OCT 22 2003 DEPARTMENT OF FINANCIAL SERVICES So Tom GALLAGHER Docketed by~ CHIEF FINANCIAL OFFICER OB - evel Ln IN THE MATTER OF: MICHAEL C, GAINER CASE NO.: 60585-03-AG / ADMINISTRATIVE COMPLAINT TO: MICHAEL C. GAINER 525-5 Atlantic Bivd. Jacksonville, Florida 32233 MICHAEL C. GAINER 67 Evans Drive Jacksonville Beach, Florida 32250-2677 You, MICHAEL C. GAINER, are hereby notified that, pursuant to Chapter 626, Florida Statutes, the Chief Financial Officer of the State of Florida has caused to be made an investigation of your activities while licensed as an insurance agent in this state, as a result of which it is alleged: GENERAL ALLEGATIONS 1. Pursuant to Chapter 626, Florida Statutes, you, MICHAEL C. GAINER, are currently licensed in this state as a Health Agent (2-40), Life Agent (2-16), Life & Health Agent (2-18), Life Including Variable Annuity & Health Agent (2-15), and Life Including Variable Annuity Agent (2-14). 2. At all times pertinent to the dates and occurrences referred to herein, you, MICHAEL C. GAINER, were licensed in this state as an insurance agent. 3. At all times pertinent to the dates and occurrences referred to herein, you, MICHAEL C. GAINER, were associated with and acted as “account representative” or agent for a company known as 21* Century Satellite Communications, Inc. (hereafter “21 Century”). 4. You, MICHAEL C. GAINER, offered for sale and sold to Florida residents, various promissory notes and lease agreements (hereafter collectively referred to as “investments”) in 21°' Century through a Florida corporation known as Brown-Gainer & Associates, Inc. (hereafter “Brown-Gainer”), in which you have served as a Vice-president. 5. The investments issued, offered for sale and sold by you, MICHAEL C. GAINER, as agent for 21st Century, are securities as defined in Section 517.012 (18), Florida Statutes. , ~ 6. The investments issued, offered for sale and sold by you, MICHAEL C. GAINER, as agent for 21st Century, were not registered with the State of Florida Department of Banking and Finance (“DBF”), as required pursuant to Section 517.07, Florida Statutes, and were not exempt from such registration requirements, either under the provisions of sections 517.051 or 517.061, Florida Statutes. 7. In each count alleged herein, you, MICHAEL C. GAINER, provided the investor with 21st Century sales materials advertising that “each lease or loan agreement is backed up by the Uniform Commercial Code”; that the investment provided not only a fixed rate of return but also “a healthy share of the profits” described as an “average profit before tax of $9.95 per subscriber per month (or 35.6%)”; that funds lent by investors to 21" Century are “secured by collateral mortgage on the equipment and the income derived from it, confirmed by a UCCI and a corporate promissory note”; that lease payments “would consist of a monthly fixed and guaranteed interest payment of | percent, plus an additional 25 percent of the annual profits generated by the installation”; and a table showing that a typical $100,000 investment would result in a net return to the investor of $84,445 over a five year period; and that investors would entitled to take 100% depreciation on the “installation equipment” over a five-year period. 8. These advertisement materials were designed to leave all purchasers with the impression that funds invested would be safely held. 9. You, MICHAEL C. GAINER, sold 21° Century promissory notes and lease agreements, earning you substantial commissions. These individual transactions, more particularly described below, not only resulted in the loss of the invested funds in the sum of $90,000 but also in $3,712.52 in penalty fees or surrender charges due to you, MICHAEL C. GAINER, twisting your insurance clients’ annuity and life insurance contracts and retirement accounts, and at least $5,355.00 in lost interest income payments. 10. Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services has jurisdiction over your insurance licenses and appointments. ~ COUNT I 11. The above General Allegations are hereby realleged and fully incorporated by reference. 12. Onor around May 1998, you, MICHAEL C. GAINER, sold to S.R. of Tolla, Florida (DOB July 21, 1961) mutual funds as well as a tax-sheltered US&G Annuity & Life Company annuity. 13. Onor around December 1, 1998, you, MICHAEL C. GAINER, convinced S. R. to invest $50,000.00 in 21st Century. S.R. had confidence in making that investment because of her prior insurance relationship with you, MICHAEL C. GAINER. 14. Inconclusion as to this count, you, MICHAEL C. GAINER, willfully used your insurance license to circumvent the Florida Insurance Code by using S.R.’s trust in you, as her insurance agent, to convince her to invest in an authorized security, at a loss of $50,000. With the same investment, you caused S.R. to suffer a loss of an additional $5,355 of interest income, for a total loss to S.R. of $55,355.00. IT IS THEREFORE CHARGED that you, MICHAEL C. GAINER, have violated or are accountable under one or more of the following provisions of the Florida Insurance Code and Rules of the Department which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (a) If the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code. [Section 626.611(4), Florida Statutes]; (b) Demonstrated lack of fitness or trustworthiness to engage in the business of Insurance. [Section 626.611(7), Florida Statutes]; (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. [Section 626.611(8), Florida Statutes]; (d) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this code. [Section 626.611(13), Florida Statutes]; (e) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public. [Section 626.621(6), Florida Statutes]. COUNT II 15. The above General Allegations are hereby realleged and fully incorporated by reference. 16. On or around April 1999, you, MICHAEL C. GAINER met A.T. of Jacksonville, Florida (DOB September 23, 1928) for the purpose of soliciting her to buy insurance products or other investments. At that time A.T. had two individual retirement accounts (hereafter “IRA’s”): a Pioneer Capital Growth Fund IRA, and a Florida Telco Credit Union IRA account. 17. During about this same period and thereafter, you, MICHAEL C. GAINER, urged A.T. to surrender, liquidate, or transfer her existing IRA’s into an annuity with Penn Mutual Life Insurance Company. These transactions were all done with your knowledge and upon your advice, and resulted in A.T. suffering a loss of $442.92 in fees or surrender charges, while earning you, MICHAEL C. GAINER, substantial commission income. 18. Onor around March 2000, you, MICHAEL C. GAINER, convinced A.T. to invest $12,000.00 in 21" Century. A.T. had confidence in making this investment because of her prior insurance relationship with you, MICHAEL C. GAINER. 19. In conclusion as to this Count, you, MICHAEL C. GAINER, willfully used your insurance license to circumvent the Florida Insurance Code by using A.T.’s trust in you, as her insurance agent, to convince her to invest in an unauthorized security, at a loss of $12,000.00. In addition, you, MICHAEL C. GAINER, twisted A.T.’s IRA’s causing her to suffer an additional $442.92 in fees or surrender charges. ~ IT IS THEREFORE CHARGED that you, MICHAEL C. GAINER, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (a) If the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code. [Section 626.611(4), Florida Statutes]; (b) | Demonstrated lack of fitness or trustworthiness to engage in the business of insurance [Section 626.611(7), Florida Statutes]; (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment [Section 626.61 1(8), Florida Statutes]; (d) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this code [Section 626.611(13), Florida Statutes]; (e) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public [Section 626.621(6), Florida Statutes]; (f) Knowingly making any misleading representations or incomplete or fraudulent comparison of a or fraudulent material omission of or with respect to any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance in another insurer. [Section 626.9541(1)(1), Florida Statutes]. COUNT III 20. The above General Allegations are hereby realleged and fully incorporated hérein by reference. 21. During the late 1980’s and 1990’s, you, MICHAEL C. GAINER, sold R.J. of Palm Coast, Florida (DOB May 10, 1927) several annuities, which were issued by Transamerica Insurance Company, Bankers United Life Assurance Company, Annuity Investors Life Insurance Company, and Penn Mutual Insurance Company. 22. Onor around the month of March 2000, you, MICHAEL C. GAINER, urged R.J. to surrender, terminate, retain, pledge, assign, borrow on, or convert all or parts of the Bankers United Life Assurance Annuity to fund an investment through Annuity Investors Life Insurance Company. This transaction was done with your knowledge and upon your advice, and resulted in R.J. suffering $3,269.00 in surrender charges or fees. 23. Onor around March 14, 2000, you, MICHAEL C. GAINER, convinced R.J. to invest $28,000.00 in 21st Century. R.J. had confidence in making that investment because of his prior relationship with you, MICHAEL C. GAINER, as summarized above. 24. Inconclusion as to this Count, you, MICHAEL C. GAINER, willfully used your insurance license to circumvent the Florida Insurance Code by using R.J.’s trust in you, as his insurance agent, to convince him to invest in an authorized security, at a loss of $28,000.00. In addition, you, MICHAEL C. GAINER, twisted R.J.’s annuities causing him a loss of $3,269.00 in surrender charges or fees. IT IS THEREFORE CHARGED that you, MICHAEL C. GAINER, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: ~ (a) If the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of this code. [Section 626.611(4), Florida Statutes}; (b) | Demonstrated lack of fitness or trustworthiness to engage in the business of Insurance. [Section 626.611(7), Florida Statutes}; (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. [Section 626.611(8), Florida Statutes]; (d) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this code. [Section 626.611(13), Florida Statutes]; (e) In the conduct of business under the license or permit, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself to be a source of injury or loss to the public. [Section 626.621(6), Florida Statutes]; (f) Knowingly making any misleading representations or incomplete or fraudulent comparison of a or fraudulent material omission of or with respect to any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance in another insurer. [Section 626.9541(1)(1), Florida Statutes]. WHEREFORE, you, MICHAEL C. GAINER, are hereby notified that the Chief Financial Officer intends to enter an order suspending or revoking your license(s) and eligibility for licensure as an insurance agent or to impose such lesser penalties as may be provided under the provisions of Chapter 626, Florida Statutes, and under the other referenced sections of the Florida Statutes as set out in this Administrative Complaint. Additionally, you are notified that the Department intends to seek aggravation of the applicable statutes for the purposes of calculating the total penalty assessed against you, MICHAEL C. GAINER, in consideration of the age and capacity of the victims. You are further notified that any order entered in this case revoking or suspending any license or eligibility for licensure held by you shall also apply to all other licenses and eligibility held by you under the Florida Insurance Code. NOTICE OF RIGHTS Pursuant to Sections 120.569 and 120.57, Florida Statutes and Rule Chapter 28-106, Florida Administrative Code (F.A.C.), you have the right to request a proceeding to contest this action by the Department. You may elect a proceeding by completing the attached Election of Rights form or filing a Petition. Your Petition or Election of a proceeding must be in writing and must be filed with the General Counsel acting as the Agency Clerk, Department of Financial Services. If served by U.S. Mail the Petition or Election should be addressed to the Florida Department of Financial Services at 612 Larson Building, Tallahassee, Florida 32399-0333. If Express Mail or hand delivery is utilized, the Petition or Election should be delivered to 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0333. The Petition or Election must be received by, and filed in the Department within twenty-one (21) days of the date of your receipt of this notice. YOUR FAILURE TO RESPOND TO THIS ADMINISTRATIVE COMPLAINT WITHIN TWENTY-ONE (21) DAYS WILL CONSTITUTE A WAIVER OF YOUR RIGHT TO REQUEST A PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF REVOCATION WILL BE ENTERED AGAINST YOU. If a proceeding is requested and there is no dispute of fact the provisions of Section 120.57(2), Florida Statutes would apply. In this regard you may submit oral or written evidence in opposition to the action taken by this agency or a written statement challenging the grounds upon which the agency has relied. While a hearing is normally not required in the absence of a dispute of fact, if you feel that a hearing is necessary one will be conducted in Tallahassee, Florida or by telephonic conference cal] upon your request. If you dispute material facts that are the basis for this agency’s action you may request a proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes. If you request this type of proceeding, the request must comply with all of the requirements of Rule Chapter 28-106, F.A.C. and contain a) A statement identifying with particularity the allegations of the Department that you dispute and the nature of the dispute; b) An explanation of what relief you are seeking and believe you are entitled to; c) Any other information which you contend is material. These proceedings are held before a State administrative law judge of the Division of Administrative Hearings. Unless the majority of witnesses are located elsewhere the Department will request that the hearing be conducted in Tallahassee. If you request a hearing, you have the right to be represented by counsel, or other qualified representative, to take testimony, to call and cross-examine witnesses, and to have subpoena and subpoena duces tecum issued on your behalf. You are hereby notified that mediation under Section 120.573, Florida Statutes, is not available. Failure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior correspondence in this matter shall be considered freeform agency action, and no such correspondence shall operate as a valid request for an administrative proceeding. Any request for administrative proceeding received prior to the date of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. DONE AND ORDERED this__ 22nd ___dayof__ october , 2003. KAREN CHANDLER Deputy Chief Financial Officer “nN Monnecnnt”” C ye nv veg ye - os Or aera 10 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT has been furnished to: MICHAEL C. GAINER, 525-5 Atlantic Blvd., Jacksonville, Florida 32233; and MICHAEL C. GAINER, 67 Evans Drive, Jacksonville Beach, Florida 32250-2677, by Certified Mail this 22nqday of October , 2003. David J. Busch Florida Bar # 140945 Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Phone: (850) 413-4146 - li STATE OF FLORIDA DEPARTMENT OF FINANCIAL SERVICES DIVISION OF LEGAL SERVICES IN THE MATTER OF: MICHAEL C. GAINER / ELECTION OF PROCEEDING I have received and have read the Notice of the ADMINISTRATIVE COMPLAINT filed against me, including the Notice of Rights contained therein, and I understand my options. I am requesting disposition of this matter as indicated below. (Choose one) 1. [J I do not dispute any of the Department’s factual allegations and I do not desire a hearing. I understand that by waiving my right to a hearing, the Department may enter a final order that adopts the Administrative Complaint and imposes the sanctions sought, including revoking my licenses and appointments as may be appropriate. 2. I do not dispute any of the Department's factual allegations and I hereby elect a proceeding to be conducted in accordance with section 120.57(2), Florida Statutes. In this regard, I desire to (Choose one): [] Submit a written statement and documentary evidence in lieu of a hearing; or [] Personally attend a hearing conducted by a department hearing officer in Tallahassee; or {] Attend that same hearing by way of a telephone conference call. 3.[ ] I do dispute one or more of the Department's factual allegations. I hereby request a hearing pursuant to section 120.57(1), Florida Statutes, to be held before the Division of Administrative Hearings. TO PRESERVE YOUR RIGHT TO A HEARING, YOU MUST FILE YOUR RESPONSE WITH THE DEPARTMENT OF FINANCIAL SERVICES WITHIN TWENTY-ONE (21) DAYS OF YOUR RECEIPT OF THE ADMINISTRATIVE COMPLAINT. THE RESPONSE MUST BE RECEIVED BY THE DEPARTMENT NO LATER THAN 5:00 P.M. ON THE TWENTY-FIRST DAY AFTER YOUR RECEIPT OF THE ADMINISTRATIVE COMPLAINT. The address for filing is: General Counsel as acting agency clerk, Florida Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0333. Signature Print Name Date: Address: Phone No.: 12

Docket for Case No: 03-004664PL