DEPARTMENT OF FINANCIAL SERVICES es JUN 14 2004 Tom GALLAGHER Booksied ks CHIEF FINANCIAL OFFICER IN THE MATTER OF: - 4 4lalp Cases Nos. FREDERICK BRUCE MAHLE, 69845-04-AG SUE SPURGE, 76439-04-AG MARIO D'AURIA 76440-04-AG ADMINISTRATIVE COMPLAINT Each of you, FREDERICK BRUCE MAHLE, and SUSAN SPURGE, and MARIO ‘D'AURIA, are hereby notified that pursuant to the Florida Insurance Code the Chief Financial Officer of the State of Florida as head of the Department of Financial Services has caused to be made an investigation of each of your activities while licensed as insurance agents in the State of Florida, as a result of which it is alleged: GENERAL ALLEGATIONS COMMON TO ALL COUNTS 1. Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services, f/k/a the Florida Department of Insurance, has jurisdiction over each and every one of your insurance licenses and appointments in this state: 2. That at all times material to this matter, you, Frederick Bruce Mahle, have been licensed in this state as a life, life and health, and health insurance agent. 3. That at times material to this matter Gary Mahle, brother of Frederick Bruce Mahle, was licensed in this state as a life, life and health, anc health insurance agent, and shared a professional relationship in the insurance business with Frederick te Bruce Mahle. Gary Mahle’s Florida insurance licenses and appointments were revoked in 2000. 4. That at all times material to this matter, you, Susan Spurge, sister to Frederick Bruce Mahle and Gary Mahle, have been licensed in this state as a life, life and health, and health insurance agent, and have shared a professional relationship in the insurance business with Frederick Bruce Mahle, and Gary Mahle. 5. That at all times material to this matter, you, Mario D’Auria, have been licensed in this state as a life, life and health, and health insurance agent, and shared a professional relationship in the insurance business with Frederick Bruce Mahle. 6. That Paul R. Jones was at material times a non-resident ficensed insurance agent in Florida, who shared a professional relationship in the insurance business with either Frederick Bruce Mahle, or Gary Mahle, or Susan Spurge. Paul R. Jones’ Georgia insurance license expired in 1994, amidst allegations of forgery and misappropriation of premium money, and has not been renewed since. 7. That at all times material hereto, Ms. Nancy Piatt Young was a widowed woman whose age, known to the Respondents, ranged from 79 to 89 years. 8. That Frederick Bruce Mahle, Mario D'Auria, Paul R. Jones, and Susan Spurge, knew Ms. Young to be a woman of considerable wealth. Her estate was worth approximately $1,723,000, according to Frederick Bruce Mahle’s own calculations. COUNT ONE 9. That on or about July 26, 1994, Gary Mahle, in his capacity as a licensed insurance agent, knowingly sold to Ms. Nancy Piatt Young a $100,000 annuity policy with the United Companies Life Insurance Company. The exact amount of commission for that sale paid to agent Gary Mahle is unknown as of the filing of tais Administrative Complaint, but a typical industry standard at that time for such a product was five per cent (5%), which would have realized a commission to Mahle of $ 5,000. 10. That on or about September 1, 1995, with the assistance and participation of Frederick Bruce Mahle knowingly acting in his capacity as a licensed insurance agent, said United Life & Annuity policy was surrendered by Ms. Young, incurring a penalty and interest loss in the amount of $7,767.14. 41. That on or about September 19, 1995, acting in his capacity as a licensed insurance agent, Mario D’Auria knowingly sold to Ms. Nancy Piatt Young three annuities for $33,000 each, with the American Life & Casualty Insurance Company. For each of those sales by agent Mario D’Auria he was paid a commission of $3,465, for a total commission of $10, 395, on those sales. 42. That on or about September 23, 1996, all three said American Life & Casualty Insurance Company annuities were surrendered, thereby incurring a penalty loss of $3,868.45, each, for a total surrender loss of $11,605.35. 13, That on or about October 28, 1996, Frederick Bruce Mahle, acting in his capacity as a licensed insurance agent but without the benefit of a securities license, knowingly facilitated the execution of three viatical settlement purchase agreements, which under Florida law, were illegal, unregistered securities, between Accelerated Benefits Corporation, then a licensed viatical settlement provider, and Ms. Nancy Piatt Young, at a cost to her of $31,300 each, for a total purchase price of $93,900, delivered via check to American Title & Trust Co., the escrow agent and trustee for Accelerated Benefits Corporation, a now revoked viatical settlement provider. Frederick Bruce Mahle earned a “brokers” commission of $1,878, each, on two of those viatical settlement purchase agreements, and $1,565 on the third, for a total commission of $5,321 for those transactions. 14. That on or about July 7, 1999, two of those viatical purchase sales agreements referenced in paragraph thirteen were cancelled through the active participation of Frederick Bruce Mahle, thereby incurring a loss to Ms. Young of $3,912.50, each, for a total cancellation loss of $7,825.00. The third such policy is being maintained by Ms. Young's heirs, she having passed away on September 30, 2000, at the age of 89. 15. That in the course of the transactions referenced in paragraphs nine through and including fourteen, above, Ms. Young suffered surrender penalties, and interest and cancellation losses in the amount of $27,197.49, and lost the benefit of the original $100,000 annuity, while the collective commissions paid for those transactions to agents Gary Mahle, Frederick Bruce Mahle, and Mario D'Auria amounted to approximately $20,716, including the estimated commission for the $100,000 annuity sale referenced in paragraph nine. 16. That the transactions alleged above, either alone or in series, were SO completely unsuited to Ms. Young's age and financial station as to be completely inappropriate for any honest, trustworthy, and competent insurance agent to facilitate for her. IT [S$ THEREFORE CHARGED that Frederick Bruce Mahle, and Mario D’Auria have violated and are accountable, each individually or in conjunction with one or more of the others, under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services, f/k/a, the Department of Insurance, which violations constitute grounds for the suspension or revocation of each of their licenses and appointments as an insurance agent in the State of Florida: (a) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; (b) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in transactions authorized by the license or appointment. [Section 626.61 1(8), Florida Statutes]; (c) | Shown to be a source of injury or loss to the public. [Section 626.621(6), Florida Statutes]; (d) Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation or to violate the Insurance Code or order or rule of the department. [Section 626.621(12), Florida Statutes}. COUNT TWO 17. That commencing on or about May 1, 1990 and ending on or about September 28, 1997, Frederick Bruce Mahle, Mario D’Auria, and Paul R. Jones (the latter two then being professional associates of Frederick Bruce Mahle), sold to Ms. Young no less than fourteen (14) separate life insurance policies. (During that same time, another associate of Frederick Bruce Mahle, a Mr. Charles DiBello, sold Ms. Young another $10,000 life insurance policy, and Frederick Bruce Mahle, Susan Spurge, and Mario D'Auria, attempted during those same times to sell her four more life insurance policies that were declined or treated as withdrawn by the prospective carriers.) 48. That of those fourteen (14) life insurance policies sold to Ms. Young by Frederick Bruce Mahle, Mario D’Auria, and Paul R. Jones, ten (10) included a death wn benefit of $10,000, one (1) included a death benefit of $15,000, one (1) included a death benefit of $24,000, one (1) included a death benefit of $25,000, and one (1) included a death benefit of $35,000. The total death benefit of all fourteen policies was $199,000. All fourteen policies were paid via annual premium initially tendered by Ms. Young at the inception of coverage, with renewals on some, but not all, thereafter. 19. That of those fourteen (14) life insurance policies, Frederick Bruce Mahle, arranged for the sale of seven of them through an unlicensed viatical settlement broker (Lasher Financial Services, later fined $1,000 by the Department for its unlicensed activities; Case No. 65784-03-AG) to ViatiCare (a Minnesota viatical settlement provider) in 1998. 20. The collective face value of those seven policies was $114,000. In return for the sale of those seven policies, Ms. Young was paid the total surn of $19,043.00, which represented the viatical settlement contract sales prices of the seven policies, minus loans against those policies. 21. For its services in brokering those seven viatical sales, Lasher Financial Services was paid commissions totaling $13,320.25. It is unknowr: what Frederick Bruce Mahle was paid to assist in these transactions. The commissions paid to Frederick Bruce Mahle, Paul R. Jones, and Mario D'Auria for the original sale of those seven life insurance policies to Ms. Young collectively amounted to $19,629.09. 22, That of the seven (7) remaining life insurance policies that were not sold to a viatical settlement provider, three (3) lapsed for non-payment of the annual premium one year after they were written, two (2) were surrendered for cash value, and two (2) were reduced to a paid-up status at the time of Ms. Young’s death. 23. That of the fourteen life insurance policies sold to Ms. Young by Frederick Bruce Mahle, Paul R. Jones, and Mario D’Auria, having a combined death benefit of $199,000, only two were in force at the time of her death, at a combined, reduced, paid- up value of $ 1,183, and only one has thus far paid a death benefit to her estate, in the amount of $644.42, which figure includes interest on the paid up sum of $584.00. 24. That the total premium cost paid by Ms. Young for the fourteen (14) life insurance policies sold to her by Frederick Bruce Mahle, Paul R. Jones, and Mario D'Auria, was $ 101, 781.68. The total commissions paid to Frederick Bruce Mahle, Paul R. Jones and Mario D’ Auria, on the sale of those 14 policies amounted to $37,285.49, which figure does not include the commission paid to the insurance agency for which any of them were working at the time of the respective sales, save the single instance of Pioneer Life Insurance Company policy # PL9407689, for which only gross commissions paid to Sun Insurance Marketing were available. 25. That the transactions alleged above were so completely unsuited to Ms. Young's age and financial station as to be completely inappropriate for any honest, trustworthy, and competent insurance agent to facilitate for her. IT IS THEREFORE CHARGED that Frederick Bruce Mahle, and Mario D'Auria have violated and are accountable, each individually or in conjunction with one or more of the others, under one or more of the following provisions of the Florida insurance Code and Rules of the Department of Financial Services, f/k/a, the Department of Insurance, which violations constitute grounds for the suspension or revocation of each of their licenses and appointments as an insurance agent in the State of Florida: (a) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; (b) | Demonstrated lack of reasonably adequate knowledge and technical competence to engage in transactions authorized by the license or appointment. [Section 626.61 1(8), Florida Statutes]; (c) Shown to be a source of injury or loss to the public. [Section 626.621(6), Florida Statutes]; (d) Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation or to violate the Insurance Code or order or rule of the department. [Section 626.621(12), Florida Statutes]. COUNT THREE 26. ‘That commencing on or about October 7, 1991, and ending on or about February 23, 2000, Frederick Bruce Mahle, Gary Mahle, Susan Spurge, and Paul R. Jones, utilizing their relationship as licensed insurance agents known to Ms. Ms. Nancy Piatt Young, sold to her ten (10) home health care coverage contracts. All ten home health care contracts were paid for via lump sum annual payment tendered by Ms. Young at the inception of the contract. 27. That of those ten contracts, four lapsed at the expiration of one year from inception, two more lapsed at the end of two years, two more contracts were entered into with the same company within nine months of each other, one was with an out of state company, and one was with a company which cannot be verified to presently exist. 28. Additionally, that although the application for one such contract, as originally completed, was for a period of two years, and required a commensurate premium that was included with that application, the application actually submitted by Frederick Bruce Mahle on behalf of Ms. Young, was altered to specify a contract period of only one year, without a commensurate reduction in premium. Ms. Young's two-year premium was submitted along with the one-year application. The contract was written for one year, and there is no record of a refund to Ms. Young for the overpayment. 29. That none of the ten contracts ever provided a benefit to Ms. Young, whose relatives were forced to pay out of pocket for nursing care for Ms. Young shortly before her death. 30. That the total premium paid by Ms. Young for those ten (10) contracts was $55,460.65. The total commissions known to have been paid for the sale of nine (9) of those ten (10) contracts to Ms. Young by Frederick Bruce Mahle, Gary Mahle, Susan Spurge, and Paul R. Jones arnounted to $21,976.69, and, based on the relationship between the nine known commissions and nine known premiums, it is estimated that the total commissions paid for ail ten (10) contracts were approximately $25,000. 31. That the transactions alleged above were so completely unsuited to Ms. Young’s age and financial station as to be completely inappropriate for any honest, trustworthy, and competent insurance agent to facilitate for her. IT IS THEREFORE CHARGED that Frederick Bruce Mahle, Gary Mahle, and Susan Spurge have violated and are accountable, each individually or in conjunction with one or more of the others, under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services, f/k/a, the Department of Insurance, which violations constitute grounds for the suspension or revocation of each of their licenses and appointments as an insurance agent in the State of Florida: (a) | Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.61 1(7), Florida Statutes]; (b) Demonstrated lack of reasonably adequate knowledge and_ technical competence to engage in transactions authorized by the license or appointment. [Section 626.61 1(8), Florida Statutes]; (c) | Shown to be a source of injury or loss to the public. [Section 626.621(6), Florida Statutes]; (d) Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation or to violate the Insurance Code or order or rule of the department. {Section 626.621(12), Florida Statutes}. COUNT FOUR 32. That in January of 1999, Frederick Bruce Mahle, utilizing the relationship with Nancy Piatt Young afforded by his insurance agent license, caused Nancy Piatt Young to sign two checks, one for $16,500 and one for $8,500, to “United Marketing”, representing to her that said checks were dedicated to “investment” purposes. Even a cursory observation of the checks reveals that only the signature appears to be in the handwriting of Ms. Young, with the remainder being written by Frederick Bruce Mahle, who by that time had become accustomed to filling out checks for Ms. ‘Young to sign. 33. | That said checks were deposited into the account of “UMA Administrative Inc.”, a Georgia corporation whose chief executive officer and chief financial officer is the same Paul R. Jones referenced above. 34. That UMA Administrative, Inc. was not then and is not now an investment house or brokerage, it did not then have nor does it now have a securities license, and, according to Paul R. Jones, UMA Administrative Inc., has no record cf any monies ever being placed with it by or on behalf of Ms. Young. 10 35. That a survey of the respective bank accounts shows that Ms. Young’s checks, drawn on different accounts but each dated January 27, 1999, were deposited into the UMA Administrative Inc., account in Georgia (on which Paul R. Jones is the only authorized signatory party), on January 29, 1999, and that on January 28, 1999, $21,600 was sent by wire transfer from that same UMA Administrative, Inc., account into a Southtrust Bank account personally owned and controlled by Frederick Bruce Mahle. 36. That Frederick Bruce Mahle used his insurance agent relationship with Ms. Young to cause her to sign said checks for a non-existent investment, intending to profit and profiting by his fraudulent misrepresentations to her in that regard by having the bulk of that “investment” money covertly returned to his possession and contro! by laundering it through UMA Administrative, Inc., with the assistance of Paul R. Jones. IT 1S THEREFORE CHARGED that Frederick Bruce Mahle has violated and is accountable under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services, f/k/a, the Department of Insurance, which violations constitute grounds for the suspension or revocation of each of their licenses and appointments as an insurance agent in the State of Florida: (a) | Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; (b) | Shown to be a source of injury or loss to the public. [Section 626.621(6), Florida. Statutes] COUNT FIVE 37. That on or about January 25, 2000, Frederick Bruce Mahle, utilizing the relationship with Nancy Piatt Young afforded by his insurance agent license, caused il Nancy Piatt Young to sign a check he had written out for her in the amount of $18,000, drawn on her Transamerica Annuity account and payable to “Manufacturers & Traders Trust”, without her full knowledge and informed consent as to the purpose of that check. 38. Manufacturers & Traders Trust was at that time the mortgagee for Frederick Bruce Mahle’s residence, having purchased Mahle’s original note and mortgage with Emergent Mortgage Corp. 39. Said check was deposited into Manufacturers & Traders Trust account and was credited to Frederick Bruce Mahle’s mortgage balance. 40. A review of Nancy Piatt Young’s estate papers and interviews with her survivors show no evidence of any intent on her part to make such a mortgage payment on behalf of Frederick Bruce Mahle, or to give or loan $18,000 to Frederick Bruce Mahle, or any acknowledgment that such had been her intent. IT IS THEREFORE CHARGED that Frederick Bruce Mahle has violated and is accountable under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services, f/k/a, the Department of Insurance, which violations constitute grounds for the suspension or revocation of each of their licenses and appointments as an insurance agent in the State cf Florida: (a) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. (Section 626.611(7), Florida Statutes]; (b) | Shown to be a source of injury or loss to the public. [Section 626.621(6), Florida. Statutes] WHEREFORE, you, FREDERICK BRUCE MAHLE, you, MARIO D’AURIA, and you, SUSAN SPURGE, are hereby notified that the Chief Financial Officer of the State of Florida intends to enter an Order revoking your licenses and appointments as an insurance agent or to impose such penalties as may be provided under the provisions of Sections 626.611, 626.621, and 626.681, 626.691, and 626.9521, Florida Statutes, and under the other referenced sections of the Florida Statutes as set out in this Administrative Complaint. NOTICE OF RIGHTS You have the right to request a proceeding to contest this action by the Department pursuant to Sections 120.569 and 120.57, Florida Statutes, and Rule 28- 107, Florida Administrative Code. The proceeding request must be in writing, signed by you, and must be filed with the Department within twenty-one (21) days of your receipt of this notice. Completion of the attached Election of Proceeding form and/or a petition for administrative hearing will suffice as a written request. The request must be filed with the General Counsel as acting Agency Clerk, at the Florida Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0333. Your written response must be received by the Department no later than 5:00 p.m. on the twenty-first day after your receipt of this notice. Mailing the response on the twenty-first day will not preserve your right to a hearing. YOUR FAILURE TO RESPOND IN WRITING WITHIN TWENTY-ONE (21) DAYS OF YOUR RECEIPT OF THIS NOTICE 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 you request a proceeding, you must provide information that complies with the requirements of Rule 28-107.004, Florida Administrative Code. As noted above, completion of the attached Election of Proceeding form conforms to these requirements. Specifically, your response must contain: (a) The name and address of the party making the request, for purpose of service; (b) | A statement that the party is requesting a hearing involving disputed issues of material fact, or a hearing not involving disputed issues of material fact; and (c) A reference to the notice, order to show cause, administrative complaint, or other communication that the party has received from the agency. \f a hearing of any type is requested, you have the right to be represented by counsel or other qualified representative at your expense, to present evidence and argument, to call and cross-examine witnesses, and to compel the attendance of witnesses and the production of documents by subpoena. If a proceeding is requested and there is no dispute of material fact, the provisions of Section 120.57(2), Florida Statutes, apply. In this regard, you may submit oral or written evidence in opposition to the action taken by the Department or a written statement challenging the grounds upon which the Department 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 call upon your request. However, if you dispute material facts that are the basis for the Department's action, you must request an adversarial proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes. 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, Florida. Failure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior oral communication or correspondence in this matter shall be considered freeform agency action, and no such oral communication or correspondence shall operate as a valid request for an administrative proceeding. Any request for an administrative proceedirg received prior 14 to the date of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. Mediation of this matter pursuant to Section 120.573, Florida Statutes, is not available. No Department attorney will discuss this maiter with you until the response has been received by the Department of Financial Services. 14th gay of __ June , 2004. DATED and SIGNED this KAREN CHANDLER Deputy Chief Financial Officer CERTIFICATE OF SERVICE | HEREBY CERTIFY that a true and correct copy of the foregoing Administrative Compliant was sent by Certified U.S. mail to Mario D’ Auria 12681 Eagle Road, Cape Coral, Florida 33909, this \ ERS day of June, 2004. Michdel H. Davidson 16

Docket for Case No: 04-002466