STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE, )
AND TREASURER )
)
Petitioner, )
)
vs. ) CASE NO. 93-1460
)
ALEX J. CAMPOS, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was conducted in this case on March 7- 11, 1994, and April 11-14, 1994, in Tallahassee, Florida, before Stuart M. Lerner, a duly designated Hearing Officer of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: S. Marc Herskovitz, Esquire
Elise M. Matthes, Esquire Department of Insurance Division of Legal Services 612 Larson Building
Tallahassee, Florida 32399-0333
For Respondent: Steven M. Malono, Esquire
Michael J. Thomas, Esquire Mang, Rett & Minnick, P.A. 660 East Jefferson Street Tallahassee, Florida 32301
STATEMENT OF THE ISSUES
Whether the Department of Insurance (hereinafter referred to as the "Department") should remove Respondent from the office of President of Perry & Company, a premium finance company authorized to do business in Florida, pursuant to Section 624.310, Florida Statutes, for the reasons set forth in the Administrative Complaint?
PRELIMINARY STATEMENT
On or about February 9, 1993, the Department of Insurance (hereinafter referred to as the "Department") issued an Administrative Complaint 1/ against Respondent announcing its intention "to enter an order removing [him] from office at Perry & Company pursuant to section 624.310, Florida Statutes," based upon certain conduct in which he allegedly engaged in his "capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company" "from 1990 to the date the company was liquidated and placed into
receivership." The Administrative Complaint alleged that Respondent "knew or should have known of the financial condition of the company" and that he "contributed to the insolvency of the insurer." In addition, in paragraphs 8 through 13, it alleged the following:
On or about May 10, 1991, the Department of Insurance issued an Immediate Final Order ordering First Miami Insurance Company, inter alia, to cease and desist writing any new business. This Order was issued due to serious concerns regarding the company's financial condition and the danger to the financial health, safety and welfare of the insurance buying public, policyholders, subscribers, claimants and creditors this financial condition created.
It was ultimately shown that indeed the Department's concerns regarding the company's financial condition were justified and that tremendous harm resulted to the health, safety and welfare of the public, policyholders, subscribers, claimants and creditors of First Miami Insurance Company culminating in the liquidation of First Miami Insurance Company. For example, new business was solicited on behalf of First Miami Insurance Company when it was obvious the company was unable to meet its current obligations. First Miami policyholders were not provided legal defenses they had contracted for and judgments were allowed to be entered against them. In excess of One Million Dollars ($1,000,000) in subrogation moneys owed to other insurers went unpaid while First Miami policyholders were sued by these insurers.
Your actions and reckless disregard of the true financial condition of First Miami Insurance Company from 1990 to the date the company was liquidated in your capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company evidences a lack of fitness and/or trustworthiness to engage in the business of insurance.
Your statements made to the Department regarding the financial condition of First Miami Insurance Company from 1990 to the date the company was liquidated and placed into receivership in your capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company were material misrepresentations made with a reckless disregard for the true financial condition of First Miami Insurance Company.
Your actions and reckless disregard of the true financial condition of the First Miami Insurance Company from 1990 to the date the company was liquidated and placed into receivership in your capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company evidence a total mismanagement of business activities of First Miami Insurance Company.
Your actions and reckless disregard of the true financial condition of the First Miami Insurance Company from 1990 to the date the company was liquidated and placed into receivership in your capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company evidence a total breach of your fiduciary duties to the insurance- buying public, policyholders, subscribers, claimants and creditors of First Miami Insurance Company.
According to the Administrative Complaint, in engaging in the foregoing conduct, Respondent violated the provisions of Section 624.310(4)(a)1., 6. and 7., Florida Statutes, and Section 626.9541(1)(w)1., Florida Statutes.
Respondent denied the allegations of wrongdoing advanced in the Administrative Complaint and requested a formal hearing on these allegations. On March 12, 1993, the matter was referred to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct the formal hearing Respondent had requested.
At the formal hearing, which was held on March 7-11, 1994, and April 11-14, 1994, 2/ a total of 13 witnesses testified: Clyde Galloway, Jr.; Erin Doherty; Thomas Terfinko; Lisette Lozano; William Whitcomb; Hugo Kummer, Jr.; Respondent; Carlos Lidsky; Stephen Rubin; Richard Perry; Idania Llanio; Robert Urich; and Michael Burns. In addition to the testimony of these 13 witnesses, a total of 160 exhibits (Petitioner's Exhibits 1 through 28,
30 through 92 and 95, and Respondent's Exhibits 1 through 8, 11, 13 through 19,
21 through 32, 34 through 35, 38, 41 through 43, 45 through 52, 54 through 58,
60 through 61, 64 through 72, 74 through 76, 79 through 81 and 85 through 88) were received into evidence.
At the conclusion of the evidentiary portion of the hearing, the Hearing Officer, on the record, advised the parties of their right to file post-hearing submittals and established a deadline for the filing of such submittals. The deadline was subsequently extended on three occasions at the Department's request. The Department and Respondent timely filed their post-hearing submittals on August 15, 1994.
The parties' post-hearing submittals contain what are labelled as proposed "findings of fact." The "findings of fact" proposed by the parties have been carefully considered and are specifically addressed in the Appendix to this Recommended Order. 3/
FINDINGS OF FACT
Based upon the evidence adduced at hearing, the factual stipulations into which the parties have entered, and the record as a whole, the following Findings of Fact are made:
Respondent's Early Employment
After graduating from Miami Dade Community College with an A.A. degree in computer science, Respondent was employed as a teller, and then as the head teller, at Pan American Bank in Miami, Florida. He remained in the employ of Pan American Bank for approximately six months.
Respondent then went to work for Brickell Bank, another bank located in the Miami area. He started as a new accounts representative, but ultimately became the bank's "in-house computer person" and worked on various computer- related projects for the bank. Respondent was employed by Brickell Bank for a period of two to three years.
Respondent left Brickell Bank to become the Vice President of Computer Operations at General Bank.
At the time, First Miami Insurance Company (hereinafter referred to as "First Miami"), as well as its immediate parent corporation, General Trust Mortgage Corporation, were wholly owned subsidiaries of General Bank. First Miami was a Florida domestic property and casualty insurer, specializing in the issuance of "non-standard" automobile insurance policies. It was initially licensed by the Department in 1988.
The majority shareholders of General Bank were Pedro Ramon Lopez and his wife, Teresa Saldise, who, at all times material to the instant case were practicing attorneys licensed to practice law in the State of Florida.
Lopez was General Bank's Chairman of the Board. Saldise was its Vice Chairman of the Board.
In late 1988 or early 1989, Respondent, who at the time had no previous experience working in the insurance industry, was assigned by General Bank the task of better automating and otherwise improving the efficiency of First Miami's operations. First Miami was having problems with its telephone and computer systems which, combined with other operational deficiencies, were resulting in delays in policy issuance and claims payments. The Department had received complaints from consumers regarding these delays, which it was investigating.
During the investigation, Respondent met with a Department official and explained to him First Miami's computer operations.
In the middle of 1989, Respondent became a full-time employee of First Miami. He was given the same title that he had had with General Bank, Vice President of Computer Operations. As Vice President of Computer Operations, Respondent initially reported to Frank Santanaria, who at the time was First Miami's Chief Financial Officer. Subsequently, when he assumed greater responsibility for the operations of the company, he reported to Diana Madero, First Miami's then Executive Vice President.
The "Spin Off" of First Miami
In August or September of 1989, General Bank decided to "spin off" both First Miami and General Trust Mortgage Corporation and make them independent of the General Bank corporate structure. The "spin off" was intended to satisfy the concerns of federal banking regulators.
At the time of the "spin off," Respondent was actively involved in the day-to-day operations of First Miami.
Although he did not participate in the decision to "spin off" First Miami, nor was he involved in taking any of the steps necessary to effectuate the "spin off," he was aware, before the "spin off" occurred, that the "spin off" decision had been made and was in the process of being implemented.
The Post-"Spin Off" First Miami
Following the "spin off," Lopez transferred his ownership interest in First Miami to Saldise.
From the date of this transfer until First Miami's liquidation, Saldise was the principal shareholder and President of First Miami and, as such, the person in effective control of the company. She exercised such control through a holding company, First Miami Holding Company, in which she had a 75 percent ownership interest.
Respondent was either an officer or director, or both, of First Miami Holding Company from May 23, 1990, until the administrative dissolution of the company on October 9, 1992.
Although Lopez was neither a shareholder, officer nor director of First Miami following the transfer, he served as a consultant to the company and, along with his wife, made strategic decisions about the company's direction, its business activities, and its investments.
In making these decisions, Saldise and Lopez occasionally sought the legal advice of other attorneys, including Stephen Rubin, with whom they dealt directly.
Rubin is a member of The Florida Bar 4/ who has been practicing law since 1969, following his graduation from Columbia University Law School. 5/
He is primarily a litigator who specializes in complex corporate, commercial and regulatory matters, however, he also does general transaction work.
Respondent replaced Diana Madero as First Miami's Executive Vice President, in charge of the company's day-to-day operations, sometime around the time of the "spin off" 6/ and he remained in that position until the Department's takeover of the company in June of 1992, receiving a salary of approximately $75,000.00 a year.
As Executive Vice President, Respondent reported to Saldise and Lopez.
For a period of time following the "spin off" Respondent also held the office of Treasurer.
From at least February of 1990, until the Department's takeover of First Miami, Respondent was on its Board of Directors.
As of December 31, 1991, the other members of the Board were as follows: Saldise; Raimundo Aleman, the Vice President of Accounting and Treasurer, who was responsible, throughout the period that Respondent was Executive Vice President, for the preparation of all of company's financial statements and reports; Orlando Roberto Soto, the Secretary; and Juan Saldise.
November, 1989 Petition for Order to Show Cause
Following the "spin off," First Miami acquired approximately
$5,000,000.00 of General Bank stock.
In November of 1989, federal banking regulators placed General Bank into conservatorship and seized its assets. Such action rendered worthless the General Bank stock held by First Miami.
Following the takeover, an article appearing in a Miami newspaper quoted the Department's General Counsel as having said that First Miami was insolvent and that its majority shareholder, Saldise, and her husband, Lopez, had "walked off" with the $5,000,000.00 that First Miami had paid for the General Bank stock that was now worthless.
Shortly thereafter, the Department filed in Leon County Circuit Court a Petition for Order to Show Cause against First Miami alleging that there was reason to believe that the company was insolvent.
First Miami's business declined after the publication of the newspaper article and the filing of the Petition for Order to Show Cause.
Independent insurance agents and premium finance companies were reluctant to continue their dealings with the company.
Representatives of two large premium finance companies that had done a considerable amount of First Miami business, Perry & Company and Equivest Premium Finance, visited with Respondent and others at First Miami's offices to inquire about First Miami's solvency.
During the pendency of the Petition for Order to Show Cause, the Department, with the assistance of auditors employed by Coopers & Lybrand, conducted an investigation of First Miami.
The investigation was headed by Curt O'Shields.
During his investigation, O'Shields had discussions with Respondent regarding First Miami's capital and surplus position as of September 30, 1989.
Following the investigation, in a February 7, 1990, memorandum to the Department's General Counsel, O'Shields recommended that the Department "settle with [First Miami] and drop the rehabilitation proceedings." O'Shields noted in his memorandum that "[o]perationally, the Company has greatly improved" and "[f]inancially, [it] ha[s] provided evidence to support admitting certain assets sufficient to make the Company solvent."
O'Shields' recommendation was followed.
On or about February 13, 1990, the Department and First Miami entered into a stipulation which provided as follows:
THIS STIPULATION is by and between the State
of Florida, Department of Insurance and Treasurer and First Miami Insurance Company. For and in consideration of the mutual promises and covenants set forth hereinbelow, the parties stipulate and agree as follows:
The parties stipulate and agree to entry of an Order of Dismissal of Civil Action 89-4343
pending in the Circuit Court of the Second Judicial Circuit In and For Leon County, Florida, and further agree immediately upon the execution of this Stipulation to enter into the Stipulation for Dismissal attached hereto as Exhibit A.
First Miami agrees that it will not carry as an admitted asset any stock it may own in General Bank.
The parties stipulate and agree that because Forum Reinsurance Company Limited at this time is not an approved reinsurer for purposes of its 1989 annual statement First Miami may not carry as an admissible asset the amount of reinsurance ceded in excess of the amount of First Miami's trust; provided, however, that the Department agrees to promptly review an application for approval of Forum Reinsurance Company Limited as an approved reinsurer, or a request for approval of Forum
Reinsurance Company Limited as a SNAR, in good faith and on the same basis as it would review an application from any other insurer. 7/
First Miami for purposes of its 1989 annual statement shall carry its wholly-owned subsidiary,
PRLS, Inc. 8/ as an admitted asset at a value of $650,000.00; provided however, that said
valuation is contingent on First Miami's obtaining a fully executed contract for sale of said subsid- iary by June 30, 1990. If First Miami does not obtain an executed contract for sale of said sub- sidiary by June 30, 1990, on its June 30, 1990 financial statement and thereafter it shall not carry PRLS, Inc. as an admitted asset.
Respondent, approved, but did not execute, the stipulation.
The Stipulation for Dismissal, attached to the stipulation as Exhibit A, provided that the parties had "resolved all matters relevant that gave cause to the filing of the PETITION FOR ORDER TO SHOW CAUSE" and that "THEREFORE, the parties agree[d] to entry of an Order by the Court dismissing this action."
Such an order was entered on February 13, 1990.
Carrera Insurance Underwriters and the "No Down Payment" Program
After the entry of the Order of Dismissal, First Miami engaged in a campaign to repair its relationships with independent insurance agents and premium finance companies.
It also formed, in June of 1990, a subsidiary, Carrera Insurance Underwriters (hereinafter referred to as "Carrera"), so as to reduce its reliance upon business generated by independent insurance agents.
Saldise, Lopez, Madero, Soto and Respondent were the initial members of Carrera's Board of Directors.
To attract business, Carrera, at the suggestion of Lopez, instituted a "no down payment" program.
Based on the legal research he had done, Lopez concluded that the "no down payment" program was not unlawful.
Other insurance companies, independent agents, and agent associations, such as the Latin-American Agents Association and the Specialty Agents Association, complained to the Department about the program.
After having received these complaints, the Department contacted First Miami and a meeting between representatives of First Miami and the Department was arranged.
The meeting was held in Tallahassee.
Among First Miami's representatives at the meeting were Saldise, Lopez and Respondent.
The primary spokesperson at the meeting for First Miami was Lopez.
Respondent's role at the meeting was to address computer-related issues.
Neither at the meeting, nor at any other time, did the Department advise First Miami that it had concerns regarding the legality of the "no down payment" program.
The Forum and Munauto Reinsurance Agreements
First Miami's reinsurance agreement with Forum Reinsurance Company Limited (hereinafter referred to as "Forum"), which was referred to in the February 13, 1990, stipulation between First Miami and the Department, had been entered into on November 27, 1989.
The reinsurance agreement with Forum was negotiated, on First Miami's behalf, by Erin Doherty of Saturn Intermediaries. She received input regarding the preferences of First Miami primarily from Saldise, Lopez and Madero. Respondent assisted in the negotiations by providing computer-generated reports and data.
Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez.
In conjunction with this reinsurance agreement, a Trust Agreement was entered into by Forum (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee").
Under the Trust Agreement, First Miami, rather than Forum, had the authority to direct and control the investment of trust fund assets. This was an unusual arrangement inasmuch as it is generally the reinsurer which exercises such direction and control.
First Miami directed that the assets of the Forum reinsurance trust fund be invested in insurance premium finance contracts of South Florida Premium Finance Company.
South Florida Premium Finance Company was a "captive" premium finance company. It financed only premiums due on policies issued by First Miami.
First Miami owned 9.09 percent of the shares of South Florida Premium Finance Company. General Trust Mortgage Corporation owned the remaining shares.
Respondent was an officer and director of South Florida Premium Finance Company from February 21, 1990, until October 9, 1992, the date of the administrative dissolution of the corporation.
From August 1, 1989, until June 5, 1992, Respondent was either an officer or director, or both, of General Trust Mortgage Corporation.
First Miami sought the Department's approval of its reinsurance arrangement with Forum. By letter dated February 26, 1990, which read as follows, the Department granted the requested approval:
This is pursuant to your request for the Department to approve Forum Reinsurance Co., Ltd. of Bermuda ("Forum Re") as a "Satisfactory Non-Approved Reinsurer" for purposes of taking
credit in First Miami Insurance Company's ("First Miami") accounting and financial statements for calendar year ended December 31, 1989.
Your request is hereby granted under Sec.
624.610(2)(b)1, F.S., with the condition that the reinsurance contract entered into by First
Miami and Forum Re shall be commuted on or before December 31, 1990 and replaced with another reinsur- ance contract satisfactory to the department. 9/
Forum commuted its reinsurance agreement with First Miami in July or August of 1990. 10/
Forum notified Doherty of its action.
Doherty then contacted First Miami and discussed the matter with Respondent.
Respondent asked Doherty to find an admitted reinsurer for First Miami that would be agreeable to allowing First Miami to exercise control over the investment of reinsurance trust fund assets.
Doherty unsuccessfully attempted to locate such a reinsurer for First Miami.
On October 11, 1990, First Miami entered into a written reinsurance agreement with Munauto, S.A., a non-admitted Spanish reinsurer, which covered both current and prior business and was particularly advantageous to First Miami. In conjunction therewith, a Trust Agreement which permitted First Miami to direct and control the investment of trust fund assets was entered into by Munauto (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). 11/
The reinsurance agreement contained an addendum which was signed by Respondent in his capacity as First Miami's Executive Vice President.
The Munauto reinsurance and trust agreements were drafted by First Miami's retained attorney, Stephen Rubin.
Saldise and Lopez had negotiated these agreements on behalf of First Miami. They first met with Munauto representatives in Spain approximately two to three months before the written agreements were executed. Following this initial meeting, Munauto's Chairman of the Board and its President visited First Miami's offices in Miami where they continued their discussions with Saldise and Lopez. During their visit, they also met with Respondent, who provided them with information regarding First Miami's operations and introduced them to the department heads.
Doherty was not in any way involved in the negotiations that culminated in the execution of these agreements. In fact, she was not even aware of the existence of the agreements.
As requested by Respondent, Doherty continued her efforts to obtain a suitable reinsurer for First Miami even after these agreements had been executed.
Respondent had made such a request at the direction of Saldise, who wanted to explore other reinsurance options.
On its Quarterly Statement for the quarter ending September 30, 1990, which was signed by Respondent and filed with Department on November 15, 1990, First Miami provided the Department with the following advisement:
Forum has cancelled the Reinsurance Agreement. Munauto S.A. has replaced Forum Reinsurance Co. (P's FOF 46, 1st and 2nd sent)
The Munauto reinsurance and trust agreements, however, were never submitted to the Department for approval.
Investment in Premium Finance Contracts
First Miami was advised by its retained attorney, Stephen Rubin, that it was legally permissible for it invest in the premium finance contract accounts receivable of South Florida Premium Finance Company.
Rubin further informed First Miami that it was his legal opinion that First Miami's ownership of these premium finance contract accounts receivable constituted an admitted asset of First Miami under the Insurance Code. He explained that, in his view, First Miami's "participations" in these accounts receivable, based upon promissory notes, were tantamount to "securities," within the meaning of Section 625.012, Florida Statutes.
Respondent was among those at First Miami with whom Rubin discussed this matter, and he relied upon Rubin's legal advice.
The $1,000,000.00 Dividend
On January 29, 1991, at a meeting of the Board of Directors of South Florida Premium Finance Company, the Board declared a "cash dividend of
$1,000,000 to the shareholders of record as of December 1, 1990:" First Miami, which held 9.09 percent of the shares; and General Trust Mortgage Corporation, which held 90.91 percent of the shares.
Saldise and Respondent were among the Board members present at the meeting.
After the meeting, South Florida Premium Finance Company issued the following checks to First Miami and General Trust Mortgage Corporation on the dates and in the amounts indicated: check number 003541, dated May 10, 1991, to First Miami in the amount of $61,325.80; check number 003542, dated May 10, 1991, to General Trust Mortgage Corporation in the amount of $613,325.51; check number 003543, dated April 26, 1991, to First Miami in the amount of $37,387.32; check number 003545, dated April 26, 1991, to General Trust Mortgage Corporation in the amount of $373,914.31. 12/
All four of these checks were signed by Respondent and Aleman for South Florida Premium Finance Company.
They all cleared the bank on May 13, 1991.
The Immediate Final Order
On or about March 1, 1991, the Department received First Miami's Annual Statement for the year ending December 31, 1990.
The Department reviewed the statement to ascertain, applying the principles of "statutory accounting" (which differ from generally accepted accounting principles or "GAAP accounting"), First Miami's current ability to meet its obligations. 13/
The review caused the Department to be concerned that First Miami was not currently able to meet its obligations.
On March 12, 1991, the Department sent First Miami a letter in which it stated the following:
A review of First Miami Insurance Company's Annual Statement indicates that real estate (page 2, line 4.1) was listed at appraised
market value, instead of cost, less depreciation.
Premium and Agents' balances and installments booked but deferred and not yet due were $6,732,243 at December 31, 1990. Please explain the justification for the admission of this asset.
Further, please indicate, how much and when the unearned premium was set up for this asset.
Page 72, Schedule P-part 2b, line 12 shows a redun[dan]cy figure of (833), please explain this.
The above referenced filing inconsistencies reported in the 1990 Annual Statement should be revised and reported properly in the amended 1990 Annual Statement to be filed with the Department within fifteen (15) days from the date of your receipt of this letter.
In addition to the above reporting inconsistencies, the Department has conducted a Diversification analysis of First Miami Insurance Company's Annual Statement, which indicates that the company is not diversified by approximately $4,192,253. With respect to the improper diversification, please submit a business plan to the Department within thirty (30) days from the date of your receipt of this letter, indicating the company's plan of action to correct this concern.
Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me.
Two days later, on March 14, 1991, the Department wrote to Respondent advising him that it was "imperative that [he] submit to this Department upon receipt of this letter, Premium Volume Written, Policyholders Surplus, Earned Premiums, and Losses Incurred for the months of January and February, 1991."
Respondent responded immediately. In his cover letter to the Department, he stated the following:
As per your request, I am attaching a copy of our total page of premiums written for January. The net premium written is $1,110,697.20, our Data processing Department is producing the end of month February reports and should be available by 3:00 p.m. on March 15, 1991.
In order to determine our net surplus of January and February Mr. Raimundo Aleman, Vice President of Accounting, is presently working on producing these numbers. Please forgive us for not having these numbers available, but as you know we have spent January and February preparing the end of year blanket.
Mr. Aleman will have a full set of Financial Statements for January ready for you by March 22nd.
We believe that the February Financial Statement
will be completed by the second or third week of April.
Should you need further assistance in this matter, please do not hesitate to contact me.
In a follow-up letter dated March 27, 1991, Respondent informed the Department of the following:
As per your request, please be advised the accounting department has been able to finish the Financial Statement for January 1991.
Our net surplus is $3,535,987.00. We are continuing to close February 1991 and as soon as the numbers become available we will forward them to you.
Should you need further information regarding
the aforementioned, please do not hesitate to call me.
By letter dated April 9, 1991, the Department requested the following of Respondent:
Pursuant to our conversation on April 1, 1991 concerning issues that are important to the Department of Insurance please confirm in writing.
First Miami Insurance Company will not take credit for reinsurance because the reinsurer is an unauthorized Alien carrier, non-approved by the Department.
First Miami Insurance Company, Mrs Teresa Saldise, nor her husband, Mr. Pedro Ramon Lopez, have any investments in banks in the United States or abroad.
With regards to the 1990 Annual Statement, premiums, Agents Balances and installments booked but deferred
and not yet due were $6,732,243, please provide documents substantiating unearned premiums excluding net of reinsurance. In addition, how much of that balance is over ninety days old?
The Statement of Actuarial Opinion was not submitted with the Annual Statement, please remit within five
(5) days from receipt of this letter.
The company's short term assets less short term liabilities indicates a liquidity deficiency of
$4,504,955. What is the company doing to improve this deficiency?
Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me.
Respondent wrote to the Department on April 15, 1991. In his letter, he stated the following:
In response to your letter dated March 12th, 1991, in reference to our Annual Statement, please be advised of the following:
Premiums and Agents balances and installments booked but deferred, and not yet due were $6,732,243 at December 31, 1990. This amount reflects premium finance contracts that have been purchased from South Florida Premium Finance. The total of this amount is all outstanding monthly payments from insureds. The amount is backed by unearned premiums in the amount of
$11,627,613.73. The net of that amount is also reflected on page 3, number 9. Unearned premiums Part 2A, Column 5, Item 34.
Page 72 Schedule P, Part 2B line 12 shows a negative figure of $833. Please see attached.
I don't believe that an amended Annual Statement is necessary due to the fact that the above two numbers in my opinion are shown correctly. Should
you have any further questions about them let me know. In reference to the Diversification analysis of the
First Miami Insurance Company 1990 Annual Statement,
I am not sure what statute you are basing yourself on to determine whether there is a diversification problem nor how you arrive at the $4,192,253.00 figure. Can you please refer me to a particular statute or explain the manner you calculate the diversification analysis. If this amount reflects the amount invested in premiums, I believe it is a fully admitted asset according to statute 625.012(3). "Premium notes policy, policy loans, and other policy assets and
liens on policies and certificates of life insurance and annuity contracts and accrued interest hereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy."
Should you have any further questions regarding the above, please do not hesitate to call me.
On Friday, May 10, 1991, the Department issued an Immediate Final Order (hereinafter referred to as the "IFO") in which it directed that First Miami "CEASE AND DESIST instanter from writing any new, reinsurance and/or renewal business effective 5:00 P.M. Friday, May 10, 1991," inasmuch as grounds "exist[ed] for the immediate suspension or revocation of FIRST MIAMI'S certificate of authority." The IFO alleged that
FIRST MIAMI in the conduct of business under its certificate of authority
Is in unsound financial condition. (Section 624.418(1)(a), Florida Statutes)
Is using methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or the public. (Section 624.418(1)(b), Florida Statutes)
No longer meets the requirements for the authority originally granted. (624.418(1)(d), Florida Statutes)
Has violated any lawful order or rule of the department or any provision of this code. (Section 624.418(2)(a), Florida Statutes)
Is impaired or insolvent. (Section 624.418(3)(a), Florida Statutes
Has failed to have and keep to the extent of an amount equal to its entire reserve and the
minimum capital and surplus required to be maintained. (Section 625.305(1), Florida Statutes
Has entered into and ceded reinsurance to non-approved reinsurers. (Section 624.610(2)(b), Florida Statutes)
Has excess investments in subsidiaries and affiliates. (Section 625.325(2), Florida Statutes)
With respect to the issue of reinsurance, the IFO further, more specifically, alleged the following:
FIRST MIAMI took a credit for reinsurance in Forum Reinsurance Company, Ltd., a non-approved reinsurer, in the amount of $3,479,939.00, which contract, pursuant to agreement with the DEPART-
MENT, was to be replaced with another reinsurance contract satisfactory to the DEPARTMENT by December 31, 1990. In addition, FIRST MIAMI'S 1990 Annual Statement reflects a credit for reinsurance in Munauto Reinsurance, S.A., a non-approved reinsurer, in the amount of $6,358,231.00. The reinsurance contract was entered into in 1990 by FIRST MIAMI with a non-approved reinsurer and has not been approved by the Department in violation of Section 624.610, Florida Statutes. Since neither of these companies are approved by the Department, the Department cannot determine if either can satisfactorily pay current or future claims of the insureds in this state.
With respect to the "Premium and Agents' balances and installments booked but deferred and not yet due" referred to in the Department's March 12, 1991, letter to First Miami, the IFO alleged the following:
The balance of $6,732,243.00 due from FIRST MIAMI'S subsidiary and premium finance company, South Florida Premium Finance Company, consisting of FIRST MIAMI'S premiums, agents balances and installments shown on the books but deferred and not yet due was 201 percent of policyholders surplus. Such amounts should have been submitted to FIRST MIAMI at the time premiums were financed. As reflected on the 1990 Annual Statement, the amount represents a loan back to South Florida Premium Finance Company and as such, is a receivable from an affiliate which exceeds the allowable statutory limitation by $5,837,107.00 in violation of Section 625.325(2), Florida Statutes.
In addition, such amount is not shown as a loan on the 1990 Annual Statement for South Florida Premium
Finance Company. Pursuant to section 625.012, Florida Statutes, only those investments and loans held in accordance with the Florida Insurance Code may be considered in determination of financial condition.
Therefore the $5.8 million cannot be considered an asset of the company.
According to the IFO, although "FIRST MIAMI'S policyholders surplus as indicated on its 1990 annual statement was $3,347,596[, w]ith the adjustments of assets and liabilities required in order to comply with applicable statutes, FIRST MIAMI'S surplus [was] really a negative $7,498,838.00" and therefore it was "in violation of section 624.408, Florida Statutes which require[d] surplus of $1,370,321.00 and [was] impaired or insolvent."
The IFO did not specifically address First Miami's "no down payment" program.
First Miami received the IFO the afternoon of May 10, 1991, and immediately contacted its attorneys in Tallahassee for legal advice.
Respondent was involved in discussions with First Miami's attorneys concerning the IFO.
First Miami's Tallahassee attorneys sought and obtained, on Monday, May 13, 1991, an order from a Leon County Circuit Court judge enjoining the Department from enforcing the IFO.
Doherty was among the witnesses who gave testimony at the injunction hearing for First Miami. She testified that an admitted carrier, namely U.S. Capital Insurance Company (hereinafter referred to as "U.S. Capital"), was ready, willing and able to enter into a reinsurance agreement with First Miami. Doherty had begun negotiating with U.S. Capital, on behalf of First Miami, in 1990.
In addition to enjoining the enforcement of the IFO, the judge ordered First Miami to take the following action:
Within twenty-four (24) hours of the time this Order is entered, [First Miami] shall provide to the [Department] an English Language version
of any and all reinsurance Treaties or Agreements to which First Miami is currently a party, unless such English version treaties have been previously provided to [the Department].
No later than 5:00 p.m. on May 24, 1991, [First Miami] shall provide to the [Department] proof of existing reinsurance, if not already provided.
No later than 4:00 p.m. on May 21, 1991, [First Miami] shall deposit the aggregate amount
of One Million ($1,000,000.00) Dollars of its funds into the registry of the court or with the Division of Collateral Securities of the Office of the Treasurer as additional security for the issuance of this Order.
No later than 5:00 p.m. on May 24, 1991, First Miami Insurance Company, shall receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars and in exchange therefor shall give to the contributor a surplus note in the form and on the terms customarily approved by the Department of Insurance, and the value of the contributed asset shall not be available for the purpose of writing insurance.
[First Miami] shall file, in a timely manner, as required by law, any and all statutorily required, quarterly financial statements, and provide a copy
of same immediately to the [Department].
After obtaining the injunction, First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover by the Department in June of 1992.
The One Million Dollar Security Deposit
On May 14, 1991, Respondent and Aleman, in their capacities as officers of General Trust Mortgage Corporation, gave Sun Bank of Miami written "authorization to debit General Trust Mortgage Corporation master Account #0189000017703 the amount of $1,000,000 and issue a cashier[']s check payable to Teresa Saldise."
On or about May 15, 1991, Saldise deposited the check in her money market account at Commercial Trust Bank in Hialeah.
On or about May 22, 1991, Saldise withdrew from this account
$1,000,000.00, with which she purchased a $1,000,000.00 cashier's check made payable to the Leon County Clerk of the Court.
The cashier's check was thereafter deposited with the Leon County Clerk of the Court on First Miami's behalf to comply with the judge's order enjoining the IFO.
On May 21, 1991, First Miami executed a note promising to repay the
$1,000,000.00 to Saldise and General Trust Mortgage Corporation at an interest rate of 12 percent per year. The note provided that the "principal [was] payable on demand."
This note was secured by a mortgage on First Miami's home office property, Units A and D-1 of the Brickell Bay Club Condominium, as well as parking spaces 181 through 381 at the condominium complex. This property was valued at $2.7 million on First Miami's 1990 Annual Statement. In addition, First Miami agreed to pay $25,000.00 in loan points, $10,000.00 in attorney's fees and $63,024.36 for 12 months of "condominium association assessments."
Respondent, along with Soto, signed the note and mortgage for First Miami.
The documents were duly recorded and a UCC-1 form was filed.
In order to facilitate First Miami's compliance with the judge's order, the Department approved the arrangements First Miami had made to obtain the $1,000,000.00 First Miami was required to deposit "as additional security for the issuance of this Order."
Subsequently, on January 19, 1992, Saldise and General Trust Mortgage Corporation made a demand for full payment of the loan.
First Miami then sought an extension of the repayment period.
Saldise and General Trust Mortgage Corporation agreed to an extension of 60 days.
In return for the extension, Saldise and General Trust Mortgage Corporation were given additional collateral for their $1,000,000.00 loan, in the form of four mortgage notes having a total value of $1,473,750.00.
Respondent and Soto signed, on behalf of First Miami, the paperwork necessary to effectuate this mortgage note extension agreement.
Before Respondent did so, though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan.
Rubin told Respondent during their discussion regarding the matter that the additional collateral would still be considered assets of First Miami even after the agreement was executed.
In its Quarterly Statement as of March 31, 1992, that it submitted to the Department, First Miami disclosed the following regarding the mortgage note extension agreement:
The Company notes that certain promissory notes owned by the Company in the original principal amount of $1.47 million have been pledged as additional security for the note issued by the Company on May 21, 1991. The Company's note is also secured by the previously-disclosed mortgage on the Company's headquarters office.
The "Company's headquarters office" was listed on the statement as a
$2,700,000.00 asset of First Miami, as it had been on all previous quarterly and annual statements submitted to the Department since 1989 Annual Statement.
The Saga Bay Property
With respect to the requirement contained in the judge's order enjoining the IFO that First Miami "receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars," Saldise and/or Lopez contributed to First Miami 13 real estate parcels located in the Saga Bay development in Dade County, Florida.
In exchange therefor, First Miami gave a surplus note, which the Department approved.
Post-IFO Reinsurance
On May 15 and 16, 1991, Jim Smith, a Reinsurance Financial Specialist with the Department, visited the offices of First Miami. The purpose of his visit was to analyze and review First Miami's reinsurance program.
Smith issued a written report detailing his findings on May 20, 1991.
In the "Summary" section of his report, Smith stated the following:
Based on the information available, the current reinsurance program is highly suspect. I believe there is a possibility that First Miami is re- insuring itself or at a minimum only obtaining limited financial reinsurance. The use of the trust agreement would normally provide some assurance as to the availability of funds.
However, the purchase of premium finance contracts from South Florida Premium Finance Company circumvents this normal protection feature. First Miami has purchased over 6 million [dollars] of these contracts since March 20, 1991. 14/
The lack of correspondence between First Miami and Silver Breeze, Ltd. 15/ and/or Munauto S.A. is also of concern. I find it unconscionable that a company would accept a potential $20 million liability without having some preliminary written negotiations or correspondence. Another
concern is that Munauto S.A. accepted the previous reinsurer's contract without modifying the terms to protect its interest. 16/ Such action is not characteristic of an arm's length transaction in the reinsurance industry. Also atypical is the wire transfer of funds through General Trust Mortgage, an affiliate, to the intermediary and reinsurer.
Smith went on to further state the following:
I have reviewed the accounting entries in regard to the Munauto reinsurance treaty and they appear to be normal and booked correctly. I also reviewed debits and credits to the re- insurance trust account at Sun Bank. These entries appeared normal except for use of these trust funds to purchase or invest in South Florida Premium Finance contracts.
The terms of the temporary restraining order (TRO) require First Miami Insurance Company to replace the current reinsurer with an approved reinsurer acceptable to the Department. I highly agree with this provision. I would suggest that First Miami has no effective reinsurance lacking supportive evidence to the contrary. Therefore, it is imperative they replace the current re- insurance with an approved reinsurance treaty which actually transfers the underwriting risk.
At the request of First Miami, following the issuance of the IFO, Doherty, on First Miami's behalf, while still negotiating with U.S. Capital, commenced negotiations with another potential reinsurer, Dai Ichi Kyoto.
In July of 1991, Doherty met with representatives of Dai Ichi Kyoto in London. Respondent was present at the meeting.
The negotiations culminated in a signed, conditional reinsurance agreement.
Respondent signed the agreement on behalf of First Miami.
Under his signature he placed the following handwritten notation, which he initialed: "Subject to approval of the Florida Department of Insurance."
The agreement never received the approval of the Department.
In early August of 1991, First Miami entered into a series of reinsurance agreements with Warwick Re Insurance and Reinsurance Company, LTD (hereinafter referred to as "Warwick Re").
The agreements were drafted by Rubin, First Miami's retained attorney. In drafting the agreements, he utilized the Munauto reinsurance documents, making revisions where appropriate.
Warwick Re was incorporated on August 7, 1991, in Anguilla. The subscribers, each with 250 shares, were General Trust Mortgage Corporation and Procesys, Inc. Respondent signed the necessary documents on behalf of General Trust Mortgage Corporation. Lopez signed on behalf of Procesys, Inc.
Prior thereto, on July 31, 1991, in anticipation of its incorporation, Warwick Re had applied for registration as an insurer in Anguilla. Respondent was listed as a director of Warwick Re on the registration form and he signed the form in various places in his capacity as a director.
The following day, August 1, 1991, the Boards of Directors of General Trust Mortgage Corporation and Procesys, Inc. each resolved to make a capital investment in Warwick Re in the amount of $100,000.00. Each resolution was signed by Respondent in his capacity as a director.
According to a financial statement prepared by Mario Toca, a certified public accountant, as of September 30, 1991, Warwick Re had
$20,988,714.00 worth of assets.
On August 8, 1991, Bob King of U.S. Capital sent a memorandum to Respondent requesting a decision regarding the offer U.S. Capital had made to First Miami regarding reinsurance.
That same day, Respondent sent King a letter in which he stated the following:
In reference to the reinsurance treaty between
U.S. Capital and First Miami Insurance Company,
I would like to advise you that we are negotiating with the Helm Bank the possibility of them pur- chasing the Premium Finance Contracts from us,
in consideration of our banking relationship. This means that we would establish a Trust for the outstanding reserves of your portion of the Quota Share. The Trust will invest in A plus Securities only.
Should you have any questions, do not hesitate to contact me.
On August 22, 1991, King sent Doherty a letter informing her of the following:
As a result of First Miami's inability to conclude our proposed transaction, please be advised that we withdraw any and all offers as presented or amended. Unfortunately, we
find ourselves unable to proceed with an organ- ization which cannot make a determination as
to its objectives and method of transacting business.
Respondent was furnished a copy of the letter by King.
After receiving King's letter, Doherty faxed a copy of the letter to Lamont Wynn of the Department at Wynn's request.
Whereas the Department was swiftly advised of the breakdown in negotiations between U.S. Capital and First Miami, it was not until January 27 1992, that the Department first learned of the reinsurance agreements between First Miami and Warwick Re.
On that date, representatives of the Department, including Lisette Lozano, went to the offices of First Miami to review First Miami's books and records.
While on the premises, Lozano spoke with Respondent, who, throughout the period he was the Executive Vice President of First Miami, served as First Miami's primary spokesperson in its dealings with the Department.
Before speaking with Lozano, Respondent had received instructions from Saldise and First Miami's attorneys that he was to discuss with Department representatives only those matters relating directly to First Miami.
Not deviating from these instructions, Respondent told Lozano that Warwick Re was "now the reinsurer of First Miami."
Respondent volunteered that Warwick Re was an Anguilla company that owned more than 90 percent of South Florida Premium Finance Company.
Lozano, who was not at all familiar with Warwick Re, asked Respondent the names of the officers and directors of the company. Following the instructions he had been given, Respondent told Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami.
That same day, January 27, 1992, South Florida Premium Finance Company and General Trust Mortgage Corporation issued checks in the amounts of
$200,000.00 and $703,549.16, respectively, payable to Warwick Re. Both checks were signed by Respondent.
The next day the checks were deposited in Warwick Re's newly opened account at Sun Bank.
The Department ultimately determined that the reinsurance agreements between First Miami and Warwick Re were not "appropriate reinsurance transactions," although it had no proof that Warwick Re was insolvent.
Infusion of Additional Capital into First Miami
In or about late 1991, Saldise and Lopez made Respondent aware of their plans to formally contribute additional assets to First Miami in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency.
Among these assets were ownership interests in the following corporations: Warwick Properties, Inc.; Investors Arts and Antiques, Inc.; Community Broadcasters, Inc.; and Procesys, Inc.
Respondent questioned Lopez as to whether the assets which were to be contributed to First Miami would be considered admitted assets under the Florida Insurance Code. Lopez told Respondent that he had researched the matter and come to the legal conclusion that they would be admissible, at least for a three year period. Furthermore, he showed Respondent a draft of a legal memorandum he was preparing which addressed the subject. Respondent subsequently reviewed a second legal memorandum, prepared by another attorney, Marc Cooper, which discussed the admissibility of these assets.
Respondent was further advised that although no written contracts effectuating the contemplated transfer of assets had yet been executed, oral agreements to do so did exist.
Saldise felt uncomfortable infusing these additional assets into First Miami without written agreements making it clear that it was her intention that the transfer of these assets would be effective only if the Department deemed them to be admitted assets.
Rubin, First Miami's retained attorney, drafted these written agreements and related board resolutions.
Although it was originally contemplated that these written agreements would be prepared and signed before the end of 1991, they were not ready for execution until March of the following year. 17/
Saldise instructed Respondent to sign the agreements on behalf of each of the parties. Respondent felt ill at ease doing so and asked Saldise whether it was appropriate for him to sign on behalf of more than one party. Saldise assured him that it was inasmuch as he was an officer of each of the parties on behalf of whom he would be signing.
Respondent also sought Rubin's legal advice on the matter. Rubin told Respondent that there was no reason, from a legal standpoint, why he could not follow Saldise's instructions regarding execution of the written agreements.
Respondent also asked Rubin if the agreements actually accomplished what Saldise and Lopez had intended: to give legal title of these assets to First Miami. Rubin responded in the affirmative to this inquiry, although he further advised Respondent, as he had Saldise, who nonetheless decided to proceed with the transfer of assets, that if a conservatorship or liquidation proceeding were initiated by the Department all of First Miami's assets would be frozen and unavailable to Saldise personally. 18/
Another matter about which Respondent was concerned was the effective date of the agreements, which the agreements indicated was December 31, 1991.
He therefore raised the subject with Rubin. Rubin advised Respondent that there was "no problem" with the December 31, 1991, effective date since the written agreements, although they would be signed after that date, merely memorialized what had already been orally agreed upon by the parties prior to December 31, 1991.
Relying on the advice he had been given, Respondent, in late March of 1992, executed the written agreements as he had been instructed, thereby formally effectuating the contribution of assets to First Miami, but only after one of the agreements, which had originally reflected a December 31, 1991, date of execution, had been modified, at his insistence, to accurately reflect the date he actually signed the agreement.
Payment of Attorney's Fees
First Miami authorized payment of past and future attorney's fees incurred by Saldise and Lopez in defending themselves in a federal court proceeding involving General Bank.
In this federal court proceeding, which was initiated after the "spin off" of First Miami, the federal government was attempting to freeze the personal assets of Saldise and Lopez.
These personal assets included many, if not all, of the assets that Saldise and Lopez planned to contribute, and that later actually were contributed, to First Miami. If these assets planned for contribution were frozen, they would be unavailable to First Miami. Accordingly, First Miami felt that it was appropriate to expend funds, in the form of payment of Saldise's and Lopez's attorney's fees, in an effort to prevent this from happening.
Notice to the Department of the Capital Infusion
First Miami notified the Department of the capital contributions made to the company by including in the 1991 Annual Statement it submitted to the Department the following footnote, footnote 18, which was drafted by Rubin and reviewed by Respondent:
PURSUANT to contracts entered between Liborio Financial Group 19/ and First Miami Insurance Company, Liborio has agreed to contribute its ownership of four subsidiary corporations, including assets owned by these subsidiaries, to First Miami subject to the satisfaction by First Miami of the condition
precedent with respect to two of the subsidiaries that the State of Florida Department of Insurance finds that all assets held by First Miami qualify as admitted assets, and that First Miami is in compliance with capital and surplus requirements.
This footnote was included in the 1991 Annual Statement at the specific direction of Saldise and Lopez.
Respondent had disagreed with Saldise's and Lopez's method of disclosure and had suggested that instead they meet with Department representatives prior to the filing of the 1991 Annual Statement to disclose the information contained in footnote 18.
Saldise and Lopez, however, vetoed Respondent's suggestion.
The Contributed Assets Warwick Properties, Inc.
Warwick Properties, Inc., (hereinafter referred to as "WP") was incorporated on July 31, 1991. Respondent was one of the incorporators. From the date of its incorporation until its administrative dissolution on October 9, 1992, Respondent was an officer, director or both of the corporation.
According to a financial statement prepared by CPA Toca, as of December 31, 1991, WP had total assets of $4,500,660.00 and total liabilities, excluding stockholders' equity of $1,176,638.00.
Among its assets was an apartment complex known as the Marianna apartments.
In October of 1989, these apartments were appraised by Philip Spool, ASA, who estimated their market value at $2,100,000.00.
The apartments were valued at $2,300,000.00 in an appraisal conducted in June of the following year by Appraisal and Real Estate Economics Associates, Inc. The written appraisal report was issued on July 9, 1990.
This appraisal was referred to in Note 6 of Toca's financial statement, which read as follows:
As stated in Note 1, property is recorded
at historical cost in accordance with generally accepted accounting principles. However, the estimated current value of land and building based on an independent appraisal performed on July 9, 1990 amounted to $2,300,000.
Another asset held by WP was a third mortgage on Saldise's personal residence.
In an appraisal conducted in August of 1988, by Appraisal and Real Estate Economics Associates, Inc. the residence was valued at $3,275,000.00 using a "cost approach" and $3,250,000.00 using a "sales comparison approach."
Investors Arts and Antiques, Inc.
Investors Arts and Antiques, Inc., owned works of art and antiques.
These items had been appraised and assigned valuations.
Investors Arts and Antiques, Inc., also owned 52.5 percent of Community Broadcasters, Inc. The other shareholders were Maria Elena Prio and Carrie Meek.
Community Broadcasters, Inc., held a Federal Communications Commission license to operate a radio station in the Miami area and had obtained certain programing rights as a result of having entered into an agreement with Business Radio Network, Inc.
Respondent was at no time an officer or director of either Investors Arts and Antiques, Inc., or Community Broadcasters, Inc.
According to a financial statement prepared by CPA Toca, as of March 23, 1992, Investors Arts and Antiques, Inc., had total assets of $2,487,700.00, with donated capital amounting to $2,487,200.00. These donations of capital had been made by Saldise and Lopez.
Procesys, Inc.
According to a financial statement prepared by CPA Toca, as of December 31, 1991, Procesys, Inc., had total assets and liabilities of
$75,065.00.
In a note to his statement, Toca made the following comment: In accordance to the Statements of Accounting
Standards (SFAS Nos. 2 and 86), the costs incurred
internally in creating computer software are charged to expense until the completion of a working model. Thereafter, all costs are capitalized and amortized based on current and future revenues. Accordingly, subject to future
revenues, the "Company's" management, estimates that the products developed have a market value of $3,000,000.
Procesys, Inc. owned the ATRACK computer software system, which was designed for use by companies providing automobile insurance.
First Miami used the ATRACK system pursuant to a licensing agreement it entered into with Procesys, Inc., which agreement the Department had approved.
Although it was used extensively by First Miami to deal with day-to- day operational matters, the system did not have an accounting function and therefore was not used by First Miami for that purpose.
Lopez helped to develop the ATRACK system when he was involved in another insurance company, International Bankers Insurance Company, prior to his involvement in First Miami.
Respondent refined and modified the system to meet the particular needs of First Miami.
In February of 1992, pursuant to Lopez's request, Respondent asked Alberto Alphonso, the owner of Microcare Service Corporation (hereinafter referred to as "Microcare"), the vendor which provided First Miami with
computer-related goods and services, to appraise the value of the ATRACK system. 20/
Alphonso was a friend of Respondent's whom Respondent had known since his community college days.
Alphonso's corporation, Microcare, had previously been owned by Respondent under the name Computer Technology Systems, Inc.
Upon the transfer of his ownership interest to Alphonso, Respondent resigned his position as an officer/director of the corporation and has not held any similar position since his resignation.
He did do some "moonlighting" work through Microcare, and his wife, Dania Campos, continued to work as a secretary for the corporation for a short period of time after the transfer. Otherwise, however, neither he nor his wife have had any involvement in the affairs of Microcare, nor have they received any dividends or corporate disbursements from the corporation.
Alphonso agreed to do the appraisal.
On or about February 17, 1992, he submitted his written report to Lopez.
Alphonso stated in the report that in his "opinion, based upon potential revenues of this product, that obtaining exclusive marketing and copy rights would have a fair market value of $3,087,500."
In early April of 1992, Respondent approached the owner of Nationwide Computer Systems, Inc., Mike Burns, an MIT graduate with an extensive computer background, requesting that he provide another opinion concerning the fair market value of the ATRACK system.
Respondent explained to Burns that he was "in a rush to get the appraisal."
Respondent did not specifically state why he needed the appraisal, but Burns was left with the impression that it was "just required to fill some requirement to have three appraisals."
Respondent advised Burns of the appraisal Alphonso had done and showed Burns Alphonso's report. In doing so, Respondent commented that he was "comfortable with the appraisal."
Burns was at first reluctant to undertake the task because he thought that someone else might be better qualified to do so. He felt more confident about his qualifications after learning of Alphonso's appraisal because he considered himself at least as qualified as Alphonso, with whom he was familiar, to do such an appraisal. He therefore ultimately agreed to accept the assignment.
On or about April 13, 1992, Burns submitted his written report to Respondent.
In the concluding paragraph of his report, Burns stated the following:
It is my opinion that the ATRACK software uses the most modern tools and operating platform and the skills of programmers and designers are above- average, and that its modular design will give it an advantage in opening new markets. For this
reason I have evaluated the software at $2.90 million in its current form. I am assuming that programmers associated with the software will bring their expertise and experience with the software. If a new programming staff is required, there will be substantial up-front learning curve costs. My estimate is based upon the information I could
gather in a limited time-frame. The staff of First Miami Insurance was open to all my requests and no attempt was made to keep me from any data I required. Some supporting material is included.
Valuation of First Miami's Home Office
In January of 1989, First Miami's home office property was appraised by Appraisal and Real Estate Economics Associates, Inc., and given a market value of $1,600,000.00.
Thereafter, the property was extensively renovated.
Following the completion of these extensive renovations, a second appraisal of the property was done by Fred Carach. In his report, Carach opined that, as of October 29, 1989, the property had a market value of $2,700,000.00
In the IFO proceeding, the Department did not raise as an issue the value of the home office property.
At no time did the Department voice any concerns regarding the appraisers that conducted these two appraisals for First Miami of its home office property.
While they may not have shared their thoughts on the matter with First Miami representatives, Department officials did question whether First Miami was overstating the true value of its home office property.
They therefore retained Charles Failla to provide them with an appraisal of the property. In his written report, Failla opined that, as of March 13, 1992, the date of the report, the property had a market value of
$800,000.00.
Valuation of South Florida Premium Finance Company
Onyx Financial Group, Inc., (hereinafter referred to as "Onyx") is a company located in Miami, Florida, which South Florida Premium Finance Company retained to provide an appraisal of its market value in anticipation of making a public offering. (The public offering, however, was never made.)
On or about December 11, 1991, Onyx provided such an appraisal.
Onyx sent the appraisal to Respondent.
First Miami used the appraisal to prepare financial statements that were later submitted to the Department.
First Miami's Handling of Claims
As noted above, at the time that Respondent was initially assigned to work for First Miami, the company was experiencing difficulty in timely paying claims and, as a result, was the subject of numerous consumer complaints made to the Department.
In response to concerns expressed by the Department about these complaints, First Miami made improvements to its telephone and computer systems and hired additional claims adjustors as well as a new claims manager.
It also, in large measure through the efforts of Respondent, developed and implemented a specific procedure to track and quickly respond to these complaints.
Immediately after First Miami took these measures, there were fewer reported delays.
As of May 13, 1991, the date the IFO was enjoined, the Department was satisfied with the remedial steps taken by First Miami and had "concluded that the consumer complaint problem [was] not related to any solvency problems."
Statistics maintained by the Department's Division of Insurance Consumer Services, however, reveal that, for the entire calendar year of 1991 and for the first two months of 1992, the Department received a relatively large number of consumer complaints about First Miami, most of which related to alleged delays in paying claims. The numbers, by line of insurance, were as follows:
1991 | Jan/Feb 1992 | |
"P/P Auto No-Fault" | 64 | 26 |
"Other P/P Auto Liab" | 376 | 71 |
"P/P Auto Phys Damage" | 317 | 86 |
The numbers for Allstate and State Farm Insurance Companies, which held much larger shares of the respective markets than did First Miami, in comparison, were as follows:
Allstate | ||
1991 | Jan/Feb 1992 | |
"P/P Auto No-Fault" | 118 | 28 |
"Other P/P Auto Liab" | 398 | 23 |
"P/P Auto Phys Damage" State Farm | 154 | 19 |
1991 | Jan/Feb 1992 | |
"P/P Auto No-Fault" | 133 | 23 |
"Other P/P Auto Liab" | 267 | 42 |
"P/P Auto Phys Damage" | 187 | 27 |
According to these statistics, however, First Miami did not have the highest "Complaint Index" (which is arrived at by dividing the insurer's 1991 complaint share by its 1990 market share) for all of the lines of insurance covered.
As evidenced by the Department's statistics, "non-standard" insurers, like First Miami, tend to have a higher "Complaint Index" than other insurers.
Following the hiring of its new claims manager, First Miami developed a written claims handling procedure, which provided, in part, as follows:
Step 1. New claims are received via telephone, mailed or faxed to First Miami Insurance Company by the insured, claimant, attorneys or agent.
Customer Service completes the automobile loss notice (ACCORD FORM), and verifies coverage.
Step 2. Accord forms are given to the Data Entry Department to complete a new loss report form.
Step 3. Claims manager or assistan[t] manager reviews accord form, assigns preliminary reserves and assigns claims to adjuster. The choice of adjuster to handle the claim will depend on the type and severity of the claim. The most
qualified adjusters will handle the most serious claims. The initial reserves are as follows when the amount of loss cannot be reasonably estimated.
PD, COLL 800 to 1,100
COMP 500 to 800
PIP 2,000 Ded 400
PIP full 1,000
BI-UM 1,000
Step 4. Data Entry Clerk sets up new loss [reserve] based on preliminary reviews.
The adjuster must review the accuracy of the reserve or the files which are processed on diary.
Adjustment, both upward and downward, must be made
on all coverage where appropriate. The police report is requested and appraisal assignment is made.
The file is returned to the cabinet to await 15 day diary cycle. File will be reviewed Bi-monthly by adjuster and manager/supervisor.
SETTLEMENT OF CLAIM:
The adjuster can settle claims up to $3,000.
Anything over $3,000 requires the signature of the claims committee which meets once a week. After claim has been settled, the unit supervisor reviews claims file to verify coverage and liability.
RELEASE OF PAYMENT:
Proper release forms must be received before final payment/check is issued.
Unit supervisor is allowed to release payments up to $2,000. If payment is from $2,000 to $3,000, it must be released by either the claims manager or his assistant. If over $3,000, payment must be released by Alex J. Campos, EVP. 21/
After payment is released, and outstanding reserves are closed out on the "Reserve History Sheet[,]" [t]his claims report is printed out on the "Daily Close Report" which indicates that the remaining reserves have been eliminated. . . .
In addition, First Miami's adjusters were given written instructions they were expected to follow. Through these written instructions, the adjusters were advised of, among other things, the following:
All of the adjuster's claims handling activities, should be directed towards achieving the major claims handling goals which are:
Provide the best possible customer service.
Comply with the insurance policy/contract and the law.
Minimize our losses and expenses.
In handling a claim, the adjuster not only deals with facts and figures, but also with people.
Therefore, the adjuster is responsible for helping to build friendly and satisfactory relations with the insured-claimant and the public. The adjuster may be the only contact the insured-claimant has with the insurer, other than the sales agent. A person who receives prompt attention and fair
treatment will want to continue his or her relationship with us. An insurer with a reputation for fast, fair claims service is likely to attract new policyholders.
One of our primary goals is to comply with the insurance contract/policy[, a]s we have both a moral and legal obligation to assure the insured receives the protection purchased. This also includes complying with any applicable law. The adjuster is responsible for seeing that moral, legal, and contractual obligations are fulfilled.
While we as an insurer are committed to fulfilling all our obligations, we are also committed to controlling and reducing our losses/expenses. This can be achieved by limiting our claims payments to only those legitimately established by contract and law. Thus, again, the adjuster is responsible for prompt and efficient processing of claims and claims data.
As this last paragraph may suggest, First Miami, at the insistence of Saldise and Lopez, had a very "conservative" claims payment philosophy: to pay claims only after they had been thoroughly investigated and determined to be valid. Conducting such investigations necessarily delayed the processing of claims. 22/
The use of a claims committee to review claims was an essential component of First Miami's "conservative" approach to the payment of claims.
First Miami's claims committee consisted of a core of three individuals: an attorney retained as a consultant by First Miami; the claims manager; and the assistant claims manager.
The attorney on the claims committee was Carlos Lidsky.
Lidsky has practiced personal injury and insurance law in the State of Florida for approximately the past 20 years.
From time to time, Lidsky and his two colleagues on the claims committee would invite additional individuals, including Respondent, to sit on the committee for particular meetings and join in the discussions and deliberations.
On those occasions that he sat on the claims committee and, as a member thereof, withheld approval of questionable claims, he reasonably believed that the committee's actions were in the best interest of First Miami's shareholders and policyholders.
Assisting the claims committee in evaluating claims involving medical issues was a nurse and a physician that First Miami had hired for that purpose in an effort to combat fraudulent claims. The physician was a respected orthopedic specialist, who also was a minor shareholder of General Trust Mortgage Corporation, First Miami's parent corporation.
Where the claims committee was presented with objective evidence of bodily injury, it invariably approved payment up to the policy limits. In those personal injury protection cases where there was no such evidence, however, the committee withheld its approval and contested the claim.
In a significant number of personal injury protection cases, Lidsky advised First Miami to invoke the arbitration clause of the policy and First Miami followed his advice.
This often led to a compromise and settlement of the claim.
Where First Miami was presented with a subrogation claim and there was an indication that there may have been some comparative negligence, the matter was investigated before any payment was made.
Lidsky had standing instructions to, on behalf of First Miami, negotiate in good faith all disputed subrogation claims, (including not only those filed against First Miami but those filed by First Miami as well) and enter into, what are referred to in the industry, as "bulk settlement" agreements.
At one point in time during the latter stages of First Miami's existence, the aggregate amount of pending subrogation claims made against it by State Farm Insurance Company and Allstate Insurance Company and separate claims being handled by Bell Adjusting Company was $1,200,000.00. None of these claims were ever paid. 23/
First Miami, however, through Lidsky, who acted at the specific direction of Saldise and Lopez, did enter into "bulk settlement" negotiations with State Farm Insurance Company (whose pending subrogation claims against First Miami at the time amounted to approximately $492,000.00) in an effort to resolve these pending claims, as well as those unpaid subrogation claims First Miami had made against State Farm. 24/
These negotiations were not fruitful. They terminated without any agreement being reached.
Lidsky believed that State Farm had not negotiated in good faith and so informed Respondent, who had not participated in the negotiations.
Unable to reach a settlement with First Miami, State Farm resorted to litigation, suing the alleged tortfeasors.
Other claims-related lawsuits were filed against First Miami policyholders. On occasion, First Miami was also sued. In some of these cases, the plaintiffs prevailed.
Lidsky and First Miami's Claims Department were responsible for seeing to it that First Miami policyholders who were the subject of a lawsuit received the legal representation First Miami was obligated to provide.
Respondent was not made aware of any case where First Miami refused to provide such representation.
First Miami's Loss Reserves
In his capacity as Executive Vice President of First Miami, Respondent did not himself establish the levels of the company's reserves.
First Miami maintained two types of reserves: an individual case reserve regarding specific claims, and an IBNR ("Incurred But Not Reported") reserve.
First Miami's Claims Department established claims reserves for individual cases.
Two actuaries, one employed by First Miami, Jeff Cohn, and the other an independent contractor, James Stergiou, reviewed and certified the actuarial soundness of First Miami's IBNR reserve.
Stergiou provided Respondent with written statements certifying the adequacy of First Miami's IBNR reserve for the years 1990 and 1991.
In its communications with First Miami, the Department never raised any questions regarding Stergiou's qualifications to provide such certifications, and Respondent had no reason to believe that Stergiou was not so qualified.
First Miami's Lawsuit
Believing that the Department and Insurance Commissioner, in concert with the Latin-American Agents Association and the Specialty Agents Association, had acted in violation of civil rights and antitrust laws in its dealings with First Miami, Saldise and Lopez decided in December of 1991, or January of 1992, that First Miami should file a lawsuit against these parties to seek redress.
Two attorneys, Sonny Meyers and Stephen Rubin, were retained to represent First Miami in connection with such contemplated legal action.
Saldise requested Respondent, in preparation for a meeting with Meyers and Rubin, to review various matters pertinent to the lawsuit, including the chronology of events concerning the "no down payment" program about which the Latin-American Agents Association and the Specialty Agents Association had complained to the Department.
The meeting was held on February 4, 1992.
A court reporter was present at the meeting.
Following the meeting, a transcript of the meeting was prepared. 25/
The lawsuit was ultimately filed in federal court in Miami.
Disposition of Carrera
Thereafter, as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the "no down payment" program that had generated so much controversy.
Carrera was initially sold to Victor Madero, Diana Madero's husband, for between $900,000.00 and $1,000,000.00. At the time of the sale, Diana Madero had an insurance agency of her own and was not in any way connected with First Miami. The sale was negotiated by Lopez on behalf of First Miami.
After Mr. Madero had made three or four payments, he decided that he did not want to remain in the insurance business. He made no further payments and First Miami "took back" Carrera from him.
Thereafter, First Miami sold Carrera to Lewis Sands for approximately the same price Madero had paid. Payments were to be made over a 12 year period and interest was charged.
Sands made payments of approximately $66,000.00 before defaulting.
As a result of the default, First Miami again took possession of Carrera.
It subsequently sold Carrera to Frank Davila for approximately the same price Madero and Sands had paid. Payments were to be made for a period of less than 12 years and interest was charged.
Following the sale to Davila, which, like the sale to Sands, was negotiated by Respondent 26/ and another First Miami Vice President, Sergio Fonte, First Miami had no ownership interest or involvement in the operation of Carrera.
Carrera was administratively dissolved on August 13, 1993.
Financial Statements
Raimundo Aleman, First Miami's Chief Financial Officer, reported to Respondent during the time Respondent was the company's Executive Vice President.
As noted above, Aleman was responsible for formulating and placing the entries on the Quarterly and Annual Statements First Miami submitted to the Department.
He was designated on the statements as First Miami's "contact person."
As a general rule, before the statements were sent to the Department, Respondent reviewed Aleman's work product to determine if there were any obvious omissions or mistakes.
With respect to the Quarterly Statement as of March 31, 1992, however, Respondent only reviewed the footnotes.
All of First Miami's Quarterly and Annual Statements contained a sworn attestation, signed by certain of its officers, certifying that the information contained therein was complete and accurate "according to the best of their information, knowledge and belief."
Respondent signed this attestation as Treasurer on the 1989 Annual Statement, the Quarterly Statement as of March 31, 1990, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990.
He signed none of the other financial statements that First Miami submitted to the Department, with the exception of the Quarterly Statement as of September 30, 1991, which he executed on behalf of Saldise. These other financial statements that First Miami submitted to the Department, but which Respondent did not sign, were: the 1990 Annual Statement; the Quarterly Statement as of March 31, 1991; the Quarterly Statement as of June 30, 1991; the 1991 Annual Statement; and the Quarterly Statement as of March 31, 1992. Respondent was listed as a Vice President and Director on these statements, all of which were signed by Aleman in his capacity as Treasurer.
Respondent was not aware, nor did he have any compelling reason to believe, that any of the financial statements that First Miami submitted to the Department during the time he was its Executive Vice President contained misleading or inaccurate information concerning First Miami's financial condition or any other matter of significance to the Department. There was no intent on Respondent's part to deceive the Department.
In discharging his duties as First Miami's Executive Vice President, including those duties related to the preparation and filing of the financial statements the company submitted to the Department, Respondent reasonably relied upon the advice and opinions of attorneys, accountants, appraisers, actuaries and other professionals concerning matters which, by all appearances, were within the scope of these professionals' expertise. For instance, he reasonably relied upon the professional opinions that had been rendered regarding the admissibility and valuation First Miami's assets and the adequacy of the company's loss reserves. His views concerning the financial condition and solvency of First Miami, understandably, were shaped by these opinions.
The On-site Review and Respondent's Deposition
After First Miami filed its 1991 Annual Statement on or about March 15, 1992, the Department conducted an on-site review at First Miami's offices.
Respondent served as First Miami's primary spokesperson during the review, answering questions posed by the Department's representatives concerning, among other things, the 1991 Annual Statement that First Miami had filed. In doing so, Respondent expressed the view that the transactions reflected in footnote 18 were "bona fide . . . with economic substance behind them" and that First Miami was not insolvent, which is what he reasonably believed.
Subsequently, various First Miami officials were subpoenaed and deposed by the Department.
Respondent was among those deposed.
First Miami had designated Respondent as its representative for purposes of responding to a subpoena with which it had been served by the Department.
Although Aleman was more knowledgeable than Respondent about the financial affairs of First Miami and the contents of its 1991 Annual Statement, he was not so designated because of his difficulty in orally communicating in the English language.
Aleman, though, did retrieve documents for Respondent's use at the deposition.
Prior to the deposition, Respondent consulted with Lopez and First Miami's attorneys with respect to the company's position concerning the admissibility of assets.
During his deposition, in responding to questions, Respondent relied upon the documents he had been given by Aleman, as well as the notes he had taken during his pre-deposition meeting with Lopez and the other attorneys.
Conservatorship and Liquidation of First Miami
On or about May 14, 1992, First Miami filed its Quarterly Statement as of March 31, 1992, with the Department. Certain assets which appeared on the 1991 Annual Statement were not included in this Quarterly Statement. Saldise had directed Aleman to delete these assets in response to the concerns the Department had expressed regarding their inclusion in the 1991 Annual Statement.
After the filing of this Quarterly Statement, the Department instituted conservatorship and liquidation proceedings in Leon County Circuit Court and, in conjunction therewith, sent personnel to First Miami's offices.
During the conservatorship, which commenced on May 29, 1992, Respondent, who had been cooperative in his prior dealings with the Department, remained on the payroll of the company. He prepared computer programs to assist in the calculation of commission payments. In addition, he provided to Department personnel on the premises valuable information concerning the operations of First Miami, including its computer system.
An unopposed order liquidating First Miami and appointing the Department Receiver was entered on June 5, 1992.
Among the findings set forth in the order was that First Miami was "insolvent as defined in section 631.011(11), Florida Statutes (1991)."
Among the directives set forth in the order was the following:
All affiliated companies including, but not limited to General Trust Mortgage Corporation, Liborio Financial Group, Inc., First Miami Holding Corporation, South Florida Premium Finance Company, Procesys, Inc., Investors Arts & Antiques, Warwick Properties Inc., Carrera Insurance Underwriters, Inc., Camino Insurance Underwriters, Inc., and Warwick Re are hereby directed to make their books and records available to the Receiver . . . .
The order further provided that "[a]ll officers, directors, agents and employees and all other persons representing [First Miami] or currently employed by [First Miami] in connection with the conduct of its business are discharged forthwith."
The Department determined that, at the time of liquidation, First Miami had admitted assets totalling $4,203,356.00, which fell into the following categories:
Mortgage loans on real estate:
First liens $1,465,889.00
Real estate:
Properties occupied by $800,000.00 27/ the company
Cash on hand and on deposit:
Cash on deposit $1,247,553.00 Short term investments $594,672.00 28/
Electronic data
processing equipment $95,242.00
On its last financial statement, the Quarterly Statement as of March 31, 1992, First Miami had listed a total of $27,340,837.00 of admitted assets.
The difference between the Department's June 5, 1992, total and First Miami's March 23, 1992, total was, in large measure, the product of the Department's disagreement with First Miami and with the professionals upon which First Miami relied 29/ as to the admissibility and valuation of certain of First Miami's assets.
Post-Liquidation Activities
Following the entry of the order of liquidation, Respondent was retained for a period of two or three weeks to continue to assist the Department/Receiver, as well as the Florida Insurance Guaranty Association, which had taken over the responsibility of processing and paying claims made against First Miami.
No other First Miami officer or director was similarly retained. 30/
Saldise and Lopez left Miami for Madrid, Spain, a day or two after the entry of the liquidation order.
First Miami had almost 600 claims-related cases in litigation at the time of liquidation. Lidsky's office handed the files in these cases over to the Florida Insurance Guaranty Association at the Department's request.
As of January 31, 1994, for both loss claims and expenses, the Florida Insurance Guaranty Association had paid $12,397,234.35 on behalf of First Miami.
As of March 7, 1994, it had reserved $1,638,369.14 to pay additional loss claims on First Miami's behalf.
Respondent's Present Employment Situation
Respondent is currently the President (but not a director) of Perry & Company, a premium finance company authorized by the Department to do business in the State of Florida.
Perry & Company's Chairman of the Board is Richard Perry.
Perry has known Respondent for approximately four or five years.
He first became acquainted with Respondent when Respondent was employed by First Miami.
At the time, Perry & Company was one of the companies that financed premium payments on insurance policies issued by First Miami.
Perry was very much impressed with the operational efficiency of First Miami.
On behalf of Perry & Company, he extended Respondent an offer of employment, at a higher salary than Respondent was receiving from First Miami. Respondent declined this initial offer of employment.
Perry renewed the offer after he learned that First Miami had been liquidated and placed in receivership.
Before he did so, though, he asked Harry Landrum, a Tallahassee consultant and lobbyist, to check with his sources at the Department to find out if, given Respondent's previous association with First Miami, Perry & Company's relationship with the Department would suffer if the company hired Respondent.
Landrum reported back to Perry that his sources had only kind words to say about Respondent.
Having received this favorable report about Respondent, Perry felt comfortable renewing his offer of employment to Respondent.
This time Respondent accepted Perry's offer.
Respondent began his employment with Perry & Company in July of !992, when he assumed the position of Executive Vice President. His primary responsibility as Executive Vice President was in the area of data processing.
In December of 1992, Respondent became Perry & Company's President, the position he holds today.
As President of Perry & Company, Respondent is responsible for virtually all of the company's day-to-day operations.
To date, he has successfully discharged these duties.
During his affiliation with Perry & Company, Respondent has not engaged in any conduct that has jeopardized the financial soundness of the company.
He has not caused, nor is it likely, based upon his past performance with Perry & Company and as Executive Vice President of First Miami, that he will cause, Perry & Company or those with whom the company does business to suffer any unwarranted loss or damage.
CONCLUSIONS OF LAW
In this proceeding, the Department is seeking, based upon conduct in which Respondent allegedly engaged as the Executive Vice President of First Miami, to effectively remove him from his current position as President of Perry & Company pursuant to Section 624.310(4), Florida Statutes, 31/ which provides, in pertinent part, as follows:
The department may issue and serve a complaint stating charges upon any affiliated party and upon the licensee involved, whenever the department has reason to believe that an affiliated party is engaging or has engaged in conduct that constitutes:
An act that demonstrates a lack of fitness or trustworthiness to engage in the business of insurance through engaging in illegal activity or mismanagement of business activities;
A willful violation of any law relating to the business of insurance; however, if the violation constitutes a misdemeanor, no complaint shall be served as provided in this section until the affiliated party is notified in writing of the matter of the violation and has been afforded a reasonable period of time, as set forth in the notice, to correct the violation and has failed to do so;
A violation of any other law involving
fraud or moral turpitude that constitutes a felony;
A willful violation of any rule of the department;
A willful violation of any order of the department;
A material misrepresentation of fact, made knowingly and willfully or made with reckless disregard for the truth of the matter; or
An act of commission or omission or a practice which is a breach of trust or a breach of a fiduciary duty.
The complaint shall contain a statement of facts and notice of opportunity for a hearing pursuant to s. 120.57.
If no hearing is requested within the time allotted by s. 120.57, or if a hearing is held and the department finds that any of the charges in the complaint are proven true and that:
The licensee has suffered or will likely suffer loss or other damage;
The interests of the policyholders, creditors, or public are, or could be, seriously prejudiced by reason of the violation or act, or breach of fiduciary duty;
The affiliated party has received financial gain by reason of the violation, act, or breach of fiduciary duty; or
The violation, act, or breach of fiduciary duty is one involving personal dishonesty on the part of the affiliated party or the conduct jeopardizes or could reasonably be anticipated
to jeopardize the financial soundness of the licensee,
The department may enter an order removing the affiliated party or restricting or prohibiting participation by the person in the affairs of that particular licensee or of any other licensee.
A contested or default order of removal, restriction or prohibition is effective when reduced to writing and served on the licensee and the affiliated party. . . .
Any affiliated party removed from office pursuant to this section is not eligible for reelection or appointment to the position or
to any other official position in any licensee in this state except upon the written consent of the department. Any affiliated party who is removed, restricted, or prohibited from participation in the affairs of a licensee pursuant to this section may petition the department for modification or termination
of the removal, restriction, or prohibition.
Resignation or termination of an affiliated party does not affect the department's jurisdiction to proceed under this subsection.
The terms "affiliated party" and "licensee," as used in Section 624.310(4), Florida Statutes, are defined in Section 624.310(1), Florida Statutes, as follows:
For the purposes of this section, the term:
"Affiliated party" means any person who directs or participates in the conduct of the affairs of a licensee and who is:
A director, officer, employee, trustee, committee member, or controlling stockholder of a licensee or a subsidiary or service corporation of the licensee, other than a controlling stockholder which is a holding company, or an agent of a licensee or a sub-
sidiary or service corporation of the licensee;
A person who has filed or is required to file a statement or any other information
required to be filed under s. 628.461 or s. 628.4615;
A stockholder, other than a stockholder that is a holding company of the licensee, who participates in the conduct of the affairs
of the licensee; or
An independent contractor who:
Renders a written opinion required by the
laws of this state under his professional credentials on behalf of the licensee, which opinion is reasonably
relied on by the department in the performance of its duties; or
Affirmatively and knowingly conceals facts, through a written misrepresentation to the department, with knowledge that such misrepresentation:
Constitutes a violation of the insurance code or a lawful rule or order of the department; and
Directly and materially endangers the ability of the licensee to meet its obligations to policyholders.
For the purposes of this subparagraph, any representation of fact made by an independent contractor on behalf of a licensee, affirmatively communicated as a representation of the licensee
to the independent contractor shall not be considered a misrepresentation by the independent contractor to the department.
"Licensee" means a person issued a license or certificate of authority or approval under this code or a person registered under a provision of this code.
First Miami was an insurer holding a certificate of authority to transact business pursuant to Chapter 624, Florida Statutes. It therefore was a "licensee," as defined in Section 624.310(1)(b), Florida Statutes. Accordingly, when he held the office of Executive Vice President of First Miami, Respondent was an "affiliated party," within the meaning of Section 624.310, Florida Statutes.
Perry & Company is a premium finance company licensed pursuant to Chapter 627, Florida Statutes. It therefore also is a "licensee," as defined in Section 624.310(1)(b), Florida Statutes. Accordingly, as the current occupant of the office of President of Perry & Company, Respondent is an "affiliated party," within the meaning of Section 624.310, Florida Statutes.
Section 624.310(4), Florida Statutes, is clearly a penal statute. See State ex rel. Vining v. Florida Real Estate Commission, 281 So.2d 487, 491 (Fla. 1973)(an administrative sanction may be characterized as "'penal' in nature" if it "tend[s] to degrade the individual's professional standing, professional reputation or livelihood"); Galbut v. City of Miami Beach, 605 So.2d 466, 468 (Fla. 3d DCA 1992)(anti-nepotism law which provided for a series of civil penalties, including "removal from public office or employment," was "penal in nature"); School Board of Pinellas County v. Noble, 384 So.2d 205,
206 (Fla. 1st DCA 1980)("statute is in effect a penal statute, as it imposes sanctions, including suspension or dismissal of an employee under continuing contract when he is found guilty of violating the statute's proscriptions"). "This being true the statute must be strictly construed and no conduct is to be regarded as included within it that is not reasonably proscribed by it. Furthermore, if there are any ambiguities included such must be construed in favor of the ["affiliated party"]. Lester v. Department of Professional and Occupational Regulations, 348 So.2d 923, 925 (Fla. 1st DCA 1977).
The statute, however, is not ambiguous concerning the Department's authority, in appropriate circumstances, to effectively prohibit an individual from holding an official position with a "licensee" on the basis of: 1) improper conduct in which that individual engaged while previously an "affiliated party" of another "licensee" (hereinafter referred to as the "former 'licensee'"); and 2) the adverse impact of that conduct upon the former
"licensee," its policyholders, its creditors, or the general public. Although Respondent argues otherwise, the statute clearly authorizes the Department to take such action. See, in particular, subsections (4)(c)("The department may enter an order removing the affiliated party or restricting or prohibiting participation by the person in the affairs of that particular licensee or of any other licensee"), (4)(g)("Any affiliated party removed from office pursuant to this section is not eligible for reelection or appointment to the position or to any other official position in any licensee in this state except upon the written consent of the department"), and (4)(h)("Resignation or termination of an affiliated party does not affect the department's jurisdiction to proceed under this subsection") of Section 624.310, Fla. Stat. [Emphasis supplied.]
Accordingly, the Department is not foreclosed from seeking to effectively remove Respondent from his position as President of Perry & Company based upon conduct in which he engaged while previously an "affiliated party" of First Miami and based upon the impact of that conduct upon First Miami, its policyholders and creditors, and the general public. If the Department were to find that, prior to the termination of Respondent's affiliation with the company, there had existed grounds under the statute to remove him from his position as Executive Vice President of First Miami, such a finding, by operation of the plain language of subsection (4)(g) of Section 624.310, Florida Statutes, would render Respondent ineligible to hold an "official position" with any "licensee," including Perry & Company, unless Respondent were able to obtain from the Department a written exemption from such disqualification.
A removal proceeding conducted pursuant to Section 624.310(4), Florida Statutes, is akin to a license suspension or revocation proceeding inasmuch as it may lead to the issuance of an order which effectively disqualifies the accused "affiliated party" or former "affiliated party" from employment, not with just the "licensee" with whom he was affiliated at the time of his improper conduct, but with all other "licensees" as well. Accordingly, like an order suspending or revoking a license, an order of removal must be supported by clear and convincing evidence establishing that grounds exist for the taking of such action. See Ferris v. Turlington, 510 So.2d 292 (Fla. 1987); Pic N' Save v. Department of Business Regulation, 601 So.2d 245 (Fla. 1st DCA 1992); Munch v. Department of Professional Regulation, 592 So.2d 1136 (Fla. 1st DCA 1992); Newberry v. Florida Department of Law Enforcement, 585 So.2d 500 (Fla. 3d DCA 1991); Pascale v. Department of Insurance, 525 So.2d 922 (Fla. 3d DCA 1988). "The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established." Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983). Furthermore, the grounds proven must be those specifically alleged in the administrative complaint. See Kinney v. Department of State, 501 So.2d 129, 133 (Fla. 5th DCA 1987); Hunter v. Department of Professional Regulation, 458 So.2d 842, 844 (Fla. 2d DCA 1984).
In those instances where a person who is the subject of a removal action is seeking an exemption from the disqualification from employment that would result, by operation of subsection (4)(g) of Section 624.310, Florida Statutes, from the entry of an order of removal in the case, that person bears the burden of demonstrating his entitlement to the requested exemption. See Cordes v. State of Florida, Department of Environmental Regulation, 582 So.2d 652, 654 (Fla. 1st DCA 1991)("[a]s the permit applicant, Cordes had the ultimate burden of persuasion of entitlement to the permit"); Florida Department of Transportation V. J.W.C. Co., Inc., 396 So.2d 778, 787 (Fla. 1st DCA 1981)("an applicant for a license or permit carries the 'ultimate burden of persuasion' of entitlement through all proceedings, of whatever nature, until such time as
final action has been taken by the agency"). The burden may be met by a showing that the harm the "disqualification" provision of the statute was intended to prevent would not occur if the exemption were granted.
The Administrative Complaint issued by the Department against Respondent in the instant case charges that from 1990 to the date First Miami was liquidated, in his capacity as the company's Executive Vice President in charge of its day-to-day operations, Respondent engaged in conduct proscribed by Sections 624.310(4)(a)1., 6., and 7., and 626.9541(1)(w)1., Florida Statutes, and that his conduct "contributed to the insolvency of [First Miami]" and resulted in "tremendous harm . . . to the health, safety and welfare of the public, policyholders, subscribers, claimants and creditors of First Miami." More specifically, the Department alleges that Respondent's "actions and reckless disregard of the true financial condition of First Miami Insurance Company from 1990 to the date the company was liquidated evidence:" "a lack of fitness and/or trustworthiness to engage in the business of insurance [as described in subsection (4)(a)1. of Section 624.310, Florida Statutes];" "a total mismanagement of business activities of First Miami [as described in subsection (4)(a)1. of Section 624.310, Florida Statutes];" and "a total breach of [his] fiduciary duties to the insurance buying public, policyholders, subscribers, claimants and creditors of First Miami [as described in subsection (4)(a)7. of Section 624.310, Florida Statutes]." In connection with this latter allegation, the Department further asserts that "First Miami policyholders were not provided legal defenses they had contracted for and judgments were allowed to be entered against them" and that "[i]n excess of One Million Dollars ($1,000,000) in subrogation moneys owed to other insurers went unpaid while First Miami policyholders were sued by these insurers." The Department also alleges that Respondent's "statements made to the Department regarding the financial condition of First Miami Insurance Company from 1990 to the date the company was liquidated and placed into receivership in [his] capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company were material misrepresentations [as described in subsection (4)(a)6. of Section 624.310, Florida Statutes] made with a reckless disregard for the true financial condition of First Miami." Finally, the Department makes the allegation that "new business was solicited on behalf of First Miami Insurance Company when it was obvious the company was unable to meet its current obligations" [in violation of Section 626.9541(1)(w)1., Florida Statutes, which provides as follows:
Whether or not delinquency proceedings as
to the insurer have been or are to be initiated, but while such insolvency or impairment exists, no director or officer of an insurer, except with the written permission of the Department of Insurance, shall authorize or permit the insurer
to solicit or accept new or renewal insurance risks in this state after such director or officer knew, or reasonably should have known, that the insurer was insolvent or impaired. "Impaired" includes impairment for capital or surplus, as defined in
s. 631.011(9) and (10)]. 32/
An examination of the record in the instant case reveals that none of the allegations of wrongdoing advanced in the Administrative Complaint are supported by even a preponderance of the record evidence.
That Respondent acted with "reckless disregard for the true financial condition of First Miami" in his capacity as Executive Vice President of the company is an allegation that is repeatedly made in the Administrative Complaint and is perhaps the centerpiece of the Department's case against Respondent. The record evidence, however, including most significantly Respondent's own testimony on the subject, which the Hearing Officer finds believable and has credited, affirmatively establishes that not only did Respondent not know, when he took the actions about which the Department complains, that First Miami was "insolvent" or on the verge of "insolvency," within the meaning of the Insurance Code, he sincerely believed otherwise on the basis of information, statements, reports and opinions provided by others, including attorneys, accountants, appraisers, and actuaries, upon which it was not unreasonable for him to rely. Cf. Section 607.0830(2), Fla. Stat.("[i]n discharging his duties, a director [of a corporation] is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (a) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; (b) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons' professional or expert competence; or (c) A committee of the board of directors of which he is not a member if the director reasonably believes the committee merits confidence").
Furthermore, while it indisputable that First Miami was judicially declared "insolvent," within the meaning of the Insurance Code, the record evidence is insufficient to establish that Respondent engaged in any mismanagement of First Miami's business activities or in any illegal activity demonstrating a lack of fitness or trustworthiness to continue in the insurance business that may have caused or contributed to First Miami's "insolvency." There has been an inadequate showing that, at any time in discharging his duties as First Miami's Executive Vice President, Respondent: (1) acted any differently than a reasonably prudent person in a like position with equivalent responsibilities and authority would have acted under similar circumstances;
acted in bad faith without a sincere desire to promote the best interests of the corporation and its shareholders; or (3) otherwise breached any fiduciary duty 33/ that he may have owed. 34/
Accordingly, the proof is insufficient to support a finding that Respondent engaged in conduct proscribed by either Section 624.310(4)(a)1., 6., or 7., Florida Statutes, or Section 626.9541(1)(w)1., Florida Statutes, in his capacity as Executive Vice President of First Miami, as alleged in the Administrative Complaint.
Inasmuch as the Department has failed to establish the existence of any of the grounds for removal alleged in the Administrative Complaint, the Administrative Complaint should be dismissed.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby
RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint against Respondent.
DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994.
STUART M. LERNER
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 18th day of October, 1994.
ENDNOTES
1/ The Administrative Complaint was signed by the Insurance Commissioner.
2/ The hearing was originally scheduled to commence on July 21, 1993, but was twice continued at Respondent's request.
3/ Among the arguments advanced by Respondent in his post-hearing submittal is that the "Department is liable to [him] for a reasonable attorney's fee in connection with his defense of this matter" pursuant to Section 120.57(1)(b)5., Florida Statutes. Inasmuch as the Hearing Officer has final order authority with respect to this request for attorney's fees under Section 120.57(1)(b)5., Florida Statutes, he is issuing a separate Final Order on this date disposing of the request. See Department of Health and Rehabilitative Services v. S.G., 613 So.2d 1380, 1384 (Fla. 1st DCA 1993).
4/ He is also admitted to practice in Washington D.C. and New York State. 5/ For a time, he was also a law professor at the University of Florida.
6/ Respondent continued to perform his computer-related duties in his new position.
7/ Reinsurance, which is sometimes referred to as "surplus relief" or a "capacity enhancer," enables an insurer to share with another insurance company the risks it has undertaken and thereby enhance its surplus, reduce the amount of its reserves, and, resultingly, write more business. The justification for an insurer doing these things based upon it being a party to a reinsurance agreement, however, does not exist where the reinsurer does not have the financial ability to meet its reinsurance obligations.
8/ PRLS, Inc. was incorporated on February 9, 1989. In August of 1989, the name of the corporation was changed to Ray Holding Company, Inc. The Articles of Amendment to the Articles of Incorporation were signed by Saldise as President and Secretary. On November 29, 1989, the name of the corporation was changed back to PRLS, Inc. In February of 1991, Articles of Dissolution of PRLS, Inc. were filed with the Secretary of State and the corporation was administratively dissolved.
9/ Typically, the Department does not pre-approve or disapprove reinsurance agreements. As a general rule, the issue of whether a reinsurance agreement should be approved is addressed by the Department after the filing of a financial statement in which the insurance company has taken credit for reinsurance.
10/ Forum was ultimately placed into receivership and thereafter liquidated. First Miami filed a claim for funds due with the Joint Liquidators.
11/ Munauto subsequently went out of business. Thereafter, First Miami filed a breach of contract action seeking to recover monies Munauto allegedly owed it.
12/ Check number 003544 was voided and never signed or issued.
13/ Statutory accounting was developed to protect policyholders and other potential claimants.
14/ Earlier in his report, Smith had opined that this purchase "grossly exceeded the allowed limits without permission from the Department."
15/ As noted in the report, Silver Breeze Ltd was the "intermediary" between Munauto S.A. and First Miami.
16/ Smith had stated in a previous section of his report that Respondent had told him during his visit that he, Respondent, "had essentially copied the reinsurance treaty and trust agreement of the previous reinsurer, Forum Re," reasoning that since "the Department had accepted the previous contract with Forum Re . . . an essentially similar contract should also be acceptable."
17/ Respondent had first seen drafts of these agreements in January or February of 1992.
18/ Rubin was not in a position to provide an expert opinion regarding the valuation of the assets to be contributed to First Miami and Respondent never sought such an opinion from him.
19/ Liborio Financial Group, Inc., was incorporated on February 11, 1991. Saldise, Lopez and Respondent were among the initial directors of the corporation. Respondent remained a director of the corporation until its administrative dissolution on October 9, 1992. He also served as the corporations's Vice President.
20/ Alphonso is currently on the payroll of Perry and Company as its Assistant Vice President of Operations.
21/ In determining whether such payment should be released, it was Respondent's responsibility, not to reevaluate the validity of claims that the claims committee had approved or partially approved, but simply to ascertain that the committee had actually given its approval or partial approval to settle the claim and that therefore payment of the claim had been properly authorized.
Payment was made by check which Respondent and one other authorized First Miami official signed. [At least two signatures were required on every check issued by First Miami and Respondent was one of the company officials who had signatory authority.]
22/ While the failure of an insurance company to pay valid claims, or its delay in doing so, may be indicative of a solvency problem, it appears that Respondent reasonably believed that, in the case of First Miami, its denial of, or delay in paying, claims was not indicative of such problems, but rather was attributable to other causes, including, most significantly, the company's "conservative" claims payment policy.
23/ As the parties have stipulated, "[t]here is no evidence that these claims were ever reduced to judgment or that the Department of Insurance independently investigated the validity of any defenses thereto which were or could have been raised by [First Miami]."
24/ As of March 20, 1992, the amount of State Farm's subrogation claims against First Miami had increased to slightly over $800,000.00.
25/ A copy of this transcript was offered and received into evidence at the final hearing in the instant case as Petitioner's Exhibit 50.
26/ A document Carrera filed with the Secretary of State on March 6, 1992, lists Respondent as Carrera's President and a member of its Board of Directors.
27/ This figure is based upon Failla's appraisal of First Miami's home office prperty.
28/ This figure included a $300,000.00 Certificate of Deposit at Sun Bank, which was encumbered by an agreement with Sun Financial.
29/ The Department knew that First Miami, in preparing its financial statements, was relying upon these professionals.
30/ Prior to the conservatorship and liquidation of First Miami, as First Miami's Executive Vice President, Respondent had been cooperative in responding to informational requests made by the Department concerning First Miami.
31/ In his post-hearing submittal, Respondent contends that Section 624.310(4), Florida Statutes, is unconstitutional. Because the issue of the constitutionality of Section 624.310(4), Florida Statutes, is one that cannot be resolved in an administrative forum, it will not be addressed by the Hearing Officer in this Recommended Order. See Palm Harbor Special Fire Control District v. Kelly, 516 So.2d 249, 250 (Fla. 1987); Cook v. Florida Parole and Probation Commission, 415 So.2d 845 (Fla. 1st DCA 1982).
32/ Sections 631.011(9) and (10), Florida Statutes, provide as follows:
"Impairment of capital" means that the minimum surplus required to be maintained in s. 624.408(3) has been dissipated and the insurer is not possessed of assets at least equal to all its liabilities together with its total issued and outstanding capital stock, if a stock insurer, or the minimum surplus or net trust fund required by s. 624.407, if a mutual, reciprocal, or business trust insurer.
"Impairment of surplus" means that the surplus of a stock insurer, the additional surplus of a mutual or reciprocal insurer, or the additional net trust fund of a business trust insurer does not comply with the requirements of s. 624.408(3).
These two terms, "impairment of capital" and "impairment of surplus," are included in the definition of "insolvency" found in subsection (11) of Section 631.011, Florida Statutes, which reads as follows:
"Insolvency" means that all the assets of the insurer, if made immediately available, would not be sufficient to discharge all its liabilities or that the insurer is unable to pay debts as they become due in the usual course of business. When the context of any provision of this code so indicates, insolvency also includes and is defined as "impairment of surplus" . . . and "impairment of capital". . . .
The term "assets," as used in this definition, according to subsection (3) of Section 631.011, Florida Statutes, "means only allowed assets as defined in chapter 625," or what have been referred to in this Recommended Order as "admitted assets."
33/ As a director and officer of First Miami, Respondent "owe[d] a fiduciary duty to the corporation and to the shareholders and [was required to] act in the best interest of the corporation." Rehabilitation Advisors, Inc. v. Floyd, 601 So.2d 1286, 1288 (Fla. 5th DCA 1992).
34/ First Miami, and therefore Respondent, owed no fiduciary duty to third parties injured by First Miami's insureds or to the insurers of these injured third parties, like State Farm and Allstate Insurance Companies, who filed subrogation claims against First Miami. See Dunn v. National Security Fire and Casualty Company, 631 So.2d 1103, 1107 (Fla. 5th DCA 1993). Likewise, First Miami's relationship with its insureds who filed "first party claims" was "more in the nature of a debtor-creditor or adversary relationship . . . than a fiduciary relationship." Shupack v. Allstate Insurance Company, 367 So.2d 1103, 1104 (Fla. 3d DCA 1979). Although it did have an obligation to attempt "in good faith to settle [such] claims when, under all of the circumstances, it could have and should have done so, had it acted fairly and honestly toward its insured and with due regard for his interests," such an obligation was a statutory duty imposed by Section 624.155(1)(b)1., Florida Statutes, not a fiduciary duty. First Miami did have a fiduciary duty to provide contractually required representation to its insureds in actions filed against them by injured third parties and/or their insurers. See Dunn v. National Security Fire and Casualty Company, 631 So.2d at 1106; Allstate Insurance Company v. Douville, 510 So.2d 1200, 1201 (Fla. 2d DCA 1987), rev. denied, 519 So.2d 986 (Fla. 1987);
Smith v. Standard Guaranty Insurance Company, 435 So.2d 848, 849 (Fla. 2d DCA 1983), rev. denied, 441 So.2d 633 (Fla. 1983). The record evidence, however, does not reveal that Respondent was responsible for any First Miami insured not receiving such representation. Nor does it demonstrate that there was any breach of First Miami's statutory obligation under Section 624.155(1)(b)1., Florida Statutes, for which he was responsible.
APPENDIX TO RECOMMENDED ORDER IN CASE NO. 93-1460
The following are the Hearing Officer's specific rulings on the proposed "findings of fact" set forth in the parties' post-hearing submittals:
The Department's Proposed Findings
To the extent that this proposed finding states that "by virtue of his position and responsibilities with Perry & Company [Respondent] is an "affiliated party" as that term is defined in section 624.310, Florida Statutes, it has been rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact. Otherwise, it has been accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order.
Accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent remained the Treasurer of First Miami until July 30, 1991, and that he remained the Executive Vice President and a director of First Miami "until October 9, 1992, the date of the administrative dissolution of the corporation," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
4-5. Accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent remained the President and a director of Carrera until August 13, 1993, it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent remained a Vice President and a director of Liborio Financial Group, Inc., "until August 13, 1993, the date of the administrative dissolution of the corporation," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
Accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent remained the Executive Vice President and a director of General Trust Mortgage Corporation until October 9, 1992, it has been rejected because it is contrary to Stipulation #6 set forth in the parties' Joint Prehearing Stipulation. Otherwise, it has been accepted and incorporated in substance.
10-13. Accepted and incorporated in substance.
!4. To the extent that this proposed finding states that August 11, 1991, was the date on which "the name [of the corporation] was changed back to PRLS, Inc.," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
15. Accepted and incorporated in substance.
16-17. Accepted and incorporated in substance, with the understanding that the term "assets," as used in these proposed findings, refers only to admitted assets, as determined by the Department.
18-22. Accepted and incorporated in substance.
To the extent that this proposed finding suggests that, as the Executive Vice President of First Miami, Respondent received information, statements, reports and opinions concerning matters relating to the financial condition of the company, it has been accepted and incorporated in substance. To the extent that it suggests that, based upon the information, statements,
reports and opinions he received, he knew that First Miami was "insolvent" or on the verge of "insolvency," within the meaning of the Insurance Code, it has been rejected because it is without sufficient evidentiary support.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
First sentence: Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings; Second sentence: Accepted and incorporated in substance.
27-47. Accepted and incorporated in substance.
48. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
49-58. Accepted and incorporated in substance.
Rejected as unpersuasive argument.
Accepted and incorporated in substance.
To the extent that this proposed finding states that check numbers 003543 and 003545 were dated April 28, 1991, [as opposed to April 26, 1991], it has been rejected because it is without sufficient evidentiary support. Furthermore, the Hearing Officer disagrees with the assertion contained in this
proposed finding that it "can be readily ascertained by a quick review of the May, 1991 bank statement of South Florida Premium Finance Company [Petitioner's Exhibit 70]" that it is not true that the company "wrote no checks between April 28, 1991, and May 10, 1991." [The dates on the bank statement indicate when the checks referenced in the statement were cashed, not when they were written.] Otherwise, it has been accepted and incorporated in substance.
62-65. Accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent, in his capacity as a corporate officer, signed the documents in question, it has been accepted and incorporated in substance. Otherwise, it has been rejected because it is without sufficient evidentiary support.
First, second and fourth sentences and third sentence, to the extent that it states that Respondent "[o]nce again signed the paperwork:" Accepted and incorporated in substance; Third sentence, to the extent that it states that Respondent "knew or reasonably should have known that this transaction was detrimental to the financial condition of the company," and fifth sentence: Rejected because they are without sufficient evidentiary support.
68-74. Accepted and incorporated in substance.
75. Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
76-80. Accepted and incorporated in substance.
First sentence and second sentence, before comma: Accepted and incorporated in substance; Second sentence, after coma, and third sentence: Rejected because they are without sufficient evidentiary support.
To the extent that this finding asserts that the banking activity described therein was "set off" by the "conversation between Respondent and Ms. Lozano," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
First sentence: To the extent that this proposed finding states "this was the first banking activity of the entity and came in direct response to a Department of Insurance visit and conversation with Respondent," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance; Second sentence: To the extent that this proposed finding states that "it should have been reported on the September 30, 1991, Quarterly Statement," it has been rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact. Otherwise, it has been accepted and incorporated in substance.
84-85. Accepted and incorporated in substance.
86-89. Rejected as findings of fact because they are more in the nature of recitations or summaries of testimony than findings of fact based upon such testimony.
Accepted and incorporated in substance.
To the extent that this proposed finding states that Respondent "knew that the company was clearly insolvent and unable to pay its claims in the normal course of business," it has been rejected because it is without sufficient evidentiary support.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
Second sentence: Rejected because it is without sufficient evidentiary support; Remaining sentences: Accepted and incorporated in substance.
First sentence: To the extent that this proposed finding suggests that "[t]he failure to pay claims, or the delay in paying claims", is [necessarily] a solvency issue," it has been rejected because it is without sufficient evidentiary support. To the extent that it suggests that it may be indicative of the insurance company's insolvency, it has been accepted and
incorporated in substance; Second sentence: Rejected because it is without sufficient evidentiary support.
Accepted and incorporated in substance.
First sentence: To the extent that this proposed finding states that the amount referenced was "owed" [as opposed to claimed] it has been rejected because it is without sufficient evidentiary support; Second sentence: Accepted and incorporated in substance.
Accepted and incorporated in substance.
To the extent that this proposed finding asserts that "[i]n some instances First Miami Insurance Company policyholders were not provided with the legal defense they had contracted for," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
First sentence: Rejected as a finding of fact because it is more in the nature of argument [which, in any event, is unpersuasive] regarding the credibility of testimony than a finding of fact; Second sentence, including all subparts: Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony.
First sentence: Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony; Second sentence: Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony.
This proposed finding has been accepted and incorporated in substance to the extent that it states: the "Chief Financial Officer reported to [Respondent];" "[Respondent] signed under oath, as Treasurer of First Miami Insurance Company, the 1989 Annual Statement, the 1990 Quarterly Statement as of March 31, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990 attesting to the information contained in those financial reports to the Department of Insurance;" and "on the 1990 Annual Statement, the Quarterly Statement as of March 31, 1991, the Quarterly Statement as of June 30, 1991, the Quarterly Statement as of September [3]0, 1991, the 1991 Annual Statement and the Quarterly Statement as of March 31, 1992 of First Miami Insurance Company, all filed with the Department of Insurance, the Respondent was listed as a Vice President and a Director." Otherwise, it has been rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony.
Last sentence: Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony; Remaining sentences: Accepted and incorporated in substance.
First sentence: To the extent that this proposed finding states that Respondent "arranged for . . . the valuation of Procesys, Inc.," it has been accepted and incorporated in substance. Otherwise, it has been rejected because it is without sufficient evidentiary support; Second, third, fifth and sixth sentences: Accepted and incorporated in substance; Fourth and seventh sentences: Rejected because they are without sufficient evidentiary support.
Second sentence: Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony; Remaining sentences: Accepted and incorporated in substance.
First and second sentence: Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon that or other testimony; Third, sixth, eighth and eleventh sentences and ninth sentence, before comma: Rejected because they are without sufficient evidentiary support; Fourth and fifth sentences and ninth sentence, after comma: Accepted and incorporated in substance; Seventh sentence: To the extent that this proposed finding suggests that, as an officer and/or director of some (but not all) of the "entities which were involved in the corporate
restructuring," Respondent was in a position to have access to information, statements, reports and opinions concerning matters relating to the financial condition of these entities, it has been accepted and incorporated in substance. To the extent that it suggests that he knew or should have known, based upon his own independent valuation of these entities' assets, that the financial condition of these entities was other than that reflected in the information, statements, reports and opinions to which he had access, it has been rejected because it is without sufficient evidentiary support; Tenth sentence: Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
First, second, third, fourth and seventh sentences: Rejected as findings of fact because they are more in the nature of recitations or summaries of testimony than findings of fact based upon such testimony; Fifth sentence: Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings; Sixth sentence: Rejected because it is without sufficient evidentiary support.
First sentence: Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony; Second sentence: Rejected as a finding of fact because it is more in the nature of argument [which, in any event, is unpersuasive] regarding the credibility of testimony than a finding of fact.
First and third sentences: Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon that or other testimony; Second, fifth and sixth sentences: Accepted and incorporated in substance; Fourth sentence: Rejected as a finding of fact because it is more in the nature of argument [which, in any event, is unpersuasive] regarding the credibility of testimony than a finding of fact; Seventh sentence: Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony.
First sentence: Rejected as a finding of fact because it is more in the nature of a recitation of testimony than a finding of fact based upon that or other testimony; Second sentence: Accepted and incorporated in substance.
First sentence, including quoted material: Rejected as a finding of fact because it is more in the nature of a recitation of testimony than a finding of fact based upon that or other testimony; Second and third sentences: Rejected as findings of fact because they are more in the nature of legal conclusions than findings of facts; Fourth sentence: Rejected because it is without sufficient evidentiary support.
First, fourth, fifth and sixth sentences: Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon that or other testimony; Second and third sentences: Rejected as findings of fact because they are more in the nature of argument [which, in any event, is unpersuasive] regarding the credibility of testimony than findings of fact; Seventh, eighth and ninth sentences: Accepted and incorporated in substance; Tenth and eleventh sentences: Rejected as unpersuasive argument.
Respondent's Proposed Findings
Accepted and incorporated in substance.
Accepted and incorporated in substance, with the understanding that the term "First Miami," as used in this proposed finding, refers to First Miami Holding Company.
Accepted and incorporated in substance.
To the extent that this proposed finding states that "Respondent has received an Associate of Arts degree in computer science," it has been accepted and incorporated in substance. Otherwise, it has not been incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
6-8. Accepted and incorporated in substance.
9. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
10-31. Accepted and incorporated in substance.
32. Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon that or other testimony.
33-34. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
To the extent that this proposed finding states that, under First Miami's written claims handling procedure, the claims committee reviewed "every claim" [as opposed to just claims over $3,000.00], it has been rejected because it is without sufficient evidentiary support.
37-44. Accepted and incorporated in substance.
45. To the extent that this proposed finding suggests that the physician who advised the claims committee had no ownership interest in First Miami or any of its related companies, it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
46-48. Accepted and incorporated in substance.
49. To the extent that this proposed finding states that First Miami "had the statutory right to . . . demand arbitration," this proposed finding has been rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact. To the extent that it states that First Miami's demanding of arbitration "could have generated consumer complaints," it has been rejected because it constitutes mere speculation. Otherwise, it has been accepted and incorporated in substance.
50-53. Accepted and incorporated in substance.
54. To the extent that this proposed finding states that First Miami "never refused to pay appropriate subrogation claims," it has been rejected because the Hearing Officer is unable to determine, based upon the record in this case, the "appropriateness" or "inappropriateness" of the subrogation claims with which First Miami was presented. Otherwise, it has been accepted and incorporated in substance.
55-56. Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
Rejected because it constitutes mere speculation. 59-63. Accepted and incorporated in substance.
64-65. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
68-69. Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon such testimony.
Rejected because it constitutes mere speculation.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
To the extent that this proposed finding suggests no consumer complaint of any kind against First Miami was ever "reduced to judgment," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
76-77. Accepted and incorporated in substance.
78-79. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
80-81. Accepted and incorporated in substance.
82. Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
83-88. Accepted and incorporated in substance.
89. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
90-102. Accepted and incorporated in substance.
103. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
104-106. Accepted and incorporated in substance.
107-108. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
109. Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
110-111. Accepted and incorporated in substance.
112-113. Rejected because they are without sufficient evidentiary support.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
118-120. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
121-133. Accepted and incorporated in substance.
134. Rejected because it is without sufficient evidentiary support. 135-136. Accepted and incorporated in substance.
To the extent that this proposed finding states that the "reinsurance agreement between First Miami and Forum Reinsurance . . . was a legally binding agreement, [and] complied with Florida Law," it has been rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact. Otherwise, it has been accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
139-140. Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
First sentence: Accepted and incorporated in substance; Second sentence: Rejected because it is without sufficient evidentiary support.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected because it is without sufficient evidentiary support.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
147-148. Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
152-166. Accepted and incorporated in substance.
167. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
168-170. Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
176-177. Accepted and incorporated in substance.
178. To the extent that this proposed finding suggests that First Miami did not already have an ownership interest in South Florida Premium Finance Company, it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
179-180. Accepted and incorporated in substance.
To the extent that this proposed finding states that Community Broadcasters, Inc., "owned real property," it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
Accepted and incorporated in substance, with the understanding that Saldise subsequently donated her shares to Investors Arts and Antiques, Inc.
183-204. Accepted and incorporated in substance.
205. Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
206-212. Accepted and incorporated in substance.
213. Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
214-225. Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
228-229. Accepted and incorporated in substance.
230-231. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
232-237. Accepted and incorporated in substance.
238. To the extent that this proposed finding states that the appraisal was provided in 1991, rather than 1992, it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
239-240. Accepted and incorporated in substance.
To the extent that this proposed finding states that the appraisal was provided in 1991, rather than 1992, it has been rejected because it is without sufficient evidentiary support. Otherwise, it has been accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
248-253. Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
258-259. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
260-261. Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon such testimony.
Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
264-266. Accepted and incorporated in substance.
267. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
268-271. Accepted and incorporated in substance.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
Accepted and incorporated in substance.
274-275. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
278-290. Accepted and incorporated in substance.
291. Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
292-293. Accepted and incorporated in substance.
First sentence: Accepted and incorporated in substance; Second sentence: Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
297-298. Accepted and incorporated in substance.
299. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
300-302. Accepted and incorporated in substance.
303. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
304-308. Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon such testimony.
309-310. Accepted and incorporated in substance.
311-315. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
316-324. Accepted and incorporated in substance.
325-326. Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon such testimony.
327-328. Accepted and incorporated in substance.
329-330. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
331-332. Rejected as findings of fact because they are more in the nature of summaries of testimony than findings of fact based upon such testimony.
333-334. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
335-336. Accepted and incorporated in substance.
337-338. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
341-342. Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a legal conclusion than a finding of fact.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
347-349. Accepted and incorporated in substance.
350. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
351-352. Accepted and incorporated in substance.
353. Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
354-357. Accepted and incorporated in substance.
358-366. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of, and commentary on, testimony than a finding of fact based upon such testimony.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
To the extent that this proposed finding states that Lopez was not an officer or director of First Miami, it has been accepted and incorporated in substance. Otherwise, it has not been incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Accepted and incorporated in substance.
Not incorporated in the Findings of Fact of this Recommended Order because it would add only unnecessary detail to these findings.
Rejected as a finding of fact because it is more in the nature of legal argument than a finding of fact.
377-383. Not incorporated in the Findings of Fact of this Recommended Order because they would add only unnecessary detail to these findings.
384. Rejected as a finding of fact because it is more in the nature of a summary of, and commentary on, testimony than a finding of fact based upon such testimony.
COPIES FURNISHED:
S. Marc Herskovitz, Esquire Elise M. Matthes, Esquire Department of Insurance
412 Larson Building Tallahassee, Florida 32399-0300
Steven M. Malono, Esquire Mang, Rett & Minnick, P.A. 660 East Jefferson Street Tallahassee, Florida 32301
Honorable Tom Gallagher
State Treasurer and Insurance Commissioner The Capitol, Plaza Level
Tallahassee, Florida 32399-0300
Bill O'Neil, Esquire General Counsel Department of Insurance The Capitol, PL-11
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 of time 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.
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE, )
AND TREASURER )
)
Petitioner, )
)
vs. ) CASE NO. 93-1460
)
ALEX J. CAMPOS, )
)
Respondent. )
)
FINAL ORDER ON REQUEST FOR ATTORNEY'S FEES PURSUANT TO SECTION 120.57(1)(b)5., FLORIDA STATUTES
On or about February 9, 1993, the Department of Insurance (hereinafter referred to as the "Department") issued an Administrative Complaint, signed by the Insurance Commissioner, against Respondent announcing its intention "to enter an order removing [Respondent] from office at Perry & Company pursuant to section 624.310, Florida Statutes," based upon certain conduct in which Respondent allegedly engaged in his "capacity as Executive Vice President in charge of the day-to-day activities of First Miami Insurance Company" "from 1990 to the date the company was liquidated and placed into receivership." According to the Administrative Complaint, in engaging in such conduct, Respondent violated the provisions of Section 624.310(4)(a)1., 6. and 7., Florida Statutes, and Section 626.9541(1)(w)1., Florida Statutes.
Respondent denied the allegations of wrongdoing advanced in the Administrative Complaint and requested a formal hearing on these allegations. In his request for a formal hearing, Respondent did not allege that the
Administrative Complaint was filed for an "improper purpose," within the meaning of Section 120.57(1)(b)5., Florida Statutes. On March 12, 1993, the matter was referred to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct the formal hearing Respondent had requested.
The formal hearing in this case was originally scheduled to commence on July 21, 1993, but was twice continued at Respondent's request. It was ultimately held on March 7-11, 1994, and April 11-14, 1994. Both parties filed their post-hearing submittals on August 15, 1994. In his post-hearing submittal, Respondent argues, among other things, that "the Department is liable to [him] for a reasonable attorney's fee in connection with his defense of this matter" pursuant to Section 120.57(1)(b)5., Florida Statutes, inasmuch as, according to Respondent, the evidence adduced at the formal hearing establishes that there was "little, if any, meaningful inquiry as to the evidence, or lack thereof, of Respondent's alleged violation of Section 624.310(4), Florida Statutes . . . prior to [the] filing [of] the Administrative Complaint." At no time prior to filing its post-hearing submittal had Respondent moved for an award of attorney fees pursuant to Section 120.57(1)(b)5., Florida Statutes, or contended in any pleading filed in this case, including the parties' Joint Prehearing Stipulation, that he was entitled to such an award.
Section 120.57(1)(b)5., Florida Statutes, provides as follows:
All pleadings, motions or other papers filed in the proceeding must be signed by a party, the party's attorney, or the party's qualified representative. The signature of a party, a party's attorney, or a party's qualified rep- resentative constitutes a certificate that he has read the pleading, motion, or other paper
and that, to the best of his knowledge, informa- tion, and belief formed after reasonable inquiry, it is not interposed for any improper purposes, such as to harass or to cause unnecessary delay or for frivolous purpose or needless increase in the cost of litigation. If a pleading, motion, or other paper is signed in violation of these requirements, the hearing officer, upon motion
or his own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.
In determining whether a "paper" has been filed in a Section 120.57(1) "proceeding" for an "improper purpose," within the meaning of Section 120.57(1)(b)5., Florida Statutes, the Hearing Officer
should not delve into an attorney's or party's subjective intent or into a good faith-bad faith analysis. Instead, if a reasonably clear legal justification can be shown for
the filing of the paper in question, improper purpose cannot be found and sanctions are inappropriate. As an example, . . . improper purpose may be manifested by excessive persistence in pursuing a claim or defense in the face of repeated adverse rulings, or by obdurate resistance out of proportion to the amounts or issues at stake.
Mercedes Lighting and Electrical Supply, Inc. v. Department of General Services, 560 So.2d 272, 278 (Fla. 1st DCA 1990).
The "paper" that Respondent contends was signed and filed in violation of the requirements of Section 120.57(1)(b)5., Florida Statutes, is the Administrative Complaint issued against him by the Department. The Administrative Complaint, however, was signed and issued prior to the commencement of the instant Section 120.57(1) "proceeding." It therefore is questionable whether such acts were governed by the requirements of Section 120.57(1)(b)5., Florida Statutes, and thus whether they are subject to the statute's sanctions. 1/ See Shoenberger v. Oselka, 909 F.2d 1086 (7th Cir.
1990)(Rule 11 of the Federal Rules of Civil Procedure, 2/ which is similar to Section 120.57(1)(b)5., Florida Statutes, 3/ "does not grant district courts the authority to impose sanctions merely for signing and filing a state court complaint that the defendants have removed to federal court;" since "when Shoenberger signed and filed his complaint in state court he was not subject to
Rule 11, . . . his signing his complaint could not have violated Rule 11" and therefore "the district court could not impose sanctions under that rule;" "Rule 11 does not impose a continuing duty to update or correct papers that did not violate the rule when signed and filed"); Dahnke v. Teamsters Local 695, 906 F.2d 1192 (7th Cir. 1990)("signer may not incur Rule 11 sanctions for actions he took in state proceedings before federal jurisdiction was invoked;" "signers have no obligation under Rule 11 to make continuous updates to previously filed pleadings and papers"); In Re Summers, 863 F.2d 20 (6th Cir. 1988)("where a complaint is properly filed in state court and then removed to federal court, it is inappropriate for the federal court to apply Rule 11 sanctions for the filing of that complaint"); Hurd v. Ralph's Grocery Company, 824 F.2d 806 (9th Cir. 1987)("sanctions cannot be imposed under Rule 11 for filing a paper in state court"); Stiefvater Real Estate, Inc. v. Hinsdale, 812 F.2d 805 (2d Cir. 1987)("rule 11 deals exclusively with 'the certification flowing from the signature to a pleading, motion, or other paper in a lawsuit,' and imposes no continuing duty on the parties or their attorneys;" "Stiefvater commenced this action in state court" and "it was defendants' removal petition
that landed it in a federal forum;" "[t]herefore, at the time the complaint was signed rule 11 simply did not apply, and the district court had no authority to give it retrospective application"); Kirby v. Allegheny Beverage Corporation, 811 F.2d 253 (4th Cir. 1987)("Rule 11 sanctions may not be imposed on an attorney for merely signing and filing a state court complaint which is subsequently removed to federal court;" "[a]t the time a state court pleading is signed, the signing attorney is not subject to the Federal Rules of Civil Procedure" and "[t]herefore, a pleading signed in a state court proceeding which is later removed to federal court cannot be signed in violation of Rule 11"); but see Good Samaritan Hospital v. Department of Health and Rehabilitative Services, 582 So.2d 722 (Fla. 4th DCA 1991)(hospital entitled to award of attorney's fees under Section 120.57(1)(b)5., Florida Statutes, where administrative complaint against hospital filed for an "improper purpose").
The Hearing Officer also questions whether it is too late for Respondent, in his post-hearing submittal, more than a year and half following the issuance of the Administrative Complaint, to first raise the issue of his entitlement to attorney's fees under Section 120.57(1)(b)5., Florida Statutes, after having failed to make any mention of such issue in the parties' Joint Prehearing Stipulation, in which the parties purported to list all issues remaining for the Hearing Officer's determination. See Esch v. Forster, 168 So. 229 (Fla.
1936)("[w]here parties by stipulation prescribe the issues on which the case is to be tried, they are estopped from thereafter asserting that the case was submitted on the wrong theory; and a stipulation of this nature . . . amounts to a binding waiver and elimination of all issues not included"); Lotspeich Company v. Neogard Corporation, 416 So.2d 1163, 1165 (Fla. 3d DCA 1982)("[p]retrial stipulations prescribing the issues on which a case is to be tried are binding upon the parties and the court, and should be strictly enforced"); see also Mercedes Lighting and Electrical Supply, Inc. v.
Department of General Services, 560 So.2d at 277("[a] party seeking sanctions under rule 11 should give notice to the court and the offending party promptly upon discovering a basis to do so;" "[t]he purpose of the rule- deterring subsequent abuses- is not well served if an offending pleading is fully litigated and the offender is not punished until the trial is at an end").
It is unnecessary, however, for the Hearing Officer to decide these questions regarding the applicability of the requirements of Section 120.57(1)(b)5., Florida Statutes, and the timing of Respondent's attempt to invoke the statute, because, even if these questions were resolved in his favor, he still would not be entitled to the award of attorney's fees he has requested
inasmuch as it is apparent from the record that the Department did not have an "improper purpose" in issuing the Administrative Complaint. Although the Hearing Officer has recommended in his Recommended Order issued on this date that the Administrative Complaint be dismissed because of the Department's failure to meet its burden of proving the existence of the grounds for removal alleged in the Administrative Complaint, it appears from a review of the testimony and documentary evidence adduced at hearing that the Department had a reasonably clear legal justification for issuing the Administrative Complaint and making these allegations against Respondent. That the Department was not successful in persuading the Hearing Officer that it had met its burden of proof with respect to these allegations is not, standing alone, a basis upon which to impose sanctions upon the Department pursuant to Section 120.57(1)(b)5., Florida Statutes. See Department of Health and Rehabilitative Services v. S.G., 613 So.2d 1380, 1385 (Fla. 1st DCA 1993); Mercedes Lighting and Electrical Supply, Inc. v. Department of General Services, 560 So.2d at 278-79.
In view of the foregoing, Respondent's request for attorney's fees under Section 120.57(1)(b)5., Florida Statutes, is hereby DENIED.
DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994.
STUART M. LERNER
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 18th day of October, 1994.
ENDNOTES
1/ Regardless of the availability of relief under Section 120.57(1)(b)5., Florida Statutes, a respondent who successfully defends against an administrative complaint issued by the Department may be awarded attorney's fees under Section 57.111, Florida Statutes, if the respondent qualifies as a "prevailing small business party" and the Department is unable to show that it was substantially justified in prosecuting the administrative complaint. See Department of Professional Regulation v. Toledo Realty, Inc., 549 So.2d 715 (Fla. 1st DCA 1989). A petition for such an award must be filed in accordance with the provisions of Florida Administrative Code Rule 22I-6.035.
2/ Rule 11 provides in pertinent part as follows:
Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated. A party who is not represented by an attorney shall sign the party's pleading, motion, or other paper and state the party's address. . . . The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and
belief formed after reasonable inquiry it is well grounded in fact and warranted by existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, motion or other paper, including a reasonable attorney's fee.
3/ It has been said that this similarity "was not unintentional, and that it was expected that the case law construing rule 11 would be useful in applying section 120.57(1)(b)5." Mercedes Lighting and Electrical Supply, Inc. v.
Department of General Services, 560 So.2d at 276.
COPIES FURNISHED:
Steven M. Malono, Esquire Mang, Rett & Collette
660 East Jefferson Street Post Office Box 11127
Tallahassee, Florida 32302-3127
S. Marc Herskovitz, Esquire Elise M. Matthes, Esquire Division of Legal Services 612 Larson Building
Tallahassee, Florida 32399-0333
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 of the Division of Administrative Hearings 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.
=================================================================
AGENCY FINAL ORDER
=================================================================
OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE
IN THE MATTER OF: DOAH CASE NO.: 93-1460
ALEX J. CAMPOS DOI CASE NO.: 93-L-0635SMH
/
FINAL ORDER
THIS CAUSE came on before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, for consideration and final agency action. By Administrative Complaint issued on or about February 9, 1993, the Department alleged that the Respondent's conduct while an officer and director of First Miami Insurance Company violated several provisions of the Florida Insurance Code. Based on those allegations, the Department sought an order removing, restricting, or prohibiting the Respondent from participating in the affairs of any licensee, pursuant to Section 624.310, Florida Statutes. The Respondent timely requested a formal proceeding pursuant to Section 120.57(1), Florida Statutes. Pursuant to notice, a formal hearing was conducted on March
7-11, 1994, and on April 11-14, 1994, in Tallahassee, Florida, before Stuart M. Lerner, a duly designated Hearing Officer of the Division of Administrative Hearings.
After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by both parties, the Hearing Officer issued his Recommended Order (attached and incorporated herein as Exhibit A) on October 18, 1994. The Hearing Officer recommended that the Department enter a final order dismissing the Administrative Complaint against the Respondent.
Both parties timely filed exceptions to the Recommended Order. For purposes of this Order, the Hearing Officer's Recommended Order, attached as Exhibit A hereto, will be referred to as "RO." When not specifically quoted in the text of this Order, references to the Respondent's Proposed Recommended Order may be found attached and incorporated herein as Exhibit B. Similarly, when not specifically quoted in the text of this Order, references to the Department's Proposed Recommended Order may be found attached and incorporated herein as Exhibit C. Transcript references are cited as "T." Based upon a careful review and consideration of the entire record in this matter, including the transcript, all the exhibits, and the written exceptions of the parties, and being otherwise duly advised in the premises, I find and conclude as follows:
INTRODUCTION
Section 624.310, Florida Statutes, allows and directs the Department to take action to remove from positions of trust and responsibility with a licensee of the Department those persons who have engaged in improper conduct in the affairs of a licensee but who would otherwise escape accountability for their actions because they themselves are not "licensees" in the traditional sense.
Most importantly, Section 624.310 allows and directs such removal of a person from his present position with any current licensee for improper conduct in his
former position with another licensee. In this way, persons are prevented from continuing their improper conduct by the simple expedient of moving to another company or forming another company.
With this Final Order, the Department removes the Respondent from his present position as President of Perry and Company, a premium finance company licensed by the Department, on the basis of the Respondent's improper conduct while an officer and director of First Miami Insurance Company, a now-insolvent insurance company licensed by the Department.
STATUTES VIOLATED
The Respondent is charged with four specific statutory violations. The first three are found in Section 624.310, "Enforcement; cease and desist orders; removal of certain persons; fines." Subsection (4) is the pertinent part. It provides for removal of affiliated parties by the Department. The Respondent violated subparagraphs 1, 6, and 7 of paragraph (a) of subsection (4). The pertinent parts of subsection (4)(a) read:
Removal of Affiliated Parties by the Department.
The department may issue and serve a complaint stating charges upon any affiliated party and upon the licensee involved, whenever the department has reason to believe that an affiliated party is engaging in or has engaged in conduct that constitutes:
1. An act that demonstrates a lack of fitness or trustworthiness to engage in the business of insurance through engaging in illegal activity or mismanagement of business activities;
* * *
A material misrepresentation of fact, made knowingly and willfully or made with reckless disregard for the truth of the matter; or
A act of commission or omission or a practice which is a breach of trust or a breach of fiduciary duty.
The fourth statute violated, Section 626.954l(1)(w)1., Florida Statutes, is in the Unfair Insurance Trade Practices Act in Part X of Chapter 626. The specific statutory section reads:
626.9541 Unfair methods of competition and unfair or deceptive acts or practices defined.--
(1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices.
(w) Soliciting or accepting new or renewal insurance risks by insolvent or impaired insurer prohibited; penalty.--
Whether or not delinquency proceedings as to the insurer have been or are to be
initiated, but while such insolvency or impairment exists, no director or officer of an insurer, except with the written permission of the Department of Insurance, shall authorize or permit the insurer to solicit or accept new or renewal insurance risks in this state after such director or officer knew, or reasonably should have known, that the insurer was insolvent or impaired. "Impaired" includes impairment for capital or surplus, as defined in s.
631.011(9) and (10).
Any such director or officer, upon conviction of a violation of this paragraph, is guilty of a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
FINDINGS OF FACT
Based on the Hearing Officer's Findings of Fact, as accepted, modified, clarified, or rejected in the Rulings on the Department's Exceptions to Findings of Fact set out below, I state that the following are especially, although not exclusively, pertinent to the disposition of this matter:
The Respondent is currently the President, but not a director, of Perry and Company, an entity licensed by the Department as a premium finance company. [Joint Prehearing Stipulation, hereinafter "JPS"]
First Miami Insurance Company was initially licensed by the Department in 1988 as a Florida domestic property and casualty insurer. [JPS]
From at least February 21, 1990 until the company was taken over by the Department in June, 1992, the Respondent held positions as a director and as an officer, Treasurer and Executive Vice President, of First Miami. [JPS, Findings of Fact 19-22, hereinafter "FOF"] The owner of the company was Teresa Saldise. [FOF 14] Her husband, Pedro Ramon Lopez, along with Ms. Saldise, made strategic decisions about First Miami's direction, its business activities, and its investments. [FOF 16] As Executive Vice President, the Respondent reported to Ms. Saldise and Mr. Lopez. [FOF 20]
The Respondent was a director and an officer of First Miami Holding Company. [JPS]
The Respondent was a director and an officer of South Florida Premium Finance Company. [JPS, FOF 60]
The Respondent was a director, an officer, and an incorporator of Warwick Properties, Inc. [JPS, FOF 175]
The Respondent was a director and an officer of General Trust Mortgage Company. [JPS, FOF 61]
The Respondent, on behalf of General Trust Mortgage Company, signed as an incorporator and subscriber in August, 1991, when Warwick Re Insurance and Reinsurance Company Limited was incorporated in Anguilla, West Indies. [JPS]
The Respondent personally signed financial statements and immediately supervised Raimundo Aleman who prepared and signed other financial statements filed with the Department attesting to the financial condition of First Miami. [FOF 275-282]
The Respondent was in charge of the day-to-day operations of First Miami. [FOF 11]
The Respondent was the spokesman, the company representative, the company liaison between First Miami and the Department. [FOF 33, 89-93, 148, 289]
Until August or September 1989, First Miami was a wholly owned subsidiary of General Bank. In August or September 1989, General Bank made First Miami independent of the General Bank corporate structure. Shortly thereafter, First Miami acquired $5,000,000 of General Bank stock. In November 1989, federal banking regulators placed General Bank in conservatorship, thus rendering worthless the General Bank stock held by First Miami. As a result of that, the Department filed a Petition for Order to Show Cause in Leon County Circuit Court, alleging that First Miami was insolvent. The Respondent was involved in discussions with Department personnel as a result of this Petition for Order to Show Cause. Therefore, as early as November, 1989, the Respondent had personal knowledge that the Department was very concerned about First Miami's solvency. [FOF 4, 10, 24-25, 27, 33]
Insurance companies obtain reinsurance by transferring some portion of their risks to a reinsurer. Reinsurance enables an insurer to share with another insurer the risks it has undertaken and thereby enhance its surplus, reduce the amount of its reserves, and therefore write more business. [RO, Endnote 7]
First Miami had entered into a reinsurance agreement with Forum Reinsurance Company Limited on November 27, 1990. [FOF 52] The Department required that agreement to be terminated on or before December 31, 1990, and replaced with other reinsurance satisfactory to the Department. [FOF 62]
The Respondent directed Erin Doherty of Saturn Intermediaries to search for reinsurers for First Miami. [FOF 66, 73]
The Respondent participated in the discussions with representatives of Munauto, S.A., a non-admitted Spanish reinsurer. First Miami entered into a reinsurance agreement with Munauto on October 11, 1990. Munauto was never submitted to the Department for approval as a reinsurer. [FOF 68, 71, 76]
The Respondent signed a reinsurance agreement with Dai Ichi Kyoto in July, 1991, but never submitted that reinsurer to the Department for approval. [FOF 132, 134]
In August, 1991, the Respondent participated in the formation and signed as a director the formative corporate documents of Warwick Re, a reinsurer established in Anguilla, West Indies. [JPS, FOF 137-139] Warwick Re was never submitted to the Department for approval. [FOF 146]
Although the Respondent did not submit either Munauto or Dai Ichi Kyoto or Warwick Re to the Department for approval as a reinsurer, [FOF 76, 132, 134] the Respondent did sign or supervise the preparation of financial
statements in which credits were taken for reinsurance ceded to those unapproved reinsurers and knew that Forum had to be replaced by an approved reinsurer.
[FOF 36, 275-282]
The Respondent was aware of and personally involved in the litigation resulting from the Department's issuance of an Immediate Final Order in May, 1991, finding First Miami insolvent. [FOF 100]
After the issuance of the Immediate Final Order, the Respondent did not seek out independent legal counsel regarding asset admissibility nor did he seek out independent appraisals of First Miami assets.
The Respondent actively participated in the arrangements to provide additional collateral derived from First Miami's assets to First Miami principal, Teresa Saldise, for the loan she had made in her capacity as a principal in General Trust Mortgage Corporation, to First Miami to post the $1 million bond to be deposited with the Leon County Circuit Court Clerk as a result of the Immediate Final Order. [FOF 105-111]
During an on-site visit in late January, 1992, by Department personnel at the offices of First Miami, the Respondent was specifically asked by Department employee Lozano about Warwick Re. He misled her about the extent of his knowledge and refused to give her any information about Warwick Re even though he participated in that company's incorporation and was a director. [FOF 149-152, as modified by this Order. See Rulings on Department's Exceptions to Findings of Fact 9.]
In late 1991, the Respondent participated in the infusion of additional assets into First Miami by First Miami's principals, Teresa Saldise and Pedro Ramon Lopez. The Respondent did not seek independent appraisals of these assets but rather hired friends and former co-workers to provide valuations. [FOF 196, 200-201, 204-208]
The Respondent was completely familiar with First Miami's claims payment operation, not only by virtue of his position as Executive Vice President, but also because he designed the computer system, [FOF 224] which necessarily requires knowledge of every single detail in the operation, and because he was a member of the claims review committee [FOF 236], and because he had responsibility for signing checks over a certain amount. [FOF 229]
First Miami was taken over by the Department in June, 1992. [JPS] It is insolvent. [JPS] The Florida Insurance Guaranty Association had paid out over $12 million as of January 31, 1994, to policyholders and other claimants. [FOF 308]
Teresa Saldise and Pedro Ramon Lopez have left the state [JPS] and left the country. They went to Spain shortly after First Miami was liquidated on June 5, 1992. [FOF 297, 306]
CONCLUSIONS OF LAW
Because this is a case of first impression and because this case is factually complicated and because this case has a voluminous record, the Department's conclusions of law in this matter are based on the Department's responsibility to interpret and implement not only Section 624.310 but all the provisions of the Florida Insurance Code and are further based on the
Department's extensive expertise and experience regarding the workings of the insurance industry and are based on the Department's exclusive responsibility in this state for the regulation of the insurance industry.
I accept the Hearing Officer's Conclusions of Law in his paragraphs 328 through 334. See Recommended Order at pages 62 through 68.
In his Conclusions of Law in paragraphs 335 and 336, regarding the burden of proof in this removal proceeding under Section 624.310, the Hearing Officer argues that this proceeding is "akin to a license suspension or revocation" and as such demands the "clear and convincing" standard of proof. The Respondent, however, is not a licensee. He is the employee of a licensee but not a licensee. Therefore, the Department argued at hearing that the correct burden of proof is a preponderance of the evidence. The statute is not definitive on this issue. This is a case of first impression and for purposes of this case only, I accept the Hearing Officer's conclusion that the burden of proof in this case is clear and convincing evidence. I specifically conclude that given that burden in this particular case, based on the preceding and succeeding findings, rulings, and conclusions, the Department has proved clearly and convincingly that the Respondent has committed the violations alleged in the Administrative Complaint and that, having committed those violations, the proper course for the Department is to remove him from his position at Perry and Company and to prevent his otherwise being involved in the business affairs of a licensee except as may be expressly permitted by the Department pursuant to Section 624.310(4)(g), Florida Statutes.
I accept the Hearing Officer's Conclusion of Law # 337, in which the Hearing Officer recites the allegations in the Administrative Complaint in this case.
For purposes of this Final Order, none of the Conclusions of Law in this section of the Order are based on Findings of Fact ## 40-51, regarding Carerra; ## 156-167, regarding the transfer of assets to First Miami by the company's principals, Ms. Saldise and Mr. Lopez, (but are considered regarding the value of those assets); ## 252-258, regarding First Miami's loss reserves; ## 259-265, regarding the federal civil rights lawsuit; and ## 266- 267, regarding the ultimate disposition of Carrera, because I conclude that all those Findings are irrelevant to the issues in this case.
I reject the Hearing Officer's Conclusions of Law ## 338 through 342, except for the Hearing Officer's conclusion in Conclusion of Law # 339, in which he states that he finds the Respondent's testimony believable and that he [the Respondent] sincerely believed that First Miami was not insolvent. The determination of the credibility of a witness is peculiarly within the purview of the Hearing Officer and may not be disturbed.
I conclude that Section 624.610, Florida Statutes, regarding reinsurance, requires insurers to seek approval from the Department of otherwise nonapproved reinsurers before credits for reinsurance ceded may be taken on financial statements. The Florida Insurance Code does not require insurers to seek reinsurance. Reinsurance is an option for insurers. Insurers wishing to exercise that option are responsible for getting the necessary approval from the Department. It is not the Department's responsibility to request documentation from insurers, although the Department certainly has the authority to do so.
I conclude that the issuance of a Certificate of Authority to an insurer by the Department, pursuant to the provisions of Chapter 624, and the notation thereon that the insurer is authorized to write certain lines of business has nothing to do with whether the insurer chooses to write its business in the preferred, standard, or nonstandard market. The insurer's choice of market is a business decision. That decision is not required by anything in the Insurance Code.
I conclude as a matter of law that First Miami was insolvent when the Immediate Final Order was issued on May 10, 1991. The IFO [Petitioner's Exhibit 46] was based on First Miami's originally submitted 1990 Annual Statement.
First Miami submitted an Amended Statement for 1990 which was entered as Petitioner's Exhibit 16. On page 2, the Asset page of the 1990 Amended Annual Statement, First Miami, on line 9.2, has entered the amount of $6,732,243.00 as premiums, agents' balances and installments booked but deferred and not yet due, the same amount referred to in the IFO. These are the South Florida Premium Finance Company contracts. On page 3, the Liabilities, Surplus and Other Funds page of the 1990 Amended Annual Statement, First Miami, on line 26, has entered the amount of $2,359,723.00 as surplus as regards policyholders.
Section 625.325(2), Florida Statutes, provides that insurers may invest in the securities of subsidiary or related corporations but with limits. [Note that it was the limits, not the admissibility which concerned Bureau Chief Galloway. See Rulings on Department's Exception to Findings of Fact, paragraph 11, below.] Section 625.325(2) provides that the investments shall not exceed the lesser of 10 percent of the insurer's admitted assets; or 50 percent of the insurer's surplus as to policyholders in excess of the minimum surplus as to policyholders required to be maintained by the insurer pursuant to Section 624.408, Florida Statutes.
The calculations are as follows, based simply on the two pages of the 1990 Amended Statement indicated above:
The total assets (page 2, 1. 21) equal $19,072,110. Ten percent of that amount is $1,907,211.
Surplus as to policyholders (page 3, 1. 26) is $2,359,723.
The minimum surplus which First Miami is required to have, based on Section 624.408(1), is the greater of $1,000,000 or 10 percent of liabilities.
Liabilities are $16,712,387 from page 3, line 22. Ten percent of that is
$1,671,239, which is greater than $1,000,000 and is therefore, the required minimum surplus. This minimum surplus calculation is necessary for the remainder of the calculation under Section 625.325(2).
Under Section 625.325(2), the amount of the premium finance contracts permitted to be carried as an asset is the lesser of 10 percent of admitted assets, determined above to be $1,907,211, or 50 percent of surplus less the minimum required to be carried. Surplus less the minimum determined above is:
$2,359,723 minus $1,671,239 = $688,484. Fifty percent of that is $344,242. Therefore, a quick glance even at the amended statement shows that the investments in South Florida Premium Finance Company of well over $6 million greatly exceed the allowable amount of $344,242.
It is clear, therefore, that First Miami was insolvent when the Immediate Final Order was issued.
I conclude that the law in Florida is that persons who are either an officer or a director of a corporation are in a position of trust and have a fiduciary duty to the company. For insurers, the contractual relationship gives rise to a fiduciary duty on the part of the principals of insurance companies to policyholders and to claimants, including third party claimants. The Florida Supreme Court long recognized that the business of insurance is greatly affected with the public trust. "The business of insurance of affected with a public interest as much as any other business in the United States." Feller v. Equitable Life Assurance Society, 57 So.2d 581, 586 (Fla. 1952). I find that the insurance industry is very like the banking industry in that regard. It is therefore no accident that Section 624.310 is very similar to Section 655.037 in the Florida Banking Code. I find that the banking and insurance industries are particularly heavily regulated and must be conducted by persons of the highest ethical and moral character because both industries are based on promises.
There is no tangible product. There are no factories. There are no stocks of raw materials. There is only cash flow. When assets do not exist; when assets are encumbered but shown as unencumbered; when assets are shifted in complex transactions, the possibility that there is mismanagement, if not outright fraud, is very great and the ability of the consumer to protect himself is minimal. Regulatory vigilance must be constant to ensure that claims are paid and to ensure that the company remains solvent to pay the claims. And each corporate officer and each corporate director must constantly adhere to his fiduciary duties and responsibilities.
Therefore, I conclude that although the Respondent sincerely believed that the company was not insolvent, he breached his fiduciary duty by not taking the necessary steps to determine for himself whether or not the company was financially sound. The Respondent omitted to act when it was reasonable for him to have done so. I reject the Hearing Officer's conclusion that the Respondent reasonably relied on others. Given the position he occupied as well as the positions occupied by those he relied on, his reliance was unreasonable.
The Respondent stated that he relied on the legal expertise of Ms. Saldise and Mr. Lopez. He should not have relied on them because they were the majority stockholders in the company and should have avoided all appearances of impropriety by making legal determinations favorable to themselves.
The Respondent also "relied" on the asset valuations of Albert Alphonso, Mike Burns, and Fred Carach. The record indicates that these persons were personal friends, were hired by the Respondent, were guided by the Respondent as to what valuations to come up with, or based their appraisals on future events. There is no reasonable reliance here. There is a breach of fiduciary duty here.
The Respondent testified that he "relied" on Attorney Rubin regarding the premium finance company contracts. As is clear in the section on Rulings on the Department's Exceptions to Findings of Fact, Mr. Rubin advised regarding the admissibility of the assets, not their value.
The Respondent breached his fiduciary duty by not taking the necessary steps to ensure that the financial statements sent to the Department were a true and accurate reflection of the company's assets and liabilities. He signed his name on some financial statements attesting that he so found. In other instances, he allowed his subordinate, Mr. Aleman, to sign the financial statements, and testified that he relied on Mr. Aleman. The Hearing Officer
found, and I accept, that the Respondent sincerely believed that there was no problem. I conclude, however, that the Respondent was seriously deficient in so believing when it is his fiduciary responsibility to know, not just to believe.
Further, there is the Respondent's evasion to Department employee Lozano regarding the status of Warwick Re. Trustworthy people do not deliberately mislead regulators.
Further, the Respondent testified that he was not involved enough in the claims handling process to know whether any First Miami insured might not have been afforded the legal representation First Miami was obligated to provide.
His testimony at hearing is belied by Petitioner's Exhibit 92, a remarkable video tape prepared by First Miami of a cocktail party and meeting, conducted by the Respondent, for the benefit of Dade County insurance agents. [Note that this exhibit was referenced in the Department's proposed Findings of Fact # 107 and 110, which were not rejected by the Hearing Officer but rather were not incorporated because they would "add unnecessary detail."] The Respondent's performance on that occasion, March 25, 1992, shows a person in complete command of the company's operations, from computers to claims handling to financial statements to assets to legal interpretations to lawsuits. If the Respondent did not know of a failure to provide representation, he should have known.
With regard to the financial statements, and the assets and reinsurance credits claimed by First Miami and relied on by the Respondent, ultimately the Department's position was proven correct. First Miami is insolvent. The Florida Insurance Guaranty Association has paid out at least $12 million [T 743] to policyholders and claimants. The Department's Petition for Order to Show Cause in 1989 and its Immediate Final Order in 1991, concluding that First Miami was insolvent, were red flags and the Respondent breached his fiduciary duty when he ignored them by failing to take steps to acquire independent verification of First Miami's financial condition.
Further, Section 631.57(1)(a) 2., Florida Statutes, provides that the Florida Insurance Guaranty Association [FIGA] apply a deductible of $100 per claim in addition to any deductible applicable under the terms of a First Miami insurance policy. Consequently, in addition to claims delays, cancellation of coverage, and other adverse consequences of insolvency, every First Miami policyholder or claimant recovering from FIGA has suffered a monetary loss of
$100 as to virtually all claims.
The Respondent sincerely believed everything was all right. He was the ultimate good soldier, taking orders and carrying them out. But he was also an officer and a director. These titles carry with them duties and responsibilities which the Respondent flagrantly ignored. They may have been just titles to him, but they are more than that under the Code and the caselaw.
I therefore conclude that the Respondent has violated Section 624.310(4)(a)7., Florida Statutes, by engaging in conduct which constitutes acts of omission and practices which are breaches of trust and breaches of fiduciary duty. This alone is sufficient to justify the Respondent's removal from his position of trust at Perry and Company.
I conclude that the Respondent has violated Section 624.310(4)(a)6., Florida Statutes, by engaging in conduct which constitutes a material misrepresentation of fact, made knowingly and willfully or made with reckless disregard for the truth of the matter.
As determined in the Rulings on the Department's Exception #9, the Hearing Officer's Finding of Fact # 152 is not supported by competent, substantial evidence. The Respondent failed to answer the Department during the January, 1992, on-site visit, regarding the status of Warwick Re when he had a duty and a statutory responsibility to do so. His response misled the Department investigator into believing he did not know the answer when in fact he did. He knew where this company was located; he knew who the officers and directors were; he was one of them. Warwick Re was supposedly a reinsurer to whom risks would be transferred so that First Miami could write more direct business. The facts regarding Warwick Re are facts which have a material bearing on the solvency of First Miami. This is a material misrepresentation if ever there was one.
I further conclude, regarding this material misrepresentation: The Respondent was the company representative responsible for communicating with the Department regarding the Department's concerns as to reinsurance and other financial matters. The Respondent had a statutory obligation under Section 624.318(2), Florida Statutes, to be completely forthcoming in his dealings with the Department. His failure in this regard indicates untrustworthiness to engage in the insurance business. His failure is also a breach of his fiduciary obligation to the company's insureds to investigate a problem raised by the Department to determine whether that problem would affect the solvency of the company.
It is clear from the totality of the record that the Respondent was beholden to Ms. Saldise and Mr. Lopez for his job. It is clear that the Respondent cared more about following his superiors' orders to conceal vital information about Warwick Re from the Department, than about telling the truth. It is also clear that, as determined in paragraph 9., immediately above, his fiduciary duty as an officer and a director required him to tell the truth. The Respondent's conduct is inexcusable.
I conclude that the Respondent has violated Section 626.9541(1)(w)1., Florida Statutes, by soliciting or accepting new or renewal insurance risks in this state after such director or officer knew, or reasonably should have known, that the insurer was insolvent or impaired.
In Finding of Fact # 104, the Hearing Officer finds: "After obtaining the injunction [of the IFO issued on May 10, 1991, on procedural, not substantive, grounds], First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover [as insolvent] by the Department in June of 1992."
The Respondent reasonably should have known that First Miami was insolvent or impaired when the IFO was issued. The Department is after all the regulator. No one who takes his fiduciary duties and responsibilities seriously would refer to the controversy over the valuation of the assets as "disagreements." Of course he and his principals "disagreed." How else to stay in business for just a little longer? This Department is responsible for interpreting and implementing the Florida Insurance Code. This Department has decades of experience and expertise in insurance industry regulation. And because of those responsibilities, experience, and expertise, the opinions of non-regulatory persons, including professionals, should not be blindly relied upon when they are at variance with those of this Department. Insurance company officers and directors must take the Department's opinions very seriously.
As indicated above, there was no professional opinion that the magnitude of First Miami's investments in South Florida Premium Finance Company were permissible under the provisions of Section 625.325, Florida Statutes. Further, to the extent that the Respondent relied on opinions of professionals which were contrary to the positions expressed by the Department, the Respondent's reliance on those professional opinions was unreasonable. The Respondent had a fiduciary responsibility to policyholders and the public. I conclude that the catastrophic effect of an insolvency on policyholders and the public dictates that when the regulator responsible for the interpretation, administration, and enforcement of the Insurance Code indicated that assets and claimed credits for reinsurance were inadmissible, the Respondent had an obligation to inform himself as to the true financial condition of First Miami rather than relying on opinions of professionals who had a vested interest in the continued transaction of business by the insurer. The Respondent should reasonably have made additional inquiry and independently satisfied himself as to the financial condition of First Miami as a result of correspondence and discussion with the Department in which the Department indicated that the financial condition was other than as represented by the financial statements produced by his immediate subordinate. When the Department took the extraordinary measure of entering an Immediate Final Order, indicating that it had made a final determination that the financial condition of First Miami was such that the continued transaction of business by First Miami posed an immediate and serious threat to policyholders and the public, the Respondent's obligation to inform himself as to the true financial condition of the insurer was significantly augmented.
First Miami is insolvent; has caused substantial loss and damage to policyholders and claimants; is no longer in business; and has cost the guaranty fund millions.
The Respondent violated his fiduciary responsibilities and continued to solicit business, in violation of Section 626.9541(1)(w)1., Florida Statutes.
I conclude that the Respondent has violated Section 624.310(4)(a)1., Florida Statutes, by engaging in conduct which demonstrates a lack of fitness or trustworthiness [both, in this case] to engage in the business of insurance through engaging in illegal activity or mismanagement of business activities.
The Respondent misled the Department about Warwick Re.
The Respondent failed to ensure that Munauto, Dai Ichi Kyoto, and Warwick Re were approved by the Department as reinsurers.
The Respondent failed to ensure that the numbers in the financial statements prepared by his subordinates were accurate.
The Respondent signed financial statements without ensuring that the numbers were accurate.
The Respondent continued to solicit business without reasonably ensuring that First Miami was not insolvent or impaired.
The Respondent actively participated in a Byzantine series of transactions to come up with the $1 million bond posted with the Leon County Court Clerk pursuant to the order enjoining the Immediate Final Order of May, 1991, and did not consult with outside counsel of any sort as to the appropriateness of those
transactions. It is perfectly apparent that those transactions had no benefit to any of the corporations involved and that if First Miami had been solvent in the first place those transactions would not have been necessary.
The Respondent actively participated in the necessary steps to encumber First Miami assets as additional collateral for the $1 million loan so that Ms. Saldise would not call in a note against her own company. This is a serious breach of fiduciary responsibility indicating mismanagement and untrustworthiness since the Respondent was an officer and director not only of First Miami but also of General Trust Mortgage.
Petitioner's Exhibit 50 is a transcript of a voluntary meeting, conducted by Attorney Addison J. Meyers, between the Respondent, Ms. Saldise, and Mr.
Lopez, on February 4, 1992. Although transcribed, the meeting was not a deposition but rather simply a transcription of the meeting. During the course of this meeting, the Respondent exhibits an excellent, detailed recall of events going back to 1988, events involving all aspects of the company's operations and involving the company's interactions with the Department. [Note that this exhibit formed the basis for the Department's proposed Findings of Fact ## 28- 31, 57, and 102, all of which were accepted by the Hearing Officer. See specific rulings at the end of the Recommended Order.] He is clearly the day-to- day operations person, the detail person, as described by Ms. Saldise in her deposition. The Respondent knew what was going on but took no steps to ascertain whether his reliance on others regarding valuations and procedures was reasonable. He breached his fiduciary duties.
I conclude that because the Respondent violated the four statutory sections set out in the four immediately preceding paragraphs, he must be removed from his position as president of Perry and Company and prohibited from otherwise being involved in the business affairs of a licensee except as may be expressly permitted by the Department pursuant to Section 624.310(4)(g), Florida Statutes.
RULINGS
On the Department's Exceptions to Findings of Fact
NOTE: for convenience, the paragraph numbers in the Department's and the Respondent's Exceptions to Findings of Fact and Conclusions of Law are retained, below, in this section on Rulings.
The Department excepts to Finding of Fact 26 [RO, p. 9], in which the Hearing Officer refers to a Miami newspaper article regarding the transfer of
$5,000,000 in assets from First Miami to General Bank, which assets promptly became worthless when federal regulators took over the bank, as not supported by competent, substantial evidence because the alleged newspaper article was not introduced into evidence. The exception is accepted in part and rejected in part.
Section 90.952, Florida Statutes, states: "Except as otherwise provided by statute, an original writing, recording, or photograph is required in order to prove the contents of the writing, recording, or photograph." A review of the exhibits in this case reveals that the alleged newspaper article was neither offered nor received into evidence. Therefore, under the Florida Evidence Code, it cannot be used to support a finding of fact as to the truth of the matter asserted.
The alleged article was mentioned by the Respondent in his testimony (T 936) and by attorney Stephen Rubin in his testimony (T 1646). The Hearing Officer's Finding of Fact is taken from the Respondent's Proposed Recommended Order (see Respondent's proposed Finding of Fact # 85) and the testimony of Mr. Rubin. The Hearing Officer's ruling on the Respondent's proposed finding of fact is that it was "accepted and incorporated in substance." [RO, p. 92] The testimony of the Respondent and of Mr. Rubin as to the existence of the article is unrebutted. Therefore, to the extent that the Finding of Fact finds that there was an article, the Department's exception is rejected. However, since the actual alleged article is not part of the record, to the extent that the Finding of Fact reflects the actual content of the alleged article, the Department's exception is accepted.
The Department excepts to Finding of Fact # 28 [RO, p. 10], in which the Hearing Officer finds that First Miami's business declined after publication of the alleged newspaper article and after the Department filed a Petition for Order to Show Cause in Leon County Circuit Court, in 1989, on the basis that the company was insolvent, as not supported by competent, substantial evidence. The exception is rejected.
There is no documentary evidence in the record to support this Finding of Fact. The Hearing Officer has taken this Finding of Fact from the Respondent's Proposed Recommended Order (see the Respondent's proposed Finding of Fact # 87), which references the transcript of the Respondent's testimony at page 937. On that page, the Respondent states that "business just totally dried up" after publication of the alleged newspaper article and the Department's issuance of a Petition for Order to Show Cause. While this testimony is uncorroborated by any documentary evidence, the testimony is also unrebutted.
The Department excepts to Finding of Fact # 29 [RO, p. 10], in which the Hearing Officer finds that independent insurance agents and premium finance companies were reluctant to continue dealing with First Miami, as not supported by competent, substantial evidence. Again, the exception is rejected for the same reasons that the immediately preceding exception was rejected.
There is no documentary or witness evidence, other than the Respondent's testimony, in the record to support this Finding of Fact. The Hearing Officer has taken this Finding of Fact from the Respondent's Proposed Recommended Order (see the Respondent's proposed Finding of Fact # 88), which references the transcript of the Respondent's testimony at pages 938-939. On those pages, the Respondent says that agents and premium finance companies did not want to do business with First Miami after publication of the alleged newspaper article and the Department's issuance of a Petition for Order to Show Cause. While this testimony is uncorroborated, it is also unrebutted.
The Department excepts to Findings of Fact ## 24 through 39 in their totality [RO, pp. 10-12], in addition to the two particular exceptions noted above, in which the Hearing Officer recites the sequence of events from November, 1989, to February, 1990, during which period First Miami was spun off from General Bank but bought $5,000,000 of General Bank assets, which became worthless when federal regulators took over the bank, which resulted in Department concern that First Miami had become insolvent, which resulted in a Petition for Order to Show Cause in Leon County Circuit Court, which ended with a settlement stipulation, as not supported by competent, substantial evidence. The exception is rejected.
These Findings of Fact are simply that. The Department's exception is actually argument on what that particular episode in First Miami's checkered history represents. As such, since the exception is more in the nature of an exception to a Conclusion of Law, the substance of the exception is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 40 through 51 [RO, pp. 12-13], regarding Carrera Insurance Underwriters and the "No Down Payment" Program, as irrelevant because the Department presented no evidence on this issue. [Note that the Department's exception refers to Findings of Fact ## 37-
This is an obvious typographical error; the section regarding Carrera is plainly marked and begins with Finding of Fact # 40.] The exception is rejected.
Carrera Insurance Underwriters is mentioned in the Department's Administrative Complaint only in paragraph 5 as part of a long list of corporations of which the Respondent was either an officer or a director or both. The Department's Proposed Recommended Order mentions Carrera only in paragraph 6 in which it is recited that the Respondent was on the Board of Directors of the company. The Department's Proposed Recommended Order contains no further mention of or argument concerning Carrera and the "no down payment" program. The Department presented no evidence regarding Carrera Insurance Underwriters or the "no down payment" scheme in its case in chief. Carrera and the "no down payment" program were brought up by the Respondent in direct examination by his counsel. [T 948-976] The gist of the Respondent's testimony is that First Miami created Carrera as a captive insurance agency; that several independent agent groups complained to the Department; that several First Miami representatives, including the Respondent, went to Tallahassee to meet with the Department; that the Department's response was that nothing was wrong with the program; that the Department's Immediate Final Order issued in May, 1991, did not address the "no down payment" program; and that the agency was finally sold, after two abortive attempts, to the husband of a First Miami officer. The Department questioned the Respondent on Carrera during the Department's cross- examination of the Respondent. [T 1481-1490] A review of those pages indicates that the purpose of the questioning was to determine whether the Respondent thought it was a prudent business practice to sell Carrera without receiving a down payment from the purchaser. [The Department's cross-examination of the Respondent may be found in the transcript between pages 1148 and 1254 and between pages 1371 and 1561.] Therefore, even though it is obvious that these findings are in fact irrelevant, the exception is rejected because irrelevance is not a ground to overturn a finding.
The Department excepts to Finding of Fact # 53 [RO, p. 13], regarding the extent of the Respondent's knowledge of financial details in the negotiations involving the Forum and the Munauto reinsurance agreements, as not supported by competent, substantial evidence. The exception is accepted in part and rejected in part.
As far as it goes, Finding of Fact # 53 is accurate in that the Respondent did assist in the negotiations by providing computer-generated reports.
However, as the Department's exception notes, the Hearing Officer accepted the Department's proposed Finding of Fact # 40 [and # 41 but the one relevant to this discussion is # 40], which references Ms. Doherty's testimony. See RO, p. 81, where the Department's proposed Findings of Fact ## 27 through 47 are "[a]ccepted and incorporated in substance." To the extent that the sentence in
Finding of Fact # 53 regarding computer-generated reports is correct but may be misleading, I quote the Department's proposed Finding of Fact # 40 which was accepted by the Hearing Officer:
In the course of this negotiation [the Forum reinsurance agreement] Ms. Doherty dealt primarily with Diana Madero, Pedro Ramon Lopez and Teresa Saldise. However, in presenting loss ratios, numbers, annual statements and information relative to the premium finance company to Forum, these issues were deferred to the Respondent.
(TR. 468). In fact, questions that Forum had regarding assets carried on the financial statements of First Miami, questions in general relative to the investment mix of the company, the portfolio, expenses or anything to do with the accounts and audits were all discussed with, and directed to, the Respondent. (TR. 469). [citations in original]
Therefore, the exception is accepted and the Hearing Officer's finding is adopted as clarified above.
The Department excepts to Finding of Fact # 54 [RO, pp. 13-14], which states that the "Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez," as not supported by competent, substantial evidence.
It is clear from Ms. Doherty's testimony that she dealt with the Respondent on reinsurance negotiation issues and that he knew what was going on. See, for example, T 474, 484, 486-487. Further, as the Hearing Officer finds in his Findings of Fact ## 131 and 132, the Respondent signed the Dai Ichi Kyoto reinsurance agreement. A review of Petitioner's Exhibit 56 shows, in fact, that the Respondent's signature is the only signature on behalf of First Miami. The Finding of Fact is taken from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 300, p. 43), which is based on the Respondent's testimony, T 1131. If the inner workings of First Miami did in fact require the Respondent to get approval from Mr. Lopez or Ms. Saldise, then any failure on his part to do so would have had repercussions within that organization. But for purposes of the non-First Miami participants in the reinsurance negotiations, the Respondent clearly had apparent authority to supply data, to respond to financial questions, and to sign agreements. Therefore, the Hearing Officer's finding that the Respondent did not have authority to independently enter into contracts of reinsurance without the prior approval of Ms. Saldise or Mr. Lopez is accurate as far as it goes. However, as indicated in the immediately preceding ruling, the record clearly supports and the Hearing Officer, through the adoption of the Department's proposed Finding of Fact # 40, quoted above, found, that despite his limited ability to actually execute reinsurance contracts, the Respondent was intimately familiar with the details of such contracts and was responsible for the negotiation and formulation of the provisions thereof.
The Department excepts to Findings of Fact 52-76 and 125-155 [RO, pp. 13-17 and 29-34], regarding reinsurance, as not supported by competent, substantial evidence. The exception is accepted in part and rejected in part.
It is clear that the Department's exception to Finding of Fact # 152 is well-taken and to that extent the exception is accepted. The second sentence in that Finding of Fact reads: "Following the instructions he [the Respondent] had been given [by Ms. Saldise and First Miami's attorneys], Respondent told [Department employee] Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami."
The Respondent's testimony is:
Q Do you recall Lissette [sic] Lozano asking you in that meeting in January of `92 if you knew who the officers and and directors of Warwick Re were?
A Yes, I do.
Q And what was your response?
A Well, I had been given strict instructions by Teresa Saldise and the attorneys that the meeting that I was about to have with Michael Svaldi and with Lissette [sic] Lozano could not extend past the First Miami relationship, that I was only allowed to disclose any kind of information and all information that they asked about First Miami and that anything outside of that, that I were [sic] not to discuss that; and based on that I told her that I had no information to provide her as to the Warwick Re questions that she had, except for how it related to the reinsurance agreement which First Miami had.
[T 1130, 11. 3-18; Ms. Lozano's first name is Lisette] Ms. Lozano's testimony is:
We went on to inquire as to, you know, where were they [Warwick Re] located, where was their office, the premises. He [the Respondent] did not know at that time where the offices were located. We went on to ask--I went on to ask who were the principals of Warwick Re and he indicated he did not know who the principals were." [T 571, 11. 12-17; emphasis supplied].
"Unable to answer" and "did not know" are two different things. The first is inability, the second is a lie or at best an artful evasion. Obviously, Department employee Lozano understood the Respondent's response to mean he did not have the information. The facts here are obviously that the Respondent was never "unable" to answer, in the sense that he did not have the information.
Rather, he felt he was "unable" to answer because he was under orders from his superiors to refuse to answer. The Hearing Officer apparently believed the Respondent's testimony that he was under orders not to answer. That being so, the Respondent should not have said that he was "unable" to answer but should have said that he had been instructed not to answer. The actual response he made is at a minimum a violation of Section 624.318(2), Florida Statutes, which requires insurers to cooperate with Department investigators. Warwick Re is a "person," pursuant to Section 624.317(1), Florida Statutes.
Both parties jointly stipulated that the Respondent was an incorporator and subscriber of Warwick Re. See Joint Stipulation, filed February 25, 1994, section D, paragraph 7, on page 14; and see Petitioner's Exhibit 32, which is
the Anguillan Application for Registration as an Insurer by a Person who is Not an Association of Underwriters. On the first page of the Exhibit is the date of 7/31/91; a list of the names of the directors, including the Respondent; and the Respondent's signature as a director.
Therefore, it is clear from the record that the Respondent knew perfectly well where Warwick Re was and who the officers and directors were. He was one of them. The Hearing Officer's Finding of Fact is therefore deficient because even if the Hearing Officer did not believe Ms. Lozano when she said that the Respondent said he did not know, it is clear that the Respondent was never unable to answer because of a lack of information. Instead he testified that he considered himself unable to answer because his superiors told him not to. As is discussed further in the section of this Order on Conclusions of Law, the Respondent's refusal to answer the Department regulator is a clear indication of his lack of trustworthiness and his unfitness to engage in the business of insurance.
As for the balance, the Department's exception is actually argument on what the reinsurance activities reveal about the principals, particularly the Respondent, in First Miami's operations. As such, since the exception is more in the nature of an exception to a Conclusion of Law, the substance of the exception is addressed in the section of this Order ruling on Conclusions of Law.
The Department excepts to Finding of Fact # 155 [RO, p. 34], regarding the solvency of Warwick Re, as not based on competent, substantial evidence.
The exception is accepted and this Finding of Fact is rejected to the extent it implies that the Department had to have proof that Warwick Re was insolvent in order to determine that that company's reinsurance arrangements with First Miami were inappropriate.
This Finding of Fact is taken directly from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 293, on page 42). The Respondent bases that proposed finding of fact on transcript references at pages 273, 276, and 386, which are the cross-examination by the Respondent's counsel of Department Bureau Chief Clyde W. Galloway. Mr. Galloway had expressed concern at the sudden increase in Warwick Re's capitalization from $200,000 to
$20 million. Mr. Galloway never said that the Department had no proof the company was not solvent. His actual testimony is:
Q That wasn't my question. I understand. My only point is upon Day 1, a company has $200,000, and on Day 5 they have $20 million; is there anything wrong if that's a contribution by the owners?
A If it's a vanilla transaction, there is nothing wrong with it. Q Okay. You don't know that this was anything but that, do you?
A Oh, I don't have any reason to believe that it was a vanilla transaction because we were never able to verify any of this.
HEARING OFFICER: You used the term, is that THE WITNESS: Vanilla.
HEARING OFFICER: Maybe you can--
THE WITNESS: Plain. A transaction without associated complications. [T 276, 11. 5-21; emphasis supplied]
And then later on in Mr. Galloway's cross-examination, there was this exchange:
Q Do you have any information that Warwick was not solvent at the time? A Yes. We didn't have any proof that it was anything.
Q So you didn't know?
A Well, we weren't provided the information. [T 386, 11. 10-15]
It was First Miami's responsibility to ensure that the Department approved the company's reinsurer. First Miami failed to get the necessary approval. The Department found out about Warwick Re only by accident, because of the on-site visit. It is the Department's position and has always been the Department's position that it is the company's responsibility to prove that it had approved reinsurance, not the Department's responsibility to prove that the company did not have reinsurance. [T 398-399] It is, after all, to any company's advantage to have reinsurance so that it can write more business. See RO, Endnote # 7, p. 74.
The Department excepts to Findings of Fact # 77-79 [RO, p. 17], regarding First Miami's investment in premium finance contracts, as not based on competent, substantial evidence. The substance of the three findings is that Attorney Rubin advised First Miami that First Miami's investment in the premium finance contracts of South Florida Premium Finance Company was legal; that those contracts were an admitted asset under the Florida Insurance Code; and that the Respondent relied on Mr. Rubin's legal advice. The exception is accepted in part and rejected in part. The Department's exception, as with the exception to Findings of Fact # 53 in paragraph 7., above, is not so much to the actual Findings as stated in the Recommended Order but to their lack of completeness which results in their being misleading.
The Hearing Officer has based his Findings of Fact on the Respondent's Proposed Recommended Order (see Respondent's proposed Findings of Fact ## 309- 310, on page 44). These findings reference the transcript at pages 112, 308-
309, 1137, and 1139, and Respondent's Exhibits 51 and 38. The Hearing Officer also accepted the Department's proposed Finding of Fact # 55 (see the Department's proposed Recommended Order at page l7 and see the Endnotes to the Recommended Order at page 81).
On page 112, Bureau Chief Galloway responds on direct examination by Department counsel:
Q Is that type of investment [in premium finance contracts] allowable under statutory accounting principles?
A Theoretically there could be some level of purchase of those, but certainly it was never anticipated, nor would it, to the level that it actually worked out in being precipitated by the First Miami-South Florida arrangement.
[T 112, 11. 6-10]
On pages 308-309, Mr. Galloway responds on cross examination by the Respondent's counsel:
Q You never had a problem with the fact that First Miami was holding as an asset receivables from premium finance contracts?
A For statutory accounting purposes you could hold the obligation of another entity or individual, but certainly not to the magnitude that First Miami ended up utilizing it.
[T 308, 11. 10-12, 22-25]
Q So it's really the concept of the investment in the notes that was a problem, wasn't it, for the Department?
A The problem was the magnitude. [T 309, 11. 18-21; emphasis supplied]
On page 1137 [1.12], the Respondent says that he believed that it was proper for First Miami to invest in premium finance contracts. On page 1139 [11. 11-13], the Respondent says that Mr. Rubin "had told the company that those [premium finance contracts] were considered to be securities, therefore they would meet the requirements of the statute for investments through a trust." At that point, Respondent's Exhibit 51 was moved and received into evidence.
Respondent's Exhibit 51 is a composite exhibit consisting of a one-page letter dated November 27, 1990, from Mr. Rubin to Mr. Sergio Fonte at First Miami, and six pages of copies from the Florida Statutes. [This is the letter referred to in the Department's exception 11. as Respondent's Exhibit 50.] Mr. Rub in makes the bald statement in the second paragraph of the letter that premium finance contracts constitute an admitted asset under Section 625.012(2). As Mr. Galloway's testimony plainly states, the Department agreed that those contracts were admitted assets. What concerned the Department was the volume of those contracts and the fact that they exceeded the investment limitations of Section 625.325(2), a section which Mr. Rubin carefully points out in the first paragraph of his letter. Nowhere in this letter does Mr. Rubin say that how First Miami had gone about investing in the premium finance contracts was permitted under the Florida Insurance Code.
Further in that regard is the other reference in Respondent's proposed finding of fact on which the Hearing Officer relied. This is Respondent's Exhibit 38, which is a transcript of a deposition of Pedro Ramon Lopez, taken on April 17, 1992. The page references are to pages 86-90. This is what Mr. Lopez said:
Q Regarding the change with the premium finance agreements, there was a conversation with counsel concurrently with making the change from individual contracts to participation?
A Concurrently, no. Before making the change.
Q Okay. And what attorneys particularly were involved in this? A Steve Rubin.
Q. Okay. Just so I can understand, with regard to Mr. Steve Rubin and the statements you made, with regard to the South Florida Premium Finance, Mr. Steve Rubin was the attorney for First Miami with regard to that decision?
A No.
Q Can you explain his role one more time?
A We consulted him. I mean, we did not officially ask him to give us a legal position on these, we just consulted.
[Page 87, 11. 9-25]
Mr. Rubin's testimony may be found between pages 1587 and 1685 of the transcript. Nowhere in those pages does Mr. Rubin offer any testimony regarding whether premium finance contracts are admissible assets or the volume of premium finance contracts which could be admissible assets. South Florida Premium Finance Company is mentioned three times: at lines 24-25 on page 1659, and lines 11-13 on page 1660, regarding who owned that company; and on lines 10-12 on page 1680, regarding Mr. Rubin's billing that company.
Therefore, the Hearing Officer's Findings are accurate as far as they go. However, to the extent they may be misleading for failure to fully reflect the record and to fully reflect the Department's proposed Finding of Fact # 55 which the Hearing Officer "accepted and incorporated in substance," [RO, p. 81], I quote the Department's proposed Finding in full:
Of particular concern to the Department, as set forth in the Immediate Final Order [issued May 10, 1991], was that First Miami had taken over $10,000,000 in reinsurance credits using unapproved reinsurers; there were excess investments in an affiliate (South Florida Premium Finance Company); and the company had inadequate reserves which led to the determination that First Miami had a negative policyholders surplus of
$7,498,838.00. (Pet. Exh. No. 46)
[emphasis supplied; citation in the original]
The details of the excess investment in premium finance contracts may be found summarized in Petitioner's Exhibit 46, the Department's Immediate Final Order issued May 10, 1991, which states in paragraph 2. that the amount of the contracts was 201 percent of policyholders surplus. The figures in this paragraph come from Petitioner's Exhibit 16, First Miami's 1990 annual statement. Section 625.325(2) plainly allows these contracts only as to the lesser of 10 percent of assets or 50 percent of surplus. This is a clear violation of the statute. Therefore, the Finding of Fact is rejected to the extent that it implies that the amounts of the contracts were permissible.
The Department excepts to Findings of Fact ## 85 through 104 in the section in the Recommended Order headed "The Immediate Final Order" [RO, pp. 18- 26], in which the Hearing Officer recites the sequence of events from the Department's receipt of First Miami's 1990 Annual statement, through the issuance of the Immediate Final Order, the grounds for its issuance, First
Miami's letters in response, First Miami's effort to enjoin the Order, the Court's bond and other requirements, and First Miami's resumption of premium solicitation. The exception is rejected.
These Findings of Fact are simply that. The Department's exception is actually argument on the appropriate conclusion to be reached from these facts. As such, since the exception is more in the nature of an exception to a Conclusion of Law, the substance of the exception is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact # 105 through 122 in the section in the Recommended Order headed "The One Million Dollar Security Deposit" [RO, pp. 26-29], in which the Hearing Officer recites the Byzantine sequence of events resulting from the necessity to post a $1,000,000 bond with the Leon County Circuit Court as a result of the Immediate Final Order. The exception is rejected.
Again, these Findings of Fact are simply that. The Department's exception is actually argument on the appropriate conclusion to be reached from these facts. As such, since the exception is more in the nature of an exception to a Conclusion of Law, the substance of the exception is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 119 [erroneously referred to in the Exceptions as 118] [RO, p. 28], regarding the Respondent's interaction with Mr. Rubin about the additional collateral for the $1,000,000 loan, as not supported by competent, substantial evidence.
The Finding of Fact says: "Before Respondent did so [sign the paperwork for the additional collateral], though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan." This Finding is taken from the Respondent's proposed Recommended Order (see proposed Findings of Fact ## 168 and 172), in which are referenced the transcript at pages 1034-1035, and pages 68-73 of Respondent's Exhibit 38, which is the deposition of Pedro Ramon Lopez.
A review of the transcript of Mr. Rubin's testimony reveals no testimony on the appropriateness of the collateral. The testimony of Mr. Lopez in Respondent's Exhibit 38, pages 68-73, does not include any mention of Mr. Rubin. However, Mr. Lopez does address the issue of the home office mortgage and the effect of pledging the loan as collateral.
Q Do you have an understanding as to whether this particular transaction you've described or where the mortgages were collateralized, whether that has any impact upon the admissibility of that mortgage as an asset of First Miami Insurance Company?
A I had to assume that the position of the Department would be that these mortgages belong to First Miami, which is First Miami's position. So I don't have any doubts to the admissibility.
[Respondent's Exhibit 38, p. 71, 11. 2-10] The testimony of the Respondent was:
Q Mr. Campos, did you have any concern regarding the request for additional collateral?
A When she [Ms. Saldise] first made the request I had some concerns of the appropriateness of, if these loans were given as additional collateral, were those assets considered to be transferred out of the company or were they still assets of the company, and I called Steve Rubin, which is the attorney for First Miami and did all the legal work--actually he prepared the documents that eventually gave the additional collateral that Teresa required, that Teresa Saldise required--I called Mr. Rubin and asked him, you know, Steve, what does this legal document do, what does it accomplish?
And he says, well, this gives additional collateral to the loan, and does-- and I said, well, does that mean that these assets are not in the company? He says, no, they are assets of the company, they are just being used as additional collateral towards the original loan.
And I said, so there is no net change in the assets of the company? He says, absolutely not, in the net capital of the company, he said, no, there is not.
[T 1034-1035, 11. 14-10]
It is a close question as to whether the Respondent's concern with whether the assets were transferred out of First Miami can be characterized as being concerned with the appropriateness of the transaction. Therefore, the Finding of Fact is adopted as clarified by the record citations in this ruling.
The Department excepts to Finding of Fact # 120 [erroneously referred to in the Exceptions as 119] [Ro, p. 28], regarding the Respondent's alleged discussion with Mr. Rubin, recounted in paragraph 14., above, as hearsay unsupported by any corroboration. The exception is accepted.
As noted above, Mr. Rubin did not testify on this matter. Mr. Lopez' deposition [Respondent's Exhibit 38] does not address this question. The Respondent's testimony is therefore clearly uncorroborated hearsay which cannot support a Finding of Fact. I note further that counsel for the Department objected to the response recounted above as hearsay at the time the response was given (see T 1035, 11.11-16). The Hearing Officer responded:
I will allow the response to stand. I don't know if it's being, I don't know if it is hearsay evidence. I know that that was another ground that you raised. Again, it's not clear as to whether or not it's being offered to prove the truth of the matter asserted or whether or not it's being offered simply to indicate that Mr. Campos was told this by Mr. Rubin, and--if we were interested, and Mr. Campos's state of knowledge at that time. So again, it's not clear at this time, but I will allow the answer to stand. [T 1035-1036, 11. 23-8]
I find that it is clear at this point in this proceeding [the issuance of the Final Order] that the answer was being offered to prove the truth of the matter asserted. And since there is no corroboration of any sort in the record, the statement is uncorroborated hearsay which cannot support a finding.
The Department apparently excepts to Findings of Fact ## 114-117 [RO,
p. 28], regarding the additional collateral issue, but does not state a ground for the exception. The exception is rejected.
The exception is actually argument as to the Respondent's duties and responsibilities as an officer and director of these various corporations regarding the additional collateral transaction. As such, since the exception is more in the nature of an exception to a Conclusion of Law, the substance of the argument in the exception is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 156 [RO, p. 34], regarding the intent of Ms. Saldise and Mr. Lopez to contribute additional assets to First Miami "in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency," as not based on competent, substantial evidence. The exception is accepted.
This Finding of Fact is taken from the Respondent's proposed Recommended Order (see proposed Findings of Fact ## 174 and 177 on page 27), which reference the transcript at pages 1037, 1038, and 1603-04; Respondent's Exhibit 87 and Petitioner's Exhibit 79 at page 177. The first two transcript references are the Respondent's direct examination. The final transcript references are to Mr. Rubin's testimony. Respondent's Exhibit 87 was identified by Mr. Rubin as "the outline Pedro Ramon Lopez followed in the presentation of what he planned as a recapitalization of First Miami. And my notes indicate what I envisioned I would be doing in terms of the intercompany transactions required to accomplish what's discussed in the typewritten portion of those two pages." [See T 1602] Nowhere in Respondent's Exhibit 87 is there any indication of intent.
Petitioner's Exhibit 79 is a deposition of Teresa Saldise, taken on April 17, 1992. There is nothing on page 177 of that deposition which indicates intent. The witness describes certain transfers of assets to First Miami as "non-cash contributions of capital," [11.20, 22] but does not otherwise elucidate.
Neither Ms. Saldise nor Mr. Lopez testified at the hearing. This finding is therefore based on uncorroborated hearsay which cannot support a finding.
The Department excepts to Findings of Fact ## 156 through 167 [RO, pp. 34-37], regarding the transfer of numerous assets to First Miami by Ms. Saldise and Mr. Lopez, as irrelevant to the allegations in the Administrative Complaint and to the defenses thereto. The exception is rejected.
The Department argues that the relevant issue is not whether Mr. Rubin's advice that the assets could be legally considered admitted assets but what in fact the value of those assets actually was. This argument and its implications regarding the Respondent's duties and responsibilities as an officer and director of these various corporations is addressed in the section of this Order on Conclusions of Law. I note here that the Hearing Officer recognized that Mr. Rubin did not provide any advice on the issue of the value of the assets. See Endnote 18 on page 75 of the Recommended Order.
The Department excepts to Finding of Fact # 170 [RO, p. 37], regarding the payment of attorney's fees by First Miami to defend Ms. Saldise and Mr. Lopez in a federal court proceeding involving General Bank which might have resulted in freezing assets intended for transfer to First Miami, as not supported by competent, substantial evidence. The exception is rejected.
Mr. Rubin's testimony at pages 1634 through 1637 of the transcript indicates that he personally prepared the Board of Directors' resolution to authorize First Miami to pay the legal fees and he was aware of the federal court action and therefore knew the reason for the payment. The Department's argument regarding the value of the assets is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 175 through 221 [RO, pp. 38-45], regarding the value of the assets contributed by Ms. Saldise and Mr. Lopez to First Miami, as not supported by competent, substantial evidence and as irrelevant to the allegations in the Administrative Complaint. The exception is rejected.
The Hearing Officer has very carefully refrained from making any findings regarding the actual or appropriate value of these various assets. Instead, all the Findings state that the valuation was based on some particular person's report of such and such a date. The Hearing Officer addressed the reasonableness of the Respondent's reliance on these various professionals in his Conclusions of Law. Similarly, the Department's argument in this exception regarding that reasonableness is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 227 [RO, pp. 45-46], regarding the Department's statistics on consumer complaints on three separate lines of auto insurance, as not supported by competent, substantial evidence. The exception is accepted in part and rejected in part.
The exception is rejected to the extent that it indicates that the statistics contained in the Finding of Fact are inaccurate. They are correct as far as they go. However, the exception is accepted to the extent that the Finding may be misleading in that it states that First Miami had a "relatively large number of consumer complaints" but did not have the highest complaint index for all lines of insurance in the report entered into evidence as Petitioner's Exhibit 57. While the statement is true as far as it goes, it is misleading because a review of the statistics indicates that First Miami had the highest number of complaints with 757, regardless of market share. By contrast, as stated in the Finding, Allstate had a total of 670 complaints, but, unstated in the Finding, with 15-17 percent of the market for these lines of business, a significantly higher share. Similarly, State Farm had a total of 587 complaints, but again, unstated in the Finding, with 17-21 percent of the market share for these lines of business, compared to First Miami's market share of .3 to 1.4 percent.
The Department excepts to Finding of Fact # 228 [RO, p. 46], which states that nonstandard insurers like First Miami have a higher complaint index than other insurers, as not supported by competent, substantial evidence and as irrelevant. The exception is rejected.
The Finding of Fact is taken from the Respondent's proposed Recommended Order (see proposed Finding of Fact # 67), which references the transcript at page 550. This is the testimony of Tom Terfinko, Bureau Chief in Consumer Services in the Department. Mr. Terfinko's testimony is:
Q Do nonstandard auto insurance companies as a general rule generate more complaints than standard companies?
A More complaints, I presume you're referring to again-- Q On average, I mean, sir.
A Since nonstandard companies do not represent as much market share as standard companies, I would say that nonstandard companies probably do generate a little bit more.
[T 550, 11. 9-19]
It is a close question as to whether Mr. Terfinko's "probably do generate a little bit more" appropriately supports the flat statement that nonstandards "tend to have a higher Complaint Index' than other insurers." The Department's real objection to this Finding of Fact is, however, that such a statement tends to relieve First Miami of responsibility for its actions, that First Miami chose to sell in the nonstandard market, and that just because it is in the nonstandard market does not mean that the company necessarily had to have a huge number of complaints. The Department's argument on this issue is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 231 [RO, p. 49], regarding First Miami's conservative claims payment philosophy, as not supported by competent, substantial evidence. The exception is accepted because there is no evidence in the record that an investigation of a claim "necessarily" results in a delay in payment. I find further that the finding, which includes its Endnote, is also rejected to the extent that the finding implies that an excessive number of complaints regarding claims delays are the result of a "conservative" claims payment philosophy.
The Hearing Officer's statement in Endnote 22 on page 76 of the Recommended Order that the "Respondent reasonably believed that, in the case of First Miami, its denial of, or delay in paying, claims was not indicative of such problems [solvency], but rather was attributable to other causes, including, most significantly, the company's 'conservative' claims payment policy" is a conclusion of law rather than a finding of fact and is, moreover, a conclusion of law peculiarly within the realm of the Department's experience and expertise. Therefore, its substance is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact # 234 and 235 and other unspecified findings [RO, p.49], which are based on the testimony of Carlos Lidsky, attorney and witness for the Respondent, as based on the testimony of a witness who cannot be considered credible.
The Department notes the invocation of the Rule of Sequestration [T 22-23,
6-24]; Mr. Lidsky's comment regarding his return to Miami [T 1363, 11. 11- 12]; Mr. Urich's testimony [T 1769-1770, 11. 9-2]; and the statement of the Respondent's counsel [T 1772-1773, 11. 21-13]. However, the exception is rejected because it goes to the credibility of the witness. It is the Hearing Officer's prerogative to assess the credibility of witnesses and I assume that the Hearing Officer has taken all factors into account in making his findings.
The Department excepts to Finding of Fact # 244, and refers to footnote 23. However, the Department's argument in this regard makes it clear that the exception is actually to Finding of Fact # 245 and to Endnote # 24, which may be found on pages 51 and 76, respectively, of the Recommended Order. To the extent that the exception is directed at the amount of the subrogation claims and specifically to the following part of the Finding of Fact: "as well as those unpaid subrogation claims First Miami had made against State Farm," the exception is accepted.
The reference to unpaid subrogation claims of First Miami against State Farm has no record foundation. That part of the Finding is taken from the Respondent's proposed Recommended Order (see proposed Finding of Fact # 74 on
page 14), which references the transcript at page 532. That is the testimony of Mr. Terf inko, consumer services bureau chief. In discussing the Department's consumer complaint numbers, counsel for the Respondent asked Mr. Terfinko:
Q In addition, your numbers don't really take into account possible subrogation claims that First Miami may have against State Farm or Allstate and perhaps be subject to some offset, do they?
A That could be the case. [T 532, 11. 11-15]
There is no testimony here. Counsel for the Respondent has assumed that there might be some claims and Mr. Terfinko answered the question regarding his complaint numbers as if there were in fact claims. But Mr. Terfinko in no way said that there were subrogation claims, only that his numbers would not reflect such a thing if there were. The only other reference in the record to First Miami subrogation claims against State Farm occurs in the testimony of Mr.
Urich. He was asked:
Q ....Did Mr. Lidsky or anybody from First Miami have subrogation claims of their own to present to State Farm [during a meeting to settle State Farm's claims against First Miami]?
A Not as a part of this arrangement. I know they wrote physical damage, and they probably had some claims, but they were never a part of this arrangement. [T 1762, 11. 1-5]
Mr. Terfinko's statement is no evidence at all. Mr. Urich's statement that there were "probably" claims is not competent, substantial evidence. Therefore, to this extent, Finding of Fact is not supported by competent, substantial evidence. The Department's argument regarding the Respondent's role in claims handling is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 248-251 [RO, pp. 51-52], regarding the Respondent's knowledge of First Miami's representation of its insureds as required by the policyholders' contracts, as not supported by competent, substantial evidence. The exception is rejected.
Finding of Fact # 251: "Respondent was not made aware of any case where First Miami refused to provide such representation" is taken from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 56), which references the transcript at page 1246. This is the testimony of the Respondent on cross examination.
Q So when First Miami's policyholder was sued by the third party carrier for their subrogation, First Miami provided a defense in every occasion?
A Sir, I don't know if they provided a defense on every occasion. They should have provided a defense, and that was the responsibility of Carlos Lidsky and the claims department to make sure that that occurred.
When an insured is, is, is, when an insured is sued, it is the obligation of First Miami to provide a defense, and I don't know of any situation that First Miami did not provide that defense.
If First Miami failed to provide a defense of that nature, it would be considered to be bad faith, but again, I am not sure if one or two of them were not provided with a defense. I didn't handle that on a day-to-day basis.
[T 1246-1247, 11. 14-4; multiple "is's" in original]
Since this testimony is unrebutted, the Finding of Fact is not deficient.
The issue of the Respondent's duties and responsibilities as an officer and director, addressed by the Respondent in his testimony immediately after the exchange quoted above, is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 252 through 258 [RO, p. 52], regarding First Miami's loss reserves, as irrelevant to the real issue in the case which is the rectitude of the Respondent's actions while an officer and director of First Miami and numerous other corporations. The exception is rejected.
Irrelevance, even though I find that such is the case here, is not a ground to overturn a Finding of Fact.
The Department excepts to Findings of Fact ## 259 through 265 [RO, pp. 52-53], regarding a federal civil rights lawsuit filed by Ms. Saldise and Mr. Lopez against the Department and some agents' associations, as irrelevant. The exception is rejected, not on the basis of irrelevance but as not supported by competent, substantial evidence.
The Hearing Officer has taken this Finding from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 122 on page 20), which references the transcript at pages 964 and 1640-1641. The Respondent's testimony on page 964 is hearsay. He says that Ms. Saldise and Mr. Lopez "felt that their civil rights had been violated" and so filed the lawsuit. [T 964,
1-3]. Mr. Rubin's testimony on pages 1640-1641 is also hearsay. He says that Ms. Saldise and Mr. Lopez believed that actions taken by the Department "were biased, prejudiced, actionable." [T 1640, 1. 19]. These statements are uncorroborated hearsay as to what Ms. Saldise and Mr. Lopez believed. The sentiments expressed in the statements are further controverted by the record evidence in that the Department's Immediate Final Order issued on May 10, 1991, did not refer in any way to Carrera and the "no down payment" program.
As noted earlier, irrelevance, even though I find that such is the case here, is not a ground to overturn a Finding of Fact. The Department's argument regarding the value of Petitioner's Exhibit 50 in assessing the appropriate outcome of this case is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 266 through 274 [RO, pp. 53-54], regarding the ultimate disposition of the Carrera insurance agency, as irrelevant. The exception is accepted in part and rejected in part.
In Finding of Fact # 266 [RO, p. 53], the Hearing Officer states that "as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the 'no down payment' program that had generated so much controversy." This Finding is taken from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 124, on pages 20-21), which references the transcript at page 968. This is the Respondent's testimony as to what Ms. Saldise and Mr. Lopez intended. [T 968, 11. 6-10]. As such it is uncorroborated hearsay as to the intent of those individuals. Therefore, the Finding is rejected as to the
use of the word "amicably." The Finding is further flawed because, as noted earlier, Carrera and the "no down payment" program were not mentioned in the Immediate Final Order. To that extent, the Finding of Fact is rejected.
However, since irrelevance is not a ground to overturn a Finding of Fact, the Finding is not rejected on that basis. Note, however, the discussion in paragraph 6., above.
The Department excepts to Finding of Fact # 275 [RO, p. 54], which states that Raimundo Aleman was First Miami's Chief Financial Officer, as not supported by competent, substantial evidence. The exception is accepted.
The Hearing Officer makes the reference to Mr. Aleman as "Chief Financial Officer" based on the Respondent's Proposed Recommended Order (see proposed Findings of Fact ## 287, 288, and 316) which proposed findings reference the transcript at pages 292, 1126-1127, 1143, and 1185-1186; and Respondent's
Exhibit 85 at page 14; Respondent's Exhibit 86 at pages 22, and 28-29; and
Petitioner'S Exhibit 79 at pages 25, 50-51, and 61.
On page 292 of the transcript, Bureau Chief Galloway is being questioned by the Respondent's counsel. Counsel, not Mr. Galloway, refers to Mr. Aleman as "chief financial officer." [T 292, 11. 10-11] On the preceding page, this exchange begins:
Q But at least Mr. Tucker [a department employee reporting to Mr. Galloway] knew that the information, the source of the information was Mr. Aleman, the chief financial officer?
A Mr. Aleman reported to Mr. Campos, as far as I knew then and know today, okay.
Q Well, my question to you about this, this letter [Petitioner's Exhibit 44] doesn't say that, though, does it? It just says that Mr. Campos has to get the document, the information from Mr. Aleman?
A From his chief financial officer.
Q Okay. All right. Let me ask you something. Why, why wasn't the Department conversing with the chief financial officer of this insurance company about financial matters of concern to it?
A Because in a regulatory environment you usually have a point of contact, and that point of contact will depend upon your level of position with respect to either operation.
At my level position, my point of1contact was Mr. Campos. He was a high ranking official with the company that was charged with the operations of that company, as far as I knew then and know today. [T 291-292, 11. 13-9]
The words "chief financial officer" clearly come from the Respondent's counsel, not from the witness. Petitioner's Exhibit 44 is a March 27, 1991, letter from the Respondent to Department employee Tucker. The Respondent does not refer Mr. Aleman by name or by title. He refers simply to the "accounting department." Petitioner's Exhibit 43 is a March 14, 1991, letter from the Respondent to Mr. Tucker. In this letter, the Respondent refers to "Mr.
Raimundo Aleman, Vice President of accounting."
The transcript at pages 1126-1127, 1143, and 1185-1186 is the Respondent's testimony. He refers to Mr. Aleman by name but not by title. Respondent's Exhibit 85 is the deposition of Diana Madero, taken on February 9, 1994. Mr.
Aleman is not mentioned on page 14. He is, however, mentioned on page 13:
Q Was Raimundo Aleman there at that time [during the time of the witness's employment with First Miami]?
A No. I don't know who the other person might have been.
Q Do you recall who the officers of First Miami were during the term of your employment?
A Sergio Fernandez was the president, and I was the vice president, and there was a secretary but I can't remember who it was.
Q What about was there a treasurer or somebody, vice president of accounting at that time?
A I don't think so.
Respondent's Exhibit 86 is the deposition of Mr. Aleman. On page 8 he refers to himself as the vice president of accounting. Nowhere on pages 22, 28, or 29 does he refer to himself by title. Petitioner's Exhibit 79 is the deposition of Teresa Saldise. On pages 25, 50, 51, and 61, Mr. Aleman is mentioned but not named by title.
It is therefore clear that the term "chief financial officer" was used initially and repeatedly by the Respondent's counsel to refer to Mr. Aleman, and repeated once by Mr. Galloway, and that in fact Mr. Aleman was the vice president for accounting. Finding of Fact # 275, to the extent it refers to Mr. Aleman as Chief Financial Officer, is unsupported by competent, substantial evidence.
However, the important point here is not whether "chief financial officer" was Mr. Aleman's title. The point is that Mr. Aleman reported to the Respondent and that the Respondent was responsible for Mr. Aleman's work product on behalf of First Miami.
The Department excepts to Finding of Fact # 283 [RO, p. 56], which states that the Respondent was unaware that First Miami's financial statements to the Department were misleading or inaccurate; that the Respondent had no compelling reason to believe that the financial statements were misleading or inaccurate; and that the Respondent had no intent to deceive, as not supported by competent, substantial evidence. The exception is accepted in part and rejected in part.
The Finding is accepted to the extent that whether the Respondent was aware of misleading entries on the financial statements and whether the Respondent had an intent to deceive are based on the Respondent's credibility as a witness.
Assessment of a witness' credibility is the Hearing Officer's prerogative. However, the Finding is rejected to the extent that it states that the Respondent had no compelling reason to believe that there were misleading entries on the financial statements. This is a conclusion of law. The Department's argument on that issue is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 284 [RO, p. 56], which finds that the Respondent reasonably relied on others in discharging his duties at First Miami, as not supported by competent, substantial evidence. The exception is accepted because, like the immediately preceding finding, this finding is really a conclusion of law.
The substance of the "finding" and the Department's argument is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Findings of Fact ## 285 through 293 [RO, pp. 56-57], regarding the Department's on-site visit in January, 1992, and the Respondent's deposition, as not supported by competent, substantial evidence. The exception is accepted to the extent that the Findings imply that the Respondent lacked detailed knowledge as to the financial condition and affairs of First Miami and imply that despite his position as the spokesperson representing First Miami before the Department in this regard, he reasonably relied on information received from others and "reasonably believed" that First Miami was not insolvent.
As with the two immediately preceding exceptions, the Department's argument is addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact 290 [RO, p. 57], which states that Mr. Aleman was more knowledgeable about the financial affairs of First Miami than the Respondent, as not supported by competent, substantial evidence. The exception is accepted.
As discussed in paragraph 30., above, Mr. Aleman was not the chief financial officer; he was the vice president of accounting. He reported to the Respondent and the Respondent was the principal spokesman for First Miami in dealing with the Department. Ms. Saldise specifically stated that the Respondent was in charge of day-to-day operations. Petitioner'S Exhibit 79 at page 50. Further, the record is devoid of any indication that Mr. Aleman participated in any of the negotiations regarding the reinsurance agreements.
Mr. Aleman did not go to Spain for the reinsurance negotiations with Munauto. Most compelling is the fact that the Respondent's signature is on virtually every significant document in the record: incorporation documents; some financial statements; and checks, as recited in the section of this Order on Findings of Fact. Mr. Aleman's signature is missing from those significant documents, with the exception of the annual statements he signed in his ministerial role as Treasurer.
The Department excepts to Finding of Fact # 296 [RO, p. 58], regarding the Respondent's "cooperativeness" in his prior dealings with the Department and regarding his provision of "valuable information" to the Department after the Department took over the company as insolvent, as not supported by competent, substantial evidence. The exception is accepted.
The Hearing Officer has taken the part about "cooperativeness" from the Respondent's Proposed Recommended Order (see proposed Finding of Fact # 368 on page 52), which references the testimony of Mr. Galloway on transcript page 336 and of Mr. Kummer on transcript pages 806-807. Both the witnesses did respond affirmatively to questions from the Respondent's counsel regarding the Respondent's "cooperativeness." However, Mr. Kummer clarified his understanding of cooperation later in his testimony in the exchange quoted in the Department's exception.
The Hearing Officer has taken the part about information supplied to the Department after the takeover from the Respondent's Proposed Recommended Order (see proposed Findings of Fact ## 321 and 323). The transcript references are to pages 699, 702, and 1145-1147. The record does not support the use of the words "valuable information." On page 699, Department employee Lozano:
Q In fact, Alex Campos aided you greatly during that period [the takeover], didn't he?
A He got paid for it, too, yes, sir.
Q In fact, wasn't he very cooperative with you and the Receiver during that period?
A I must say he was to a certain extent, yes. [T 699, 11. 12-17]
This is a lukewarm endorsement at best and does not support "valuable information." The other transcript references merely show that the Respondent was still on the premises after the takeover. The Finding of Fact is therefore adopted as supplemented by the additional clarifying record citations.
The Department excepts to Finding of Fact # 301 [RO, p. 59], regarding First Miami's admitted assets at liquidation, as not supported by competent, substantial evidence. The exception is accepted to the extent that the finding is misleading because there is no explicit reference, except in Endnote 28, to the encumbrances on those assets. The particulars are addressed more fully in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 303 [RO, p. 59], regarding the "disagreements" between the Department and First Miami as to the value of First Miami's assets, as not supported by competent, substantial evidence. The exception is accepted because this "finding" is really a Conclusion of Law and is peculiarly a conclusion of law infused with the Department's experience, expertise, and responsibility for implementing the provisions of the Florida Insurance Code. These were not "disagreements." If they had been simply "disagreements," First Miami, as the Department's exception points out, would still be in business. I note also that as reflected in these rulings previously, the disallowance of the excessive investments in premium finance loans of South Florida Premium Finance Company did not result from First Miami's reliance on professionals. Mr. Rubin indicated only that this type of investment was permissible. First Miami had no professional opinion indicating that these investments complied with the restrictions as to dollar amounts in Section 625.325, Florida Statutes. Similarly, First Miami had received no professional opinion that it was entitled to take credit for its purported reinsurance contracts with Warwick Re or Dai Ichi Kyoto. This matter is more fully addressed in the section of this Order on Conclusions of Law.
The Department excepts to Finding of Fact # 319 [RO, p. 61], regarding Mr. Landrum's report on the Respondent to Mr. Perry, the owner of the company of which the Respondent is presently president, as not supported by competent, substantial evidence. The exception is accepted.
The Hearing Officer has taken this Finding from the Respondent's proposed Recommended Order (see proposed Findings of Fact ## 348-352), which reference the transcript at pages 1699-1700, and 1706-1707). This is the testimony of Mr. Perry. Mr. Landrum did not testify. Therefore, this testimony is uncorroborated hearsay which cannot support a finding.
The Department excepts to Finding of Fact # 327 [RO, p. 62], which predicts that, based on the Respondent's past performance at First Miami, he will not cause harm at Perry & Company, as not supported by competent, substantial evidence. The exception is accepted but not because of failure of support but because it is a conclusion of law. As such it is addressed in the section of this Order on Conclusions of Law, in conjunction with the Hearing Officer's statement in Conclusion of Law 336 that the "burden [of seeking an exemption to removal] may be met by a showing that the harm the 'disqualification' provision of the statute was intended to prevent would not occur if the exemption were granted."
On the Department's Exceptions to Conclusions of Law
The Department excepts to Conclusions of Law ## 335 and 336 [RO, pp. 68-69], regarding the appropriate burden of proof in a proceeding under Section 624.310.] The exception is rejected and addressed in the section on Conclusions of Law.
The Department excepts to Conclusion of Law # 338 [RO, p. 71], in which the Hearing Officer concludes that none of the Department's allegations are proved even by a preponderance of the evidence. The exception is accepted and addressed in the section on Conclusions of Law.
The Department excepts to Conclusions of Law ## 340-341 [RO, p. 72- 73], in which the Hearing Officer concludes that the record does not establish that the Respondent's activities demonstrated a lack of fitness or trustworthiness to engage in the insurance business. The exception is accepted and addressed in the section on Conclusions of Law.
The Department excepts to Conclusions of Law # 341-342 [RO, p. 73], in which the Hearing Officer concludes that the Respondent violated no part of the Insurance Code so that the Administrative Complaint should be dismissed. The exception is accepted and addressed in the section on Conclusions of Law.
On the Respondent's Exceptions to Conclusions of Law
The Respondent's first exception is to Conclusions of Law 333 and 334, contending that Section 624.310, Florida Statutes, does not allow the Department to remove a person from his present position with a licensed entity because of that person's improper conduct during the course of his licensure with or employment with or by another licensed entity. The Respondent's exception is rejected. I conclude that the Hearing Officer's analysis of the plain language of the statute is correct. I conclude further that the Hearing Officer's analysis is the only logical interpretation of the purpose of the statute.
Subsection (4) of Section 624.310, "Removal of Affiliated Parties by the Department," sets out prohibited activities and provides for a hearing under Chapter 120 in paragraphs (a) and (b). The flush language at the end of paragraph (c) plainly states the Legislature's intent to make improper conduct at one licensed entity grounds for removal from the affairs of another licensed entity. "The department may enter an order removing the affiliated party or
restricting or prohibiting participation by the person in the affairs of that particular licensee or of any other licensee." This plain, unambiguous language is reinforced by paragraph (g) of subsection (4):
Any affiliated party removed from office pursuant to this section is not eligible for reelection or appointment to the position or to any other official position in any licensee in this state except upon the written consent of the department. Any affiliated party who is removed, restricted, or prohibited from participation in the affairs of a licensee pursuant to this section may petition the department for modification or termination of the removal, restriction, or prohibition.
The Hearing Officer correctly quoted and interpreted the foregoing provisions. The Hearing Officer further quoted paragraph (h) of subsection (4) which says: "Resignation or termination of an affiliated party does not affect the department's jurisdiction to proceed under this subsection [(4)]."
How can it be otherwise? The obvious purpose of Section 624.310 is to remove persons guilty of improper conduct, as that conduct is defined in the section, from positions of trust and responsibility in licensed entities. If the section were restricted, as it plainly is not, to removal solely from the person's current position, then the person could simply move to another licensed entity and continue his deleterious activities. And paragraph (h) of subsection
(4) is clearly designed to foreclose the possibility that a person could thwart the intent of the section simply by resigning from his current position, only to reappear later at another licensed entity, beyond the reach of the statute.
Paragraph (h) of subsection (4) is at work in the present case. The Department's prosecution of the Respondent is for improper conduct at a previous licensed entity and the object of that prosecution is to remove him from his present position with another licensed entity. The Respondent's statement that "[a]lleged conduct adversely impacting a 'former' licensee is not contemplated by the provisions of [section] 624.310(4), Florida Statutes, and is not a logical conclusion in light of the nature of this removal proceeding" is itself not a logical statement. If the removal of the Respondent from his position as President of Perry & Company were not possible under Section 624.310, then there would hardly be any point in prosecuting the Respondent for his misconduct while a director and officer of First Miami, since First Miami is defunct and there is no position there to remove him from.
The Respondent's second exception is to Conclusion of Law 336, contending that the Hearing Officer is wrong in concluding that if the Respondent were to seek an exemption from the removal order under Section 624.310(4)(g), the Respondent would have the burden of proving entitlement to the exemption. The exception is rejected.
Once removed from his position, the Respondent becomes a person unregulated by the Department but seeking a status which puts him under Department regulation even though he is not actually licensed by the Department. He then must petition the Department to have the disqualification removed. As the petitioner, he bears the burden of proof. I note the last sentence in the Recommended Order in this conclusion of law. It reads: "The burden may be met
by a showing that the harm the 'disqualification' provision of the statute was intended to prevent would not occur if the exemption were granted." This is a case of first impression. There is nothing in the record addressing the issue of an exemption. The Department brought this action to remove the Respondent from his present position. The Department is responsible for interpreting and implementing Section 624.310, and since this action addresses removal and since the Department has obviously not yet encountered a request for an exemption, the Department has not yet made a determination as to what showing is necessary on the part of someone seeking such an exemption. The statute is totally silent as to the appropriate grounds for modification or removal of the restriction. The Department is unwilling to adopt an interpretation of a statute where the interpretation is purely hypothetical and where there is no factual context presented in which to apply the statute. Therefore, this observation by the Hearing Officer is rejected.
OTHER RULINGS
On the Department's Exception to Preliminary Statement
The Department excepts to the Hearing Officer's statement in the Preliminary Statement of the Recommended Order that "[t]he deadline [for filing posthearing submittals] was subsequently extended on three occasions at the Department's request." [RO p. 4] The exception is accepted.
At the end of the hearing, the Hearing Officer decided that the proposed recommended orders would be due 40 days after the filing of the transcript and that the page limitation would be 40, but indicated he would entertain motions for extensions. T 1879-1882. The transcript was filed on May 3, 1994, which made the proposed recommended orders due on June 12, 1994. On May 12, 1994, the Respondent filed a motion for an extension of time until July 1, 1994, which motion was granted by Order dated May 13, 1994. On June 8, 1994, the Department filed a motion for a further extension until July 18, 1994, which motion was granted by Order dated June 10, 1994. On June 29, 1994, the Respondent filed a motion to extend the page limitation to 60 pages, which motion was granted by Order dated July 1, 1994. On July 1, 1994, the Department filed a motion to further extend the due date to August 1, 1994, which motion was granted by Order dated July 6, 1994. And finally, on July 12, 1994, the Respondent filed a motion both to extend the due date to August 15, 1994, and to extend the page limitation to 75 pages, which motion was granted on both points by Order dated July 15, 1994. Therefore, the statement should be that four extensions of time were granted, two at the request of the Respondent and two at the request of the Department.
On the Department's Exception to the Recommendation
The Department excepts to the Hearing Officer's recommendation that all charges against the Respondent be dismissed and that he not be removed from his present position at Perry and Company. For the reasons set forth in the other sections of this Order, the exception is accepted.
Based on the foregoing rulings and conclusions, it is ORDERED:
That the Findings of Fact of the Hearing Officer are adopted in full as the Department's Findings of Fact, with the modifications, clarifications, and rejections set out in the rulings on exceptions noted above.
That the Conclusions of Law of the Hearing Officer are adopted in full as the Department's Conclusions of Law, with the exceptions noted above.
That the Hearing Officer's recommendation that the Administrative Complaint against the Respondent be dismissed is rejected.
ACCORDINGLY, any and all licenses and eligibility for licensure presently held by the Respondent under the Florida Insurance Code are hereby REVOKED. Further, the Respondent shall forthwith CEASE any participation in the affairs of any entity licensed, as that term is defined in Section 120.52(9), Florida Statutes, under the Florida Insurance Code, and is PROHIBITED from engaging in such activities. The Respondent is therefore hereby REMOVED from his position as president of Perry and Company, a premium finance company licensed under the Florida Insurance Code. The Respondent is not eligible for reelection or appointment to any official position in any licensee in this state except upon the written consent of the Department.
Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a Notice of Appeal with the General Counsel, acting as the agency clerk, at the Larson Building, Tallahassee, Florida 32399- 0307, and a copy of the same and the filing fee with the appropriate District Court of Appeal within thirty (30) days of the rendition of this Order.
DONE and ORDERED this 12th day of January, 1995.
BILL NELSON
Treasurer and Insurance Commissioner
COPIES FURNISHED TO:
Honorable Stuart M. Lerner Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
Steven M. Malono, Esquire Michael J. Thomas, Esquire Mang, Rett & Minnick, P.A. 660 East Jefferson Street Tallahassee, Florida 32301
S. Marc Herskovitz, Esquire Elise Matthes, Esquire Department of Insurance Division of Legal Services 612 Larson Building
Tallahassee, Florida 32399-0333
=================================================================
DISTRICT COURT OPINION
=================================================================
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
ALEX J. CAMPOS, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND
Appellant, DISPOSITION THEREOF IF FILED
v. CASE NO. 94-3767, 95-473
DOAH CASE NO. 93-1460
DEPARTMENT OF INSURANCE AND TREASURER,
Appellee.
/ Opinion filed January 18, 1996.
An appeal from the Department of Insurance.
Steven M. Malono of Cobb, Cole & Bell, Tallahassee, for appellant.
S. Marc Herskovitz, Division of Legal Services, Tallahassee, for appellee.
PER CURIAM.
AFFIRMED.
ZEHMER, C.J., BARFIELD and KAHN, JJ., CONCUR.
================================================================= CORRECTED DISTRICT COURT OPINION
=================================================================
THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
ALEX J. CAMPOS, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND
Appellant, DISPOSITION THEREOF IF FILED
CASE NO. 94-3767, 95-473
v. DOAH CASE NO. 93-1460
DEPARTMENT OF INSURANCE AND TREASURER,
CORRECT COPY
Appellee.
/
Opinion filed January 18, 1996.
An appeal from the Department of Insurance.
Steven M. Malono of Cobb, Cole & Bell, Tallahassee, for appellant.
S. Marc Herskovitz, Division of Legal Services, Tallahassee, for appellee.
PER CURIAM.
AFFIRMED.
BARFIELD, ALLEN and KAHN, JJ., CONCUR.
M A N D A T E
from
DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT
To the Honorable: Stuart M. Lerner, Hearing Officer
Division of Administrative Hearings WHEREAS, in that certain cause filed in this Court styled:
DEPARTMENT OF INSURANCE AND TREASURER
vs. Case No. 94-3767
Your Case No. 93-1460
ALEX J. CAMPOS
The attached opinion was rendered on January 18, 1996,
YOU ARE HEREBY COMMANDED that further proceedings be had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.
WITNESS the Honorable E. Earle Zehmer
Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 5th day of February, 1996.
Karen Roberts
Deputy Clerk, District Court of Appeal of Florida, First District
DISTRICT COURT OF APPEAL, FIRST DISTRICT
Tallahassee, Florida 32399
Telephone No. (904)488-6151
February 6, 1996
CASE NO: 94-03767 95-00473
L.T. CASE NO. 93-1460
Alex J. Campos v. Dept. of insurance and Treasurer
Appellant(s), Appellee(s).
BY ORDER OF THE COURT:
The Mandate of this Court issued February 5, 1996, is hereby set aside and held for naught.
I HEREBY CERTIFY that the foregoing is (a true copy of) the original court order.
JON S. WHEELER, CLERK BY:
Karen Roberts
Deputy Clerk
Copies:
Steven M. Malono S. Marc Herkovitz
Elise M. Matthes Ann Cole, Agency Clerk
M A N D A T E
from
DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT
To the Honorable: Stuart M. Lerner, Hearing Officer
Division of Administrative Hearings WHEREAS, in that certain cause filed in this Court styled:
DEPARTMENT OF INSURANCE AND TREASURER
vs. Case No. 94-3767
Your Case No. 93-1460
ALEX J. CAMPOS
The attached opinion was rendered on January 18, 1996,
YOU ARE HEREBY COMMANDED that further proceedings be had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.
WITNESS the Honorable E. Earle Zehmer
Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 18th day of March, 1996.
(seal) Jon S. Wheeler
Deputy Clerk, District Court of Appeal of Florida, First District
| Issue Date | Proceedings |
|---|---|
| Mar. 20, 1996 | Mandate; Opinion filed. |
| Jan. 25, 1996 | Corrected Copy Opinion filed. |
| Jan. 22, 1996 | First DCA Opinion filed. |
| May 19, 1995 | BY ORDER OF THE COURT (Motion to withdraw is denied) filed. |
| Jan. 25, 1995 | BY ORDER OF THE COURT filed. |
| Jan. 18, 1995 | Letter to Deanna Hartford from Wendy Wiener (regarding the Campos appeal) filed. |
| Jan. 13, 1995 | Final Order filed. |
| Dec. 01, 1994 | Appellant's Amended Motion for Extension of time to Designate the Record filed. |
| Nov. 28, 1994 | Appellant's Motion for Extension of time to designate the Record filed. |
| Nov. 23, 1994 | AGENCY APPEAL, ONCE THE RETENTION SCHEDULE OF -KEEP ONE YEAR AFTER CLOSURE- IS MET, CASE FILE IS RETURNED TO AGENCY GENERAL COUNSEL. -ac |
| Nov. 14, 1994 | Respondent's Exceptions to Recommended Order filed. |
| Oct. 18, 1994 | Final Order on Request for Attorney`s Fees Pursuant to Section 120.57(1) (b) 5., Florida Statutes sent out. |
| Oct. 18, 1994 | Recommended Order sent out. CASE CLOSED. Hearing held 03/07-11/94 &04/11-14/94. |
| Aug. 15, 1994 | Notice of Filing Proposed Recommended Order And Respondent's Written Closing Argument And Memorandum; (Respondent) Proposed Recommended Order; Petitioner's Proposed Recommended Order filed. |
| Jul. 15, 1994 | Order sent out. (Petitioner's proposed RO of 75 pages due 8-15-94) |
| Jul. 12, 1994 | Respondent`s Motion to Extend Filing Deadline of Proposed Recommended Order and Page Limitation filed. |
| Jul. 06, 1994 | Order sent out. (proposed recommended orders shall be filed no later than 8/1/94) |
| Jul. 01, 1994 | (Petitioner) Motion for Extension of Time To File Proposed Recommended Orders filed. |
| Jul. 01, 1994 | Order sent out. (respondent's proposed recommended order shall not exceed 60 pages) |
| Jul. 01, 1994 | (Petitioner) Motion for Extension of Time To File Proposed Recommended Orders filed. |
| Jun. 29, 1994 | Respondent's Motion to Extend Proposed Recommended Order Page Limitation filed. |
| Jun. 10, 1994 | Order sent out. (proposed order s shall be filed no later than 7/18/94) |
| May 13, 1994 | Order sent out. (Proposed recommended orders to be filed by 7/1/94) |
| May 12, 1994 | Respondent's Motion for Extension of Time to File Proposed Recommended Orders filed. |
| May 03, 1994 | Transcript (14 Volumes, Tagged); Petitioner and Respondent Exhibits (2 boxes, Tagged)filed. |
| Apr. 25, 1994 | Order sent out. (Petitioner's exhibits 92 & 95 are admitted into evidence) |
| Apr. 19, 1994 | Letter to SML from S. Herskovitz; Affidavits filed. |
| Apr. 14, 1994 | CASE STATUS: Hearing Held. |
| Apr. 13, 1994 | Petitioner's Second Amended Witness and Exhibit List filed. |
| Mar. 28, 1994 | Respondent's Motion to Amend Exhibit List; Respondent's Response to Petitioner's Delineation of the Transcript of Proceedings Dated February 4, 1992 filed. |
| Mar. 23, 1994 | Petitioner's Delineation of The Transcript of Proceedings Dated February 4, 1992 filed. |
| Mar. 21, 1994 | Respondent`s Response to Petitioner`s Objections to the Deposition Testimony of Diana Madero; Respondent`s Response to Petitioner`s Objections to the Deposition Testimony of Raimundo Aleman filed. |
| Mar. 15, 1994 | Petitioner`s Objections to the Deposition Testimony of Diana Madero; Petitioner`s Objections to the Deposition Testimony of Raimundo Aleman filed. |
| Mar. 11, 1994 | (2) Notice of Filing Deposition filed. (From Steven M. Malono) |
| Mar. 07, 1994 | Petitioner's Motion to File Amended Exhibit List to Joint Prehearing Stipulation filed. |
| Mar. 01, 1994 | (Respondent) Motion for Official Recognition filed. |
| Mar. 01, 1994 | Order sent out (If final hearing has not concluded by 3/11/94, it will continue on 4/11/94, 9:30am) |
| Feb. 25, 1994 | Subpoena Ad Testificandum filed. (From Michael Thomas) |
| Feb. 25, 1994 | Joint Prehearing Stipulation w/Composite Exhibit-A filed. |
| Feb. 16, 1994 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Feb. 16, 1994 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Feb. 14, 1994 | Subpoena Ad Testificandum w/Affidavit of Service filed. (From Michael Thomas) |
| Jan. 27, 1994 | (Petitioner) Notice of Taking Deposition w/Subpoena filed. |
| Dec. 16, 1993 | Respondent's Supplemental Response to Order filed. |
| Dec. 07, 1993 | (Respondent) Response to Order filed. |
| Dec. 06, 1993 | Petitioner's Response to Order filed. |
| Dec. 06, 1993 | Petitioner's Response to Order filed. |
| Nov. 23, 1993 | Order sent out. (Re: Motion for Extension of Time Granted) |
| Nov. 18, 1993 | (joint) Response to Order filed. |
| Nov. 04, 1993 | Order sent out. (hearing rescheduled for 3/7-11/94; 9:30am; Talla) |
| Nov. 02, 1993 | Respondent`s Request for Oral Argument; Respondent`s Motion to Compel Production of Documents w/Exhibits A&B filed. |
| Nov. 02, 1993 | Respondent's Motion for Continuance of Final Hearing filed. |
| Oct. 27, 1993 | Respondent`s Notice of Service of Interrogatory Answers to Petitioner filed. |
| Oct. 26, 1993 | (Respondent) Request for Copies filed. |
| Oct. 22, 1993 | Order Granting Protective Order sent out. |
| Oct. 22, 1993 | Petitioner's Notice of Production From Non-Party w/Subpoena Duces Tecum & Exhibit-A filed. |
| Oct. 19, 1993 | Petitioner's Response to Respondent's Motion for Protective Order filed. |
| Oct. 12, 1993 | (Petitioner) Amended Notice of Taking Deposition Duces Tecum (Date Change Only) filed. |
| Oct. 12, 1993 | Respondent's Notice of Withdrawal of Motion to Compel Production filed. |
| Oct. 11, 1993 | Letter to S. Marc Herskovitz from Steven M. Malono (re: amending motion for protective order) filed. |
| Oct. 11, 1993 | Order sent out. (Re: Motion for Extension of Time Granted) |
| Oct. 08, 1993 | (Petitioner) Motion for Extension of Time to File Response filed. |
| Oct. 06, 1993 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Oct. 04, 1993 | Respondent's Motion for Protective Order filed. |
| Sep. 28, 1993 | (Petitioner) Amended Notice of Taking Deposition Duces Tecum filed. |
| Sep. 27, 1993 | Petitioner`s Notice of Service of Second Set of Interrogatories to Respondent filed. |
| Sep. 23, 1993 | (Petitioner) Amended Notice of Taking Deposition Duces Tecum filed. |
| Sep. 22, 1993 | Notice of Taking Deposition DT filed. |
| Sep. 21, 1993 | Notice of Taking Deposition DT filed. |
| Sep. 21, 1993 | Respondent's Response to Order filed. |
| Sep. 15, 1993 | Order sent out. (Re: Motion to Compel Discovery) |
| Sep. 08, 1993 | Petitioner's Response to Hearing Officer's Order filed. |
| Sep. 03, 1993 | (Petitioner) Notice of Taking Deposition Duces Tecum (3) filed. |
| Sep. 02, 1993 | Petitioner's Amended Response to Motion to Compel Discovery filed. |
| Aug. 31, 1993 | Order sent out. (Re: Motion to compel discovery) |
| Aug. 26, 1993 | Petitioner's Response to Motion to Compel Discovery filed. |
| Aug. 24, 1993 | (Petitioner) Amended Notice of Taking Deposition Duces Tecum; Respondent's Motion to Compel Discovery w/Exhibits A-D filed. |
| Aug. 06, 1993 | Notice of Service of Second Set of Interrogatories filed. |
| Aug. 03, 1993 | (Respondent) Notice of Appearance filed. |
| Jul. 21, 1993 | Notice of Hearing sent out. (hearing set for 11/22-24/93; 9:30am; Talla) |
| Jul. 14, 1993 | (Petitioner) Response to Order filed. |
| Jul. 14, 1993 | (Respondent) Response to Order filed. |
| Jun. 24, 1993 | Order sent out. (Hearing continued; status report due with 20 days) |
| Jun. 18, 1993 | (Respondent) Notice of Service of Respondent`s Responses to Petitioner`s First Set of Interrogatories filed. |
| Jun. 18, 1993 | Petitioner's First Set of Interrogatories to Respondent w/Interrogatories to Respondent filed. |
| Jun. 17, 1993 | Respondent's Motion for Continuance of Prehearing Stipulation Schedule and Final Hearing filed. |
| May 18, 1993 | Notice of Petitioner`s Response to Respondent`s Request for Public Records and Request for Production filed. |
| May 17, 1993 | (Petitioner) Notice of Entry of Appearance filed. |
| May 13, 1993 | Notice of Service of Petitioner`s 1st Set of Interrogs. to Respondent filed. |
| Apr. 02, 1993 | Order Requiring Prehearing Stipulation sent out. |
| Apr. 01, 1993 | Notice of Hearing sent out. (hearing set for July 21-23, and 26-27, 1993; 9:00am; Talla) |
| Mar. 29, 1993 | Joint Response to Initial Order filed. |
| Mar. 22, 1993 | Respondent's Public Records Request and Request for Production of Documents; Notice of Service of Interrogatories; Respondent's First Interrogatories Propounded to Petitioner Department of Insurance filed. |
| Mar. 16, 1993 | Initial Order issued. |
| Mar. 12, 1993 | Agency referral letter; Administrative Complaint; Request for Formal Section 120.57(1) Administrative Hearing; Election of Rights filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 18, 1996 | Opinion | |
| Jan. 12, 1995 | Agency Final Order | |
| Oct. 18, 1994 | Recommended Order | DOI failed to prove that, in his previous position with insurance company, respondent engaged in conduct warranting his removal from current position with premium financing company. |
