FLORIDA DEPARTMENT OF FINANCIAL SERVICES TOM GALLAGHER F I L E D CHIEF FINANCIAL OFFICER STATE OF FLORIDA MAR 23 2005 IN THE MATTER OF: Docketed by: FS al ye A CASE NO: 78903-05-AG THOMAS ANDREW MASCIARELLI / ADMINISTRATIVE COMPLAINT TO: Thomas Andrew Masciarelli 1904 Appleton Court West Palm Beach, Florida 33403-1181 Thomas Andrew Masciarelli Palm Beach Financial Services, Inc. 2300 Palm Beach Lakes Blvd., Suite 200-G West Palm Beach, Florida 33409-3307 You, THOMAS ANDREW MASCIARELLI, 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, THOMAS ANDREW MASCIARELLI, License I.D. #A 167366, are currently licensed in this state as a Life Agent (2- 16), Life & Health Agent (2-18), and Health Agent (2-40). 2. At all times pertinent to the dates and occurrences referred to herein, you, THOMAS ANDREW MASCIARELLI, were licensed in this state as an insurance agent. 3. Atall times pertinent to the dates and occurrences referred to herein, you, THOMAS ANDREW MASCIARELLI, served as an officer and registered agent for Palm Beach Financial Services, Inc, which operated as an insurance agency. 4. By reason of that postion, you, THOMAS ANDREW MASCIARELLLI, remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provisions of the Florida Insurance Code committed by yourself or any person under your direct supervision and control while acting on behalf of the corporation as you knew or should have known of such acts or violations. [626.795, Florida Statutes] 5. Atall times pertinent to the dates and occurrences referred to herein, you, THOMAS ANDREW MASCIARELLI, were president of American Income Real Estate Investment, Inc. (“AIREI’). This company was designed by you to furnish potential investors with the opportunity to invest sums in various real estate ventures. 6. tall times pertinent to the dates and occurrences referred to herein, you, THOMAS ANDREW MASCIARELLI, were associated with a social organization known as the “Sons of Italy.” This organization has lodges in various Florida cities, one of them being Sons of Italy John Paul Lodge 2427 in West Palm Beach, hereafter “John Paul Lodge.” 7. You, THOMAS ANDREW MASCIARELLI, by reason of your connection with one or more Sons of Italy lodges, met with and befriended members of the Sons of Italy and developed a professional insurance relationship with many of them. All of the consumers listed in counts one through five below were associates of or affiliated with the Sons of Italy and trusted you by reason of that common connection. COUNT I 8. The above General Allegations are hereby realleged and fully incorporated by reference. 9. In or about 1987, J.M. whose birth date is September 8, 1924, purchased a Nationwide life insurance policy. J.M. thereafter also purchased two Reliance annuity contracts. 10. In or about 2000, you, THOMAS ANDREW MASCIARELLI, met with J.M., in an effort to sell her an ING life insurance policy to replace the Nationwide life insurance policy. 11. In order to induce J.M. into purchasing the ING life insurance policy, you, THOMAS ANDREW MASCIARELLI, advised J.M. that she would receive a larger death benefit if she surrendered the life insurance policy and replaced it with the new life insurance policy. As a result of replacing her Nationwide policy, J.M. suffered a tax liability of $3,537.89, while you earned $19,318.88 in commissions. 12. At approximately the same time, you, THOMAS ANDREW MASCIARELLI, convinced J.M. to purchase two Allianz annuity contracts to replace the two existing Reliance annuities. 13. You, THOMAS ANDREW MASCIARELLI, sold J.M. the two Allianz annuities for the primary purpose of earning a commission of $43,000.00 on the sales rather than for serving the best insurance interests of J.M. She suffered surrender charges in excess of $23,000 as a result of her surrendering the Reliance annuities at your suggestion. 14. You, THOMAS ANDREW MASCIARELLI, intentionally and fraudulently misrepresented the consequences of these insurance transactions to your elderly client, J.M. so as to lead her to believe that her purchases from you were in her best interests. 15. The surrender of the aforementioned Nationwide life insurance policy and the Reliance annuity contracts, and subsequent writing of the ING life insurance policy and Allianz annuities by partial use of the same funds caused J.M. a loss of $23,409.39 in early withdrawal penalties, but resulted in commissions to you, THOMAS ANDREW MASCIARELLL, in the amount of $46,356.57. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Insurance 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 626.61 1(4), Florida Statutes]; (b) — Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising. [Section 626.611(5), Florida Statutes]; (c) | Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; (d) | 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]; (e) Fraudulent or dishonest practices in the conduct of business under the license or appointment. [Section 626.611(9), Florida Statutes]; (f) Violation of the provision against twisting, as defined in Section 626.9541(1)(). [Section 626.621(5), Florida Statutes]; (g) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part IX of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest. [Section 626.621(6), Florida Statutes]; (h) If a life agent, violation of the code of ethics. [Section 626.621(9), Florida Statutes]; (i) Misrepresents the benefits, advantages, conditions, or terms of an insurance policy. [Section 626.9541(1)(a)(6), Florida Statutes]; (j) Knowingly making a false or fraudulent written or oral statement or representation on, or relative to, an application or negotiation for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual. [Section 626.9541(1)(k)(1), Florida Statutes}; (k) | Knowingly making any misleading representation or incomplete or fraudulent comparisons or fraudulent material omissions 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 with another insurer. [Section 626.9541(1)(1), Florida Statutes]; (63) The Business of Life Insurance is hereby declared to be a public trust in which service all agents of all companies have a common obligation to work together in serving the best interests of the insuring public, by understanding and observing the laws governing Life Insurance in letter and in spirit by presenting accurately and completely every fact essential to a client's decision, and by being fair in all relations with colleagues and competitors always placing the policyholder’s interests first. [Rule 4-215.210, Florida Administrative Code}; (m) Twisting is declared to be unethical. No person shall make any misleading representations or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, or convert any insurance policy, or to take out a policy of insurance in another insurer. [Rule 4-215.215. Florida Administrative Code}; (n) Misrepresentations are declared to be unethical. No person shall make, issue, circulate, or cause to be made, issued, or circulated, any estimate, circular, or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or make any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or use any name or title of any policy or class of policies misrepresenting the true nature thereof. [Rule 4-215.230, Florida Administrative Code]. COUNT II 16. The above General Allegations are hereby realleged and fully incorporated herein by reference. 17. On or about 1999, J.T., whose birth date is November 28, 1937, and her then- living husband V.T, purchased two annuities from Conseco. 18. In May, 2002, you, THOMAS ANDREW MASCIARELLI, replaced those two annuities with two other Allianz annuities, which you sold to J.T. You, THOMAS ANDREW MASCIARELLI, intentionally falsified J.T.’s birth date on the insurance applications so that the commission on the sales would be greater. 19. Asaresult of that transaction, J.T. incurred surrender penalties of $668.38. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the above-listed (a) through (n) provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent. COUNT III 20. The above General Allegations are hereby realleged and fully incorporated herein by reference. 21. R.K. was born on November 4, 1929. She became a client of yours, THOMAS ANDREW MASCIARELLI, by reason of your affiliation with the Sons of Italy. 22. You, THOMAS ANDREW MASCIARELLI, sold R.K. five American Investor annuities, earning yourself $22,940.78 in commissions on those sales. 23. | You, THOMAS ANDREW MASCIARELLI, in June, 2003, replaced the above American Investor annuities with four Allianz annuities thereby earning you commissions in an amount totaling $19,371.10. 24. — R.K., however, incurred a total of approximately $22,500.00 in surrender charges on the replacement transactions described above. 25. You, THOMAS ANDREW MASCIARELLL, intentionally falsified R.K.’s birth date on the insurance applications so that you would receive larger commissions on the sales. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the above-listed (a) through (n) provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent. COUNT IV 26. The above General Allegations are hereby realleged and fully incorporated herein by reference. 27. N.S. was born on January 5, 1934. She became a client of yours, THOMAS ANDREW MASCIARELLI, by reason of your affiliation with the Sons of Italy. 28. You, THOMAS ANDREW MASCIARELLI, convinced N.S. to convert an American Investor annuity to an Allianz annuity in May, 2003, resulting in your earning $3,951.66 in commission on that sale. 29. N.S., however, incurred a surrender charge on that transaction of $4,249.10. 30. | Approximately six months after the placement of the Allianz annuity, you convinced N.S. to liquidate that annuity in order to invest the funds in a real estate investment you suggested. 31. As aresult of that liquidation, N.S. incurred a surrender charge of $4,843.67. 32. You, THOMAS ANDREW MASCIARELLI, intentionally falsified N.S.’s birth date on the insurance application for the Allianz annuity so that you would receive larger commission on the sale. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the above-listed (a) through (n) provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent. COUNT V 33. | The above General Allegations are hereby realleged and fully incorporated herein by reference. 34. John Paul Lodge invested some of their funds in annuities, including two American Investor annuities and one Reliance annuity. On or about September, 2003, you, THOMAS ANDREW MASCIARELLI, convinced certain John Paul Lodge officers to surrender these annuities in favor of purchasing from you American Equity annuities. 35. As a result of these conversions John Paul Lodge lost $18,829.46 by reason of surrender penalties. You, THOMAS ANDREW MASCIARELLI, earned commissions on these insurance transactions totaling approximately $17,000.00. 36. You, THOMAS ANDREW MASCIARELLI, knowingly and willingly facilitated these transactions in order to earn these commissions without regard to the financial well being of the John Paul Lodge. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the above-listed (a) through (n) provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent. COUNT VI 37. The above General Allegations are hereby realleged and fully incorporated herein by reference. 38. During a period extending approximately from 1998 to 2004, you were appointed and transacted business for the following insurers authorized to transact insurance business in Florida: Great American Life Insurance Company, Reliance Standard Life Insurance Company, Jackson National Life Insurance Company, Illinois Mutual Life Insurance Company, American Equity Investment Life Insurance Company, Conseco, ING, American Investors and Allianz. 39. Asa result of your doing business with each of these companies, you willfully failed to return unearned commissions due these insurers from your insurance sales. 40. These unearned commissions total approximately $150,000.00 and are broken down among the aforementioned companies as follows: a. Great American Life Insurance Company - $22,948.90 b. Reliance Standard Life Insurance Company-$14,651.99 c. Jackson National Life Insurance Company-$8,000.00 d. Illinois Mutual Life Insurance Company-$7,322.00 e. American Equity Investment Life Insurance Company-$8,074.00 f. Conseco-$30,744.00 g. American Investors-$14,725.00 h. Alliance-$53,596.29 i. AmerUs Annuity-$14,725 j. ING-Southland-$5,645.59 41. Demand has been made upon you, THOMAS ANDREW MASCIARELLI, for payment of the funds, but you have refused same. 42. You, THOMAS ANDREW MASCIARELLLI, have converted, misappropriated and wrongfully withheld funds belonging to an insurance company and received by you in transactions under your insurance licenses. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the following provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (a) Ifthe 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) All premiums, return premiums; or other funds belonging to insurers or others received by an agent, customer representative, or adjuster in transactions under his or her license are trust funds received by the licensee in a fiduciary capacity. An agent shall keep the funds 10 belonging to each insurer for which he or she is not appointed, other that a surplus lines insurer, in a separate account so as to allow the department or office to properly audit such funds. The licensee in the applicable regular course of business shal! account for and pay the same to the insurer, insured, or other person entitled thereto. [Section 626.561(1), Florida Statutes]; (c) Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license or appointment. [Section 626.611(10), Florida Statutes]; (d) Failure or refusal, upon demand, to pay over to any insurer he or she represents or has represented any money coming into his or her hands belonging to the insurer. [Section 626.621(4), Florida Statutes]; (e) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes]; COUNT VII 43. | The above General Allegations are hereby realleged and fully incorporated herein by reference. 44. Onor about 1998, you, THOMAS ANDREW MASCIARELLI, sold J.J., of Lakeworth, Florida, a Conseco annuity. On or about August, 2000, you, THOMAS ANDREW MASCIARELLI, convinced J.J. to surrender the Conseco annuity in favor of purchasing an Allianz annuity. 45. In August, 2004, you. THOMAS ANDREW MASCIARELLI, contacted J.J. regarding an investment in real estate. At your recommendation, J.J. surrendered the Allianz annuity in order to invest the proceeds, plus other monies, in AIREI by way of a promissory note for $28,480.00. As a result of your recommendtion, J.J. incurred surrender charges totallying $1,776.41 by reason of this transaction. 11 46. The above-referenced promissory instrument constitutes a “note” as defined in section 517.021(20(a), Florida Statutes and are therefore securities, the sale of which are regulated pursuant to Chapter 517, Florida Statutes. IT IS THEREFORE CHARGED, that you, THOMAS ANDREW MASCIARELLI, have violated or are accountable under one or more of the above-listed (a) through (n) provisions of the Florida Insurance Code and Rules of the Department of Insurance which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent and the following additional provision: (a) Sale of an unregistered security that was required to be registered, pursuant to chapter 517. [Section 626.611(16), Florida Statutes] (b) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes] WHEREFORE, you, THOMAS ANDREW MASCIARELLL, are hereby notified that the Chief Financial Officer 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, 626.681, 626.691, 626.692, and 626.9521, 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, THOMAS ANDREW MASCIARELLI, in consideration of the age and capacity of the victim. 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. 12 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. 13 Ifa 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 which 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 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. Mediation of this matter pursuant to section 120.573, Florida Statutes, is not available. No Department attorney will discuss this matter with you until the response has been received by the Department of Financial Services. 14 DATED and SIGNED this 23° dayor March , 2005. unl Larcblir ky KAREN CHANDLER ; Deputy Chief Financial Officer 15 CERTIFICATE OF SERVICE ] HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTION OF PROCEEDING have been furnished to: Thomas Andrew Masciarelli, 1904 Appleton Court, West Palm Beach, Florida 33403-1181; Thomas Andrew Masciarelli, Palm Beach Financial Services, Inc., 2300 Palm Beach Lakes Blvd., Suite 200-G. West Palm Beach, Florida 33409-3307 by Certified Mail this 23" day of March, 2005. A AMES BOSSART \Y Florida Bar Number 0140945 Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 > Phone: 850-413-4124 Fax: 850-487-4907 Attorney for the Department 16 STATE OF FLORIDA DEPARTMENT OF FINANCIAL SERVICES E \ i c yy IN THE MATTER OF: os APRIL A 149 THOMAS ANDREW MASCIARELLI CASE NO.: 78903-05-AG jyISIOH OF / ADMINISTRA ve HEARINGS ELECTION OF PROCEEDING Ihave 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. | am requesting disposition of this matter as indicated below. (Choose one) 17] 3. ] 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. 1 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, | 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. 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. Si gnature Print Name Date: Address: Phone No.: 17

Docket for Case No: 05-001293PL