STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

ISAAC BROWN, JR.,

Respondent.

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) Case No. 11-0454PL

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RECOMMENDED ORDER

On April 19, 2011, a duly-noticed hearing was held by video teleconference in Daytona Beach and Tallahassee, Florida, before Lisa Shearer Nelson, an Administrative Law Judge assigned by the Division of Administrative Hearings.

APPEARANCES

For Petitioner: David J. Busch, Esquire

Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32312

For Respondent: Isaac Brown, pro se

17 Spring Meadows Drive Ormond Beach, Florida 32174

STATEMENT OF THE ISSUE

The issue to be determined is whether Respondent violated section 626.611(5), (7), (9), and (10), and section 626.621(6) and (9), Florida Statutes (2002), as alleged in the Administrative Complaint, and if so, what penalty should be imposed?

PRELIMINARY STATEMENT

On November 8, 2010, Petitioner, Department of Financial Services (DFS or Petitioner) filed an Administrative Complaint against Respondent, Isaac Brown, alleging violations of section 626.611(5), (7), (9), and (10), and section 626.621(6) and (9),

Florida Statutes (2002). On December 6, 2010, Respondent filed an Election of Proceeding form requesting an administrative hearing pursuant to section 120.57(1), Florida Statutes. On January 26, 2011, the case was referred to the Division of Administrative Hearings for the assignment of an administrative law judge.

A Notice of Hearing was issued on February 3, 2011, scheduling the case for hearing by video teleconference on

April 19, 2011, and the case proceeded as scheduled. At hearing, Petitioner presented the testimony of Pamela Johnson, William Crooms, and Richard Brinkley, and Petitioner's Exhibits 1 through

9 were admitted into evidence. Respondent presented the testimony of Allyson Brown and Respondent's Exhibit 1 was admitted.

The Transcript of the hearing was filed with the Division on May 3, 2011. At the parties' request, the deadline for filing proposed recommended orders was extended to 30 days past the filing of the Transcript, making them due June 2, 2011.

Petitioner filed its Proposed Recommended Order June 1, 2011. Respondent filed a Memorandum on June 7, 2011, referencing the

Department's Proposed Recommended Order and essentially offering a payment plan in settlement of the charges. Both submissions have been carefully considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the state agency charged with the licensing and regulation of insurance agents in the State of Florida, and is responsible for administering the disciplinary provisions of chapter 626, Florida Statutes, pursuant to section 20.121(2)(g) and (h).

2. Respondent has been licensed as a life, including variable annuity and health, agent (2-15), life, including variable annuity, agent (2-16), and a life and health agent (2-

   18) at all times relevant to this proceeding.

   
   

3. During the period relevant to these proceedings, Respondent was the president of BCMI, Inc.

4. Pamela Johnson was employed by the Volusia County Sheriff's Department and on duty when she was involved in a motor accident on I-95 on September 4, 1998. Ms. Johnson was injured in the accident and was unable to continue working as a result.

5. Ms. Johnson filed suit against the company owning the truck that hit her, and in 2000 received a compensatory award of approximately $650,000. She hired an investment advisor to handle the award, and placed her funds in a money market account. Until that time, she had no prior investment experience.

   
   

6. Ms. Johnson describes herself as a person who wants to take very few risks with her money. She wanted all of her investments to be very safe and conservative.

7. In 2002, she spoke to Respondent regarding possible investments. She was acquainted with Respondent through her sister. After Respondent met with her at her home, she decided to remove $100,000 from her money market account and invest in an annuity that Respondent was offering.

8. She received a check for $100,000 from the money market account and signed it over to Respondent. Respondent assisted her in filling out an application for an annuity. He then deposited the check into his business account.

9. Respondent did not, however, actually purchase the annuity with the funds entrusted to him.

10. Ms. Johnson did not receive any paperwork regarding her purchase of the annuity, other than her initial application, and asked Respondent when she would receive the paperwork. At first, Respondent told her that he had received his copy and she should receive hers in the mail. She did not. Ms. Johnson called Respondent repeatedly and made several appointments with him between June and October, 2002, in order to obtain more information regarding her investment.

11. Ms. Johnson was finally able to meet with Respondent in October of 2002, and learned for the first time that Respondent had not purchased on her behalf the annuity for which she had

    
    

    applied. Instead, he decided (without input from her) to use the money in a real estate investment. He represented to her that she had already made $5,000 on her investment.

12. At this time, Respondent told Ms. Johnson that if she still wanted to purchase an annuity, she would have to write him another check. She did so, this time directly to Transamerica Life and Annuity instead of to Respondent. She has since moved the management of that annuity to another insurance agency.

13. Ms. Johnson continued to seek documentation for her first investment, to no avail. She told Respondent she needed some documentation in order to complete her taxes, so in February 2003, he showed her a sheet of paper entitled "Account Summary," which listed her two investments. The first investment was her annuity with Transamerica Life and Annuity. The second investment is entitled "Corporate Note," with "real estate" in parenthesis, an identification number (which is her social security number), and an account balance of $105,000. The document stated at the bottom below Respondent's name and address, "**No taxes are due on these accounts at this time."

14. Despite multiple contacts by both Ms. Johnson and a friend of Ms. Johnson, no further documentation regarding her investment has ever been provided. Finally, in May of 2004, Respondent told Ms. Johnson that an employee of the real estate company had embezzled all of the funds and that her entire investment was lost.

    
    

15. Both the Financial Industry Regulatory Authority (FINRA) and Ms. Johnston eventually filed complaints with DFS regarding Respondent's handling of her first $100,000 investment.

16. Respondent has offered several payment plans to

    
    

    Ms. Johnson over the years, but he has never actually returned any money to her. He did not have her permission to invest in a real estate transaction. He only had permission to purchase an annuity.

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with sections 120.569 and 120.57(1), Florida Statutes.

18. This is a disciplinary action by Petitioner in which Petitioner seeks to suspend Respondent's license as an insurance agent. Petitioner bears the burden of proof to demonstrate the allegations in the Administrative Complaint by clear and convincing evidence. Dep't of Banking and Fin. v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

19. As stated by the Florida Supreme Court:

    
    

    Clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and lacking in confusion as to the facts in issue. The evidence must be of such a weight that it produces in the mind of the trier of fact a firm belief or conviction,

    
    

    without hesitancy, as to the truth of the allegations sought to be established.

    
    

    In re Henson, 913 So. 2d 579, 590 (Fla. 2005), quoting Slomowitz

    
    

    v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

    
    

20. As a preliminary matter, the Administrative Complaint does not specify which codification of the Florida Statutes is being charged. While Petitioner's Proposed Recommended Order cites to Florida Statutes (2010), the appropriate charging statute is the statute in effect at time of the conduct alleged. In this case, the conduct is alleged to have occurred, in large part, from May 2002 through February 2003, making the relevant statutes Florida Statutes (2001) and (2002). However, a review of the language of the 2001 and 2002 statutes with the current version indicates that the relevant statutes have not been changed in any material way. Accordingly, all references are to the 2001 version of sections 626.611 and 626.621.

21. The Administrative Complaint charges Respondent with violating section 626.611(5), (7), (9), and (10).1/ Section 626.611 provides in pertinent part:

    626.611 Grounds for compulsory refusal, suspension, or revocation of agent's. . . license or appointment.--The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, . . ., and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:

    
    

    * * *

    
    

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

    
    

    * * *

    
    

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

    
    

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

       
       

    2. Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license or appointment.

    
    

22. Respondent represented that he was purchasing an annuity contract for Ms. Johnson, and after receiving her money, continued to represent that he had done so for several months. He used the funds for another purpose without her permission, made misrepresentations to her regarding gains made on the so- called investment, and continued to deceive her for months before admitting that he in fact lost all of her money through an investment she had never authorized. Despite the passage of several years, he has made no attempt to repay her any of the funds that she lost as a result of his unauthorized actions.

    
    

23. The Administrative Complaint also charges Respondent with violating section 626.621(6) and (9), which provides:

    626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, customer representative's, service representative's, or managing general agent's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, service representative, or managing general agent, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s.626.611:

    
    

    * * *

    
    

    (6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part IX of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest.

    
    

    * * *

    
    

    (9) If a life agent, violation of the code of ethics.

    
    

24. The circumstances regarding these allegations are the same as those supporting the violations of section 626.611. Section 626.621 specifies that it authorizes discipline only where the agency finds that "any one or more of the following

    
    

    applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s.626.611," and that situation is not presented here. Should the Department conclude that Respondent did not violate section 626.611, clear and convincing evidence was presented to establish that Respondent was the source of loss to Ms. Johnson, a member of the public, when he took her $100,000 and deposited into his operating account, then invested it in a venture not authorized by the client, in violation of section 626.621(6). However, the Department provided no evidence regarding what constitutes the life insurance agent Code of Ethics, so no violation of section 626.621(9) is recommended.

25. With respect to penalty, the Department cited to the disciplinary guidelines now in effect. However, penalty should be based upon the guidelines in effect at the time of the offenses, in order to provide appropriate notice to Respondent. The undersigned has reviewed a prior version of the current rule, previously listed as Florida Administrative Code Rule 69O- 231.080, which became final in September of 2002, and covers most of the events taking place in this case. There are few differences in penalty between the current version of the rule and the former version: however the longest suspension for any of the listed violations under the former rule is nine months, as opposed to 12 months under the current rule.

    
    

26. Florida Administrative Code Rule 69O-231.040, like the current rule renumbered as 69B-231.040, provides that a penalty may be adjusted based upon aggravating and mitigating factors found in rule 69O-231.160(1) (now renumberd as 61B-231.160). As noted by the Department, several aggravating factors are applicable, such as the willful nature of Respondent's conduct; the loss of $100,000 by Ms. Johnson; the failure to repay any of the funds over a nine-year period; and the pattern of deceit exhibited by Respondent's initial representation that he had received his copy of the paperwork regarding the non-existent annuity, and his avoidance of repeated inquiries regarding

Ms. Johnson's investment; and his personal involvement in the deceit. Simply put, Respondent treated Ms. Johnson's money as if it were his own to invest as he wished, and then lied about his actions. Under these circumstances, a significant upward departure from the guidelines is in order.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law reached, it is

RECOMMENDED that the Department of Financial Services enter a Final Order finding Respondent guilty of violating section 626.611(5), (7), (9), and (10) and section 626.621(6); revoking his license; and requiring that he make restitution to Pamela Johnson in the amount of $100,000 pursuant to the authority in section 626.692.

DONE AND ENTERED this 23rd day of June, 2011, in Tallahassee, Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

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

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of June, 2011.

ENDNOTE

1/ The Department's Proposed Recommended Order references certain paragraphs in the Administrative Complaint and described them as "charges." See, e.g., paragraphs 23-25 of the Proposed Recommended Order. However, the Administrative Complaint references these paragraphs as containing allegations related to Respondent's conduct. Following paragraph 20, the Administrative Complaint specifically indicates the provisions with which Respondent is charged, and it is these statutory violations that are discussed in this Recommended Order.

COPIES FURNISHED:

David J. Busch, Esquire Department of Financial Services Division of Legal Services

612 Larson Building

200 East Gaines Street Tallahassee, Florida 32312

Isaac Brown

17 Spring Meadows Drive Ormond Beach, Florida 32174

Julie Jones, Agency Clerk Department of Financial Services Division of Legal Services

612 Larson Building

200 East Gaines Street Tallahassee, Florida 32312

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

Docket for Case No: 11-000454PL

Orders for Case No: 11-000454PL