\ 7 FLORIDA DEPARTMENT OF FINANCIAL SERVICES TOM GALLAGHER : F | LE D CHIEF FINANCIAL OFFICER STATE OF FLORIDA RAY & 2006 IN THE MATTER OF: Dooksted ao CASE NO.: 85368-06-AG TIMOTHY EUGENE BAGGETT / ADMINISTRATIVE COMPLAINT TO: TIMOTHY EUGENE BAGGETT SOO D> c/o Baggett Insurance & Associates le . dk U | | = . 6314 Hatcher Road é Lakeland, FL 33811-2266 TIMOTHY EUGENE BAGGETT ‘ 6314 Hatcher Road Lakeland, FL 33811-2266 You, TIMOTHY EUGENE BAGGETT, 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, TIMOTHY EUGENE BAGGETT, License I.D. #4295655 are currently licensed in this state as a Life & Variable Annuity agent (2-14), Life, Health and Variable Annuity agent (2-15), 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, TIMOTHY EUGENE BAGGETT, were licensed in this state as an insurance agent. 3. In or about the yeat 2001, you, TIMOTHY EUGENE BAGGETT, as a licensed insurance agent in the State of Florida, used your insurance license to exploit an elderly Florida consumer through misrepresentations concerning terms and conditions of a transaction involving the funding and purchase of an annuity in order to induce the consumer to enter into a loan agreement and annuity purchase that was not in the best interest of the insured, but yielded to you substantial commissions therefore. 4. Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services has jurisdiction over your insurance licenses and appointments. COUNT I 5. The above General Allegations are hereby realleged and fully incorporated by reference. . 6. In or around June, 2001, you, TIMOTHY EUGENE BAGGETT, met with Mrs. T.M. of Lakeland, Florida, for the purpose of soliciting Mrs. T.M. to purchase an annuity or other investment products from you. 7. During that visit, and in an effort to facilitate an annuity purchase by Mrs. T.M., you, TIMOTHY EUGENE BAGGETT, urged Mrs. T.M. to allow you to transfer her existing stock portfolio, which consisted mainly of conservative utility stocks, into an investment with a company named Derivium Capital. At your direction and believing you, TIMOTHY EUGENE BAGGETT, to be acting in her best interests, Mrs. T.M., then eighty-five years of age, did in fact allow you to invest her stock portfolio in investments of your choosing. Ww 8. In addition to the investment with Derivium Capital that you, TIMOTHY EUGENE BAGGETT, urged upon Mrs. T.M., you further directed your client to purchase an annuity written through American Equity Investment Life Insurance Company (“American Equity”). Based upon your recommendation and believing you, TIMOTHY EUGENE BAGGETT, to be acting in her best interests, Mrs. T.M. did agree to purchase American Equity annuity contract number #095443 from you on June 25, 2001. 9. Unbeknownst to Mrs. T.M., the investment with Derivium Capital that you, TIMOTHY EUGENE BAGGETT, sold to her was actually a complex collateralized loan agreement, whereby Mrs. T.M.’s stock portfolio was pledged and used as collateral for a loan to her. With the ultimate intent of selling Mrs. T.M. an annuity, through the use of this loan agreement you, TIMOTHY EUGENE BAGGETT, caused to be created a collateralized loan in the amount of $218,000, in effect, representing ninety percent of the value of Mrs. T.M.’s stock portfolio. It was through the use of direct money transfer from Derivium Capital, using $200,000 of the aforementioned $218,000 in loan proceeds generated without your elderly client’s knowledge and consent, that you, TIMOTHY EUGENE BAGGETT, created and funded American Equity annuity contract number #095443, 10. ‘In addition, the complex collateralized loan agreement with Derivium Capital that you, TIMOTHY EUGENE BAGGETT, sold to your client, caused your client to lose her ri ghts to receive thousands of dollars in dividends generated by her stock portfolio annually, and further caused her to incur a massive 10.5% in annual interest debt owed on the loan you effectuated against her stocks. Through the life of this ten year loan, you, TIMOTHY EUGENE BAGGETT, will have caused your client, Mrs. T.M., to suffer at least an additional quarter million dollars in interest charges and additional tax consequences. This transactional episode, which amounted to the creation of a loan to fund the purchase of an annuity, created hundreds of thousands of dollars in losses for your elderly client, but resulted in $21,760.00 in commissions to you, TIMOTHY EUGENE BAGGETT. 11. You, TIMOTHY EUGENE BAGGETT, used your position as a Florida licensed insurance agent to exploit your elderly client’s trust in you. Through the use of material omissions and fraudulent material misrepresentations, you, TIMOTHY EUGENE BAGGETT, induced your elderly client into relinquishing full control and benefit of her stock portfolio, entering into an unnecessary and costly loan agreement, and purchasing an annuity that was unsuitable and inappropriate for her investment needs but which generated substantial commissions to you. IT IS THEREFORE CHARGED, that you, TIMOTHY EUGENE BAGGETT, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (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 the transactions authorized by the license or appointment. [Section 626.61 1(8), Florida Statutes]; (c) 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]; (d) 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 interest. [Section 626.621(6), Florida Statutes]; (e) 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]; (f) Fraudulent or dishonest practices in the conduct of business under the license or appointment. [Section 626.611(9), Florida Statutes]; (g) No person shall engage in this state in any trade practice which is defined in this part as, or determined pursuant to s. 626.951 or s. 626.9561 to be, an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance. [Section 626.9521, Florida Statutes]; (h) 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]. COUNT II 12. The above General Allegations are hereby realleged and fully incorporated by reference. 13. On or about February 26, 2003, you, TIMOTHY EUGENE BAGGETT, a licensed insurance agent, met with Mrs. T.M., an eighty-seven year old Florida consumer with whom you had an existing business relationship. As her insurance agent, you, TIMOTHY ’ EUGENE BAGGETT, carry with you in all dealings with Mrs. T.M. an outstanding fiduciary obligation. During this visit, and exploiting the trust Mrs. T.M. placed in you as a result of your existing relationship with her as her insurance agent, you, TIMOTHY EUGENE BAGGETT, attempted to convince Mrs. T.M. to allow you to borrow money from her for your personal use. 14. At your request, and based upon the trust she placed in you, TIMOTHY EUGENE BAGGETT, as her agent, Mrs. T.M. did agree to allow you to borrow from her the sum of $30,000 in the form of a personal loan. As of the date of this Administrative Complaint, you, TIMOTHY EUGENE BAGGETT, have failed to honor with discipline the repayment terms of the Promissory Note between you and Mrs. T.M. by failing to remit to her timely payments under that Promissory Note. IT IS THEREFORE CHARGED, that you, TIMOTHY EUGENE BAGGETT, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitutes grounds for the suspension or revocation of your licenses and eligibility as an insurance agent: (a) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance, [Section 626.611(7), Florida Statutes); (b) Fraudulent or dishonest practices in the conduct of business under the license or appointment. [Section 626.611(9), Florida Statutes]; (c) 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 interest. [Section 626.621(6), Florida Statutes]. WHEREFORE, you, TIMOTHY EUGENE BAGGETT, are hereby notified that the Treasurer and Insurance Commissioner 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 624.310, 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. In addition, you are notified that the Department intends to seek aggravation of the total applicable penalties in consideration of the willfulness of your, TIMOTHY EUGENE BAGGETT’s conduct, the age or capacity of the victim, and the degree of injury to 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. 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) Astatement 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. 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. Ifa 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. F ailure 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. DATED and SIGNED this y Ye sy of [U i ls , 2006. ' \ ert} a) wd IN CHANDLER : Deputy Chief Financial Officer CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTION OF RIGHTS has been furnished to TIMOTHY EUGENE BAGGETT, c/o Baggett Insurance & Associates, 6314 Hatcher Road, Lakeland, Florida, 33811- 2266 by Certified Mail this_ /#-_day of , 2006. Division of egal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-033 (850) 413-4230 (850) 488-0697 facsimile 10

Docket for Case No: 06-002841PL