bond...

    (4) When the obligation of the surety on the bond or bonds has been released in writing by the court, the collateral shall be returned to the rightful owner as agreed in the indemnity agreement unless another disposition is provided for by legal assignment of the right to receive the collateral to another person.

    * * *

    648.45(2) The department shall... suspend [or] revoke...any license... issued under this

    chapter or the insurance code...for any violation of the laws of this state relating to bail or

    any violation of the insurance code or for any of the following causes:

    * * *

    (e) Demonstrated lack of fitness or trustworthi- ness to engage in the bail bond business.

    * * *

    1. Fraudulent or dishonest practices in the conduct of business under the license or appointment.

    2. Misappropriation, conversion, or unlawful withholding of moneys belonging to a surety, a principal, or others and received in the conduct of business under a license.

    * * *

    (j) Willful failure to comply with or willful violation of any proper order or rule of the department or willful violation of any provision of this chapter or the insurance code.

    * * *

    (n) Failure to return collateral as required by s. 648.571.

    648.45(3)(b) Violation of any law relating to the business of bail bond insurance or violation of any provision of the insurance code.

    * * *

    (d) Showing himself to be a source of injury or loss to the public or detrimental to the

    public interest or being found by the department to be no longer carrying on the bail bond business in good faith.

    * * *

    648.571 A bondsman who has taken collateral or an insurer or managing general agent who holds collateral as security for a bail bond shall, upon demand, return the collateral to the person from whom it was received within

    21 days after the bail bond has been discharged in writing by the court.

    
    

25. As indicated above, pursuant to Section 648.45(2), Florida Statutes, Petitioner is authorized to suspend or revoke any license issued under Chapter 648 if the licensee violates any subsection of that statute or the insurance

    code. The Department also has the authority to impose an administrative fine or probation pursuant to Sections 648.52 and 648.53, Florida Statutes. Section

    648.50 provides that upon suspension or revocation of any license as a limited surety agent, the Department shall at the same time suspend or revoke all other licenses or appointments which may be held by the licensee under the Florida Insurance Code.

    
    

26. The evidence in this case established that Respondent failed to timely return to the Indemnitor, Ernest Justice, the $350.00 collateral put up for the Bond. The Bond was discharged on April 3, 1991 and the court records indicate that notification of that discharge was sent to Respondent. Mr. Justice made numerous attempts to contact Respondent by calling Respondent's office and leaving messages in order to request and demand return of the collateral. The collateral was not returned until the day of the final hearing. Based on these facts, Respondent has violated sections 648.442(1) and (4), 648.45(2)(h) and (n), 648.45(3)(b) and 648.571, Florida Statutes.

    
    

27. Respondent contends that he was not obligated to return the collateral until he received written certification from the court that the Bond had been discharged. Mr. Sandy confirmed that many bail bondsmen interpret the statute as not requiring a return of collateral until written notification is received. While this interpretation may be widespread, it is not consistent with the statute and does not provide a defense to the charges in this case. However, there was no conclusive evidence of willful or fraudulent conduct on the part of Respondent. Therefore, the evidence was insufficient to establish violations of Sections 648.45(2)(g) and (j) or 648.45(3)(d), Florida Statutes.

    
    

28. While the violations established in this case are serious, they do not justify putting Respondent out of business permanently. Respondent has had three previous Administrative Complaints filed against him. Thus, there is cause for concern. The evidence presented regarding those prior cases indicates that only one of those cases is particularly relevant. In 1989, Respondent was disciplined for failing to return collateral. This prior history of failing to return collateral mandates more significant penalties than would ordinarily be applied for the violations established in this case. However, Petitioner's contention that all of Respondent's licenses should be revoked is unduly harsh based upon the evidence presented.

    
    

29. While Petitioner contends there are other individuals to whom Respondent has not returned collateral as required, insufficient evidence was presented in his case to support that conclusion.

    
    

30. Apparently, Respondent is having personal financial problems, as indicated by the IRS liens filed against him and the foreclosure action pending against his home. Petitioner contends that in view of the prior administrative actions, as well as Respondent's personal financial condition, Respondent demonstrates a lack of fitness and trustworthiness to continue as an insurance agent justifying a finding that Respondent has violated section 648.45(2)(e), Florida Statutes and Respondent's licenses should be revoked. This conclusion is also rejected as unduly harsh. The evidence presented regarding Respondent's financial problems was inconclusive. While Respondent should be closely monitored, it cannot be concluded based upon the evidence presented in this case that he should be permanently put out of business.

    RECOMMENDATION

    
    

    Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered suspending Respondent's licenses for three months, placing him on probation for two years and assessing an administrative fine in the amount of $500.

    
    

    RECOMMENDED this 9th day of March, 1992, at Tallahassee, Florida.

    
    

    
    

    J. STEPHEN MENTON 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 9th day of March, 1992.

    
    

    APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-6302

    
    

    Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties.

    
    

    The Petitioner's Proposed Findings of Fact

    
    

    Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

    Reason for Rejection.

    
    

    1. Adopted in substance in	Findings	of	Fact	1.
    2. Adopted in substance in	Findings	of	Fact	1.
    3. Adopted in substance in	Findings	of	Fact	2.
    4. Adopted in substance in	Findings	of	Fact	3.
    	Findings	of	Fact	5.
    7. Adopted in substance in	Findings	of	Fact	5.
    8. Adopted in substance in	Findings	of	Fact	7.

    1. Rejected as unnecessary.

    2. Adopted in substance in

    
    

    1. Subordinate to Findings of Fact 13 and 14 and addressed in the Preliminary Statement.

       
       

    2. Subordinate to Findings of Fact 6 and 10.

    3. Adopted in substance in Findings of Fact 8.

       
       

    4. Subordinate to Findings of Fact 18.

       
       

    5. Subordinate to Findings of Fact 19.

       
       

    6. Subordinate to Findings of Fact 20.

The Respondents's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact

of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

10g. Rejected as unnecesdsary.

11a. Adopted in substance in Findings of Fact 21. 11b. Adopted in substance in Findings of Fact 21. 11c. Adopted in substance in Findings of Fact 21.

12. Adopted in substance in Findings of Fact 4.

COPIES FURNISHED:

David D. Hershel, Esquire Department of Insurance and

Treasury

Larson Building, Room 412 Tallahassee, Florida 32399-0300

Franklin Prince, Esquire Northbridge Centre, Suite 300-P

515 N. Flagler Drive

West Palm Beach, Florida 33401

Tom Gallagher

State Treasurer and Insurance Commissioner

Department of Insurance and Treasurer The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Bill O'Neil

Deputy General Counsel Department of Legal Affairs The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

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: 91-006302

Orders for Case No: 91-006302