STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE )

AND TREASURER, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4689

)

RUDOLPH HARRIS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Veronica E. Donnelly, held a formal hearing in the above-styled case on December 6, 1990, in Tampa, Florida.

APPEARANCES

For Petitioner: Gordon T. Nicol, Esquire

Department of Insurance

412 Larson Building Tallahassee, Florida 32399-0300

For Respondent: Rudolph Harris, pro se

812 East Henderson Avenue Tampa, Florida 33602

STATEMENT OF THE ISSUES

Whether the Respondent's license as a limited surety agent should be suspended, revoked or otherwise disciplined based upon the allegations set forth in the Administrative Complaint.

PRELIMINARY STATEMENT

By an Administrative Complaint filed July 9, 1990, the Department of Insurance and Treasurer (the Department), charged the Respondent, Rudolph Harris (Harris) with having violated various provisions of Chapter 648, Florida Statutes. The gravamen of the charges is that Respondent Harris failed to remit it funds received for bond forfeitures and premiums.

In his Answer to the Administrative Complaint, Respondent disputed the allegations of fact and requested a formal administrative hearing. The case was then transferred to the Division of Administrative Hearings on August 5, 1990, and the final hearing was scheduled. The case proceeded to hearing on December 6, 1990.

During the hearing, the Department presented eight witnesses and eight exhibits. The Respondent testified in his own behalf and submitted eight exhibits. He was allowed an additional ten days to file other exhibits he did not bring to the hearing. None of these additional exhibits were ever filed with the Hearing Officer. As the ten days have expired, the evidentiary portion of the proceedings has closed, and the additional exhibits can no longer be considered by the Hearing Officer. All of the exhibits offered at hearing were admitted into evidence.

The transcript was filed with the Division of Administrative Hearings on January 22, 1991. The Department's Proposed Recommended Order was filed January 30, 1991. Respondent's right to file proposed findings of fact was waived when he failed to submit them in a timely manner. Rulings on the proposed findings submitted by the Department are in the Appendix of the Recommended Order.

FINDINGS OF FACT

1. Background

   
   

   1. At all times material to these proceedings, Respondent Harris was licensed as a limited surety agent and continues to be eligible for licensure and appointment in Florida.

      
      

   2. On June 2, 1988, Respondent executed a bail bond agreement with Indiana Lumbermen's Mutual Insurance Company (Indiana Lumbermen's) as the insurer of the surety bonds, Underwriters Surety, Inc. (Underwriters) as its agent, and Jim Fowler, Jr. d/b/a Fowler Enterprises (Fowler) as its representative indemnitor and supervising representative.

      
      

   3. Under the terms of the agreement, Indiana Lumbermen's agreed to act as surety on bail bonds solicited and signed in its name by Respondent Harris. In turn, he agreed to charge, collect and remit all bond premiums through Fowler, who has a separate agreement with Indiana Lumbermen's and Underwriters regarding those duties. Additionally, Respondent agreed to hold Indiana Lumbermen's, Underwriters, and Fowler harmless for all bond forfeitures and court costs expended by any of them for bail bonds issued in Indiana Lumbermen's name by him.

      
      

   4. Because Fowler was also required to indemnify Indiana Lumbermen's and Underwriters against bond forfeitures and court costs resulting from bonds issued by Respondent Harris, a $10,000 mortgage was placed against Respondent's home as collateral for such losses by Fowler.

      
      

   5. Indiana Lumbermen's and Underwriters also required Respondent Harris to place two per cent of the face amount of each bond in an indemnity fund. The agreement states that after each indemnification is finally determined and satisfied, the remaining portion of the indemnity fund will be delivered to the Respondent or to Fowler.

      
      

   6. Fowler and the Respondent agreed that when the indemnity fund built up to $25,000.00 in reserved funds, Fowler would release the mortgage. Respondent could also request that the amount of money he was required to place into the indemnity fund for subsequent bond executions be reduced to one per cent of the face of the bonds.

   7. After the bail bond agreement was executed by all parties and the Respondent's wife in June of 1988, the bail bonds service office was opened in Tampa, Hillsborough County, Florida.

      
      

2. Bond Forfeitures

   
   

   1. On December 12, 1988, two final judgments were entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-168638 and No. BB1-168639 due to the failure of Charles Douglas, Jr., to appear to answer criminal charges for which the bonds had been issued. Each bond was in the principal amount of $1,000.00 and was issued by Respondent Harris as Attorney- In-Fact for Indiana Lumbermen's. The sum of the two judgments was $2,000.00 and

      $169.00 and court costs.

      
      

   2. Warren H. Dawson, attorney for the Defendant, motioned the court to vacate the judgments on January 24, 1989.

      
      

   3. Instead vacating the judgments, the court stayed the enforcement of the judgments until April 26, 1989.

      
      

   4. At the chose of the time period, Charles Douglas, Jr., was not located, ad the bond funds were forfeited to the State of Florida for the use and benefit of Hillsborough County. These funds, totalling 2,000.00, were paid to the Clerk of Court by Harry Hamner Enterprises on May 18, 1989, as agent for Fowler. Court costs of $84.50 were paid by Respondent Harris, and $84.50 in court costs remain outstanding.

      
      

   5. The funds paid to the Clerk of Court on behalf of Fowler were issued to a low Fowler to comply with the bail bond agreement as super representative. Respondent Harris is still obligated to indemnify Fowler for the payment.

      
      

   6. On December 3, 1990, a remittance of $1,000.00 was given to Fowler because Defendant had been located. As this hearing took place only three days later, it is unknown if a check for the other S1,000.00 was forthcoming to Fowler. If the failure to remit the owner $1,000.00 was an oversight, it could be easily corrected by the Clerk of Court as the location of the Defendant would allow we return of these funds as well.

      
      

   7. On June 4, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-200214 due to the failure of Ivan R. Jacob to appear in court to answer the criminal charges for which the bond had been issued. The bond was in the principal amount of

      $1,000.00 and was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The judgment was for $1,000.00 and $84.50 in court costs.

      
      

   8. Warren H. Dawson, attorney for the Defendant, motioned the court to vacate and set aside the judgment and costs on July 12, 1989. The motion was granted on August 24, 1989, except that the payment of $84.50 in court costs was still required.

      
      

   9. The outstanding court costs of $84.50 were paid by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's on August 28, 1989.

      
      

   10. Respondent Harris has not indemnified Indiana Lumbermen's for those funds expended to pay the court costs as required by the bail bond agreement. He is still obligated to do so.

   11. On June 14, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-197205 due to the failure of William A. Evans to appear to answer criminal charges for which the bond had been issued. The principal amount of the bond was $500.00. It was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The sum of the judgment was $500.00 with court costs of $84.50.

       
       

   12. The judgment and court costs were satisfied by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's on August 28, 1939.

       
       

   13. Respondent Harris has not indemnified Indiana Lumbermen's for the funds expended, as required by the bail bond agreement.

       
       

   14. On June 21, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-197204 due to the failure of Williams A. Evans, Jr., to answer criminal charges for which the bond had been issued. The principal amount of the bond was $500.00, and it was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The sum of the judgment was $500.00 plus court costs of $84.50.

       
       

   15. On August 28, 1989, the judgment and court costs were satisfied by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's.

       
       

   16. Respondent Harris has not indemnified Indiana Lumbermen's for the funds expended, as required by the bail bond agreement.

       
       

   17. Respondent has not received funds to pay for the bond forfeitures from any source.

       
       

3. Bond Net Premiums

   
   

   1. As part of his duties regarding the issuance of bonds for Indiana Lumbermen's, Respondent was required to regularly report the execution of bail bonds to Fowler and Underwriters. The net premiums were to be paid to either of these agents for Indiana Lumbermen's.

      
      

   2. According to the business records maintained by Fowler, the Respondent failed to remit the required net premiums owed with reports numbered 35, 36, 37 and 38. The amount of money owed for these premiums is $2,370.00.

      
      

   3. For April 7, 1989, Rosettia Jacobs paid Respondent $1,000.00 to obtain two bonds for the pretrial release of her son, Andre Hudson. Two bonds, with a face value of $5,000.00 each were executed by Respondent that day.

      
      

   4. The net premiums for two bonds with a face value of $10,000.00 were listed on bail bond execution report number 36, but the net premium was never paid to Fowler or Underwriters from the cash received from Rosettia Jacobs for that purpose.

      
      

   5. In July 1989, Melvin Rolfe met with Respondent's son, who represented he could accept funds on behalf of his father for the bail bond business. Melvin Rolfe gave Respondent's son $250.00 for a bail bond in order to obtain the pretrial release of his brother, Joseph Rolfe. Of these funds, $100.00 was for payment of the gross premium and $150.00 was collateral. The bond for

      $1,000.00 was executed by Respondent on August 1, 1989.

   6. The collateral given to Respondent's son was not noted on bail bond execution report number 35. The net premium for the $1,000.00 bond for Joseph Rolfe was not sent to Fowler or Underwriters from the cash delivered by Melvin Rolfe for that purpose.

      
      

   7. On August 1, 1989, Melvin Hamilton gave the Respondent $250.00 for two bonds in order to obtain the pretrial release of his brother, Mark Hamilton.

      One bond premium was $100.00 and the other bond premium was $50.00. The additional $100.00 was collateral. Bonds with the total face value of $1,250.00 were executed by Respondent on August 1, 1989.

      
      

   8. The collateral was not noted on the bail bond execution report number 35, and the net premiums were not sent to Fowler or Underwriters from the funds delivered by Melvin Hamilton for that purpose.

      
      

   9. On August 4, 1989, Charles Rodriguez paid $350.00 for bond premiums to Respondent in order to obtain the pretrial release of his wife, Tina Dunn. The total gross premium amount was $450.00. Respondent extended credit to Charles Rodriguez and issued three bonds with the total face value of $4,500.00 on August 4, 1989.

      
      

   10. Although the bonds were issued and noted on bail bond execution report 35, the net premiums were not sent to Fowler or Underwriters from the funds delivered by Charles Rodriguez for that purpose.

       
       

   11. On September 13, 1989, Fowler, as supervising representative for Indiana Lumbermen's and Underwriters, sent a formal demand to Respondent for the

       $2,370.00 due for premiums not included with reports numbered 35-38. Respondent has failed to pay any of the funds actually received for those premiums to Fowler, Underwriters, or Lumbermen's.

       
       

4. Mitigation

1. Respondent has made some attempts to locate defendants whose bonds have been forfeited to the state.

   
   

2. Respondent extended credit to some people seeking bail bonds so he never collected some of the money owed to Indiana Lumbermen's for premiums.

   
   

   CONCLUSIONS OF LAW

   
   

3. The Division of Administrative Hearings has jurisdiction over the subject matter alleged in the Administrative Complaint and the parties to this proceeding pursuant to Sections 120.57(1) and 648.46(5), Florida Statutes.

   
   

4. Section 648.45, Florida Statutes [1987], authorizes the Department to deny, suspend, revoke or refuse to renew any license issued to limited surety agents such as the Respondent for any violation of the laws of this state relating to bail or any violation of the insurance code.

   
   

5. The procedure for disciplinary action against licenses requires the filing of a formal complaint and prosecution of the complaint pursuant to Chapter 120. Section 468.46(3), Florida Statutes [1987].

6. Such proceedings are penal in nature. Bach v. Florida Board of Dentistry, 378 So.2d 34 (Fla. 1st DCA 1980). The Department has the burden of proof and must prove by clear and convincing evidence that the Respondent committed the violations set forth in the administrative complaint. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

   
   

7. Factually, the Department has failed to prove that Respondent Harris misappropriated the $3,422.50 due Fowler for bond forfeitures as alleged in Paragraph 12 of the Administrative Complaint. There was no showing that the Respondent received these funds back from the court or the defendants during the conduct of his business and failed to return the funds to Fowler. Respondent Harris could not misappropriate what he has never received.

   
   

8. The second allegation of misconduct in Paragraph 12 states that Respondent Harris misappropriated $2,370.00 due Fowler for bond premiums. Evidence presented reveals that Respondent issued bonds for which net bond premiums to Indiana Lumbermen's, through Underwriters or Fowler, have never been paid. While the Department did not prove that Respondent received and misappropriated all of these funds, it is clear that he did misappropriate funds belonging to Indiana Lumbermen's, the surety company who acted as the insurer, on the bonds he wrote on Andre Hudson, Joseph Rolfe, Mark Hamilton and Tina Dunn. The net premiums for these bonds were not sent to Fowler, as required under the bail bond agreement. Accordingly, Respondent is guilty of having violated Section 648.45(2)(h), Florida Statutes [1989], which prohibits the misappropriation of moneys belonging to a surety and received in the conduct of business under a license.

   
   

9. Paragraph 13 of the Administrative Complaint charges Respondent with failing to remit net premiums in the amount of $2,370.00 to Indiana Lumbermen's or Fowler, in violation of Section 648.45(3)(c), Florida Statutes [1987].

   
   

10. This charge is similar to the previous charge. Again, it must be proved that funds belonging to the insurer were received and not paid upon demand. While this misconduct was proved at hearing, it involved the same funds and victim as the misappropriation allegation in Paragraph 12. As a result, the charge is dismissed to prevent the Respondent from being prosecuted twice for the same misconduct.

RECOMMENDATION

Based upon the foregoing, which demonstrates that Respondent misappropriated net bond premiums owed the insurer on four occasions between April and early August 1989, it is RECOMMENDED:

The limited surety license of Rudolph Harris, Respondent, be suspended for one year, pursuant to Section 648.49(1), Florida Statutes [1987].

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of February 1991.

VERONICA E. DONNELLY

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February, 1991.

APPENDIX TO RECOMMENDED ORDER CASE NO. 90-4689

Petitioner's proposed finding of fact are addressed as follows:

1. Accepted. See HO #1.

2. Accepted. See HO #1.

3. Rejected. Contrary to fact. See #18-#23. Also, irrelevant as to charging document which claimed Respondent misappropriated bond forfeiture funds.

4. Rejected. Irrelevant as to charging document which claim Respondent misappropriated forfeiture funds. See HO $14-#17.

5. Rejected. Contrary to fact. See HO #8-#13.

6. Accepted. See HO #35.

COPIES FURNISHED:

Gordon T. Nicol, Esquire Department of Insurance

412 Larson Building Tallahassee, FL 32399-0300

Rudolph Harris

812 E. Henderson Avenue Tampa, FL 33602

Tom Gallagher

State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, FL 32399-0300

Bill O'Neil General Counsel

Department of Insurance and Treasurer The Capitol, Plaza Level

Tallahassee, FL 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to 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: 90-004689

Orders for Case No: 90-004689