STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

JOHN VINCENT BRASILI,

Respondent.

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) Case No. 04-2077PL

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RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot, the assigned Administrative Law Judge of the Division of Administrative Hearings, on October 12, 2004, by video teleconference between sites in West Palm Beach and Tallahassee, Florida.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Financial Services 612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: Nancy Wright, Esquire

7274 Michigan Isle Road Lake Worth, Florida 33467

STATEMENT OF THE ISSUE

The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed

against him, and, if so, what disciplinary action should be taken against him, if any.

PRELIMINARY STATEMENT

Petitioner Department of Financial Services filed an Administrative Complaint against Respondent John Vincent Brasili, alleging that he had violated various statutes regulating his conduct as an insurance agent, and Respondent timely requested an evidentiary hearing regarding those allegations. This cause was thereafter transferred to the Division of Administrative Hearings to conduct the evidentiary proceeding.

The Department presented the testimony of Christie Gutknecht, Ellen Prabhakar, Edith Ellis, Gertrude Franklin, and Nancy Franklin. The Respondent testified on his own behalf.

Additionally, the Department's Exhibits numbered 1-10 were admitted in evidence.

Although both parties requested the right to file proposed recommended orders after the conclusion of the final hearing, only the Department did so. That document has been considered in the entry of this Recommended Order.

FINDINGS OF FACT

1. At all times material hereto, Respondent has been licensed in Florida as a life and variable annuity contracts salesman and as a life and health insurance agent.

2. In 1994 twin sisters Edith Ellis and Gertrude Franklin attended a luncheon at which Respondent made a presentation. The sisters were then 79 years old, and both were the owners of single-premium insurance policies issued by Merrill Lynch. They decided to cash in their existing policies and purchase new policies through Respondent.

3. Both Ellis and Franklin executed 1035 exchange forms whereby the monies obtained from cashing in their Merrill Lynch policies were transferred to the insurance companies issuing their new policies. Both were charged a substantial penalty by Merrill Lynch.

4. On August 11, 1994, Security Connecticut Insurance Company issued to Edith Ellis a flexible premium adjustable life insurance policy with a face value of $150,000. The cover page of the policy recites in bold print that it is a flexible premium adjustable life insurance policy, directs the insured to read the policy, and provides a 20-day period for canceling the policy with a full refund. It also contains a statement that

   provides:

   
   

   This Policy provides flexible premium, adjustable life insurance to the Maturity Date. Coverage will end prior to the Maturity Date if premiums paid and interest credited are insufficient to continue coverage to that date. Dividends are not payable. Flexible premiums are payable to the end of the period shown, if any, or until

   the Insured's death, whichever comes first.

5. The cover page also recites that the first premium is

   
   

   $75,000 and that the monthly premium is $805.75. After deductions, Merrill Lynch only transferred $44,928.81, and Ellis never paid any additional premiums. Therefore, the policy was not funded to maturity since the company only received a partial payment.

6. The insurance company did not set up this policy to receive periodic premium payments because it was originally anticipated that the company would receive $75,000 which would carry the expense, based upon the then interest rate. The policy was dependent upon interest rates.

7. The company sent annual statements, however, to both Ellis and to the agency where Respondent worked. These statements clearly showed a declining accumulated value for the policy and specified how much it had declined from the previous year. When Ellis surrendered the policy on July 3, 2002, its value was $4,849.

8. First Colony Life Insurance issued a flexible premium adjustable life insurance policy to Gertrude Franklin on October 18, 1994, with a face value of $600,000. The cover page provides for a 20-day cancellation period with a full refund of premiums paid. In bold type, the cover page further advises as follows: "Flexible Premium Adjustable Life Insurance Policy", "Adjustable Death Benefit Payable at Death", "Flexible Premiums

   Payable During Insured's Lifetime", and "Benefits Vary with Current Cost of Insurance Rates and Current Interest Rates." It also advises that the initial premium is $56,796.

9. The insurance company received an initial premium payment of $203,993.75 on December 19, 1994, and an additional premium payment in February 1996, for a total of premiums paid of approximately $266,000. The total premiums received, however, were insufficient to fund the policy to maturity since that would have required in excess of $400,000 in premiums.

10. Annual statements sent by the insurance company reflected that the policy value was declining.

11. On August 26, 1996, the insurance company received a letter over the name of Nancy Franklin, the trustee of the trust which owned the policy, advising the company to send billing and annual statements to the address of the agency where Respondent was employed. Respondent sent that letter as a courtesy because Gertrude Franklin asked him to keep her papers for her because she had no place to keep them. Gertrude Franklin, not her daughter, signed that letter.

12. Respondent left that agency in October 1997 and was not permitted to take any records with him.

13. In 2002 Edith Ellis showed her policy to someone at a senior center. Based upon that person's statements she called her sister and told her that their policies were no good. They

    contacted Respondent who came to their homes and reviewed their policies.

14. He advised Gertrude Franklin that her only options at that point were to pay an additional premium or to reduce the face value of the policy to $400,000 in order to keep it in effect longer. She chose the latter course.

15. Respondent gave Franklin a letter for Nancy Franklin's signature directing the insurance company to reduce the face value of the policy. Franklin, not her daughter, signed the letter and forwarded it to the company. The company reduced the face value based upon that letter which it received on April 1, 2002. That directive allowed the policy to stay in force another two months.

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the subject matter hereof and the parties hereto. §§ 120.569 and 120.57(1), Fla. Stat.

17. The Administrative Complaint filed in this cause alleges that Respondent committed numerous statutory violations in his dealings with Ellis and Franklin as follows: Section 626.611(5) which prohibits willful misrepresentation or deception with regard to an insurance policy; Section 626.611(7) which prohibits a demonstrated lack of fitness or trustworthiness to engage in the business of insurance; Section

    626.611(9) which prohibits fraudulent or dishonest practices in the conduct of business; Sections 626.611(13) and 626.621(2) which prohibit a willful violation of the insurance code; Section 626.9541(1)(e)1 which prohibits knowingly making false material statements; and Section 626.9541(1)(l) which prohibits knowingly making misleading representations with respect to insurance policies to induce a person to surrender a policy or take out a policy of insurance in another insurer. In its proposed recommended order the Department has withdrawn its allegation that Respondent also violated Section 626.611(8), Florida Statutes.

18. The Department has the burden of proving by clear and convincing evidence that Respondent committed the acts alleged in the Administrative Complaint. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). The Department has not met its burden.

19. The principal thrust of the Department's case is that Respondent sold to the sisters flexible premium adjustable life insurance policies rather than the single-premium policies they wanted. The evidence, however, is not convincing that that is what occurred. No explanation was offered as to why the sisters would cash in existing single-premium policies and suffer substantial financial penalties in doing so in order to purchase the same thing. Gertrude Franklin did testify, on the other hand, that Respondent discussed at least two different policies

    with her before she purchased the one she chose. Further, she knew there was more than "one payment for life" involved since she made one payment in October 1994 and another substantial payment in February 1996.

20. Even had the evidence been convincing as to Respondent's misrepresenting the type of policy he was selling to each of them, such misrepresentation would have been apparent by the bold type on the cover page of each policy. Edith Ellis' assertion that nobody looks at an insurance policy, even if true, does not transfer responsibility for any alleged misunderstanding to Respondent. The more credible testimony is that both Ellis and Franklin understood what they were purchasing at the time.

21. The Department has proven as to the two letters purportedly signed by Nancy Franklin, however, that Respondent acted dishonestly. Gertrude Franklin testified that Respondent told her that she could sign her daughter's name, but Respondent testified that Gertrude Franklin told him that she could sign her daughter's name. Although their versions of what happened are conflicting, under either version Respondent knew that he was sending the insurance company letters signed by Gertrude but reflecting that they were signed by Nancy. That was dishonest.

22. The dishonesty evidenced by the two letters, however, was not material and did nothing to alter the course of events

as to Franklin's policy. The first changed the address as to his employing agency and does not prove or disprove that Franklin was not also receiving statements from the insurance company. The second reduced the face value of the policy and was clearly intended to help, not to harm Franklin. In short, allowing Franklin to sign her daughter's name falls far short of constituting dishonest practices in the conduct of business as prohibited by Section 626.611(9), Florida Statutes.

RECOMMENDATION

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

RECOMMENDED that a final order be entered dismissing the Administrative Complaint filed against Respondent in this cause.

DONE AND ENTERED this 28th day of December, 2004, in Tallahassee, Leon County, Florida.

S

LINDA M. RIGOT

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 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 28th day of December, 2004.

COPIES FURNISHED:

James A. Bossart, Esquire Department of Financial Services 612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333

Nancy Wright, Esquire 7274 Michigan Isle Road

Lake Worth, Florida 33467

Honorable Tom Gallagher Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

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: 04-002077PL

Orders for Case No: 04-002077PL