Aubuchon, Jr., was represented by Howard L. Greitzer, Esquire, of Fort Lauderdale, Florida.
In December, 1985, Petitioner filed an Administrative Complaint against Respondent, and Respondent requested a formal hearing. Accordingly, the issues for determination herein are whether Respondent is guilty of the allegations contained within that Administrative Complaint, and, if so, what disciplinary action should be taken, if any.
Petitioner presented the testimony of Karla M. Myers, Jane Mininni, Arthur Barrow, and Jeffrey Glass. The Respondent testified on his own behalf.
Additionally, Petitioner's Exhibits numbered 1-8 and Respondent's Exhibits numbered 1-36 were admitted in evidence.
During the final hearing in this cause, Petitioner voluntarily dismissed Count III of the Administrative Complaint and also voluntarily dismissed paragraphs 20(b) and 20(i) of Count IV.
Both parties have submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A ruling on each finding of fact can be found in the Appendix to this Recommended Order.
Respondent, Theodore L. Aubuchon, Jr., has been licensed by the Department of Insurance as a general lines agent and limited surety agent for a period of approximately 12 years. Other than the instant Administrative Complaint and its attendant Emergency Order of Suspension, Respondent has never been the subject of an Administrative Complaint or the subject of disciplinary action by the Department of Insurance.
Respondent was served with an Emergency Order of Suspension in November of 1985, to which he failed to respond, and as of the date of the hearing in this cause, his licenses as a general lines agent and as a limited surety agent have been suspended since November of 1985.
Pioneer Bonding & Insurance Agency, Inc. (hereinafter "Pioneer"), was formed in 1963 by its first president, Respondent's grandfather. Respondent's father took over control of the company in approximately 1965, and Respondent succeeded to the position of president in 1979. Respondent remained as an employee of Pioneer and its president until some time in 1985.
Pioneer acted as a general agent for American Druggists' Insurance Company (hereinafter "ADIC") from 1973 until approximately March of 1984, pursuant to an agency agreement. That agreement specifically sets forth the respective responsibilities of ADIC and Pioneer as it pertains to the bail bond business, including but not limited to the processing of claims, reports, disposition of collateral, and the return of collateral.
All counts of this Administrative Complaint deal with bonds underwritten by ADIC.
By letter dated October 3, 1983, ADIC advised Petitioner that Respondent d/b/a Pioneer had satisfactorily performed all duties as general agent for ADIC, that no claims were outstanding against Respondent, that any claims preceding the date of the letter were forever waived by ADIC, and that all funds collected were being maintained in accordance with the law.
Shortly after the letter of October 3, 1983, ADIC advised Respondent that it was exercising its 120-day option for termination of its agency agreement. Upon being so advised, Respondent began negotiating with ADIC in an attempt to enter into a limited agency agreement solely for the purpose of servicing outstanding and continuing bonds beyond March of 1984. No formal limited agency agreement was ever consummated, and by May 29, 1984, ADIC employee Norman Stotts had been sent by ADIC to handle the transition, to audit Pioneer's books and records regarding ADIC bonds, and to essentially take control over all bonds written by Pioneer on behalf of ADIC.
Because no limited agency agreement regulating the servicing of outstanding and continuing bonds was entered into between them, both ADIC and Pioneer sought to control the disposition of collateral and to resolve forfeitures. ADIC at no time gave any written directions to Pioneer as to the manner in which collateral was to be disposed of upon the termination of the agency agreement between them. Further, as of June 1984, Norman Stotts was in possession of the books and records of Pioneer on behalf of ADIC.
In June of 1984, ADIC filed a civil action in the United States District Court for the Southern District of Florida against Pioneer, Respondent, and others. On August 24, 1985, that federal court issued an injunction prohibiting the release of any funds previously received by Pioneer or by Respondent in connection with the issuance of ADIC bonds. ADIC voluntarily dismissed the federal litigation on July 8, 1986.
On April 30, 1986, the Court of Common Pleas in Franklin County, Ohio, issued an Order of Liquidation and Injunction against ADIC, which Order had the effect of prohibiting the disbursement of funds or collateral held by any agents or brokers of that company. On the following day, pursuant to a motion filed by Petitioner, the Circuit Court of the Second Judicial Circuit in and for Leon
County, Florida, issued an Order Appointing Ancillary Receiver for purposes of liquidation, which Order also contained an injunction directed against ADIC agents.
On January 7, 1983, Karla Myers obtained a surety bond in the amount of $5,000 for Robert Myers Painting, Inc. with ADIC as surety. Respondent signed the surety bond as agent for the surety. Similarly, Respondent signed the collateral security receipt as attorney-in-fact for ADIC. By its terms, the surety bond expired February 28, 1985. By an unnotarized letter dated March 5, 1985, the Tri-County Painters and Decorators Joint Trade Board, Inc. released Robert Myers Painting, Inc. from the surety bond, which letter was received by Karla Myers on March 8, 1985.
Subsequent to March 8, 1985, Karla Myers made numerous telephone calls to Pioneer to obtain the return of her $5,000 in collateral. She was advised by employees at Pioneer that Respondent was no longer employed at Pioneer, and on one occasion, Myers contacted Respondent at his home. Respondent advised her that he would need to confer with his attorney regarding the matter.
By March, 1985, Respondent was no longer in control of the books and records of Pioneer, with those books and records being in the control and custody of Norman Stotts. A notarized release, along with the original copy of the Collateral Security Agreement, was not provided by Karla Myers to Respondent or Pioneer in order to secure the release of the $5,000 in collateral, and Pioneer and Respondent were already engaged in litigation with ADIC, Respondent having been advised by his attorney not to discuss that litigation.
On approximately August 20 1986, ADIC authorized Respondent to return the Myers collateral. Respondent then obtained the authorization of Petitioner, and the collateral was returned to Myers in August of 1986.
On August 10, 1983, Pioneer accepted from Antonio and Jane Mininni
$10,000 as collateral for a beverage wholesaler's bond underwritten by ADIC. A subsequent increase in the bond to $15,000 was required by the Florida Division of Alcoholic Beverages and Tobacco.
On April 9, 1985, ADIC advised Mininni d/b/a Old Bridge, Inc., that its bond was being cancelled effective June 10, 1985, and that there would be a 90-day waiting period before the collateral would be returned. That waiting period would have expired on September 10, 1985, after the entry of the federal injunction.
On June 13, 1985, the Old Bridge, Inc. bond was transferred from ADIC to Southland Insurance Company in order that Old Bridge, Inc. would continue to have the state-required coverage. Mininni participated in and approved that transfer.
At all times Old Bridge, Inc. had coverage for the total amount of coverage it had purchased.
In August of 1986, Mr. and Mrs. Mininni on behalf of their business, Old Bridge, Inc., executed a release releasing Pioneer, ADIC, and Respondent; the federal court litigation had been dismissed; Respondent obtained authorization from ADIC and from Petitioner to return to Old Bridge, Inc. its collateral; and the collateral was returned.
On behalf of a client, attorney Sam Pendino needed to make arrangements for collateral on four bail bonds. In a telephone conversation with Respondent, Pendino advised that he wanted an attorney, rather than an insurance company, to hold the collateral under an escrow agreement. Respondent suggested the name of attorney Terence T. O'Malley, Sr. Pendino subsequently satisfied himself that O'Malley was a licensed attorney authorized to practice law in the State of Florida, and on January 13, 1984, an escrow agreement was entered into by and between Pendino and O'Malley under which O'Malley became the escrow agent for the collateral. That escrow agreement was later signed by Respondent on behalf of ADIC.
Pendino and O'Malley physically put the collateral, with an approximate value of $100,000 made up of $57,500 in cash and the balance in precious metals, into a safe deposit box which they rented on the same day that the escrow agreement was signed. Respondent was not a signator on the safe deposit box and was not present at the time the actual transfer of the collateral took place. No evidence was offered to indicate that Respondent ever came into possession of any of the collateral.
Under the terms of the escrow agreement, O'Malley was responsible for returning the collateral with no further authorization needed upon the discharge of the bonds for which the collateral had been placed. The bonds were discharged on September 3, 1985, after entry of the federal court injunction. Pendino contacted O'Malley, but O'Malley failed to return the collateral.
Pendino filed a lawsuit against O'Malley. He included Respondent as a defendant because Respondent had signed the escrow agreement. According to Pendino's attorney who was the only witness to testify on Petitioner's behalf regarding this transaction, at all stages of the litigation Respondent was disassociated from O'Malley's position, had agreed to the return of the collateral, and had requested the Court to enter orders returning the collateral to Pendino. By the time of the final hearing in this cause, O'Malley had already been held in civil contempt of court and there was presently pending an indirect criminal contempt proceeding regarding false testimony given by O'Malley as to the location of the collateral in question.
Respondent, on behalf of Pioneer and ADIC, wrote a bail bond in the amount of $250,000 to guarantee the appearance of John Lee Paul, Sr., in the Circuit Court of St. Johns County, Florida. Certain real property in Georgia was placed as collateral for the bond. The bond was subsequently ordered forfeited, and judgment was entered against ADIC on January 16, 1984. The real property which was the collateral for the bail bond was sold, and the proceeds were transferred to the general operating account of Pioneer.
On June 20, 1984, the legal representative of ADIC and Pioneer, the Assistant State Attorney, the St. Johns County Attorney, the Clerk of the Circuit Court for St. Johns County, and the attorney for the Clerk of the Circuit Court entered into a stipulation for a payment schedule on that final judgment. The payment schedule set forth in that stipulation was approved by the Court on June 21, 1984. Since that time, the bond has been paid in full.
It is a common practice for a surety company, with the approval of the Court, to arrange an extended payment schedule when such a large bond has been estreated.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.
The Administrative Complaint filed herein contains five counts and charges Respondent with having violated numerous statutory prohibitions. Count I involves the Karla Myers transaction and alleges that Respondent failed to account for or pay trust funds to the person entitled thereto in the regular course of business [Section 626.561(1), Florida Statutes]; demonstrated a lack of fitness or trustworthiness to engage in the business of insurance [Section 626.611(7), Florida Statutes]; engaged in fraudulent or dishonest practices [Section 626.611(9), Florida Statutes]; misappropriated, converted or unlawfully withheld monies received in the conduct of business [Section 626.611(10), Florida Statutes]; violated a provision of the Insurance Code [Section 626.621(2), Florida Statutes]; engaged in unfair methods of competition or in unfair or deceptive acts [Section 626.621(6), Florida Statutes]; and has shown himself to be a source of injury or loss to the public or detrimental to the public interest [Section 626.621(6), Florida Statutes]. The evidence is uncontroverted that the earliest demand made by Karla Myers for the return of her collateral would have occurred in March of 1985, ten months after ADIC took possession and control of Pioneer's books and records, nine months after ADIC filed the federal litigation against Pioneer and Respondent, and after Respondent was no longer employed by Pioneer. The evidence is further uncontroverted that the federal court entered its injunction prohibiting the return of collateral in August of 1985. Petitioner has failed to prove that during the interim period of March to August 1985 that Respondent had the ability to return the Myers collateral, that Myers had done all that she was required to do to be entitled to the return of the collateral, and that, if so, the five months constituted either an unreasonable delay or a delay not in the regular course of business. Further, it is clear that Respondent did return to Myers her collateral as soon as: (1) the federal court injunction prohibiting him from doing so was dissolved in July of 1986; (2) permission was obtained from ADIC, the surety on the bond; and (3) authorization was obtained from Petitioner in view of the liquidation proceedings in Ohio and ancillary proceedings in Florida against ADIC, in order that Respondent not violate the injunctions entered by those courts. Accordingly, Petitioner has failed to prove Respondent guilty of that level of conduct for which disciplinary action can be taken.
Count II involves the Mininni/Old Bridge, Inc. bond and charges Respondent with having violated the same statutory prohibitions recited above. Yet, the evidence is uncontroverted that Mininni through Respondent obtained a bond for $10,000 from ADIC, that the bond was later increased to $15,000, that when ADIC advised that it intended to terminate the bond it was transferred to Southland Insurance Company, and that at all times Mininni and Old Bridge, Inc., were covered by a bond in the amount for which they had paid. Certainly, no statutory violation has been proven. Petitioner's proposed recommended order fails to offer any proposed finding of fact or conclusion of law relative to the Mininni/Old Bridge, Inc. bond.
Count III of the Administrative Complaint was voluntarily dismissed by Petitioner during the final hearing in this cause.
Count IV involves the escrow agreement between attorneys Pendino and O'Malley. Again, the evidence is clear that the attorneys rented the safe deposit box and placed in it the $100,000 worth of cash and precious metals, that Respondent was not present when the collateral was placed in that box and
was not a signator on that box, that Respondent never came into possession of the collateral, and that Respondent's only involvement in the transaction was signing the escrow agreement at a time subsequent to the time when the escrow agreement was signed by the other parties thereto, Pendino and O'Malley. The only evidence presented by Petitioner regarding the allegations of Count IV was in the form of the testimony of the attorney for Pendino in the litigation against O'Malley, which clearly indicated that Respondent was considered a nominal party only in that litigation and that even the parties did not consider Respondent to have been involved in O'Malley's failure to return the collateral. Yet, Count IV of the Administrative Complaint charges Respondent with having failed to return collateral accepted by him [Section 648.442(1), Florida Statutes]; having failed to give a proper receipt for collateral accepted by him [Section 648.442(2), Florida Statutes]; having misappropriated, converted or unlawfully withheld monies [Section 648.45(2)(h), Florida Statutes]; having failed to accept collateral in the name of the insurer [Section 648.442(3), Florida Statutes]; having failed to return collateral upon demand within 21 days after discharge of a bail bond [Section 648.57, Florida Statutes]; having demonstrated a lack of fitness or trustworthiness to engage in the bail bond business [Section 648.45(2)(e), Florida Statutes]; having engaged in fraudulent or dishonest practices in the conduct of business [Section 648.45(2)(g), Florida Statutes]; having wilfully failed to comply with or having wilfully violated an order or rule of the Department or a provision of the Insurance Code [Section 648.45(2)(j), Florida Statutes]; having demonstrated a lack of good faith in carrying out contractual obligations to the satisfaction of the insurance commissioner [Section 648.45(2)(1), Florida Statutes]; and having shown himself to be a source of injury or loss to the public or detrimental to the public interest and/or no longer carrying on bail bond business in good faith [Section 648.45(3)(d), Florida Statutes]: (Petitioner also voluntarily dismissed the charged violations contained in paragraphs 20(b) and 20(i) of Count IV during the final hearing.) Petitioner has failed to prove any of the statutory violations alleged in Count IV of the Administrative Complaint.
Count V of the Administrative Complaint involves the John Lee Paul, Sr. bond. It is uncontroverted that Respondent wrote the $250,000 bail bond, that the bond was subsequently estreated and final judgment entered against ADIC, that the collateral for the bond was liquidated and the proceeds thereof were deposited into the general operating account of Pioneer. It was stipulated during the final hearing that the bond has in fact been paid. Uncontroverted evidence was admitted to show that it is a common practice for the bonding company, prosecutor and Clerk of the Court to enter into an extended payment schedule for a large bond, with the approval of the court, which allows time in which to locate the missing defendant and return him to the jurisdiction of the court. In the John Lee Paul, Sr. matter, such an agreement was entered into and approved by the court. Yet, Count V of the Administrative Complaint alleges that Respondent violated the same statutory provisions set forth under Count IV and also alleges that Respondent failed or refused upon demand to pay over to any insurer any money coming into his hands belonging to the insurer, in violation of Section 648.45(3)(c), Florida Statutes. Petitioner has failed to prove that Respondent's conduct in this matter was inappropriate let alone in violation of any of the statutory prohibitions set forth under Count IV and has failed to prove that the additional statute relied upon in Count V has any application to the facts alleged in Count V. In its proposed recommended order, however, Petitioner attempts to raise for the first time allegations that Respondent also violated Sections 903.26 and 903.27, Florida Statutes, which place time limits upon the payment of forfeited bonds. As to those latter sections, first, Respondent was not charged with those violations in the Administrative Complaint, and, second, no evidence was offered that the
