STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RICHARD ERIC WATTS, )

)

Petitioner, )

)

vs. ) Case No. 97-2270

)

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

On October 15, 1997, a formal administrative hearing in this case was held in Sarasota, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Richard E. Watts, pro se

1345 Main Street, Suite C-4 Sarasota, Florida 34236

For Respondent: Pamela R. Jacobs, Esquire

Regional Counsel

Department of Banking and Finance 1300 Riverplace Boulevard, Suite 640

Jacksonville, Florida 32207 STATEMENT OF THE ISSUE

The issue in this case is whether the Petitioner’s application for licensure as a mortgage broker should be approved.

PRELIMINARY STATEMENT

On August 29, 1996, Richard Eric Watts filed an application for licensure as a mortgage broker with the Department of Banking and Finance. By letter dated October 22, 1996, the Department notified Mr. Watts that his application would be denied.

Mr. Watts filed a request for formal hearing. The Department forwarded the request to the Division of Administrative Hearings, which scheduled the proceeding. The Department twice amended the Notice of Intent to Deny the Application, amending and clarifying the proposed grounds for denial.

At the hearing, Mr. Watts presented the testimony of three witnesses, testified on his own behalf, and had Exhibits numbered 1-26 admitted into evidence. The Department presented the testimony of two witnesses and had Exhibits numbered 1-3(A, B, and D), 4-13, 15, and 17 (including parts A-E) admitted into evidence.

A transcript of the hearing was filed. Both parties filed proposed recommended orders. A prehearing stipulation filed by the parties was admitted into evidence.

FINDINGS OF FACT

1. The parties set forth an extensive set of stipulated facts in the Prehearing Stipulation filed prior to the commencement of the hearing.

2. The stipulated facts describe the activities of Richard

   Eric Watts (Petitioner) on behalf of Frederick M. Larry in relation to a $50,000 investment of Mr. Larry's funds with D. F. Owen, Inc., in May 1985. At approximately the same time as the Larry investment was made, the Petitioner contracted with D.F. Owen to act as an investment adviser for a fee of $33,500.

3. The stipulated facts describe the activities of the Petitioner on behalf of Cynthia Halabrin Trust. The Petitioner was the trustee for the trust, which was a residence. During a period of time that the residence was under renovation, the Petitioner allowed Mr. Larry to reside without payment to the trust.

4. The stipulated facts describe the activities of the Petitioner regarding the unregistered operation of "Watts Investment Management, Inc." during 1985 and the subsequent registration of the entity in 1986.

5. The stipulated facts describe the activities of the Petitioner regarding his employment as a broker for Paine Webber from 1982-1985, and the failure to obtain approval for outside employment activities while working for the investment firm.

6. The stipulated facts describe the legal action taken by Cynthia Halabrin Raybuck against the Petitioner and Paine Webber related to the activities of the Petitioner as trustee of the Halabrin trust. The parties settled the case through arbitration.

7. The stipulated facts address the creation of "Danbury

   Mortgage Company," and describe the preliminary activities of the unlicensed entity. The facts also identify the Petitioner's association with the Paradigm Mortgage Company, based in Jacksonville, Florida.

8. For purposes of this Recommended Order, all stipulated facts set forth in the prehearing stipulation filed by the parties are adopted and incorporated herein.

9. On or about August 29, 1996, the Petitioner filed an application with the Department of Banking and Finance, Division of Finance (Department) seeking licensure as a mortgage broker.

10. The Petitioner’s application disclosed that in 1989 he was denied admission to the Florida Bar.

11. In January 1989, the Petitioner was notified by the Florida Board of Bar Examiners (“Board”) of their intent to deny his application for admission to the Florida Bar. A hearing was conducted in June 1989 regarding the denial. The Petitioner was represented by legal counsel and testified under oath at the hearing.

12. On August 31, 1989, the Board of Bar Examiners denied Petitioner’s application for admission.

13. Based on the facts set forth in the Board's order, the Board concluded that the Petitioner “engaged in acts to serve his own interest to the detriment of others, violated registration laws, neglected payment of student loan obligations and issued numerous worthless checks.”

14. The Board also determined that the Petitioner provided misleading testimony at his Bar hearing and failed to disclose material information on his application.

15. Although at the formal administrative hearing the Petitioner attempted to explain the circumstances under which the Board's determination occurred, the testimony at hearing and the stipulated facts support the findings made by the Board.

16. Upon the filing of the Petitioner's application for licensure as a mortgage broker, the Department undertook a review of the application. Based on the review, the Department determined that the Petitioner had held himself out for business as a mortgage broker without an appropriate license.

17. In December 1995, the Petitioner registered the name "Danbury Mortgage Corporation" with the Florida Department of State, Division of Corporations.

18. In January 1996, the Petitioner established a business location for Danbury Mortgage Corporation.

1. The Petitioner listed the business under the "mortgage brokers" section of the Sarasota Yellow Pages.

2. At no time was the Danbury Mortgage Company licensed by the Department of Banking and Finance.

3. At the hearing, the Petitioner suggested that no mortgage business had been conducted by Danbury Mortgage Company. The Petitioner asserted that he had affiliated with another company (Paradigm) and that the other company was handling the

   registration of his office as a Paradigm branch.

   
   

4. The evidence establishes that the Petitioner was involved in completion of at least one mortgage loan application on behalf of Paradigm Mortgage Company without appropriate licensure. The Paradigm "branch" office was located in the same building as Danbury Mortgage Company, and shared the Danbury telephone number.

5. Based on a cryptic telephone message received by the Petitioner from a Paradigm supervisor, the Petitioner assumed that he was licensed. The Petitioner did not return the telephone call and made no credible attempt at determining whether he was licensed prior to acting on behalf of Paradigm Mortgage Company.

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over the parties and to the subject matter of this proceeding. Section 120.57(1), Florida Statutes.

7. The Department of Banking and Finance, Division of Finance, is responsible for regulation of mortgage brokers and related activities, including the licensure of brokers. Chapter 494, Florida Statutes.

8. The Petitioner has the burden of establishing that he meets the qualifications for licensure. Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (1st DCA 1977). In this case, the burden has not been met.

9. Section 494.0041(1), Florida Statutes, sets forth the disciplinary actions, including denial of licensure, which may be taken by the Department, against a licensed person or an applicant for licensure. Section 494.0041(2), Florida Statutes, provides grounds for such discipline and includes the following:

   (c) A material misstatement of fact on an initial or renewal application.

   
   

   * * *

   1. Any misuse, misapplication, or misappropriation of personal property entrusted to his care to which he had no current property right at the time of entrustment.

      
      

   2. Having a license, or the equivalent, to practice any profession or occupation revoked, suspended, or otherwise acted against, including the denial of licensure by a licensing authority of this state or another state, territory, or country for fraud, dishonest dealing, or any other act of moral turpitude.

   
   

   * * *

   (k) Acting as a mortgage broker or mortgage brokerage business without a current, active license issued under ss. 494.003-494.0043.

   
   

   * * *

   (q) Commission of fraud, misrepresentation, concealment, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in any state, nation, or territory; or aiding, assisting, or conspiring with any other person engaged in any such misconduct and in furtherance thereof.

10. The investment of the Larry funds with D.F. Owen, Inc. constitutes a violation of Section 494.0041(2)(q), Florida Statutes.

11. The misuse of the Halabrin Trust property constitutes a

    violation of Section 494.0041(2)(h), Florida Statutes.

    
    

12. The preliminary operation of the Danbury Mortgage Company, including advertising, and manner in which the phone was answered, and the taking of mortgage applications on behalf of Paradigm Mortgage Company without appropriate licensure, constitutes a violation of Section 494.0041(2)(k), Florida Statutes.

13. The denial of his application for admission to the Florida Bar is grounds for denial of the mortgage broker license under the provisions of Section 494.0041(2)(i), Florida Statutes.

14. The Petitioner's explanations at formal hearing of the circumstances under which such events occurred offered little but self-serving rationalization for his acts and did not provide any reasonable information upon which his behavior could be excused.

15. As to the operation of Danbury Mortgage Company, the Petitioner asserts that Danbury transacted no business and therefore required no licensure.

16. Section 494.001, Florida Statutes provides the following relevant definitions:

    (2) "Act as a mortgage broker" means, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a borrower, negotiating or offering to negotiate the terms or conditions of a mortgage loan on behalf of a lender, or negotiating or offering to negotiate the sale of an existing mortgage loan to a noninstitutional investor.

    (5) "Branch broker" means the licensee in charge of, and responsible for, the operation of a branch office of a mortgage brokerage business.

    
    

    (13) "Mortgage brokerage business" means a person acting as a mortgage broker.

    
    

    (18) "Principal broker" means a licensee in charge of, and responsible for, the operation of the principal place of business and all branch brokers.

    
    

17. The evidence establishes that at least one application for a mortgage was completed by the Petitioner while unlicensed during the period that the Petitioner believed he was licensed through Paradigm Mortgage Company.

18. The Petitioner asserts that he was not involved in the licensing details for the Paradigm "branch" and believed that he was licensed. Mistaken belief as to registration is not a defense to unregistered activity. Santacroce V. Department of Banking and Finance, 608 So. 2d 134, (Fla. 4th DCA 1992).

19. The evidence fails to establish that the Petitioner's application for licensure should be approved.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order denying the application of Richard Eric Watts for licensure as a mortgage broker.

DONE AND ORDERED this 30th day of December, 1997, in Tallahassee, Leon County, Florida.

_ _ WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1997.

COPIES FURNISHED:

Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350

Richard E. Watts, pro se 1345 Main Street, Suite C-4 Sarasota, Florida 34236

Pamela R. Jacobs, Esquire Regional Counsel

Department of Banking and Finance 1300 Riverplace Blvd, Suite 640

Jacksonville, Florida 32207

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: 97-002270

Orders for Case No: 97-002270