FLORIDA FINANCIAL SERVICES IN THE MATTER OF: i Jun 10 ogg: HARRY LEROY SMELSER ‘Dockeied by- EX : CASE NO: 79883-05-AG TO: an ADMINISTRATIVE COMPLAINT HARRY LEROY SMELSER 2121 SE 2™ Terrace Cape Coral, Florida 33990 aoe eed oy sas le & , & a nm You, HARRY LEROY SMELSER, are hereby notified that pursuant to Chapters 624 and nN eet \ it is alleged that: 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 GENERAL ALLEGATIONS 1. You, HARRY LEROY SMELSER, are currently licensed in this state as a life insurance agent, as a life and health insurance agent and as a health insurance agent. 2. At all times relevant to the dates and occurrences alleged herein, you, HARRY 3. LEROY SMELSER, were licensed in this state as an insurance agent. Pursuant to Chapter 626, Florida Statutes, the Chief Financial Officer of the State of Florida and the Department of Financial Services has jurisdiction over your insurance licenses and your eligibility for licensure and appointment. COUNTI 4. The above General Allegations numbered one (1) through three (3) are hereby realleged and fully incorporated herein by reference. 5. At all times pertinent to the dates and occurrences referred to herein, you, HARRY LEROY SMELSER, were an officer and director of G.T. Legacy, Inc., a Florida incorporated insurance business. 6. CH. of Punta Gorda, Florida, an elderly 80-year-old widow, as of April 29, 2000, was a long time insurance and annuity customer of G.T. Legacy, Inc. 7. C.H., as of April 29, 2000, held a substantial portion of her retirement assets in twelve annuities listed as follows: (1) American National annuity #LAR0041292, issued on 4/27/1998 with an approximate purchase value of $10,000; (2) American National annuity #LAR0041296, issued on 4/27/1998 with an approximate purchase value of $25,000; (3) National Western annuity #100896187, issued on 4/27/1998, with an approximate purchase value of $30,000; (4) American National Annuity #LAR0041308, issued on 6/9/1998, with an approximate purchase value of $10,880; (5) Life USA/Allianz annuity #5754607 issued on 11/19/1998 with an approximate purchase value of $42,500. (6) Life USA/Allianz annuity #5743945, issued on 12/21/1998 with an approximate purchase value of $63,574.99;(7) Life USA/Allianz annuity #5743956, issued on 12/21/1998 with an approximate purchase value of $36,512.58; (8) Nationwide annuity #10627713, issued on 02/24/1999 with an approximate purchase value of $50,000; (9) American Equity annuity #27430, issued on 8/2/1999 with an approximate purchase value of $25,857.09; (10) American Equity annuity #27431, issued on 8/2/1999 with an approximate purchase value of $10,342; (11) American Equity annuity #27429, issued on 8/3/1999 with an approximate purchase value. of $11,237.85; and (12) American Equity annuity #49312, issued on 2/28/2000 with an approximate purchase value of $10,008. 8. Each of the above mentioned annuities, with the exception of #8, the Nationwide annuity, were sold to C.H. by Gregg Thompson, an insurance agent, as well as an officer and director of G.T. Legacy, Inc, and Respondent’s business partner. On or about April 29, 2000, Greg Thompson resigned from G.T. Legacy, Inc and left the corporation. 9. On or about the summer of 2000 and only after Gregg Thompson had left G. T. Legacy, Inc., you, HARRY LEROY SMELSER, undertook the systematic and willful replacement of each of C.H.’s above mentioned annuities that had previously been sold to her by Gregg Thompson with another annuity. 10. You, HARRY LEROY SMELSER, willfully induced C.H. to surrender and replace nine of the above-mentioned annuities and purchase nine new annuities. This was done for the sole purpose of receiving a commission and without an objectively reasonable basis for believing that the replacements would result in an actual and demonstrable benefit to C.H. 11. More specifically, you, HARRY LEROY SMELSER, on about 7/12/2000 induced C.H. to replace her Nationwide annuity #10627713 and to purchase a Life USA/Allianz annuity #6610707 for $51,228.47. As a result of this transaction, C.H. paid a surrender penalty of approximately $2,700. 12. You, HARRY LEROY SMELSER, on or about 8/6/2000 induced C. H. to replace her National Western annuity #100896187 and to purchase a Midland National annuity #8500010434 for $31,495.60. C.H. was assessed a surrender penalty of $3,891.78. 13. You, HARRY LEROY SMELSER, on or about 8/17/2000, induced C.H. to replace her Life USA/Allianz annuity #5743945 and to purchase a Midland National annuity #8500010431 for $54,632.00. C.H. was assessed a $5643.14 surrender penalty and forfeited the 15% bonus paid by Life USA for purchasing the annuity. 14. You, HARRY LEROY SMELSER, on or about 8/17/2000, induced C.H. to replace her Life USA/Allianz annuity #5743956 and to purchase a Midland National annuity #8500010433 for $31,376.41. C.H. was assessed a $3,240.98 surrender penalty and forfeited the 15% bonus paid by Life USA for purchasing the annuity. 15. You, HARRY LEROY SMELSER, on or about 11/30/2000, induced C.H. to replace her American Equity annuity #27429 and to purchase a Midland National annuity #8500014211 for $10,516.11. C.H. was assessed a $798.16 surrender penalty. 16. You, HARRY LEROY SMELSER, on or about 9/5/2001, induced C.H. to replace her American Equity annuity #27431 and to purchase a Midland National annuity #8500041321 for $10,867.29. C.H. was assessed a $1343.14 surrender penalty. 17. You, HARRY LEROY SMELSER, on or about 9/5/2001, induced C.H. to replace her American Equity annuity #27430 and to purchase a Midland National annuity #8500041322 for $27,168.17. C.H. was assessed a $3,357.26 surrender penalty. 18. You, HARRY LEROY SMELSER, on or about 3/27/2002, induced C.H. to replace her American Equity annuity #49312 and to purchase a Midland National annuity #8500067264 for $10,968.84. C.H. was assessed a $1,218.76 surrender penalty. 19. You, HARRY LEROY SMELSER, on or about 3/27/2002, induced C.H. to replace her Life USA/Allianz annuity #6610707 and to purchase a Midland National annuity #8500067265 for $48,410.43. C.H. was assessed a $5,122.64 surrender penalty and forfeited the 14% bonus she received for purchasing the Life USA annuity. 20. You, HARRY LEROY SMELSER, on or about 8/27/02, attempted to induce C.H. to replace the Midland National annuities #8500010431 and #8500010433 described in paragraphs 12 and 13 above that you had previously sold to her with a new Life USA/Allianz annuity. On or about 10/23/02, you, HARRY LEROY SMELSER, attempted to induce C.H. to replace the Midland National annuities # 8500041321 and #8500041322 described in paragraphs 15 and 16 above that you had previously sold to her with a new Life USA/Allianz annuity. C.H. declined to enter into the transactions, however, if she had, she would have been assessed approximately $18,000 in surrender penalties. 21. You, HARRY LEROY SMELSER, willfully failed to disclose to C.H. the terms and conditions of the annuities that were purchased including, but not limited to, failure to disclose the cash surrender value, surrender charges, the fact that by purchasing a new annuity the surrender penalty period would begin anew, the forfeiture to her of the bonus paid by the Life USA/Allianz annuities, maturity date, liquidity or lack thereof, the annual yield or rate of return, and the annuity cost or fees charged by the insurance company. 22. You, HARRY LEROY SMELSER, willfully failed to disclose to C.H. that the surrender of her in force annuities and the subsequent purchase of the annuities being solicited by you would result in the loss of well in excess of $30,000 of her principal in surrender fees and forfeited bonus’. When C.H. queried you, HARRY LEROY SMELSER, about possible surrender penalties, you represented to C.H. that “she was not to worry about them and that you would take care of it” This was a willful misstatement and a material misrepresentation of fact. C.A. would not have purchased the annuities but for the misrepresentations. You, HARRY LEROY SMELSER, were aware or should have been aware of this fact. 23. C.H. would not have knowingly liquidated her financial instruments and purchased the annuities except for the willfully misleading statements, deceptive statements and omissions. 24. Your sale of the of the annuities to C.H. was not in her best interest, was neither necessary nor appropriate for a woman of her age and financial circumstance, was without demonstrable benefit, and was done for the sole purpose of obtaining a fee, commission, money or other benefit from an insurance company. IT IS THEREFORE CHARGED that you, HARRY LEROY SMELSER, have violated or are accountable under the following provisions of the Florida Insurance Code which constitute grounds for the suspension or revocation of your licenses as an insurance agent in the state: (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) 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) 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] (g) Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or appointment. [Section 626.621(2), Florida Statutes]] (h) 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 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] (i) Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison, which misrepresents the benefits, advantages, conditions, or terms of any insurance policy. [Section 626.9541(1)(a) 1, Florida Statutes} (i) Knowingly: a. Filing with any supervisory or other public official, b. Making, publishing, disseminating, circulating, c. Delivering to any person, d. Placing before the public, e. Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement. [Section 626.9541(1)(e) 1, Florida Statutes] f. Knowingly making any misleading representations or incomplete or fraudulent comparisons or fraudulent material omissions of or with respect to any insurance policies or insurers for the purpose of inducing any person to surrender any insurance policy, or take out a policy of insurance in another insurer. [Section 626.9541(1)(1), Florida Statutes] WHEREFORE, you, HARRY LEROY SMELSER, are hereby notified that the Chief Financial Officer intends to enter an Order suspending or 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, 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 form the agency. 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. _ ath DATED and SIGNED this | a) day of , 2008. "ho, (dele HANDLER Deputy Chief Financial Officer 10 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Administrative Complaint has been furnished by certified United States Mail to: Harry Leroy Smelser at 2121 SE 2"! Terrace, Cape Coral, Florida 33990 this lo” day of Ou ne , 2005. Tallahassee, Florida 32399-0333 (850) 413-4124 11

Docket for Case No: 05-002425PL