. ~ FLORIDA DEPARTMENT OF FINANCIAL SERVICES TOM GALLAGHER CHIEF FINANCIAL OFFICER STATE OF FLORIDA MAY 92 2006 IN THE MATTER OF: 0 lo- 097 PL Docketed by A. JAMES W. CRAIN, JR. : CASE NO.: 86177-06-AG / ADMINISTRATIVE COMPLAINT TO: JAMES W. CRAIN, JR. 562 Oak Bay Drive Osprey, Florida 34229-8959 JAMES W. CRAIN, JR. 2477 Stickney Point Road, Suite 217B Sarasota, Florida 34231-4070 JAMES W. CRAIN, JR. 2477 Stickney Point Road, Suite 315B Sarasota, Florida 34231-4070 YOU, JAMES W. CRAIN, JR., license number A056967, are hereby notified that the Chief Financial Officer of the State of Florida (“the Department”), has caused to be made an investigation of your activities while licensed as a life & health, health, and life insurance agent in this state, as a result of which it is alleged: GENERAL ALLEGATIONS 1. Pursuant to Chapters 626, Florida Statutes, you, JAMES W. CRAIN, JR. are currently licensed in this state as a Life & Health (2-18), Health (2-40), and Life (2-16) insurance agent, 2. At all times pertinent to the dates and occurrence referred to herein, you, JAMES W. CRAIN, JR. were licensed in this state as a life & health, health, and life insurance agent pursuant to Chapter 626, Florida Statutes. 3, Pursuant to Chapters 626; Florida Statutes, the Florida Department of Financial Services has jurisdiction over you, JAMES W. CRAIN, JR’s insurance license and appointments. 4. For approximately the last 10 years, you, JAMES W. CRAIN, JR. have been conducting life & health and, more recently, a so-called “discount home health care services” business through a number of Florida corporations, all of which are located at 2477 Stickney Point Road, Suite 315B, Sarasota, Florida 34231. These corporations include International Life & Health Services, Inc., Independent ‘Living Home Care Membership Association, Inc., Independent Life Home Care Agency, Inc., International Life and Health Services of Manatee Cty, Inc., and International Life and Health Services of Sarasota County, Inc. 5. You, JAMES W. CRAIN, JR. are the Director and/or President of International Life & Health Services, Inc., Independent Living Home Care Membership Association, Inc., Independent Living Home Care Agency, Inc., International Life and Health Services of Manatee Cty, Inc., and International Life and Health Services of Sarasota County, Inc., each having as its described corporate purposes, the following: (a) The apparent corporate purpose of International Life & Health Services, Inc. is that of an insurance agency marketing life and health insurance, (b) The stated corporate purpose of Independent Living Home Care Membership Association, Inc. is: “For providing a discount home health care services plan where members can get 24 hour or 8 hour care in their own home for on average one-half the norm{al] cost.” (c) The stated corporate purpose of Independent Living Home Care Agency, Inc. is “To provide homemaker and companion services and custodial care to paying customers.” (d) The stated corporate purpose of International Life and Health Services of Manatee Cty, Inc., is “Insurance agency sell insurance Life & Health.” (e) The stated corporate purpose of International Life and Health Services of Sarasota County, Inc. is “an insurance agency.” 6. Pursuant to Section 626.839, Florida Statutes, you, JAMES W. CRAIN, JR. are personally and fully liable and accountable for any wrongful acts, misconduct, or violation of any provision of the Florida Insurance Code committed either by you, JAMES W. CRAIN, JR., or anyone under your direct supervision and control while acting on behalf of any of the above- listed entities located at 2477 Stickney Point Road, Suite 315B, Sarasota, Florida 34231. References to you, JAMES W. CRAIN, JR., below shall include actions by your employees and agents. 7. You, JAMES W. CRAIN, JR. employed or contracted various licensed insurance agents, including Michael D. Carll, Kelly Ann White, James E, Denner, John D. Mueller, and Christopher G, Cary. These agents are or have been licensed as Health (2-40) and, in most instances, Life & Health (2-18) agents, 8. You, JAMES W. CRAIN, JR., by reason of your insurance licensure, and through your agents, sold the Independent Living Home Care Membership Association, Inc. (“Home Care”) discount home health care services membership plan to approximately 44 elderly Floridians, most of whom are in their 80°s or 90’s, Approximately 15 of the elderly are in their 80’s and approximately 13 are in their 90’s. Some of these elderly Floridians are disabled and suffering from diminished mental capacity, and some of them already had home medical care coverage in place. One of these elderly Floridians was legally blind at the time she was sold the Home Care membership plan, and she remains legally blind today. 9. You, JAMES W. CRAIN, JR. sold these elderly consumers the Home Care membership plan despite application requirements that the consumer be of sound mind and body, that the individual not be blind, deaf, or wheelchair bound, and that the Home Care membership plan not replace any existing insurance product. 10. Notwithstanding protections and advisories afforded by law or by contract, these elderly consumers purchased the Home Care membership plan on trust, and representations made by you, JAMES W. CRAIN, JR. and your agents. These representations led the elderly consumer to believe that they would receive both discount homemaker/companion services and home medical care services (or “homemaker and medical care services”). However, upon closer reading, the Home Care membership plan, despite its cost, only purports to provide access to discount homemaker service providers and does not provide the actual homemaker or home medical care services. As such, these elderly Floridians will have to pay for any homemaker and medical care services that are provided, in addition to what they had already paid for the Home Care membership plan. 11. Monies collected for these 4, 6 or 8 year Home Care membership plans was between $2,475 and $5,040 (including a three payment option plan that amounted to a 25% interest charge for premium financing) per elderly consumer. 12. To date, monies paid for the Home Care membership plans total at least $192,700. 13. These monies were deposited to the Home Care account at AmSouth Bank, account number 0046683984. JAMES W. CRAIN, JR. is the only known person with signature authority for the bank account. 14, To date, no access to discount homemaker providers or actual homemaker and medical care services have been provided to the aforementioned elderly consumers, despite your, JAMES W. CRAIN, JR., representations and the stated corporate purposes of the corporations listed in paragraphs 4 and 5 above. 15. As of mid-February 2006, the remaining balance in Home Care’s AmSouth Bank account that was available for providing either access to discount homemaker providers or providing actual medical homemaker and medical care services or refunds to consumers was approximately $3,600, Since mid-December 2005, each mid-month account balance has been less than $5,000, despite regular and significant monthly inflow of premium dollars since the inception of the Home Care Association 16. You, JAMES W. CRAIN, JR. paid your sales agents a commission rate of 50% or 60% of the premiums collected per sale of the Home Care membership plan. These sales commissions were paid by way of checks drawn on Home Care’s AmSouth Bank account and were signed by you, JAMES W. CRAIN, JR. 17. Since the inception of Home Care’s AmSouth Bank account, there has been some $40,000 of questionable disbursements. by you, JAMES W. CRAIN, JR. These disbursements have included “cash” payments, withdrawals, bill payments, and loans that directly benefit you, JAMES W. CRAIN, JR. 18. As aresult of the aforementioned depletion of funds, the continuing harm to these elderly Florida consumers is that the access to discount homemaker providers and the actual homemaker and medical care services that these senior citizens were led to believe were paid for through either 2009, 2011 or 2013, will not be provided. Also, should a consumer request a refund, the likelihood of any refund is doubtful. 19. Even if funds had not been depleted from Home Care’s AmSouth Bank account, these elderly consumers may not live long enough to receive the many years of benefits they were led to believe they had paid for: COUNTI 20. The above General Allegations numbered one through nineteen are hereby re- alleged and fully incorporated herein by reference. 21, One of the 44 elderly Floridians that you, JAMES W. CRAIN, JR., through insurance agent Michael D. Carll, sold the Home care membership plan to was Carin Clareus of Sarasota, Florida, who is an existing client of your insurance agency. 22. Mrs. Clareus is a 96 year old widow, who is legally blind and who lives alone. 23. The Home Care membership plan was sold to Mrs. Clareus as being insurance in February of 2005. At that time, Mrs. Clareus paid an initial installment of $1,953 for a 6 year Home Care membership plan despite the fact that the Home Care membership plan application provides that the plan will only be sold to individuals of sound mind and body, and who is not legally blind, deaf, wheelchair bound or replacing any existing insurance product. 24. Mrs. Clareus never received any services from the Home Care membership plan. 25. By taking advantage of a prior and ongoing insurance agent and client fiduciary relationship with Mrs. Clareus, you, JAMES W. CRAIN, JR. misrepresented that the Home Care membership plan would provide access to homemaker providers and would provide actual homemaker and home medical care services beginning in 2005 and continuing through 2011. To date, neither the access to homemaker providers nor any home medical services have been provided. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes; Natelson v. Department of Insurance, 454 So. 2d 31 (Fla. 1* DCA 1984).] 26. Natelson v. Department of Insurance, 454 So. 2d 31, 32 (Fla. 1* DCA 1984), provides — “Insurance is a business greatly affected by the public trust, and the holder of an agent’s license stands in a fiduciary relationship to both the client and insurance company”. 27. You, JAMES. W. CRAIN, JR., after making false and worthless promises of providing access to homemaker providers and the providing of actual homemaker and home medical care services, defrauded Mrs. Clareus of some $1,302 in premiums. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes, [Natelson_v. Department of Insurance, 454 So, 2d 31 (Fla. 1" DCA 1984).] IT IS THEREFORE CHARGED that you, JAMES W. CRAIN, JR., have violated or are accountable under various provisions of the Florida Insurance Code and Rules of the Department of Financial Services, which constitutes grounds for the suspension or revocation of your licenses as a Florida insurance agent: (a) Section 626.611(7), Florida Statutes, provides — “The department shall ... suspend, revoke, or refuse to renew or continue the license or appointment of any ... agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the ... licensee, or appointee any one or more of the following applicable grounds exist: (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.” COUNT IT 28. The above General Allegations numbered one through nineteen are hereby re- alleged and fully incorporated herein by reference. 29. One of the 44 elderly Floridians that you, JAMES W. CRAIN, JR., through insurance agent Michael D. Carll, sold the Home care plan to was Eva Muller of Venice, Florida, who is an existing client of your insurance agency. Mrs. Muller is an 85 year old widow, who is suffering from short term memory loss, who has no living relatives, and who has no close friends nearby. 30. The Home Care membership plan was sold to Mrs. Muller in March of 2005 even though she already had a Penn Treaty home care policy. At that time, Mrs. Muller paid $3,475 for a 6 year Home Care membership plan despite the fact that the Home Care membership plan application provides that the plan will only be sold to individuals of sound mind and body, and who are not legally blind, deaf, wheelchair bound or replacing any existing insurance product. 31. Mrs. Muller never received any services from the Home Care membership plan despite repeated requests for services after she broke her arm in the Fall of 2005. 32. By taking advantage of a prior and ongoing insurance agent and client fiduciary relationship with Mrs. Muller, you, JAMES W. CRAIN, JR. misrepresented that the Home Care membership plan would provide access to homemaker providers and would provide actual homemaker and home medical care services beginning in 2005 and continuing through 2011. To date, neither the access to homemaker providers nor any home medical services have been provided. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes; Natelson v. Department of Insurance, 454 So. 2d 31 (Fla. 1* DCA 1984).] 33. Natelson v. Department of Insurance, 454 So. 2d 31, 32 (Fla. 1" DCA 1984), provides — “Insurance is a business greatly affected by the public trust, and the holder of an agent’s license stands in a fiduciary relationship to both the client and insurance company”. 34. You, JAMES W. CRAIN, JR., after making false and worthless promises of providing access to homemaker providers and the providing of actual homemaker and home medical care services, defrauded Mrs. Muller of some $3,475 in premiums. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes. [Natelson_v. Department of Insurance, 454 So, 2d 31 (Fla. 1" DCA 1984).] | IT IS THEREFORE CHARGED that you, JAMES W. CRAIN, JR., have violated or are accountable under various provisions of the Florida Insurance Code and Rules of the Department of Financial Services, which constitutes grounds for the suspension or revocation of your licenses as a Florida insurance agent: (a) Section 626.611(7), Florida Statutes, provides ~ “The department shall ... suspend, revoke, or refuse to renew or continue the license or appointment of any ... agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the ... licensee, or appointee any one or more of the following applicable grounds exist: (7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.” COUNT I 35. The above General Allegations numbered one through nineteen are hereby re- alleged and fully incorporated herein by reference. 36. One of the 44 elderly Floridians that you, JAMES W. CRAIN, JR., through insurance agents Christopher G. Cary and Michael D. Carll, sold the Home care membership plan to was Janet McClurkin of Sarasota, Florida, who is an existing client of your insurance agency. Mrs. McClurkin is a 94 year old widow, who lives alone in a large senior community, who has some memory loss, and who is easily confused, 37. The Home Care membership plan was sold to Mrs. McClurkin in April of 2005, as being an extension of her existing Penn Treaty long term nursing care policy. During 2005, Mrs. McCluckin made two installment payments totaling $2112 towards a three installment Home Care membership plan that would have resulted in a total of 6 years of paid up coverage. 38. The Home Care membership plan was sold to Mrs. McClurkin despite’ the fact that the Home Care membership plan application provides that the plan will only be sold to individuals of sound mind and body, and who are not legally blind, deaf, wheel chair bound or replacing any existing insurance product. 39. Mrs. McClurkin never received any services from the Home Care membership plan. 40. By taking advantage of a prior and ongoing insurance agent and client fiduciary relationship with Mrs. McClurkin, you, JAMES W. CRAIN, JR. misrepresented that the Home Care membership plan, in conjunction with the existing Penn treaty coverage, would provide access to homemaker providers and would provide actual homemaker and home medical care services for 6 years. To date, neither the access to homemaker providers nor any home medical services have been provided. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes; Natelson v. Department of Insurance, 454 So, 2d 31 (Fla. 1" DCA 1984).] 41. Natelson v. Department of Insurance, 454 So. 2d 31, 32 (Fla. 1 DCA 1984), provides — “Insurance is a business greatly affected by the public trust, and the holder of an agent’s license stands in a fiduciary relationship to both the client and insurance company”. 42. You, JAMES W. CRAIN, JR., after making false and worthless promises of providing access to homemaker providers and the providing of actual homemaker and home 10 medical care services, defrauded Mrs. McClurkin of some $2112 in premiums. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes. [Natelson_v. Department of Insurance, 454 So, 2d 31 (Fla. 1* DCA 1984).] IT IS THEREFORE CHARGED that you, JAMES W. CRAIN, JR., have violated or are accountable under various provisions of the Florida Insurance Code and Rules of the Department of Financial Services, which constitutes grounds for the suspension or revocation of your licenses as a Florida insurance agent: (a) Section 626.611(7), Florida Statutes, provides — “The department shall ... suspend, revoke, or refuse to renew or continue the license or appointment of any ... agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the ... licensee, or appointee any one or more of the following applicable grounds exist: (7) Demonstrated a lack of fitness or trustworthiness to engage in the business of insurance.” ) COUNT IV 43, | The above General Allegations numbered one through nineteen are hereby re- alleged and fully incorporated herein by reference. 44. One of the 44 elderly Floridians that you, JAMES W. CRAIN, JR., through insurance agent Michael D. Carll, sold the Home care membership plan to was Ruth Frakes of Sarasota, Florida, who is an existing client of your insurance agency. Mrs. Frakes is an 89 year old widow, who lives alone, who has difficulty hearing, who has vision problems, who has some memory confusion, and who wears a Life Alert alarm. 11 45. Mrs. Frakes had previously purchased a Penn Treaty policy from your insurance agency. The Home Care membership plan was sold to Mrs. Frakes in February of 2005. Initially, Mrs. Frakes paid $1953 for a 4 year Home Care membership plan despite the fact that the Home Care membership plan application provides that the plan will only be sold to individuals of sound mind and body, and who are not legally blind, deaf, wheelchair bound or replacing any existing insurance product. 46. Subsequently, Mrs. Frakes was convinced to pay an additional some $2,917, or a total of $4,870, for a 6 year Home Care membership plan. 47, Mrs. Frakes never received any services from the Home Care membership plan. 48. By taking advantage of a prior and ongoing insurance agent and client fiduciary relationship with Mrs, Frakes, you, JAMES W. CRAIN, JR. misrepresented that the Home Care membership plan would provide access to homemaker providers and would provide actual homemaker and home medical care services beginning in 2005 and continuing through 2011. To date, neither the access to homemaker providers nor any home medical services have been provided. As such, you, JAMES W. CRAIN, JR. have demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes; Natelson v. Department of Insurance, 454 So. 2d 31 (Fla. 1* DCA 1984).] 49. Natelson v. Department of Insurance, 454 So. 2d 31, 32 (Fla. 1 DCA 1984), provides — “Insurance is a business greatly affected by the public trust, and the holder of an agent’s license stands in a fiduciary relationship to both the client and insurance company”. 50. You, JAMES W. CRAIN, JR., after making false and worthless promises of providing access to homemaker providers and the providing of actual homemaker and home medical care services, defrauded Mrs. Frakes of some $4,870 in premiums. As such, you, JAMES W. CRAIN, JR. haves demonstrated a lack of fitness or trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes. [Natelson_v. Department of Insurance, 454 So. 2d 31 (Fla. 1* DCA 1984),] IT IS THEREFORE CHARGED that you, JAMES W. CRAIN, JR., have violated or are . accountable under various provisions of the Florida Insurance Code and Rules of the Department of Financial Services, which constitutes grounds for the suspension or revocation of your licenses as a Florida insurance agent: (a) Section 626.611(7), Florida Statutes, provides - “The department shall ... suspend, revoke, or refuse to renew or continue the license or appointment of any ... agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the ... licensee, or appointee any one or more of the following applicable grounds exist: (7) Demonstrated a lack of fitness or trustworthiness to engage in the business of insurance.” | WHEREFORE, you, JAMES W. CRAIN, JR., are hereby notified that the Chief Financial Officer, or his Deputy, intends to enter an Order suspending or revoking your licenses and appointments as an insurance agent or to impose such penalties as may be provided under the provisions of Sections 626.611, 626.641, 626.651, 626.681, and 626.691, Florida Statutes, and under the other referenced sections of the Florida Statutes as set out in this Administrative Complaint. You are further notified that any order entered in this case revoking or suspending any license or eligibility for licensure held by you shall also apply to all other licenses and eligibility held by you under the Florida Insurance Code. 13° NOTICE OF RIGHTS You have the right to request a proceeding to contest this action by the Department pursuant to Sections 120.569 and 120.57, Florida Statutes, and Rule 28-107, Florida Administrative Code. The proceeding request must be in writing, signed by you, and must be filed with the Department within twenty-one (21) days of your receipt of this notice. Completion of the attached Election of Proceeding form and/or a petition for administrative hearing will suffice as a written request. The request must be filed with the General Counsel as acting Agency Clerk, at the Florida Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0333. Your written response must be received by the Department no later than 5:00 p.m. on the twenty-first day after your receipt of this notice. Mailing the response on the twenty-first day will not preserve your right to a hearing. YOUR FAILURE TO RESPOND IN WRITING WITHIN TWENTY-ONE (21) DAYS OF YOUR RECEIPT OF THIS . NOTICE WILL CONSTITUTE A WAIVER OF YOUR RIGHT TO REQUEST A. PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF REVOCATION WILL BE ENTERED AGAINST YOU. If you request a proceeding, you must provide information that complies with the requirements of Rule 28-107.004, Florida Administrative Code. As noted above, completion of the attached Election of Proceeding form conforms to these requirements. Specifically, your response must contain: (a) The name and address of the party making the request, for purpose of service; (b) A statement that the party is requesting a hearing involving disputed issues of material fact, or a hearing not involving disputed issues of material fact; and (c) A reference to the notice, order to show cause, administrative complaint, or other communication that the party has received from the agency. 14 If a hearing of any type is requested, you have the right to be represented by counsel or other qualified representative at your expense, to present evidence and argument, to call and cross-examine witnesses, and to compel the attendance of witnesses and the production of documents by subpoena. If a proceeding is requested and there is no dispute of material fact, the provisions of Section 120.57(2), Florida Statutes, apply. In this regard, you may submit oral or written evidence in opposition to the action taken by the Department or a written statement challenging the grounds upon which the Department has relied. While a hearing is normally not required in the absence of a dispute of fact, if you feel that a hearing is necessary, one will be conducted in Tallahassee, Florida, or by telephonic conference call upon your request. However, if you dispute material facts, which are the basis for the Department’s action, you must request an adversarial proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes. These proceedings are held before a State administrative law judge of the Division of Administrative Hearings.. Unless the majority of witnesses are located elsewhere, the Department will request that the hearing be conducted in Tallahassee, Florida. Failure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior oral communication or correspondence in this matter shall be considered freeform agency action, and no such oral communication or correspondence shall operate as a valid request for an administrative proceeding. Any request for an administrative proceeding received prior to the date of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. 15 Mediation of this matter pursuant to Section 120.573, Florida Statutes, is not available. No Department attorney will discuss this matter with you until the response has been received by the Department of Financial Services. DATED and SIGNED this 2% © gay of May, 2006. INCHANDLER Deputy Chief Financial Officer CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTION OF PROCEEDING have been furnished to: JAMES W. CRAIN, JR., at the following addresses: 562 Oak Bay Drive, Osprey, Florida 34229-8959; 2477 Stickney Point Road, Suite 217B, Sarasota, Florida 34231-4070; and 2477 Stickney Point Road, Suite 315B, Sarasota, Florida 34231-4070, by restricted U.S. Certified Mail and personal service this ee 0D day of May, 2006. Philip M. Pome Florida Bar Number: 0729310 David J. Busch Florida Bar Number: 140945 Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 (850) 413-4146/4156 Fax (850) 487-4907 Attorneys for Department 16

Docket for Case No: 06-002097PL

Orders for Case No: 06-002097PL