STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 03-0426PL

)

MATTHEW LAWRENCE KLEIN, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on April 17, 2003, in Fort Lauderdale, Florida, before Patricia Hart Malono, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Dean Andrews, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: No appearance

STATEMENT OF THE ISSUE

Whether the Respondent committed the offenses alleged in the Administrative Complaint dated October 1, 2002, and, if so, the penalty that should be imposed.

PRELIMINARY STATEMENT

In a four-count Administrative Complaint dated October 1, 2003, the Department of Financial Services1 ("Department") charged Matthew Lawrence Klein with having violated

Section 626.611(7), Florida Statutes, by demonstrating a lack of fitness or trustworthiness to engage in the business of insurance; Section 626.611(9), Florida Statutes, by engaging in fraudulent or dishonest practices in the conduct of business under a license or appointment; Section 626.611(4), Florida Statutes, by willfully using a license or appointment to circumvent requirements or prohibitions of the Insurance Code; Section 626.611(5), Florida Statutes, by engaging in willful deception with regard to a policy or contract of insurance; Section 626.611(10), Florida Statutes, by misappropriating money belonging to insurers received in the conduct of business under a license or appointment; Section 626.611(13), Florida Statutes, by willfully failing to comply with, or willfully violating, a proper order or rule of the department or provision of the Insurance Code; Section 626.621(6), Florida Statutes, by engaging in deceptive acts or practices or having been a source of injury or loss to the public or having been detrimental to the public interest when engaging in business under a license or appointment; Section 626.9521, Florida Statutes, by engaging in deceptive practices involving the business of insurance; and

Section 626.9541(1)(k)1., Florida Statutes, by knowingly making a false or fraudulent statement or representation on or relative to an application for an insurance policy for the purpose of obtaining a commission.2

The Department alleged in the Administrative Complaint that Mr. Klein had violated these statutes with respect to applications for health insurance submitted to Freedom Life Insurance Company ("Freedom Life") on behalf of Steven and Nancy Schwinn, Cary and Bonnie Washington, Robert and Cathy Antetomer, and Paul and Karen Holock. Specifically, the Department charged that Mr. Klein had himself completed the four applications for health insurance and that the information he included on the applications was deliberately false and fraudulent; that

Mr. Klein had submitted a premium check with each of the four applications, which he signed with a fictitious name and which was drawn on a closed account; and that Mr. Klein prepared and submitted these four applications and premium checks to Freedom Life for the purpose of being paid advance commissions.

Mr. Klein submitted an Election of Rights form to the Department in which he indicated that he wished to submit a written statement and documentary evidence in lieu of an evidentiary hearing and that he disputed one or more of the Department's factual allegations. The Department transmitted

the matter to the Division of Administrative Hearings for assignment of an administrative law judge.

Pursuant to notice, the final hearing was held on April 17, 2003. Mr. Klein did not appear at the hearing. He did, however, prepare a letter addressed to counsel for the Department and to Judge Larry J. Sartin indicating that he did "not want to waste anymore of the Ins[urance] Dep[artmen]t[']s time. So I wish to offer my written statement in lieu of my hearing."3 According to the Department's counsel, this letter was received by the Department on or about April 11, 2003; it was not, however, filed with the Division of Administrative Hearings. At the final hearing, the Department presented the testimony of Linda Grant, an investigator employed by the Department, and Respondent's Composite Exhibit 1, consisting of the licensure file of Mr. Klein maintained by the Department, was offered and received into evidence.

No transcript of the proceeding was filed with the Division of Administrative Hearings. The Department timely filed proposed findings of fact and conclusions of law, which have been considered in the preparation of this Recommended Order.

After the Department's Proposed Recommended Order was filed, Mr. Klein, on May 9, 2003, filed a letter disputing the penalty recommended by the Department. To the extent that this letter contains argument with respect to the appropriate penalty, it

has been treated as a post-hearing submittal and considered in the preparation of this Recommended Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made:

1. The Department is the state agency charged with the administration of the Insurance Code of the State of Florida, including Chapter 626, Florida Statutes. See Section 20.121, Florida Statutes (2002).

2. At the times material to this proceeding, Mr. Klein was licensed in Florida as an insurance agent for several lines of insurance. Mr. Klein was an authorized agent for Freedom Life.

3. On or about February 6, 2002, the Department received a Termination of Appointment Form from Freedom Life, in which Freedom Life notified the Department that Mr. Klein's appointment as its agent had been terminated. Documentation attached to the form included four applications for health insurance and four checks for premium submitted with the applications.

4. After receiving the Termination of Appointment Form, the Department initiated an investigation into the matter.

   Applicants Steven and Nancy Schwinn.

   
   

5. The first questionable application for health insurance provided to the Department by Freedom Life named Steven and Nancy Schwinn as applicants, carried a signature purporting to be that of Mr. Klein, and was dated November 23, 2001. In the application, Mr. Schwinn's address was listed as Post Office Box 256 in Fort Lauderdale; his employer was identified as

   M.L.K. Inc. Investments; and Blue Cross/Blue Shield was identified as his current health insurance carrier.

6. The Department's investigation revealed the following:

   
   

   1. The telephone number given for Steven and Nancy Schwinn is disconnected and neither Bellsouth nor AT&T has any record of having ever assigned a telephone number to Steven and/or Nancy Schwinn. A computer search failed to turn up a telephone number in Florida for Steven and/or Nancy Schwinn.

   2. The United States Postal Service reported that Post Office Box 256 in Fort Lauderdale is not assigned to Steven and/or Nancy Schwinn, but is, and has been, assigned to another individual unaffiliated with the transaction at issue herein.

   3. A search of property records in Miami-Dade, Broward, and Palm Beach counties failed to show any real property listed in the names of Steven and/or Nancy Schwinn.

   4. The Social Security Administration reported that the Social Security numbers listed on the application for Steven and

      Nancy Schwinn are invalid; that is, the Social Security numbers do not exist.

   5. The Florida Department of Revenue reported that a search of its records did not reveal any wage information for Steven or Nancy Schwinn under the Social Security numbers provided on the application.

   6. Blue Cross/Blue Shield reported that it could find no evidence that it had ever provided health insurance coverage to Steven Schwinn.

   Applicants Cary and Bonnie Washington.

   
   

7. The second questionable application for health insurance provided to the Department by Freedom Life named Cary and Bonnie Washington as applicants, carried a signature purporting to be that of Mr. Klein, and was dated November 23, 2001. In the application, Mr. Washington's address was listed as Post Office Box 256 in Fort Lauderdale; his employer was identified as M.L.K. Investments; and Blue Cross/Blue Shield was identified as his current health insurance carrier.

8. The Department's investigation revealed the following:

   
   

   1. The telephone number given for Cary and Bonnie Washington is disconnected and neither Bellsouth nor AT&T has any record of having ever assigned a telephone number to Cary and/or Bonnie Washington. A computer search failed to turn up a telephone number in Florida for Cary and/or Bonnie Washington.

   2. The United States Postal Service reported that Post Office Box 256 in Fort Lauderdale is not assigned to Cary and/or Bonnie Washington, but was, and has been, assigned to another individual unaffiliated with the transaction at issue herein.

   3. A search of property records in Miami-Dade, Broward, and Palm Beach counties failed to show any real property listed in the names of Cary and/or Bonnie Washington.

   4. The Social Security Administration reported that, although the Social Security numbers listed on the application for Cary and Bonnie Washington are valid, they are not issued to persons named Cary and Bonnie Washington.

   5. The Florida Department of Revenue reported that a search of its records did not reveal any wage information for Cary or Bonnie Washington under the Social Security numbers provided on the application.

   6. Blue Cross/Blue Shield reported that it could find no evidence that it had ever provided health insurance coverage to Cary Washington.

   Applicants Robert and Kathy Antetomer.

   
   

9. The third questionable application for health insurance provided to the Department by Freedom Life named Robert and Kathy Antetomer as applicants, carried a signature purporting to be that of Mr. Klein, and was dated November 23, 2001. In the application, Mr. Antetomer's address was listed as Post Office

   Box 256 in Fort Lauderdale; his employer was identified as

   
   

   M.L.K. Investments; and Blue Cross/Blue Shield was identified as his current health insurance carrier.

10. The Department's investigation revealed the following:

    
    

    1. The telephone number given for Robert and Kathy Antetomer is disconnected and neither Bellsouth nor AT&T has any record of having ever assigned a telephone number to Robert and/or Kathy Antetomer. A computer search failed to turn up a telephone number in Florida for Robert and/or Kathy Antetomer.

    2. The United States Postal Service reported that Post Office Box 256 in Fort Lauderdale is not assigned to Robert and/or Kathy Antetomer, but is, and has been, assigned to another individual unaffiliated with the transaction at issue herein.

    3. A search of property records in Miami-Dade, Broward, and Palm Beach counties failed to show any real property listed in the names of Robert and/or Kathy Antetomer.

    4. The Social Security Administration reported that, although the Social Security number listed on the application for Kathy Antetomer is valid, it is not issued to a person named Kathy Antetomer. The Social Security Administration reported that the Social Security number listed on the application for Robert Antetomer is invalid; that is, the Social Security number does not exist.

    5. The Florida Department of Revenue reported that a search of its records did not reveal any wage information for Robert or Kathy Antetomer under the Social Security numbers provided on the application.

    6. Blue Cross/Blue Shield reported that it could find no evidence that it had ever provided health insurance coverage to Robert Antetomer.

    Applicants Karen and Paul Holock.

    
    

11. The fourth questionable application for health insurance provided to the Department by Freedom Life named Karen and Paul Holock as applicants, carried a signature purporting to be that of Mr. Klein, and was dated November 29, 2001. In the application, Mrs. Holock's address was listed as Post Office Box 431 in Fort Lauderdale; her employer was identified as

    M.L.K. Investments; and Foundation Health was identified as her current health insurance carrier.

12. The Department's investigation revealed the following:

    
    

    1. The telephone number given for Karen and Paul Holock is disconnected and neither Bellsouth nor AT&T has any record of having ever assigned a telephone number to Karen and/or Paul Holock. A computer search failed to turn up a telephone number in Florida for Karen and/or Paul Holock.

    2. The United States Postal Service reported that Post Office Box 431 in Fort Lauderdale is not assigned to Karen

       and/or Paul Holock, but is, and has been, assigned to another individual unaffiliated with the transaction at issue herein.

    3. A search of property records in Miami-Dade, Broward, and Palm Beach counties failed to show any real property listed in the names of Karen and/or Paul Holock.

    4. The Social Security Administration reported that, although the Social Security numbers listed on the application for Karen and Paul Holock are valid, they are not issued to persons named Karen and Paul Holock.

    5. The Florida Department of Revenue reported that a search of its records did not reveal any wage information for Karen or Paul Holock under the Social Security numbers provided on the application.

    6. Foundation Health reported that it could find no evidence that it had ever provided health insurance coverage to Karen Holock.

13. According to the records of the Florida Division of Corporations, M.L.K. Inc. was administratively dissolved in September 1997; Mr. Klein is listed as the only director of the corporation.

14. The four checks that accompanied the four health insurance applications were written on an account purportedly belonging to "M.L.K. Inc."; three of the checks were returned to Freedom Life with "Account Closed" stamped on the front; Freedom

    Life did not submit the fourth check for deposit. Mr. Klein admitted in the letter sent to the Department's counsel on or about April 11, 2003, that he had written "bad checks" for the four policies.4

15. The evidence presented by the Department is sufficient to establish with the requisite degree of certainty that

    Mr. Klein is not trustworthy or fit to engage in business as an insurance agent, and he has committed dishonest and fraudulent practices as an agent licensed by the State of Florida and appointed by Freedom Life: Mr. Klein completed and submitted four health insurance applications to Freedom Life when he knew that the persons named as applicants were fictitious and that the information contained in the applications was false;

    Mr. Klein knowingly and deliberately sent with the applications four checks for the policy premiums that were drawn on a bank account that he knew was closed and contained no funds.

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and of the parties thereto pursuant to Sections 120.569 and 120.57(1), Florida Statutes (2002).

17. In its Administrative Complaint, the Department seeks, inter alia, to suspend or revoke Mr. Klein's license as an insurance agent. Accordingly, the Department has the burden of

    proving the allegations in the Administrative Complaint by clear and convincing evidence. See Department of Banking and Finance,

    Division of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996)(The "clear and convincing evidence" standard applies when an agency seeks to suspend or revoke a license.)

18. Section 626.611, Florida Statutes (2001), provides in pertinent part:

    The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, title agency, solicitor, adjuster, customer representative, service representative, or managing general agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:

    
    

    * * *

    
    

    (5) Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising.

    
    

    * * *

    
    

    (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

    
    

    * * *

    (9) Fraudulent or dishonest practices in the conduct of business under the license or appointment.

    
    

19. Based on the findings of fact herein, the Department has proven by clear and convincing evidence that Mr. Klein demonstrated untrustworthiness as an insurance agent and that he engaged in dishonest practices as an insurance agent and that he, therefore, violated Section 626.611(7) and (9), Florida Statutes (2001), with respect to each of the four counts of the Administrative Complaint. The Department has failed to prove by clear and convincing evidence that Mr. Klein willfully misrepresented or deceived anyone regarding an insurance policy; his offenses dealt with the submission of a false application for an insurance policy. The Department has, therefore, failed to prove that Mr. Klein violated Section 626.611(5), Florida Statutes (2001).

20. Rule 4-231.080, Florida Administrative Code, sets forth the penalties to be assessed for violations of

    Section 626.611, Florida Statutes. The penalty for a violation of Section 626.611(7) is suspension of the licensee's license for a period of six months; the penalty for a violation of Section 626.611(9) is suspension of the licensee's license for a period of nine months.

21. Rule 4-231.040(1)(a), Florida Administrative Code, provides that the penalty for each count in the Administrative Complaint is to be calculated based on the violation carrying the highest penalty. In this case, the violation of

    Section 626.611(9), Florida Statutes, carries the highest penalty, suspension of the license for a period of nine months.

22. Rule 4-231.040(2), Florida Administrative Code, provides that the penalties for each count are to be added together to arrive at the total penalty to be assessed. In this case, the Department has proven that Mr. Klein violated

    Section 616.611(9), Florida Statutes (2001), with respect to each of the four counts in the Administrative Complaint.

    Consequently, the total penalty set forth in the Department's rules is a 36-month suspension of Mr. Klein's license as an insurance agent.

23. The aggravating and mitigating factors set forth in Rule 4-231.160, Florida Administrative Code, have been considered, including the absence of prior disciplinary actions against Mr. Klein. It is concluded that that the penalty derived from Rules 4-231.080 and 4-231.040, Florida Administrative Code, should not be modified and that Mr. Klein's license(s) to engage in the business of insurance should be suspended for a period of 36 months.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Matthew Lawrence Klein violated Section 626.611(7) and (9), Florida Statutes (2001), and suspending his license(s) to engage in the business of insurance for a period of 36 months.

DONE AND ENTERED this 21st day of May, 2003, in Tallahassee, Leon County, Florida.

PATRICIA HART MALONO

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 2003.

ENDNOTES

1/ Formerly the Department of Insurance, Office of the Insurance Commissioner.

2/ In its Proposed Recommended Order, filed April 29, 2003, the Department proposed that Mr. Klein be found guilty of having violated only Sections 626.611(5), (7), and (9), Florida Statutes. Accordingly, it is deemed that the Department has withdrawn its charges that Mr. Klein violated the remaining statutory sections identified in its Administrative Complaint.

3/ The Department filed a copy of this letter with the Division of Administrative Hearings after the hearing. To the extent that the letter contains factual assertions intended by

Mr. Klein to exculpate him, they were not made under oath at the hearing and are, therefore, hearsay and may not be used as the basis for a finding of fact herein. See Section 120.57(1)(c), Florida Statutes (2002). Even had Mr. Klein presented these factual assertions in sworn testimony at the final hearing, they are unpersuasive and would not have been credited.

4/ This statement may be the basis for a finding of fact because it is an admission against interest made by Mr. Klein and, therefore, would have been admissible over objection in a civil action. See Sections 90.803(18) and 120.57(1)(c). Florida Statutes (2002).

COPIES FURNISHED:

Dean Andrews, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333

Matthew Lawrence Klein

4511 Norfolk Island Pine Drive Tamarac, Florida 33319

Honorable Tom Gallagher Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 03-000426PL

Orders for Case No: 03-000426PL