STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF FINANCIAL SERVICES,
Petitioner,
vs.
RUSSELL G. WOLVEN,
Respondent.
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) Case No. 05-0142PL
) DFS No. 75703-04-AG
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)
)
)
)
DEPARTMENT OF FINANCIAL SERVICES,
Petitioner,
vs.
WALTER ROLF STROHMAIER,
Respondent.
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) Case No. 05-0429PL
) DFS No. 75701-04-AG
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OFFICE OF FINANCIAL REGULATION, )
)
Petitioner, )
)
vs. )
) SCOTT W. SPOR; JAMES P. HOLLIS; ) DENNIS L. BAUGHER; )
RICHARD L. BAMMERLIN; )
MICHAEL STEVEN MOORE; and )
RUSSELL G. WOLVEN, )
)
Respondents. )
Case No. 05-0515
OFR Nos. 0081a-S-10/03
0081b-S-10/03
0081c-S-10/03
0081e-S-10/03
0081g-S-10/03
0081i-S-10/03
)
DEPARTMENT OF FINANCIAL SERVICES,
Petitioner,
vs.
RICHARD LEE BAMMERLIN,
Respondent.
)
)
)
)
)
) Case No. 05-0569PL
) DFS No. 75699-04-AG
)
)
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)
RECOMMENDED ORDER
Notice was provided and on June 29 and 30, 2005; July 28
and 29, 2005; and September 15 and 16, 2005, a formal hearing was held. Authority for conducting the hearing is set forth in Sections 120.569 and 120.57(1), Florida Statutes (2005). The hearing location was the Division of Administrative Hearings, 1230 Apalachee Parkway, Tallahassee, Florida. The hearing was conducted by Charles C. Adams, Administrative Law Judge.
APPEARANCES
For Petitioner Office of Financial Regulation (OFR):
A. Gregory Melchoir, Esquire Office of Financial Regulation 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394
For Petitioner Department of Financial Services (DFS):
David J. Busch, Esquire Department of Financial Services Division of Legal Services
612 Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0333
For Respondents Russell J. Wolven, Dennis L. Baugher
and Richard L. Bammerlin:
Steven M. Malono, Esquire Pennington, Moore, Wilkinson,
Bell & Dunbar, P.A.
215 South Monroe Street, Second Floor Post Office Box 10095
Tallahassee, Florida 32302-2095 For Respondent Walter Rolf Strohmaier:
Randall G. Blankenship, Esquire
170 East Central Avenue Winter Haven, Florida 33880
For Respondent Scott W. Spor:
Mike Piscitelli, Esquire
Vezina, Lawrence & Piscitelli, P.A.
350 East Las Olas Boulevard, Suite 1130 Fort Lauderdale, Florida 33301
For Respondent James P. Hollis:
Norman B. Arnoff, Esquire Wexler & Burkhark, P.C.
50 Charles Lindbergh Boulevard, Suite 206 Mitchel Field, New York 11553
For Respondent Michael Steven Moore: No appearance
STATEMENT OF THE ISSUES
In relation to DOAH Case No. 05-0515, does the case involve the sale of securities as described in Chapter 517, Florida Statutes (2002), that would confer jurisdiction upon OFR to proceed to a hearing on the merits of the Administrative Complaint that forms the basis for DOAH Case No. 05-0515, and to what extent, if any, the named Respondents have been involved with the sale of securities sufficient to declare jurisdiction
over their activities? Preliminary to that determination is the related issue concerning the possible pre-emption of OFR's regulatory authority by virtue of the regulatory action previously taken by the State of Florida, Department of Business and Professional Regulation, Division of Land Sales, Condominiums and Mobile Homes (DBPR) under authority set forth in Chapter 721, Florida Statutes (2002)? Argument has also been set forth concerning the significance of court cases as they might influence OFR's ability to declare their regulatory authority in this instance.
PRELIMINARY STATEMENT
On January 18, 2005, the case that would become DOAH Case 05-0142PL was filed with the State of Florida, Division of Administrative Hearings (DOAH). On February 7, 2005, the case that would become DOAH Case No. 05-0429PL was filed with DOAH. On February 11, 2005, the case that would become DOAH Case
No. 05-0515 was filed with DOAH. On February 15, 2005, the case that would become DOAH Case No. 05-0569PL was filed with DOAH.
On March 9, 2005, a Prehearing Order on Scheduling was issued in relation to the aforementioned cases and DOAH Case Nos. 05-430PL, 05-0786PL, 05-0788PL, and 05-0789PL. The latter
group of cases have since been withdrawn.1/
On March 18, 2005, a response was made to the prehearing order on scheduling. Having considered that response, the above-styled cases were consolidated for hearing on their merits. However, the hearing on the merits was contingent upon the establishment of jurisdiction in DOAH Case No. 05-0515, as alluded to in the statement of the issues. The proceedings were bifurcated with the jurisdictional component heard first, to be followed by the merits case if jurisdiction were found.
The case was originally set to be heard on May 4 and 5, 2005. Eventually the case was heard on the dates previously described.
A motion was filed seeking clarification of the statement of the issues provided in the Notice of Hearing. On April 4, 2005, an order was entered in response to that motion reconfirming the pendency of the hearing to consider the jurisdictional question.
On April 6, 2005, Respondents Richard G. Wolven, Dennis L. Baugher and Richard L. Bammerlin, as applicable, moved to dismiss the Administrative Complaints against those Respondents in DOAH Case Nos. 05-0142PL, and 05-0569PL premised upon Administrative Complaints drawn by DFS against individual insurance agents' licenses, Chapter 626, Florida Statutes. They also sought to dismiss the Administrative Complaint in DOAH Case No. 05-0515. In the course of the motion to dismiss, those
Respondents adopted by reference a motion to dismiss the Administrative Complaint which Respondent Scott W. Spor had filed with OFR before the case was transmitted to DOAH, together with the memorandum of law supporting the motion to dismiss offered by Respondent Scott W. Spor.
On April 13, 2005, Respondent Steven Moore petitioned DOAH asking to be heard in DOAH Case No. 05-0515. On April 18, 2005, Respondent Moore was joined in the consolidated proceedings by order.
On April 18, 2005, OFR moved to strike two affirmative defenses raised by Respondent Scott W. Spor and a Motion for Protective Order related to the taking of the deposition of Don Saxon. On April 21, 2005, Respondent Scott W. Spor filed a memorandum in opposition to the Motion for Protective Order and motion to strike two of the affirmative defenses of Respondent Spor.
On April 25, 2005, an order was entered granting OFR's motion to strike paragraph 13 of the affirmative defenses raised by Respondent Spor and denying the motion to strike paragraph 14.
On May 23, 2005, OFR filed a Motion for Protective Order concerning confidential information sought for production by Respondent Spor.
On June 16, 2005, Respondent James P. Hollis filed a memorandum of law questioning OFR's jurisdiction to proceed with its Administrative Complaint.
On June 24, 2005, Respondent Scott W. Spor filed a Motion in Limine seeking to limit the scope of proceedings involved with the jurisdictional question pertaining to DOAH Case No. 05- 0515.
On June 27, 2005, OFR filed a Motion for Protective Order to quash the subpoena of James E. Blount.
On June 28, 2005, OFR filed a suggestion of sub-issues to be considered in the initial hearing on jurisdiction, and opposition to the motion to dismiss that was pending. On that same date, OFR filed a response in opposition to the Motion in Limine by Respondent Spor.
Issues associated with the participation of Messers Saxon and Blount were resolved, as was the concern over confidential information and its protection. Any confidential information presented at hearing would not be publicly disclosed while maintained by the undersigned, and it is presumed that the parties will conduct themselves in a similar manner.
Those concerns expressed in the Motion in Limine intended to limit the scope of the proceedings involving jurisdiction were addressed in the course of the hearing.
Issues framed by the motion to dismiss, the response to that motion, the Hollis' memorandum of law and OFR's statement of sub-issues are resolved by the entry of the Recommended Order.
At hearing OFR called a number of witnesses whose names are set forth in the Index to the hearing transcript. OFR Exhibits numbered 1, 2, 7 through 9, 12 through 14, 16A, 16B, 17 through 20, 21A, 22B through 22D, 23E through 23G, 24A, 25 through 28, 29B through 29H, 30A through 30L, 32D, 33D, 41, 42C, 48, 49B, 53
in part2/, 62 through 66, 71A through 71E, 71G, 71H, 72B through 72G, 73, 76, 80, 82, 85 and 90 were admitted. At hearing OFR Exhibits numbered 10A, 11A, 30M, 35, 70 and 81 were denied admission. Ruling was reserved on the admission of OFR Exhibit numbered 22A. It is denied admission. Respondent Spor testified and called one witness. The witness called is identified in the Index to the hearing transcript. Spor's Exhibits numbered 3 through 15 were admitted.
The ten-volume hearing transcript was filed October 7, 2005. Consistent with the opportunities provided the parties, Petitioner OFR and Respondents Spor, Hollis, Bammerlin, Baugher, and Wolven filed proposed recommended orders on November 15, 2005. With the extended deadline for filing proposed recommended orders, a Recommended Order is being entered under
the waiver provision set forth in Florida Administrative Code Rule 28-106.216(2).
FINDINGS OF FACT OFR ADMINISTRATIVE COMPLAINT
On September 28, 2004, OFR in an Administrative Complaint accused Universal Luxury Coaches LLC (ULC) and a number of individuals with violations in association with what it alleged to be a "security," in particular an investment contract as defined in Section 517.021(19)(q), Florida Statutes (2002).3/
The matters set forth in the OFR Administrative Complaint would be addressed in DOAH Case No. 05-0515 when referred to DOAH.
The investment contract contemplated in the OFR Administrative Complaint was described as a timeshare plan interest investment and the ARP Agreement II.
Under terms set forth in the Administrative Complaint, the ARP Agreement II is also described as the Affinity Rental Program Agreement in which:
The timeshare plan purchaser would assign his or her interest to ULC, ULCS as 'Sub- lessee' would retain control of the lease interest, ULC would rent the coaches, and ULC would provide the purchaser/investor a
10 percent per annum return on the investors funds.
PAYMENTS: LEASE INTEREST OWNER is entitled
to $8.33 per month per thousand dollars of Purchased plan points that are assigned above . . . . .
The reason for reference to the timeshare plan investment was in recognition that ULC as a developer had submitted an application to have its proposal recognized as a timeshare plan by DBPR under the auspices of Chapter 721, Florida Statutes, known as the "Florida Vacation Plan and Time Sharing Act," before OFR brought its Administrative Complaint.
When DBPR reviewed the application from ULC it included, among other matters, the ARP Agreement II. The significance of that fact will be discussed later.
Under the OFR Administrative Complaint, ULC and the named individuals were accused of being involved with fraudulent transactions associated with the ARP Agreement II. § 517.301, Fla. Stat. (2002). As a consequence, OFR sought sanctions against the named Respondents by entering an order to cease and desist pursuant to Section 517.221(1), Florida Statutes (2002), and to impose an administrative fine against the Respondents based upon authority set forth in Section 517.221(3), Florida Statutes (2002).
The OFR Administrative Complaint notified the Respondents of their rights to contest the allegations by requesting a hearing in accordance with Sections 120.569 and
120.57(1), Florida Statutes (2004). Some Respondents did petition for a hearing in accordance with Florida Administrative Code Chapter 28-106. Only those Respondents named in the style for DOAH Case No. 05-0515 remain from the original Respondents accused in the OFR Administrative Complaint.
Walter Rolf Strohmaier, the Respondent in the DFS Administrative Complaint related to DOAH Case No. 05-0429PL, has also participated in this case involving the OFR jurisdiction to proceed in DOAH Case No. 05-0515 because the determination concerning jurisdiction has substantial effect on his rights in DOAH Case No. 05-0429PL, a prosecution related to Respondent's insurance license. The factual allegations in DOAH Case No. 05- 0429PL mirror those found in DOAH Case No. 05-0515.
Realizing that DBPR has considered and acted upon the application submitted by ULC to have a timeshare plan recognized, it raises the question of whether OFR was preempted from taking action against the Respondents based upon language at Section 721.23, Florida Statutes (2002), which states: "Timeshare plans are not securities under provisions of Chapter
517 or its successor." That provision will be discussed.
ULC CREATION
Respondent Scott W. Spor (Spor) developed a concept to use luxury motor coaches, personalty, as a basis to establish a timeshare plan in Florida. This is contrasted with the more
traditional real estate timeshare plan. To promote his idea, he relied upon Conrad Clement, the CEO of Featherlite, Inc., which manufactures and sells luxury motor coaches from its facilities in Sanford, Florida. Together Respondent Spor and Mr. Clement formed ULC as a Delaware corporation organized February 2, 2002. The corporation was a limited liability corporation. The start- up funding for ULC was provided by Mr. Clement in an amount approximating $200,000.00. Respondent Spor served as president for ULC and continued his affiliation with the corporation until February 2004. Mr. Clement was chairman of the board for ULC.
While Respondent Spor worked with ULC, he received a salary. Respondent Spor was intimately familiar with the ULC operations in marketing the business.
Respondent James P. Hollis (Hollis) was vice-president of sales for ULC, and Respondent Dennis L. Baugher (Baugher) was a member of a sales management team. Both acted in relation to business transacted by ULC concerning luxury coaches.
Respondent Hollis served as a recruiter of sales agents in the ULC operation. Respondent Hollis was not involved with the actual sales. Respondent Hollis did give instructions to the sales force for ULC on how to make sales presentations.
Respondents Hollis and Baugher were paid in relation to their participation with ULC.
ULC used insurance agents, realtors, and financial planners to sell the ULC product.
Respondent Spor was involved with hiring various attorneys to assist in dealing with DBPR and OFR pertaining to ULC activities.
On October 5, 2004, in the case of State of Florida,
Office of Financial Regulation, Plaintiff, vs. Universal Luxury Coaches, LLC, Defendant, Case No. 04-CA-2130-16-W, in the Circuit Court of the Eighteenth Judicial Circuit, in and for Seminole County, Florida, an order was entered appointing
Gary P. Lipson, Esquire, as Receiver of all assets and properties of ULC.
ACTIONS BY DBPR
On June 19, 2002, DBPR received ULC's application for what it referred to as Universal Luxury Lease Plan, a timeshare plan for motorized RV coaches. The application was submitted by Richard C. Booth, Esquire, an attorney familiar with timeshare law in Florida. It was the initial timeshare application processed in Florida in relation to personalty.
On July 9, 2002, Attorney Booth sent DBPR what he called clerical corrections to the Plan declaration. One item within this correspondence was the broker agreement. Section 3 to that broker agreement described the duties of the broker,
ULC, in relation to the lease owner of the luxury coach. Paragraph 3.E to the Broker Agreement stated:
Payment of Lease Owner: Lease Owner is entitled to $8.33 per month for a thousand dollars of interest cost purchase for completed and paid reservation fees.
On September 10, 2002, DBPR communicated with
Mr. Booth. Among the items of concern was the Broker Agreement. In its correspondence DBPR asked that Mr. Booth:
Please clarify how the broker agreement (Exhibit 20) is part of this timeshare plan. It appears to be a separate contract between the developer and the lessee.
On September 19, 2002, Mr. Booth responded to the September 10, 2002, DBPR letter in relation to the inquiry concerning the Broker Agreement. What he said was "The rental option is available to the lease interest holder and we feel strongly this should be disclosed." In this correspondence Mr. Booth also revealed that ULC had begun to refer to the "Broker Agreement" as the Affinity Rental Program Agreement at
Exhibit XX. As a consequence, DBPR later began to refer to the "Broker Agreement" as the Affinity Rental Program Agreement. It did so on November 8, 2002, in a letter to Mr. Booth, the details of which will be discussed.
Earlier on October 10, 2002, DBPR wrote Mr. Booth and in its fifth item stated:
Please clarify how the 'Broker Agreement (Exhibit 20)' is part of this timeshare plan. It appears to be a separate contract between the developer and the lessee.
On October 21, 2002, Mr. Booth responded to DBPR, and in commenting on item 5, he stated:
The Department's position that the Broker Agreement (Exhibit XX) will not be reviewed as it is between the Seller and Lessee is acknowledged. Nevertheless, Seller desires to keep the Agreement as part of the file and disclosed to the prospective customers.
During the pendency of the application process Mr. Booth submitted advertising material to DBPR requesting
review of that advertising material. He used a form provided by DBPR for this purpose.
The DBPR employee responsible for reviewing the ULC application, Dave Mahlert, sent an e-mail to his supervisor concerning the advertising. The e-mail was sent October 17, 2002. Some of the statements within the advertising, as
Mr. Mahlert perceived it, mentioned in his e-mail were:
A unique investment opportunity . . . there is no stock market risk with this plan . . . received income from the rental reservation fees, a secure and reliable source of monthly rental income . . . rental program (ARP) and receive monthly income.
He went on to describe in the e-mail, "There are other statements that seem to conflict with the file."
In turn, DBPR in the person of Mr. Mahlert prepared an advertising deficiency notice pursuant to Sections 721.11(4), Florida Statutes (2002). It was dated October 18, 2002.
On October 28, 2002, after receiving the October 18, 2002, deficiency notice, Mr. Booth wrote back to Mr. Mahlert stating, "The advertising filing has been completely revised to the letter of Section 721.11, Florida Statutes."
On November 4, 2002, Mr. Mahlert sent a second advertising deficiency notice to Mr. Booth citing non-compliance with Section 721.11(4), Florida Statutes (2002). This notice also stated:
The introduction page states in part ' . . . and can use the coach for your personal use or to earn rental income'. This appears to conflict with Section 721.01(5)(q)2, Florida Statutes please advise.
That section requires that a public offering statement for a timeshare plan contain a statement that is in conspicuous type and substantially in the form:
The purchase of a timeshare interest should be based upon its value as a vacation experience or for spending leisure time, and not considered for purposes of acquiring an appreciating investment or with an expectation that the timeshare interest may be resold.
Mr. Booth responded to the second advertising deficiency notice through a fax transmission to Mr. Mahlert. That transmission was made November 4, 2002. Part of the fax
addressed to Mr. Mahlert responded to the details within the second advertising deficiency notice. Mr. Booth also faxed several pages with portions redacted. The first page stated:
The ARP will be marketed as packaged events with tickets, drivers, concierges, logos and other amenities. It will allow individuals and corporations to host hospitality receptions, create trade show presence, conduct business in luxury with the 500-mile turnaround service as well [as] a short-term leisure travel.
Another page submitted by Mr. Booth responding to the second advertising deficiency notice referred to " . . . As a member you own the rights to utilize your time over the span of 12 years and can use the coach for your personal use or (redaction) rental (redaction) . . ." and then the hand-written word "program."
On November 8, 2002, Ross Fleetwood, Director of the Division of Florida Land Sales, Condominiums and Mobile Homes wrote Mr. Booth in reference to the ULC application. On one topic the letter said:
The division received your client's advertising filing on October 16, 2002. The Division's first deficiency notice related to the advertising was sent on October 18, 2002. The advertising deficiency notice cited numerous instances of references to the investment nature of your client's timeshare plan. However, it is a basic tenant of Florida timeshare law that no written or verbal advertising or offering statement may in any way represent the timeshare interest as an investment
opportunity. See Sections 721.11(4) and 721.07(5)(q)2 (2002). The division's second deficiency notice contains some of the issues previously cited in the first deficiency notice. The Division's third deficiency notice is forthcoming due to the continued impression of investment opportunity present in the advertising material.
That paragraph to the letter was followed by notice to Mr. Booth that the advertising material containing previously cited deficiencies may be in violation of Chapter 721, Florida Statutes (2002).
On November 8, 2002, DBPR again communicated with Mr. Booth. This time the letter was from Mr. Mahlert. Under item 4 it states:
Exhibit 20, Other Contracts or Leases signed by Purchasers-In your deficiency response you indicated that the 'Affinity Rental Program Agreement' is a part of the timeshare plan. Where in the plan documents is this document described? The agreement refers to the 'lease/owner' however, this term is not defined in the documents. Who is the lease/owner?
Under item 6 Mr. Mahlert went on to state:
There are two 'Equipment Lease' agreements in Exhibit 20. Please explain how these leases impact the timeshare plan. They appear to be addendums to the purchase contract and should meet the requirements of Section 721.06, Florida Statutes. Pursuant to Section 721.07(5)(q)1, Florida Statutes, it appears s. 7.d. of the POS shall contain information concerning the Affinity Agreement and the Equipment Lease Agreement. Please clarify. Reference to the 'Broker
Agreement' (Affinity Rental Program Agreement) appeared in the Division's deficiency letters of September 10, 2002 and October 20, 2002.
Meetings took place on November 8, 13, 14, 15 and 19, 2002, between DBPR and ULC representatives concerning the application. Respondent Spor was among the participants representing ULC. Through these discussions, Mr. Spor decided to remove the Affinity Rental Program Agreement from the timeshare plan. A personal note he made is to that effect.
On November 14, 2002, Mr. Booth wrote Mr. Mahlert. In that correspondence, he stated under Item 5, "the 'Affinity Rental Program Agreement', 'Broker Agreement', and 'Equipment Leases' are withdrawn from Exhibit XX."
On November 15, 2002, Mr. Booth wrote to Mr. Mahlert and advised "Seller withdraws the above advertisement reserving the right to resubmit." The reference line in this correspondence was "Bus 13932 Advertisement."
On November 19, 2002, DBPR wrote to Mr. Spor to advise that the ULC timeshare plan had been approved. In approving the timeshare plan DBPR states:
Based upon the representations contained in your filing, accompanying information, and subsequent correspondence, the division approves the following documents for filing and use in the timeshare plan:
. Public Offering Statement Text;
. Receipt for Timeshare Documents;
. Plan Declaration for the Universal Luxury Lease Plan;
. Lease Agreement, Schedule of Lease Interest and Lease Renewal;
. Management Agreement Between Universal Luxury Coaches LLC, and Universal Ventures Inc. Management Services;
. 2003 Estimated Operating Budget;
. Floor Plans and Survey of Motor Coach Layouts;
. Contract for Lease Plan (Form of Purchase Contract);
. Purchase Deposit Escrow Agreement between Universal Luxury Coaches, LLC Corporation, Seller and Richard C. Booth, Esquire, Escrow Agent;
. Rules and Regulations
. Nondisturbance Notice
In the November 19, 2002, approval letter DBPR also acknowledged receipt of certain documents. The Affinity Rental Program was not listed among those items.
Taken in context, nothing in the approval letter indicates DBPR approved Exhibit XX (the Affinity Rental Program) by the action it took November 19, 2002.
On November 19, 2002, Mr. Booth wrote Mr. Spor and said:
The extractions of the Affinity Rental Program Agreement Documents from the filing may posture an argument that the rental return aspect of the timeshare security exemption may not apply, hence, it may not provide the additional comfort level of securities exemption that we originally sought. The inherent disclosures in the lease itself, however may be enough to forestall non-applicability. The real issue of Florida's personalty timeshare compliance may [sic] its virtue with other timeshare real estate statutes, hence our exempt securities position, albeit timeshare approval, may prove to be an integral part of our compliance efforts. [Emphasis supplied]
Following the approval of the ULC timeshare plan, ULC submitted two amendments for consideration by DBPR. The first amendment was filed on November 27, 2002. The second amendment was filed on February 14, 2003. Those amendments were approved on December 26, 2002, and April 1, 2003, respectively. The amendments did not address the Broker Agreement (Exhibit XX) or the Affinity Rental Program Agreement.
On January 29, 2003, Mr. Booth submitted additional advertising materials to DBPR for the record. There was no intent to have the material reviewed. The material was presented consistent with Section 721.11(1)(a), Florida Statutes (2002), calling for all advertising material to be filed prior to use.
DBPR was made aware of ULC advertising pertaining to its luxury coaches that appeared in the St. Petersburg Times newspaper. This led to an investigation by DBPR timeshare section directed of ULC. Several features under the advertising were being investigated. The first was the provision that stated, "Approved and regulated by the Florida Department of Business and Professional Regulation." DBPR was concerned that this constituted an endorsement by that agency that would not be permitted under the advertising statute. This refers to Chapter 721, Florida Statutes. The second area of concern was that the advertisement did not have the required timeshare disclosure statement indicating that the advertisement is being used for purposes of soliciting timeshare interest. The third consideration was the feature that related to the representation that this was a unique timeshare opportunity, in that it was an investment with a guaranteed return reflected in the advertisement.
The investment feature in ULC's advertisement was a matter of first impression for DBPR in their regulatory function. The DBPR response was one of concern that the advertisement constituted a misrepresentation. Ordinarily timeshares are marketed and sold as vacation experiences. The reference to a return on investment was not considered to be appropriate.
DBPR also became aware of the ULC website which had advertising material, to include the reference to a ten percent return on investment. This was found within an option 4 of the options made available for purchasers, in which the fourth option commented on the receipt of monthly rental income of ten percent per year.
A search by DBPR of its files did not reveal any approval of the St. Petersburg Times newspaper advertisement or the information displayed on the website.
As a consequence of the advertisement, DBPR took administrative action against ULC. This led to negotiations and the entry of a Consent Order in DBPR Case No. 2003071978. In pertinent part the Consent Order states:
FINDINGS OF FACT
* * *
2. RESPONDENT is the 'creating developer' of the Universal Luxury Lease Plan, a personal property 'timeshare plan' as those terms are defined in sections 721.05(9)(a) and 721.05(37), Florida Statutes, located in the city of Sanford, Florida.
* * *
On or about July 10, 2003, DIVISION was made aware of a newspaper advertisement for Universal Luxury Lease Plan. This advertisement, promoted the purchase of a timeshare interest in the Universal Luxury Lease Plan as an investment that offered purchasers a 10 percent per year return on their investment.
On July 25, 2003, DIVISION'S investigators were given an application package containing the Universal Luxury Lease Plan Enrollment Forms, CD-ROM, Public Offering Statement, Contracts and Motor Coach Brochures. The application package stated that it was advertising material being used for the purposes of soliciting timeshare interests. It described a component of the timeshare plan called the 'Affinity Rental Program' and stated that the program will typically produce a monthly income of 10 percent of the lease-hold ownership interest.
CONCLUSIONS OF LAW
* * *
The RESPONDENT failed to comply with Section 721.056, Florida Statutes, which provides that notwithstanding obligations placed upon any other person, it is the duty of the developer to supervise, manage, and control all aspects of the offerings of a timeshare plan, including but not limited to, promotion, advertising, contracting and closing.
The RESPONDENT failed to comply with Section 721.11(1)(a), Florida Statutes, which provides that all advertising material must be filed with the DIVISION by the developer prior to use.
The RESPONDENT failed to comply with Section 721.11(4)(a), Florida Statutes, which provides that no advertising material by a seller shall misrepresent a fact or create a false or misleading impression regarding the timeshare plan. Rule 61B- 39.002(5), Florida Administrative Code, provides that approval by the DIVISION of a Public Offering Statement shall not be promoted to the public as an endorsement by the DIVISION of the developer or the
timeshare plan or be used to induce the purchase of an interest in the timeshare plan.
The RESPONDENT failed to comply with Section 721.11(5)(a), Florida Statutes, which provides that no written advertising material may be utilized without each prospective purchaser being provided with the following disclosure in conspicuous type in substantially the following form:
This advertising material is being used for the purpose of soliciting sales of timeshare interests; or this advertising material is being used for the purpose of soliciting sales of a vacation (or vacation membership or vacation ownership) plan.
The RESPONDENT failed to comply with Section 721.07, Florida Statutes, and Rule 61B-39.008(3), Florida Administrative Code, by failing to file the CD-ROM version of the Public Offering Statement prior to use.
The DIVISION may impose a penalty against a developer pursuant to Section 721.26, Florida Statutes.
For these violations Respondent paid a $50,000 administrative fine and was required to submit a revised Public Offering Statement.
ULC MARKETING AND SALES
In December 2002, ULC began to market its lease program. It referred to four options available to the purchaser:
Use your units for your personal enjoyment.
Transfer the lease for the benefit of friends or family.
Exchange opportunities with other interval ownership programs.
Place your points in ARP (Affinity Rental Program) to receive a monthly rental income.
The prospective purchaser was also informed that combinations of these options could be pursued, if there was ownership in multiple units.
Of those persons who purchased interests in the ULC timeshare plan, 100 percent elected to participate in Option 4, seeking a 10 percent return on their money by signing the Affinity Rental Program Agreement. Respondent Spor signed all the Affinity Rental Program Agreements as President of ULC.
The sales activity by ULC covers the period
December 20, 2002 through September 11, 2003. During that time,
$8,043,600 was paid to participate in the Affinity Rental Program, of which $1,048,550 worth of purchases were cancelled. There were 199 sales, with 27 cancellations. The purchasers who opted for the Affinity Rental Program had ten days to decline participation following the signing of the contract. If they did not decline, the purchasers were entitled to an interest payment on the 15th day after the first day of the month beyond the signing of the contract.
To support the Affinity Rental Program Agreement, which involved ULC renting coaches to third parties, aside from ULC and the purchasers who had signed the Affinity Rental Program Agreement, ULC made arrangements with Featherlite. ULC obtained the first coach from Featherlite on April 28, 2003, and other coaches were obtained beyond that date.
The initial rental to third parties took place on June 19, 2003. ULC earned $398,323 through its rentals.
Under the circumstances, the investors' funds were used to make the monthly payments before income was derived from the rentals made by ULC to third parties. Ultimately, the investors in Option 4 did not receive the full benefit of their bargain with ULC, in that the interest payments ceased before the conclusion of the payment period that ULC was obligated to meet.
In the process related to the purchase of the Universal Luxury Lease Plan, the purchaser was expected to sign a receipt for timeshare documents. Included within the material signed for was the Public Offering Statement Text, a Contract for Lease Plan and Lease. There was a separate receipt for a CD-Rom of the Public Offering Statement and other documents described, which must be signed by the purchaser and was dependent upon acknowledgement that the purchaser had the necessary system to accommodate review of the material found
within the CD-ROM format, should the purchasers elect to receive information through that format.
The Contract for Lease Plan bore a date, the name, street, city, county, zip code, and phone number of the purchaser and reminded the purchaser of the following:
You, the lessee, may buy the Universal Luxury Lease Plan described below for cash. The cash price is shown below as the 'Cash Sale Price.' By signing this agreement, you choose to buy the Universal Luxury Lease Plan under the terms and conditions on the front and back of this agreement. Any property or services being purchased is referred to in this agreement as the 'Universal Luxury Lease Plan'. You warrant that the Universal Luxury Lease Plan is being purchased primarily for personal, family, or pleasure use. In consideration of the purchase price, you shall, without additional cost or charges (except those specifically contained in this agreement) have the right to park at the Featherlite Coach Station, 4441 Orange Blvd., Sanford, Florida 32771. The Seller reserves the right to alter this location.
The Universal Luxury Lease Plan determines the duration of your participation in the Plan. This contract represents your purchase of the Plan when all documents are received.
Following a written statement of additional agreements between the parties, there was a place for the signature of the lessee and the seller pertaining to the Contract for Lease Plan.
The Universal Luxury Lease Plan material that was in the CD-ROM format did not explain Exhibit XX or the Affinity
Rental Program. It did not include the Affinity Rental Program Agreement to be executed by the lease/purchaser and ULC in the instance where Option 4 was selected. The promotion of Option 4, the Affinity Rental Program was by a separate written presentation.
The Affinity Rental Program Agreement was in the following form:
AFFINITY RENTAL PROGRAM AGREEMENT
This agreement made and entered into this day of , 20 , between Universal Luxury Coaches, LLC (herein known as Sub-lessee) and
(Herein known as Lease Interest Owner) for and in consideration of the mutual covenants herein contained, the parties agree as follows:
Lease Interest Owner hereby agrees to assign (# of plan point) to Sub-Lessee pursuant to the following terms and conditions;
The Terms of Agreement: This agreement shall be for a 12-month period. At the end of each 12-month period the Lease Interest Owner may terminate this agreement with not less than 30 days prior written notice of election to terminate and the election termination date. This agreement shall automatically renew for an additional 12-month period if not terminated in writing by the Lease Interest Owner for as long as the Lease Interest Owner's Lease remains in force.
Responsibilities of Sub-Lessee: The responsibilities of Sub- Lessee in connection with the above-described plan are as follows:
Sub-Lessee hereby agrees to abide by all terms and conditions of the original LEASE.
Payments: Lease Interest Owner is entitled to $8.33 per month per $1,000.00 of Purchased plan points that are assigned above (Section
4.014 of LEASE). Said amount shall be payable on the fifteenth (15th) day of each month.
First contract payment shall be within forty-five
days of this agreement.
Payment of Annual Fees: Sub-Lessee will assume responsibility for the payment of Annual Fees for the assigned plan points at the appropriate time as outlined in Section 4.02 of the LEASE.
Qualified Funds: Lease Interest Owner acknowledges that funds held in an individual retirement account (IRA) are subject to certain transactions laws and regulations. These laws and regulations prohibit the use of funds held in an IRA with respect to certain transactions (Prohibited Transactions). Funds held in an IRA account to pay the Non Interest deposit is a Prohibited Transaction if-1) the Lease Interest Owner uses the equipment for his/her personal use or 2) the Lease Interest Owner leases the equipment to certain other disqualified persons. The entire amount is subject to a penalty tax outlined in IRS Regulation, Section 4975. Sub-lessee urges the Lease Interest Owner to consult his/her tax advisor before using the equipment for personal enjoyment. Lease Interest Owner hereby releases Sub-lessee of any liability with respect to Lease Interest Owner's use of funds held in an IRA to pay the non Interest deposit.
Dispute: In the unforeseen event of a dispute, venue and jurisdiction shall be Seminole County, Florida. Each party to pay their respective attorneys fees
LEASE INTEREST OWNER UNIVERSAL LUXURY COACHES, LLC LEASE INTEREST OWNER By
ADDRESS UNIVERSAL LUXURY COACHES, LLC
4441 Orange Boulevard
Sanford, FL 32771
800-367-5347
Within the written material presented to purchasers was found a reference to the flexibility of participation alternatives. It was stated:
. The individual or corporation may purchase plan points as follows.
. Each point is valued at $50.00 with a minimum purchase of 100 points, currently
$5,000.
. Additional points may be purchased in ten point increments, currently $500.
* * *
. Each lease is for 3 years with flexible opt-in-opt-out renewal options every 3 years up to a maximum of 12 years.
. Redemption values are set forth in the plan document.
. Each member may chose to use their time for personal benefit, transfer their lease for the benefit of others, exchange their point with other interval ownership programs, or place their units in the Affinity Rental Program (ARP) enabling them to receive monthly income.
The written material which also carried illustrations of the examples of the luxury coach and events where the coach might be driven had more specific information reported about the Affinity Rental Program wherein it was stated:
Affinity Rental Program (ARP) is the internal marketing arm of our company that works directly with Featherlite to market short-term leases of luxury motor coaches. The leases are short-term rentals ranging from 3, 4 day, 1 week to 1 month periods depending on the individual needs of each client. These leases are used to establish high market visibility at specialty venues such as, NASCAR, IRL, PGA, NFL, and many more events.
* * *
This Program was created not just to capitalize on a market niche but also to provide our members who wish to place their leasehold ownership interest points from the plan, into a secure and reliable means of monthly rental income. Currently there is a demand in the market place for short-term rental of luxury motor coaches, ULC will be
the premier company providing service and meeting this demand. This typically will produce a monthly income of 10 percent of the leasehold ownership interest purchased.
Salvatore Listro, a Florida resident, who is 74 years old, entered into the Affinity Rental Program with ULC. He is a retired police officer. He did business with Respondent Michael Steven Moore (Moore) in Florida. Mr. Moore told Mr. Listro that the ULC program was a timeshare for busses and that if he invested his money as a security he would get 10 percent back. At the end of a three-year period, he would get the amount of principal back that he has invested. The amount that was under discussion was $20,000.
Through their discussion, Mr. Listro made it clear to Mr. Moore that he did not intend to invest in a timeshare, he only had a desire to invest in the Plan that was sort of a security. Mr. Listro paid $20,000 to Mr. Moore to participate in Option 4.
Among the items involved with the marketing to and purchase by Mr. Listro was the brochure describing the four options and explaining the nature of the Affinity Rental Program. Mr. Listro received a CD-Rom, and from that format details of the Universal Lease Plan were obtained. Mr. Listro was presented with enrollment forms for the Universal Luxury Lease Plan. One was entitled "New Business Transmittal" which
set out the purchase amount of $20,000, with $166.60 being reflected as the rental income being paid monthly. There was a suitability questionnaire setting forth income ranges, net worth, etc. It was signed by Mr. Listro. He signed the receipt for timeshare documents. Mr. Listro signed the receipt for the CD-Rom. The Contract for Lease Plan was filled out setting forth information about Mr. Listro. Mr. Listro signed the Contract for Lease Plan and Lease. These documents were signed by Scott W. Spor as President of ULC.
Although Mr. Listro received the CD-ROM on the ULC offering, he did not access the information contained in it.
Mr. Listro did not read information in the page under Contract for Lease Plan which stated: "You warrant that the Universal Luxury Lease Plan is being purchased primarily for personal, family, or pleasure use." He did not read this information because he accepted Mr. Moore's representation that Mr. Listro was allowed to participate in Option 4, the Affinity Rental Program to earn interest.
As with others, the CD-Rom provided to Mr. Listro did not include information concerning the Affinity Rental Program Agreement.
Mr. Listro received a copy of the Contract for Lease Plan, Lease and Affinity Rental Program Agreement executed by Mr. Spor as President of ULC.
After signing the Affinity Rental Program Agreement, consistent with his participation in Affinity Rental Program Mr. Listro received $166.66 interest payments for 11 months. On November 15, 2003, he received correspondence from Mr. Spor. In this correspondence, Mr. Spor stated the ULC intent to send checks for timeshare interest under the Affinity Rental Program or offer the opportunity for use of the coach by Mr. Listro. The last of his interest checks came in 2004.
Joan Guerra resides in Apollo Beach, Florida. She was interested in attaining money to fund the nursing home expenses for her father, Kenneth Oxford, which costs about $2,300 per month. In this connection, Ms. Guerra had access to four annuities in the name of her father in the amount of $69,000. per annuity. She was in contact with an insurance salesman that she was familiar with, Ray Henwood.
Later Mr. Henwood and Respondent Russell G. Wolven (Wolven) came to Ms. Guerra's home in Florida and provided her information about ULC. Among the items was a blue brochure. The brochure was entitled "For Agents Use Only," in what was described as a three-fold document. Through the information, Ms. Guerra was made aware that under the "ARP Program" she could receive rental income of ten percent. The three-fold document indicated that there would be no stock market risk and the willingness of ULC to absorb up to five percent penalty charges
from investments such as CDs, money markets, annuities, mutual funds if surrendered prematurely. This is taken to mean in relation to the conversion of monies from those investment products over to the ULC plan.
In her discussions with Messers Henwood and Wolven, Ms. Guerra was informed that she could take the money from the annuities held in her father's name and through a transaction with ULC receive interest payments, four checks totaling
$2,300.00 per month. Ms. Guerra signed four Affinity Rental Program Agreements, and a Contract for Lease Plan and received interest payments for a time. She also signed a receipt for the CD-Rom providing information about ULC.
In order to accomplish these arrangements, Ms. Guerra closed the annuities. ULC provided credit against the purchase of its plan, equivalent to the surrender fees associated with closing out the annuities.
Marlene Frances Holland is a resident of Crystal River, Florida. Ms. Holland works at a local church and has a net-worth of about $25,000, including her trailer where she lives. She is a widow. She had an interest in purchasing a supplemental insurance policy. Through a friend in her church, she was introduced to Respondent Richard Lee Bammerlin (Bammerlin) and Kenneth Keys. In the course of her discussions in Florida, Ms. Holland commented that she could use some extra
income. In response Mr. Bammerlin and Mr. Keys provided her a ULC blue brochure and told Ms. Holland about an opportunity to invest in ULC and earn $8.33 per $1,000.00 invested.
Ms. Holland sent an e-mail to inquire about the safety of the investment being described in association with ULC and wanted to know how long ULC had been in business and whether they were on the stock exchange. Mr. Bammerlin responded that the parent Featherlite has been around for 35 years and that that company was on the stock exchange under the letters FTHR on the NASDAQ Exchange.
Ms. Holland cashed in a $6,000.00 CD and invested in ULC in February 2002. For her investment she received $50.00 a month from ULC. Under the terms of the Affinity Rental Program Agreement, the payments stopped in June 2004. Ms. Holland signed a Contract for Lease Plan, Lease and Affinity Rental Program Agreement. She was provided the Universal Luxury Lease Plan Document CD-ROM. The Public Offering Statement within that material is dated November 15, 2002. Ms. Holland signed a Receipt for Timeshare Documents. Again, none of the material provided in association with the CD-Rom pertained to the Affinity Rental Program Agreement.
Concerning the Contract for Lease Plan, in its reference to the principal basis for making a purchase having to do with personal use, Ms. Holland indicated that she did not
read most of what had been provided because she was not interested in purchasing something, she only wanted the interest payments. As she states, both gentlemen, taken to mean
Mr. Bammerlin and Mr. Keys, told her that the Affinity Rental Program Agreement was "All I really need to know."
Sylvia Jones is a resident of Houston, Texas. She purchased $230,100.00 worth of points in association with the Affinity Rental Program. The person that Ms. Jones dealt with was Joanna Peterson in Texas. The purchase was made in June 2002. Her purchase came from insurance proceeds on a life insurance policy that was provided following the death of her husband. She had no interest in the first three options offered under the ULC Plan. She only wanted to obtain ten percent return from the Affinity Rental Program. She sent money to participate in the plan to Sanford, Florida. Respondent Spor executed the "Lease" and "Contract for Lease" involved with
Ms. Jones' purchase.
In the transaction Ms. Jones was provided a copy of a blue brochure and a Universal Luxury Lease Plan Document through a CD-ROM, the "Public Offering Statement" in the second page of the printout information from the CD-ROM reflects the date March 31, 2002. Ms. Jones executed a Receipt for Timeshare Documents. Information provided through the CD-ROM did not include the Affinity Rental Program Agreement.
Mary Glassburn is a resident of Sterling, Colorado.
Ms. Glassburn had $30,000.00 invested in something known as Ucatan. She was being advised concerning her investments by a Dennis Bucantis in Colorado. He told Ms. Glassburn that she needed to take the money out of Ucatan because of some problems in that business. Bucantis told Ms. Glassburn about ULC. He provided a blue brochure and a ULC "Explanation of Use of Plan Points," which described the Affinity Rental Program and income in the amount of $8.33 for each $1,000.00 increment.
Ms. Glassburn explained to Ms. Bucantis that she did not have any intention of using the luxury coaches. She only wanted to invest for the return of ten percent per month.
In February 2003, Ms. Glassburn sent a check to ULC for $30,000.00 at the ULC Sanford, Florida address. Mr. Spor executed the Contract for Lease Plan, Lease, as well as the Affinity Rental Program Agreement for the Glassburn purchase.
In March 2003, Ms. Glassburn received confirmation of her investment and her check in the amount of $189.04. She then received checks of $250.00 a month until payment stopped.
Ms. Glassburn was provided a ULC Universal Luxury Lease Plan Document CD-ROM. At the second page of the printout within the Public Offering Statement, there was a date of November 15, 2002. Ms. Glassburn executed the Receipt of Timeshare Documents and Receipt for CD-Rom related to the
Universal Luxury Lease Plan. None of the information provided in association with the CD-Rom sets out information concerning the Affinity Rental Program Agreement.
MORE OFR
OFR undertook an investigation that led to the Administrative Complaint in DOAH Case No. 05-0515. The investigation revealed that none of the named Respondents in DOAH Case No. 05-0515 are registered with OFR pursuant to Chapter 517, Florida Statutes (2002).
Separately, ULC over time was in communication with OFR about the investment circumstances contemplated in the Affinity Rental Program Agreement.
On March 11, 2003, Mr. Spor and other representatives of ULC met with Tom Gallagher, Chief Financial Officer, and Paul Mitchell, his Chief of Staff. As Mr. Spor describes it, the details of the rental aspect of the ULC Plan were discussed. He reports some comments attributable to Mr. Gallagher and the experience Mr. Gallagher had with Interval Ownership Plans utilized by NetJets and the possible comparability of the ULC Plan to NetJets, where you buy more than you need and you rent the rest out. Mr. Mitchell was to pursue the matter by referring the request for an opinion on the topic to Don Saxon, OFR Director.
In an internal communication between Conrad Clemment and Scott Spor by e-mail dated April 22, 2003, there is a reference to a declaratory statement letter from the State of Florida. This is interpreted to mean interest in obtaining a declaratory statement from OFR. Mentioned is made of Tasha, taken to mean Tasha O. Buford, Esquire, an attorney employed by ULC and Don Rhett, Esquire, another attorney employed by ULC. The e-mail comments that ULC, through counsel, needs to present a legal opinion to Mr. Saxon for his consideration on the subject of the ULC Plan. The effort is trying to persuade OFR that what was being sold was a timeshare and should not be considered a security.
On April 25, 2003, Donald A. Rhett wrote to Don Saxon.
Nowhere in that correspondence does it refer to the Affinity Rental Program Agreement and the promise for the return of $8.33 per thousand dollars invested or the existence of the fourth option in marketing materials that pertains to the Affinity Rental Program. At the time the letter was sent, ULC was already marketing the Affinity Rental Program and had sold leases consistent with the program.
Tasha O. Buford, Esquire, sent a copy of the Public Offering Statement under the Universal Luxury Lease Plan and other information about ULC to Josephine A. Schultz, Attorney
Supervisor for DFS. The Public Offering Statement in the material transmitted by Ms. Buford was dated March 31, 2003.
Information transmitted by Ms. Buford in her May 19, 2003, correspondence included a document referred to as the Affinity Rental Program Agreement. While it mentions the entitlement of the lease owner to $8.33 per month per thousand dollars of interest cost purchase for completed and paid reservation fees, the form is unlike the Affinity Rental Program Agreement form being used by ULC in its transactions with purchasers that was quoted earlier.
On July 8, 2003, an e-mail was sent from Don Saxon to Paul Mitchell referencing Universal Luxury Coaches, which stated:
Don't want you to think I forgot about this. We're close to decision. There is one more piece to this and I'll discuss with you at the retreat. Thanks.
The contents of this e-mail were made known to ULC.
Frank Tsamoutales, in the interest of ULC sent an e- mail to Paul Mitchell on July 8, 2003, following the e-mail from Don Saxon to Paul Mitchell. In the Tsamoutales e-mail, he says:
Thanks. If they have any concerns 'that cause problem [sic], please give heads up. And we will work it out. If [sic] fact I have recommended to my client they make some changes to offering.
Then on July 9, 2003, Paul Mitchell sends an e-mail to Frank Tsamoutales again referencing Universal Luxury Coaches in which he states:
Frank--it is my understanding that 3 of the
4 offerings are fine with us---on the fourth one, we are working on getting some sort of an opinion--we just want to make sure all is right! Thanks for being patient---Paul
Ultimately, there is no indication that OFR ever condoned the marketing and sale of Option 4, the Affinity Rental Program as part of the timeshare plan, either by a formal declaratory statement pursuant to Section 120.565, Florida Statutes or any other means.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has authority to consider this dispute over the jurisdiction of OFR to proceed with the Administrative Complaint in DOAH Case No. 05-0515.
§§ 120.569 and 120.57(1), Fla. Stat. (2005).
To address the jurisdictional question, DBPR's regulatory activities in relation to ULC must be analyzed, to determine what consequences they have, if any, in the attempt by OFR to pursue its case. To this end, the preemption provisions set forth in Section 721.23, Florida Statutes (2002), and case authority in state and federal court that deals with securities law is examined.
The standard of proof necessary for Petitioner to sustain its case concerning the jurisdictional question is clear and convincing evidence. Department of Banking and Finance, Division of Investor Protection v. Osborne Stearn and Company, 670 So. 2d 932 (Fla. 1996). The meaning of clear and convincing evidence is explained in Slomowitz v. Walker, 429 So. 2d 797 (Fla. 4th DCA 1983).
Through its filing, ULC sought recognition of its personal property timeshare arrangement as developer. As such the proposed timeshare plan was required to undergo review by DBPR. § 721.02(1) and (2), Fla. Stat. (2002).
A "timeshare plan," within the definition set forth in the "Florida Vacation Plan and Timesharing Act" is defined at Section 721.05(37), Florida Statutes (2002), where it states:
'Timeshare plan' means any arrangement, plan, scheme, or similar device, other than an exchange program, whether by membership, agreement, tenancy in common, sale, lease, deed, rental agreement, license, or right- to-use agreement or by any other means, whereby a purchaser, for consideration, receives ownership rights in or a right to use accommodations, and facilities, if any, for a period of time less than a full year during any given year, but not necessarily for consecutive years.
By its filing, ULC sought approval of its registered public offering statement, Section 721.07, Florida Statutes
(2002), and consideration of related documents associated with the filing to be used in the timeshare plan.
Under terms set forth in Sections 721.056, Florida Statutes (2002), ULC as the developer had certain supervisory duties. That provision states:
Supervisory duties of developer.-- Notwithstanding obligations placed upon any other persons by this chapter, it is the duty of the developer to supervise, manage, and control all aspects of the offering of a timeshare plan, including, but not limited to, promotion, advertising, contracting, and closing. Any violation of this section which occurs during such offering activities shall be deemed to be a violation by the developer as well as by the person actually committing such violation.
Some of the material under consideration by DBPR related to advertising. The response by DBPR to the advertising materials was controlled by Section 721.11(1), (2)(a), (b), (d), (f), (4)(a) and (5)(a), Florida Statutes (2002) which states:
(1)(a) All advertising material must be filed with the division by the developer prior to use. At the request of the developer, the division shall review the advertising material and notify the developer of any deficiencies within 10 days after the filing. If the developer corrects the deficiencies or if there are no deficiencies, the division shall notify the developer of its approval of the advertising materials. Notwithstanding anything to the contrary contained in this subsection, so long as the developer uses advertising materials approved by the division, following the developer's request for a review, the developer shall not be liable
for any violation of this section or s.
721.111 with respect to such advertising materials.
(b) All advertising materials must be substantially in compliance with this chapter and in full compliance with the mandatory provisions of this chapter. In the event that any such material is not in substantial compliance with this chapter, the division may file administrative charges and an injunction against the developer and exact such penalties or remedies as provided in s. 721.26, or may require the developer to correct any deficiency in the materials by notifying the developer of the deficiency. If the developer fails to correct the deficiency after such notification, the division may file administrative charges against the developer and exact such penalties or remedies as provided in s. 721.26.
The term "advertising material" includes:
Any promotional brochure, pamphlet, advertisement, or other material to be disseminated to the public in connection with the sale of a timeshare plan.
Any radio or television advertisement.
* * *
(d) Any standard oral sales presentation.
* * *
(f) Any photograph, drawing, or artist's representation of accommodations or facilities of a timeshare plan which exists or which will or may exist.
* * *
No advertising or oral statement made by any seller shall:
Misrepresent a fact or create a false or misleading impression regarding the timeshare plan or promotion thereof.
* * *
(5)(a) No written advertising material, including any lodging certificate, gift award, premium, discount, or display booth, may be utilized without each prospective purchaser being provided a disclosure in conspicuous type in substantially the following form: This advertising material is being used for the purpose of soliciting sales of timeshare interests; or This advertising material is being used for the purpose of soliciting sales of a vacation (or vacation membership or vacation ownership) plan. The division shall have the discretion to approve the use of an alternate disclosure. The conspicuous disclosure required in this subsection shall only be required to be given to each prospective purchaser on one piece of advertising for each advertising promotion or marketing campaign, provided that if the promotion or campaign contains terms and conditions, the conspicuous disclosure required in this subsection shall be included on any piece containing such terms and conditions. The conspicuous disclosure required in this subsection shall be provided before the purchaser is required to take any affirmative action pursuant to the promotion. If the advertising material containing the conspicuous disclosure is a display booth, the disclosure required by this subsection must be conspicuously displayed on or within the display booth.
Section 721.26, Florida Statutes (2002) created the opportunity for DBPR to enforce and ensure compliance with the provisions of the chapter.
In particular, Section 721.26(5)(a),(b),(c), and (e)1, Florida Statutes (2002) states:
Notwithstanding any remedies available to purchasers, if the division has reasonable cause to believe that a violation of this chapter, or of any division rule or order promulgated or issued pursuant to this chapter, has occurred, the division may institute enforcement proceedings in its own name against any regulated party, as such term is defined in this subsection:
1. "Regulated party," for purposes of this section, means any developer, exchange company, seller, managing entity, association, association director, association officer, manager, management firm, escrow agent, trustee, any respective assignees or agents, or any other person having duties or obligations pursuant to this chapter.
2. Any person who materially participates in any offer or disposition of any interest in, or the management or operation of, a timeshare plan in violation of this chapter or relevant rules involving fraud, deception, false pretenses, misrepresentation, or false advertising or the disbursement, concealment, or diversion of any funds or assets, which conduct adversely affects the interests of a purchaser, and which person directly or indirectly controls a regulated party or is a general partner, officer, director, agent, or employee of such regulated party, shall be jointly and severally liable under this subsection with such regulated party, unless
such person did not know, and in the exercise of reasonable care could not have known, of the existence of the facts giving rise to the violation of this chapter. A right of contribution shall exist among jointly and severally liable persons pursuant to this paragraph.
The division may permit any person whose conduct or actions may be under investigation to waive formal proceedings and enter into a consent proceeding whereby an order, rule, or letter of censure or warning, whether formal or informal, may be entered against that person.
The division may issue an order requiring a regulated party to cease and desist from an unlawful practice under this chapter and take such affirmative action as in the judgment of the division will carry out the purposes of this chapter.
(e)1. The division may impose a penalty against any regulated party for a violation of this chapter or any rule adopted thereunder. A penalty may be imposed on the basis of each day of continuing violation, but in no event may the penalty for any offense exceed $10,000. All accounts collected shall be deposited with the Treasurer to the credit of the Division of Florida Land Sales, Condominiums, and Mobile Homes Trust Fund.
On November 19, 2002, DBPR acted in accordance with stated authority in approving the ULC Timeshare Plan. The ULC Timeshare Plan was established on November 19, 2002, when DBPR approved the Public Offering Statement. See Gilreath v. Westgate Daytona, Ltd., 871 So. 2d 961 (Fla. 5th DCA 2004). DBPR did not include the Affinity Rental Program in that
approval. The Affinity Rental Program had not been recognized as part of the ULC Timeshare Plan. At that juncture, nothing had been done by DBPR which would deprive OFR of its opportunity to pursue its duties under provisions set forth in Chapter 517, Florida Statutes (2002). No preemption had been established as contemplated by Section 721.23, Florida Statutes (2002), which
states:
Securities.--Timeshare plans are not securities under the provisions of chapter 517 or its successor.
Beyond that point in time, DBPR investigated ULC in the developer's activities. Ultimately, it addressed those activities through a Consent Order, which dealt with the newspaper advertisement promoting the investment opportunity offered to purchasers calling for a ten percent per year return on the investment. The Consent Order also referred to the application package of ULC setting out enrollment forms, CD-Rom Public Offering Statement, contracts and brochures related to the motor coaches. The application package referred to advertising material and the component dealing with "the Affinity Rental Program" and the production of monthly income of ten percent of the lease/hold ownership interest. Based upon the facts set out in the Consent Order DBPR found ULC out of compliance with Sections 721.056, 721.11(1)(a), 721.11(4)(a), and 721.11(5)(a), Florida Statutes (2003), as well as Section
721.07, Florida Statutes (2003).4/ The reference to violations also referred to provisions within Florida Administrative Code Rule 61B-39. The conclusions of law related to advertising, addressed the Affinity Rental Program as a return on investment, among other conclusions that have no significance to this case. In particular, it was concluded that ULC failed to file advertising material prior to its use and that the advertising material misrepresented a fact or created a false or misleading impression regarding the Timeshare Plan. Mention was also made of the lack of disclosure in conspicuous type as to the purpose of the advertising. ULC paid a $50,000.00 administrative penalty to resolve their dispute with DBPR through the Consent Order.
The regulatory response by DBPR embodied in the Consent Order did not incorporate the Affinity Rental Program as part of the ULC Timeshare Plan. To the contrary, consistent with the statute it described ULC's sales efforts as a misrepresentation of a fact or creation of a false or misleading impression regarding the Timeshare Plan that had been approved. Nothing in the Consent Order contemplates ULC advertising the Affinity Rental Program as part of the Timeshare Plan in the future. That lack of recognition and acceptance of the Affinity Rental Program within the Consent Order coincides with the definition of "Timeshare Plan" set out in Section 721.05(37),
Florida Statutes (2003), where no mention is made of an arrangement contemplating a return on investment through a payment of leasehold interest.
The Consent Order is read as DBPR's effort at protecting the integrity of the Timeshare Plan that it had recognized. DBPR in its investigation leading to, and with the issuance of the Consent Order, did not take action that would preempt OFR's opportunity to pursue the significance of the Affinity Rental Program through provisions set forth in Chapter 517, Florida Statutes. The preemption provision in Section 721.23, Florida Statutes (2003), does not pertain by virtue of the Consent Order entered by DBPR.
Over time Florida appellate courts have addressed what is now the "Florida Securities and Investor Protection Act." In addressing Chapter 14899, Laws of Florida, Acts of 1931 and amendments to that law enacted in 1933, 1935 and 1939, in the case State, By Knott et al. v. Hemphill, 195 So. 915 (Fla. 1940), the Florida Supreme Court spoke of investment contracts and the legislature providing protection against fraud.
Later, in the case Nichols v. Yandre, et. al.,
9 So. 2d 157 (Fla. 1942), the Florida Supreme Court addressed the Uniform Sale of Securities Act, Chapter 14899, Laws of
Florida, Acts of 1931, as amended, as designed by the legislature to protect the investor in securities from fraud.
In 1942 the Florida Supreme Court in McElfresh v.
State, 151 Fla. 140, 144 9 So. 2d 277, 278 (Fla. 1942) addressed
Section 1, Chapter 19190, General Laws of Florida 1939 concerning securities where it stated:
Statutes of this character are upheld under the police power of the State. The purpose is to protect the public against fraud and the statute will be given a broad and liberal interpretation to effectuate the purpose. Of necessity no definition of a security can be given to fit all cases. The thing sold will in each case be examined to determine if it falls within the purview of the statute.
In Levine v. I.R.E. Properties, Inc., 344 So. 2d 938, 940 (Fla. 3rd DCA 1977), the court stated:
A security is defined as a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.
Securities and Exchange Commission v. W.J. Howey Company, 328 U.S. 293, 298, 66 S.Ct. 1100, 90 L.Ed. 1244 . . . In determining the meaning and scope of the term 'security', form should be disregarded for substance, and the focus should be on economic reality.
. . . [w]hether a particular investment constitutes a security depends on the facts and circumstances of each individual case.
In Le Chateau Royal Corporation v. Emil Pantaleo, 370 So. 2d 1155 (Fla. 4th DCA 1979), the court referred to Howey, supra, as the most widely accepted test to determine whether a
contract is an investment. In this case the Florida court was addressing Chapter 517, Florida Statutes (1973).
In Adams v. State, 443 So. 2d 1003 (Fla. 2nd DCA 1984) the court alluded to the fact that Section 517.021(15), Florida Statutes (1981), did not spell out the meaning of an "investment contract." It then went on to refer to the same term in the Federal Securities Act and the definition provided in Howey, supra. The Florida court further discussed the expectation of profits being derived solely from the efforts of another as part of the Howey definition of investment contract and cited with favor federal decisions interpreting the word "solely." Particular emphasis was placed on the determinations in other court decisions, to include federal decisions, and the court stated:
. . . whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of enterprise. . . .
Id. at 1005.
In the case Farag v. National Data Bank Subscriptions, Inc., 448 So. 2d 1098 (Fla. 2nd DCA 1984), the court dealt with the definition of "security" set out in Section 517.021(15), Florida Statutes (1981). In that case involving an alleged tax shelter the court held:
As the court observed in Howey, a security is not always an easily recognized creature. Several considerations are necessary, such as what character the investment is given in commerce by the terms of the offer, the plan of distribution and the economic inducements held out by the sellers. . . .
Id. at 1101.
In the case Mehl v. Office of Financial Regulation, 859 So. 2d 1260 (Fla. 1st DCA 2003) discussing a pay telephone sale and lease-back program, and the issue of whether it carried the expectation of profits derived solely from the efforts of others, constituting an investment contract, the case referred to the Florida Securities Investor Protection Act, Chapter 517, Florida Statutes (2000). It addressed the test set out in Howey, supra. It also referred to the case Securities and Exchange Commission v. ETS Pay Phones, Inc., 300 F.3d 1281 (llth Cir. 2002), cert. granted sub nom. Securities and Exchange Commission v. Edwards, 538 U.S. 976, 123 S. Ct. 1788, 155 L. Ed. 2d 665 (2003). The Florida case was an appeal from an administrative hearing and order by OFR determining that the program involved an investment contract. The Florida court affirmed that determination.
Based upon the Florida cases discussed in the preceding paragraphs, it has been demonstrated that decisions in federal cases, in particular Howey, supra, and federal cases expanding the Howey principles, are authoritative in analyzing
the OFR jurisdiction to proceed and the potential that DBPR in its actions precluded OFR from pursuing its Administrative Complaint.
The Court in Howey, 66 S. Ct. at 1103 stated:
In other words, an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.
In Tcherepnin v. Knight et al., 389 U.S. 332, 336, 88
S. Ct. 548, 19 L. Ed. 2d 564 (1967), the Supreme Court addressed the significance of the Howey decision, wherein the Tcherepnin Court stated:
[W]e are reminded that, in searching for the meaning and scope of the word 'security' in the Act, form should be disregarded for substance and emphasis should be on economic reality.
In United Housing Foundation, Inc., et al. v. Forman
et al., 421 U.S. 837, 95 S. Ct. 2051, 44 L. Ed. 2d 621 (1975),
the Supreme Court again referred to its prior decisions in Howey and Tcherepnin, when placing substance over form to determine the scope of the word "security." In the United Housing decision, 421 U.S. at 849, the Court also stated that:
The primary purpose of the Acts of 1933 and 1934 was to eliminate serious abuses
in a largely unregulated securities market.
In International Brotherhood of Teamsters, Chauffeurs Warehousemen and Helpers of America v. Daniel, 439 U.S. 551, 99
S. Ct. 790, 58 L. Ed. 2d 808 (1979), the Supreme Court was addressing a pension plan that had been entered into by a collective bargaining agreement, in statements associated with the matter and the question of fraud in connection with the sale of a security as addressed in the Securities Exchange Act of 1934. The Court stated:
To determine whether a particular financial relationship constitutes an investment contract, '[the] test is whether the scheme involves an investment of money in a common enterprise with profits that come solely from the efforts of others.' Howey, 328 U.S., at 301. This test is to be applied in light of 'the substance--the economic realities of the transaction--rather than the names that may have been employed by the parties.' . . .
Id. at 558.
Marine Bank v. Weaver, et ux., 455 U.S. 551, 102 S. Ct. 1220, 71 L. Ed. 2d 409 (1982) involved the question of a certificate of deposit from a federally regulated bank and the possible violation of fraud provisions of the Securities Exchange Act of 1934. It was decided that the certificate of deposit issued by a federally regulated bank did not constitute a security under Federal Securities Laws. Therefore the bank
certificate of deposit was not subject to liability under terms set forth in the anti-fraud provisions of the federal securities law. The Supreme Court, in Marine Bank, 455 U.S. at 555 stated:
The definition of 'security' in the Securities Exchange Act of 1934 is quite broad. The Act was adopted to restore investors' confidence in the financial markets and the term 'security' was meant to include 'the many types of instruments that in our commercial world will fall within the ordinary concept of a security.' . . .
The Court went on to state:
The board statutory definition is preceded, however, by the statement that the terms mentioned are not to be considered securities if 'the context otherwise requires . . . ' Moreover, we are satisfied that Congress, in enacting the securities laws, did not intend to provide a broad federal remedy for all fraud.
Id. at 556.
The Marine Bank court, 455 U.S. at 558 held:
We see, therefore, important differences between a certificate of deposit purchased from a federally regulated bank and other long-term debt obligations. The Court of Appeals failed to give appropriate weight to the important fact that the purchaser of a certificate of deposit is virtually guaranteed payment in full, whereas the holder of an ordinary long-term debt obligation assumes the risk of the borrower's insolvency. The definition of 'security' in the 1934 Act provides that an instrument which seems to fall within the broad sweep of the Act is not to be considered a security if the context otherwise requires. It is unnecessary to subject issuers of bank certificates of
deposit to liability under the anti-fraud provisions of the federal securities laws since the holders of bank certificates of deposit are abundantly protected under the federal banking laws. We therefore hold that the certificate of deposit purchased by the Weavers is not a security.
In Olson v. E.F. Hutton and Company, Inc., 957 F.2d 622 (8th Cir. 1992), the court was considering the alleged breach of fiduciary duties under ERISA, violations of the Securities Exchange Act, and violations of the Minnesota Securities Act. In its discussion, the court stated:
In determining whether Marine Bank removes a given investment from the protection of the securities laws, courts have focused on whether existing regulations guarantee a return of the investment . . . Where such guarantees exist, the securities laws provide no added protection. However, when the investment is not guaranteed, Marine Bank does not bar application of the securities laws to what would otherwise qualify as a security. . . .
Id. at 628. In the Olson case, those matters involving certificates of deposit were subject to securities laws.
In the present case, ULC customers are not provided any form of guarantee in their investments made with ULC under Option 4, the Affinity Rental Program. In that context, the regulatory pursuits by DBPR would not forestall OFR in its efforts at regulation. DBPR concerned itself with the integrity of the Timeshare Plan, by removing the advertising related to the Affinity Rental Program. This action did not prohibit OFR
from examining the transactions under Option 4, the Affinity Rental Program when considering case authority commencing with Marine Bank, supra.
The case Reves, et al. v. Ernst & Young, 494 U.S. 56, 110 S. Ct. 945, 108 L. Ed. 2d 47 (1990) involved uncollateralized and uninsured promissory notes. In its opinion, the Supreme Court stated:
The case presents the question whether certain demand notes issued by the Farmers Cooperative of Arkansas and Oklahoma (Co-op) are 'securities' within the meaning of § 3(a)(10) of the Securities Exchange Act of 1934. We conclude that they are.
Id. at 58. In the discussion the court referred to a decision by the Supreme Court in Landreth Timber. The Reves court stated:
We made clear in Landreth Timber that stock was a special case, explicitly limiting our holding to that sort of instrument. Id. at 694. Although we refused finally to rule out a similar per se rule for notes, we intimated that such a rule would be unjustified. Unlike 'stock' we said, 'note' may now be viewed as a relatively broad term that encompasses instruments with widely varying characteristics, depending on whether issued in a consumer context, as commercial paper, or in some other investment context. . . . While common stock is the quintessence of a security, Landreth Timber, supra, at 693, and investors therefore justifiably assume the sale of stock is covered by the Securities Acts, the same simply cannot be said of notes, which are used in a variety of settings not all of which involve investments. Thus, the phrase
'any note' should not be interpreted to mean literally 'any note,' but must be understood against the backdrop of what Congress was attempting to accomplish in enacting the Securities Acts. Because the Landreth Timber formula cannot sensibly be applied to notes, some other principle must be developed define the term 'note.' . . .
494 U.S. at 62.
The Reves court goes on to describe the Second Circuit's 'family resemblance' approach in relation to notes. The Reves court went on to state:
Because we think the 'family resemblance' test provides a more promising framework for analysis, however we adopt it. The test begins with the language of the statute; because the Securities Acts define 'security' to include 'any note,' we begin with the presumption that every note is a security. We nonetheless recognize that this presumption cannot be irrebutable. As we have said, supra, at 61, Congress was concerned with regulating the investment market, not with creating a general federal cause of action for fraud. In an attempt to give more content to that dividing line, the Second Circuit has identified a list of instruments commonly denominated 'notes' that nonetheless fall without the 'security' category.
494 U.S. at 64-65.
The Reves court then describes a list of notes that are not considered to be securities. The Reves court then said:
We agree that the items identified by the Second Circuit are not properly viewed as 'securities.' More guidance, though, is needed. It is impossible to make any meaningful inquiry into whether an
instrument bears a 'resemblance' to one of the instruments identified by the Second Circuit without specifying what it is about those instruments that makes them non- 'securities.'
Id. at 65-66.
The Reves court refers to the general standards for deciding whether a transaction involves a "security" in relation to notes and details the factors where it states:
First, we examine the transaction to assess the motivations that would prompt a reasonable seller and buyer to enter into it. If the seller's purpose is to raise money for the general use of a business enterprise or to finance substantial investments and the buyer is interested primarily in the profit the note is expected to generate the instrument is likely to be a 'security.' If the note is exchanged to facilitate the purchase and sale of a minor asset or consumer good, to correct for the seller's cash-flow difficulties, or to advance some other commercial or consumer purpose, on the other hand, the note is less sensibly described as a 'security.' . . .
Second, we examine the 'plan of distribution' of the instrument . . . to determine whether it is an instrument in which there is 'common trading for speculation or investment' . . . Third, we examine the reasonable expectations of the investing public: The court will consider instruments to be 'securities' on the basis of such public expectations, even where an economic analysis of the circumstances of the particular transaction might suggest that the instruments are not 'securities' as used in that transaction. . . . Finally, we examine whether some factor such as the existence of another regulatory scheme significantly reduces the risk of the
instrument, thereby rendering application of the Securities Acts unnecessary.
Id. at 66-67.
The Reves court then held:
We conclude, then, that in determining whether an instrument denominated a 'note' is a 'security,' courts are to apply the version of the 'family resemblance' test that we have articulated here: A note is presumed to be a 'security,' and that presumption may be rebutted only by a showing that the note bears a strong resemblance (in terms of the four factors we have identified) to one of the enumerated categories of instrument. If an instrument is not sufficiently similar to an item on the list, the decision whether another category should be added is to be made by examining the same factors.
Id. at 67.
Nothing about the Affinity Rental Program that has been described bears resemblance to a note. It is an investment contract. Therefore, the family resemblance test does not apply.
In Securities and Exchange Commission v. Edwards, 540 U.S. 389, 124 S. Ct. 892, 157 L. Ed. 2d 813 (2004), pay phones were sold to the public through independent distributors. The pay phones had site leases, a five-year lease-back and management agreement, and a buy-back agreement. ETS Pay Phones, Inc. (ETS) set up the phone sites, installed the equipment and arranged for the connection of long-distance service, collected
coin revenues and maintained and repaired the phones. Through the buy-back agreement, ETS promised to refund the full purchase price of the package at the end of the lease or within 180 days of a purchaser's request. As the Supreme Court describes:
The pay phones did not generate enough revenue for ETS to make the payments required by the leaseback agreements, so the company depended on funds from new investors to meet its obligations. In September 2000, ETS filed for bankruptcy protection. The SEC brought this civil enforcement action the same month. . . .
Id. at 392.
The Edwards court goes on to state:
Congress' purpose in enacting the securities law was to regulate investments, in whatever form they are made and by whatever name they are called. . . . To that end, it enacted a broad definition of 'security', 'sufficient' to encompass virtually any instrument that might be sold as an investment. . . .
The test for whether a particular scheme is an investment contract was established in our decision in SEC v. W.J. Howey, Company, 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244, (1946). . . .
Thus, when we held that 'profits' must 'come solely from the efforts of others,' we were speaking of the profits that investors seek on their investment, not the profits of the scheme in which they invest. We used 'profits' in the sense of income or return, to include, for example, dividends, other periodic payments or the increased value of the investment.
There is no reason to distinguish between promises of fixed returns and promises of variable returns for purposes of the test, so understood. In both cases, the investing public is attracted by representations of investments income, as purchasers were in this case by ETS' invitation to 'watch the profits add up.'
Id. at 393-394.
The Edwards court held:
. . . an investment scheme promising a fixed rate of return can be an 'investment contract' subject to the federal securities laws.
540 U.S. at 397. Under the decision, the ETS offering was an investment contract.
The Option 4, Affinity Rental Program is similar to the ETS investment scheme described in Edwards, supra, calling for a fixed rate of return. The Affinity Rental Program like the ETS investment arrangement involving the pay phones is an investment contract. See § 517.021(19)(q), Fla. Stat. (2002).
Those named Respondents in DOAH Case No. 05-0515 are subject to OFR jurisdictions under authority set forth in Section 517.12(1), Florida Statutes (2002) which states:
Registration of dealers, associated persons, investment advisors, and branch offices.--
No dealer, associated person, or issuer of securities shall sell or offer for sale any securities in or from offices in this state, or sell securities to persons in this state from offices outside this state, by mail or otherwise, unless the person has been registered with the department pursuant
to the provisions of this section. The department shall not register any person as an associated person of a dealer unless the dealer with which the applicant seeks registration is lawfully registered with the department pursuant to this chapter.
Definitions of dealer, associated person and issuer are found in Section 517.021(2), (6) and (13), Florida Statutes (2002), as alphabetically described.
OFR has jurisdiction to pursue a cease and desist order in accordance with Section 517.221(1), Florida Statutes (2002), and to take action to impose and collect an administrative fine based upon the allegations in the Administrative Complaint and under authority set forth in Section 517.221(3), Florida Statutes (2002).
OFR has provided adequate notice to Respondents concerning the action it intends to take on the merits of the Administrative Complaint in DOAH Case No. 05-0515, to include a statement of its jurisdiction, thus affording due process. See Werner v. State, Dept. of Ins. and Treasurer, 689 So. 2d 1211 (Fla. 1st DCA 1991).
Any challenge to the facial constitutionality of Chapter 517, Florida Statutes (2002) based upon an argument that a Respondent has been deprived of due process is outside the jurisdiction of this forum. See Key Haven Associated
Enterprises, Inc. v. Board of Trustees of Internal Improvement
Trust Fund, et al., 427 So. 2d 153 (Fla. 1982); and Department of Revenue v. Young American Builders, 330 So. 2d 864 (Fla. 1st
DCA 1976).
Based upon the consideration of the facts found and the conclusions of law reached, it is
RECOMMENDED:
That an order be entered by OFR finding jurisdiction to proceed with the Administrative Complaint in DOAH Case No. 05- 0515 on its merits.
DONE AND ENTERED this 6th day of January, 2006, in Tallahassee, Leon County, Florida.
S
CHARLES C. ADAMS
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 6th day of January, 2006.
ENDNOTES
1/ Some of the Respondents named in the Administrative Complaint to DOAH Case No. 05-0515, did not petition to be heard on the allegations or withdrew their petition for hearing.
2/ Concerning the deposition of Donald A. Rhett, pages 5 through 9, 36 through 40, 44, 45, 73 through 75, 90 through 92 and 94 through 107 are admitted. All other pages within the deposition are denied admission.
3/ Some of the facts in the Administrative Complaint relate to a period in time when Chapter 517, Florida Statutes (2003) was in effect but it does not differ from Chapter 517, Florida Statutes (2002).
4/ Those provisions within Chapter 721, Florida Statutes (2003) did not change from the language in Chapter 721, Florida Statutes (2002).
COPIES FURNISHED:
David J. Busch, Esquire Department of Financial Services Division of Legal Services
612 Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0333
A. Gregory Melchior, Esquire Office of Financial Regulation 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394
Norman B. Arnoff, Esquire Wexler & Burkhark, P.C.
50 Charles Lindbergh Boulevard, Suite 206 Mitchel Field, New York 11553
Randall G. Blankenship, Esquire
170 East Central Avenue Winter Haven, Florida 33880
Steven M. Malono, Esquire Pennington, Moore, Wilkinson,
Bell & Dunbar, P.A.
215 South Monroe Street, Second Floor Post Office Box 10095
Tallahassee, Florida 32302-2095
Mike Piscitelli, Esquire
Vezina, Lawrence & Piscitelli, P.A.
350 East Las Olas Boulevard, Suite 1130 Fort Lauderdale, Florida 33301
Bruce A. Minnick, Esquire Post Office Box 15588
Tallahassee, Florida 32317-5588
Honorable Tom Gallagher Chief Financial Officer
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.
| Issue Date | Document | Summary |
|---|---|---|
| Feb. 09, 2006 | Other | |
| Jan. 06, 2006 | Recommended Order | The investment contract in this case was a security allowing the regulator to proceed on the merits. |
DEPARTMENT OF FINANCIAL SERVICES vs RICHARD LEE BAMMERLIN, 05-000515 (2005)
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FLORIDA REAL ESTATE COMMISSION vs BARBARA B. WISE, 05-000515 (2005)
