STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF THE COMPTROLLER, )

DIVISION OF BANKING, )

)

Petitioner, )

)

vs. ) CASE NO. 93-0002

) VINCENT A. RADCLIFFE, III; U.S. ) SAVINGS TRUST MANAGEMENT, INC., )

a Florida Corporation; and U.S. ) SAVINGS TRUST DEVELOPMENT, INC., )

a Florida Corporation, )

)

Respondents. )

)

RECOMMENDED ORDER

A hearing was held in this case in Tampa, Florida on November 22, 1993 before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For the Petitioner: Susan E. Steinberg, Esquire

Department of Banking & Finance 1313 Tampa Street, Suite 615

Tampa, Florida 33602-3394

For the Respondent: Dane E. DiSano, Esquire

Radcliffe 4020 Park Street North, Suite 301-B

St. Petersburg, Florida 33709 (Permitted to withdraw at hearing)

For the Respondent: David R. Schachter, Esquire Corporations Rubin Icot Center

13770 58th Street North, Suite 308

Clearwater, Florida 36420 (Permitted to withdraw at hearing)

STATEMENT OF THE ISSUES

The issue for consideration in this hearing is whether the Department's Emergency Cease and Desist Order relating to Respondent's activities in Florida should be made permanent and whether an administrative fine should be imposed against the Respondents.

PRELIMINARY MATTERS

By Administrative Complaint and Notice of Intention to Issue an Emergency Cease and Desist Order, dated November 20, 1992, the Department of Banking and Finance sought to prohibit Respondents, both individually and as corporate entities, from conducting unlawful banking activities within the State of Florida and to impose an administrative fine in the event the proscribed activity continued beyond the entry of that Order. Both Corporate respondents filed Petitions for Administrative Hearing regarding the Department's action on December 11, 1992, and Petitioner, Radcliffe, filed his Petition in opposition on December 16, 1992. Thereafter, the matter was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer.

The case was initially set for hearing on May 18, 1993 by the undersigned on February 5, 1993 but the hearing was continued until July 21, 1993 at the request of the Petitioner on April 27, 1993. Thereafter, at the joint request of the parties, the matter was placed in abeyance until, on August 18, 1993, at Petitioner's request, the undersigned again set the matter for hearing in Tampa on November 22, 1993, at which time it was heard as scheduled.

In the interim, however, on November 9, 1993, counsel for Respondent, Radcliffe, filed a Motion for Continuance or, in the alternative, to withdraw, based on his inability to contact his client against whom an criminal arrest warrant was outstanding. Counsel indicated his assumption that his client would not appear at the hearing, and, without any contact with his client, counsel was unprepared to present a defense. The issue was argued at a telephone conference call on the motion on November 15, 1993, and thereafter, the undersigned denied both the Motion for Continuance and the Motion to Withdraw with the understanding that counsel would attend the hearing in the event his client appeared. In the event the Respondent did not appear, the undersigned would revisit the Motion to Withdraw.

Also, in the interim, counsel for the corporate Respondents filed a Motion to Withdraw, citing as his grounds therefor, the same matters as cited by Radcliffe's counsel and indicating Radcliffe was, in essence, the corporations. Counsel for the corporations was situated at his office in New York and attended the hearing by telephone conference call. When, as late as 20 minutes after the time scheduled for convening the hearing, Mr. Radcliffe had not appeared, the undersigned granted the Motion to Withdraw of both counsel and they were excused. Prior to doing so, however, the undersigned determined from Radcliffe's counsel that Radcliffe had been notified of the date, time and place of the hearing.

At the hearing, Petitioner presented the testimony of Joan Johnston, a Financial Investigator with the Department's Tampa office; Carl B. Eisenbach, Jr., the Department's Area Financial Manager in Tampa; and Irene Bradley, Barbara Archibald, Barry Vierengarten and William Kunkel, all investors/depositors with the Respondents. Petitioner also introduced Petitioner's Exhibits 1-23. The undersigned also officially recognized pertinent editions of Sections 655.933, 655.922, 655.005. 658.74, 655.012 and 655.015, Florida Statutes. Respondents did not appear and presented no evidence.

A transcript of the proceedings was furnished and subsequent to the hearing, counsel for Petitioner submitted Proposed Findings of Fact which are accepted and incorporated herein. No post-hearing matters were submitted by or for Respondents.

FINDINGS OF FACT

1. At all times pertinent to the allegations contained herein, the Petitioner, Department of Banking and Finance, was the state agency responsible for and with the authority for regulation of the banking industry in Florida. The Respondents, US Savings Trust Management, Inc., and US Savings Trust Development, Inc., were Florida corporations engaged in activities in Florida which fall within the jurisdiction of the Department. Respondent, Vincent A. Radcliffe, III, was the principal for the Florida operations of both corporations and managed and controlled both corporations.

   
   

2. None of the Respondents was licensed in Florida as Florida or federal financial institutions as described in Section 655.0051(1)(g),(h), or (p), Florida Statutes. As best as can be determined, both US Trust Management, Inc. and U.S. Trust Development, Inc. were operated by Respondent Radcliffe as a single business.

   
   

3. Both corporate Respondents operated a program marketed as the Savings Plan. Participants for this plan were solicited by the corporate Respondents through Respondent, Radcliffe, and by employees or agents of the corporations to participate in what was described as a savings program which would allow participants to deposit after-tax income, deducted from their pay, for both the short and long term.

   
   

4. Radcliffe and the other corporate solicitors told prospective participants they could deposit money with US Trust Management, Inc. through payroll deductions; their deposits would be allocated into both short term and long term savings accounts; their short terms savings were fully liquid and could be withdrawn at any time; their long term savings were also liquid but a substantial penalty was incurred for early withdrawal; their funds on deposit would earn above-market rates of interest due to USSTM's ability to pool funds to earn higher rates; and their savings plans were insured by FDIC for up to one hundred thousand dollars. In fact, these representations were made for the purpose of inducing individuals to deposit money with Respondent and, for the most part, were false or misleading.

   
   

5. As of March, 1992, Respondents had enrolled at least three hundred

   (300) participants from approximately fifty (50) different businesses in the Plan. Participants received quarterly statements reflecting account activity, liquid balances and total amount on deposit as well as notifying them they were earning between 5.25 and 9 percent interest on their deposits. If a participant wanted to withdraw any of his or her money, a request to USSTM was all that was required. USSTM accepted funds from participants in the plan during the period January, 1989 through December, 1992.

   
   

6. Participants were led to believe their money was placed in separate short or long term accounts within the saving plan. This was not true. Instead, the funds received from all participants were commingled and deposited in accounts in the name of USSTM at several different financial institutions. For the two years from January, 1991 through December, 1992, the funds were on deposit in a non-interest bearing account at the C&S Bank of Pinellas County.

   
   

7. None of the financial institutions into which the participants' money was placed was advised of the origin of the funds. In fact, the only evidence that participants had placed money with Respondents were the Respondents' records. These records, as of March 31, 1992, revealed Short Term Savings Plan

   placements with USSTM by participants of $110,554.00. At the same time, USSTM deposits at C&S Bank totalled $28,509.00, leaving the sum of more than

   $82,000.00 not accounted for. USSTM records showed long term retirement plan placements by participants of $72,406.00 on the same date.

   
   

8. Though most participants in the long term retirement plan were unaware of the fact, their placements with this plan were used to purchase an insurance product in their names. In many cases the participants were not furnished with a policy, or their policy was allowed to lapse for failure by Respondents to pay the related premiums thereon, notwithstanding the participants continued to make the monthly placements.

   
   

9. Notwithstanding Respondents were served with an Emergency Cease and Desist Order by the Department on November 30, 1992, they received and cashed checks from participants to the Savings Plan subsequent to that date and up to and including December 10, 1992.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

    
    

11. Section 655.922, Florida Statutes, prohibits any person other that a financial institution having its principal place of business in this state from engaging in the business of soliciting or receiving funds for deposit or from issuing certificates of deposit or paying checks. It also provides that:

    
    

    ... no person shall establish or maintain a place of business in this state for any of the functions, transactions or purposes mentioned ....

    
    

12. Subsection (3) of that Section authorizes the Department of Banking and Finance to issue and serve upon any person who violates any of the provisions of that statute a complaint seeking a cease and desist order .

    
    

13. To constitute a banking operation, the evidence must establish that funds are solicited or received for deposit and that a debtor-creditor relationship is created between the depositor and the depository, Department of Banking and Finance v. Standard Federal Savings and Loan Association, 488 So.2d 50 (Fla. 1986).

    
    

14. In this case, to take the action sought, the Department must establish the misconduct of the Respondents here by a preponderance of the evidence. Regardless of the weight of evidence test imposed in this case, the evidence of record overwhelmingly meets it. The evidence clearly establishes that Respondents sold their plan to prospective depositors, soliciting deposits into their "Plans" by the use of mostly false and misleading representations. Were that not enough, once having received the deposits, Respondents failed to safeguard and steward those funds held in the fiduciary relationship created but converted a substantial portion thereof to other purposes. This activity by Respondents resulted in serious loss to many of the depositors.

15. What is more, even when served with the Department's Cease and Desist Order, Respondents, while perhaps refraining from further solicitation, nonetheless continued to receive deposits and, instead of returning them to the depositors, accepted and converted them as well.

    
    

16. Section 655.041(2)(b), Florida Statutes, authorizes the Department to impose an administrative fine in the amount of $50,000.00 per day for each day the violation continues. The evidence shows Respondents were served with the Department's Cease and Desist Order on November 30, 1992 and thereafter continued to accept funds for deposit through December 10, 1992, an additional

10 days. This continuing misconduct permits imposition of an administrative fine of $50,000.00 each day for 10 days, for a total of $500,000.00. In addition, Respondents' misconduct can fairly be characterized as reckless and clearly resulted in pecuniary loss to their depositors which under the provisions of Section 655.041(2)(a), authorizes imposition of a fine of

$10,000.00 for each day the violation continues. The Department does not seek to impose such a fine, however.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that the Emergency Cease and Desist Order entered by the Department on November 20, 1992 against the Respondents be made permanent, and that an administrative fine of $500,000.00 be assessed against the Respondents, Vincent A. Radcliffe, III; U.S. Savings Trust Management, Inc.; and U.S. Savings Trust Development, Inc., jointly and severally.

RECOMMENDED this 7th day of January, 1994, in Tallahassee, Florida.

ARNOLD H. POLLOCK, 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 7th day of January, 1994.

COPIES FURNISHED:

Susan E. Steinberg, Esquire Department of Banking and Finance 1313 Tampa Street, Suite 615

Tampa, Florida 33602-3394

Vincent A. Radcliffe, III 1900 Seton Drive

Clearwater, Florida 34623

Dane E. DiSano, Esquire 4020 Park Street North Suite 301-B

St. Petersburg, Florida 33709

David R. Schachter, Esquire Rubin Icot Center

13770 58th Street North, Suite 308

Clearwater, Florida 34620

Hon. Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level

Tallahassee, Florida 32399-0350

William G. Reeves General Counsel

Office of the Comptroller Room 1302, The Capitol

Tallahassee, Florida 32399-0350

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 consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which will issue the Final Order in this case.

Docket for Case No: 93-000002

Orders for Case No: 93-000002