MAR-12-2009 THU 02:46 PM 618504880697 Mar 12 2009 15:29 FAX NO. 488 0697 P, 14/39 = awe, REG 18 M0) i REPRESENTING ALEX SINK CHIEF FINANCIAL OFFICER STATE OF FLORIDA IN THE MATTER OF: CASE NO.: 94306-08-AG LARRY YALE KRAKOW / ADMINISTRATIVE COMPLAINT TO: LARRY YALE KRAKOW 7611 Eagle Point Drive Delray Beach, Florida 33446 You, LARRY YALE KRAKi Chief Financial Officer of the State OW, license 1D. # A145478, are hereby notified that the of Florida has caused to be made an investigation of your activities while licensed by the Department as a: (1) life including variable annuity, (2) life including variable annuity and health, (3) life, (4) life and health, and (5) health insurance agent in this state, as a result of which it is leged: GENERAL ALLEGATIONS 1, Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services (“Department”) has jurisdiction over the insurance licenses and appointments in this matter. 2, Pursuant to Chapter 6: currently and at all times pertinent to Department as a: (1) life including [ Florida Statutes, you, LARRY YALE KRAKOW, are € dates and occurrences referred to herein licensed by the variable annuity, (2) life including variable annuity and Mar 12 2009 15:30 MAR-12-2009 THU 02:47 PM 618504880697 FAX NO. 488 0697 P, health, (3) life, (4) life and health, and (5) health insurance agent in this state, license 1D. # A145478, 3. Global Financial Group of South Florida, Inc, is a registered insurance agency, registration LD, # R002342, located at 1750 University Dr, Suite 107, Coral Springs, Florida 33071, 4. At all times pertinent to the dates and occurrences referred to herein, you, LARRY YALE KRAKOW, were transacting insurance on behalf of Global Financial Group of South Florida, Inc, 5. You, LARRY YALE KRAKOW, are currently the Secretary of Global Financial Group of Boca Raton, Inc., a licensed insurance agency, license I,D, # L047330, located at 7025 Bera Casa Way, 1750 University r Suite 106, Boca Raton, Florida 33433, You, LARRY YALE KRAKOW, are also curently the agent in charge of Global Financial Group of Boca Raton, Inc, 6. You, LARRY YALE KRAKOW, are currently the President, Secretary, and Treasurer of Golani Financial Group, a licensed insurance agency, license 1D, # L051562, located at 7611 Eagle Point Drive, Delray Beach, Florida 33446. You, LARRY YALE KRAKOW, are also currently the agent in charge of Golani Financial Group. 7. The following are previous disciplinary orders and prior warnings entered against you, LARRY YALE KRAKOW, by the Department: aaa Consent Order, dated October 15, 2002, for engaging in unfair methods of competition or in unfair or deceptive acts or practices, as defined in Section 626.9541(1)(h), Florida Statutes, or having otherwise shown yourself to be a source of injury or loss to the public, in the conduct off business under the license or appointment, by 15/39 Mar 12 2009 15:30 MAR-12-2009 THU 02:47 PM 618504880697 FAX NO. 488 0697 P, offering unlawfal rebates to consumers and withholding monies belonging to insurers. ii. Consent Order, dated August 4, 2003, for failure to comply with continuing education requirements for insurance agents, in violation of Section 626.2814, Florida Statutes. iti. Letter of Guidance, dated December 23, 2003, for disseminating life and health insurance advertisements with no indication that the benefitting ont approved the advertising, in violation of then Rules 4-150.013 and 4-150,114, Florida Administrative Code [transferred to |Rules 69B-150.013 and 69B-150.114, Florida Administrative Code]. iv. Consent Order, dated August 15, 2005, for failure to comply with continuing education requirements for insurance agents, in violation of Section 626.2815] Florida Statutes, v. Consent Order, dated September 6, 2007, for failure to comply with continuing education requirements for insurance agents, in violation of Section 626.2815] Florida Statutes, Equity-Indexed Deferred Annuities 8, Very broadly speakirip, an annuity is a contract between a policyholder and an insurance company in which the company promises to make periodic payments to the policyholder, starting immediately or at some future time, If the payments are delayed to the future, it is a deferred annuity. If the payments start immediately, it is an immediate annuity, 9%, An equity-indexed annuity, either immediate or deferred, has a credited interest rate that depends on the performance of an external market index, with a guaranteed minimum return. 10. For an equity indexed|deferred annuity, a prospective annuitant must understand: (a) the overall product features; (b) investing; (c) tax impacts of the annuity; (d) the projected rates of return and how certain those rates are; (e) the risks associated with the insurance 16/39 Mar 12 2009 15:31 MAR-12-2009 THU 02:47 PM 618504880697 FAX NO. 488 0697 P, 17/39 compaty, or “credit risk”; (D liquidity of the investment; and (g) fees or costs associated with the annuity, . 11, There are several features of equity indexed deferred annuities which can have adverse consequences for some annuitants, as: (a) it is far more complex than traditional annuities; (b) there is uncertainty ofjthe return on the annuitant's investment; (c} the income from the annuity is treated ordinary income rather than capital gains; (d) the treatment for tax purposes to beneficiaries; (e) the lack of liquidity and surrender charges; (f) inflexibility in changing or “rebalancing” the mix of assets invested in; and (g) fees associated with the annuity, Life Insurance Code of Ethics 12. 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 plesenting 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 69B-215.210, Florida Administrative Code] 13, 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 polity, or to take out a policy of insurance in another insurer, [Rule 69B-215.215, Florida Administrative Code] 14. Misrepresentations ard 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 Mar 12 2009 15:31 MAR-12-2009 THU 02:48 PM 618504880697 FAX NO. 488 0697 P, 18/39 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 4) legal reserve system upon which any life insurer operates, of use any name or title of any policy or class of policies misrepresenting the true nature thereof, [Rule 69B-215.230(1), Florida Administrative Code] 15, No person shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be|made, published, disseminated, circulated, ar placed before the public, in a newspaper, magazins, or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over Any radio or television station, or in any other way, any advertisement, announcement or stattment containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading. [Rule 69B-215,230(2), Florida Administrative Code} COUNTI 16. The general allegations are hereby realleged and fully incorporated herein by reference, 17, You, LARRY YALE KRAKOW, knowingly and willfully made, issued, circulated, published, disseminated, dr put before the public or caused to be made, issued, or circulated, published, disseminated, | or put before the public, certain written advertising materials, 18, The advertising materials used by you, LARRY YALE KRAKOW, contain the phrase, “Larry Krakow ranked first athong 143,000 Agents,” underneath a header consisting of Mar 12 2009 15:31 MAR-12-2009 THU 02:48 PM 618504880697 FAX NO. 488 0697 P, 19/39 the logo for Allianz Life Insurance Company of North America (“Allianz Life”) and the language “Press Release dated. March 31, 2003: Allianz Insurance Company announces the rankings of top annuity agents.” 19. Allianz Life did not| nor has it ever, issued a press release entitled; “Allianz Insurance Company announces the rankings of top annuity agents.” 20, — Allianz Life did not, hor has it ever, issued a press telease containing the phrase, “Larry Krakow ranked first among [143,000 Agents” or one indicating that Larry Krakow was ranked first among any number of agents, 21. Allianz Life does an rankings of its agents based on volume of sales, but this information is not published or otherwise intended to be made available ta potential customers, 22. The advertising materials used by you, LARRY YALE KRAKOW, were not submitted to Allianz Life for approval. 23. Had the advertising materials used by you, LARRY YALE KRAKOW, been Submitted to Allianz life for approval, Allianz Life would not have approved or authorized their use, 24. Furthermore, the advertising materials used by you, LARRY YALE KRAKOW, contain excerpts from a Wall Street Journal Article, dated January 6, 2003, 25. The article excerpts in the advertising tnaterials used by you, LARRY YALE KRAKOW, fail to include any mention of the criticisms of the product, the complexities of the product, the controversy surrounding the lack of regulation by the Securities and Exchange Commission, and the issue of eatly withdrawal penalties, all of which are referenced in the original Wall Street Journal article, Mar 12 2009 15:32 MAR-12-2009 THU 02:48 PM 618504880697 FAX NO. 488 0697 P, 20/39 26. For instance, in your advertising materials the title of the Wall Street Journal Article is represented as, “Equity-Index Annuities Gain Favor... Potential and Protection Give Luster to the Vehicles...” 27. However, the true arid complete title of the Wall Street Journal article is “Equity- Index Annuities Gain Favor -- Despite Their Complexities; Potential and Protection Give Luster to the Vehicles, But Critics Blast the Details.” (emphasis added) 28. For instance, in your advertising materials the first sentence of the Wall Street Journal article is represented as, “Equity-Index Annuities are catching on...” 29, However, the true and complete first sentence of the Wall Street Journal article is, “Equity-Index Annuities are catching on, much to the dismay of critics who complain that these Products are difficult to understand,” (emphasis added) 30. You, LARRY YALE KRAKOW, through the conduct and actions described herein, failed to place the policyholder’s interests first. 31. You, LARRY YALE KRAKOW, through the conduct and actions described herein, did not accurately and completely present every fact essential to a client's decision. 32. The advertising matetials described herein are not genuine, do not represent the current opinion of the author, and are not accurately reptoduced. 33. The advertising materials described herein are reasonably expected to mislead or deceive, from the overall el of the advertisement, a person of average education or intelligence, within the segment of th public to which it is directed. 34. The advertising materials described herein contain statements, comparisons, or material omissions that were false, fraudulent, dishonest, untrue, deceptive, or misleading. Mar 12 2009 15:32 MAR-12-2009 THU 02:49 PM 618504880697 FAX NO. 488 0697 P, 21/39 35. You, LARRY YALE KRAKOW, knew or should have known that the advertising materials described herein contain) statements, comparisons, or material omissions that were false, fraudulent, dishonest, untrue, deceptive, or misleading. 36. The conduct and actions of you, LARRY YALE KRAKOW, described herein, were for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, exchange or convert any insurance policy or to take out a policy of insurance with another insurer. 37, You, LARRY YALE KRAKOW, as demonstrated by the conduct and actions described herein, were motivated to increase sales numbers and commissions in disregard to the fiduciary duty you owed to your clients. 38. You, LARRY YALE KRAKOW, through the conduct and actions described herein, demonstrated a lack of fitness or trustworthiness fo engage in the business of insurance, as well as a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by your insutance licenses. 39. You, LARRY YALE KRAKOW, through the conduct and actions described herein, violated a public trust in violation of the Life Insurance Code of Ethies set forth in ’ Chapter 698-215, Florida Administrative Code. IT IS THEREFORE CHARGED that you, LARRY YALE KRAKOW, have violated or are accountable under one or more of the following provisions of the Florida Statutes or Florida Administrative Code, which constitule grounds for the suspension or revocation of your licenses as a Florida insurance agent: Mar 12 2009 15:32 MAR-12-2009 THU 02:49 PM 618504880697 FAX NO. 488 0697 P, 22/39 (a) 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 626.61 1{5), Florida Statutes]; (b) Demonstrated lack pf fitness or trastworthiness to engage in the business of insurance, [Section €26,611(7), Florida Statutes]; (c) Demonstrated lack af reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment, [Section 626.611(8), Florida Statutes]; (4) Fraudulent or dishonkst practices in the conduct of business under the license or appointment, [Section 626.611(9), Florida Statutes]; (e) 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]; (f) 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]; (g) Violation of any lawful order or rule of the department, commission, or office. [Section 626.621(3), Florida Statutes]: {h) Violation of the proyision against twisting, as defined in s. 626,9541(1}(), {Section 626.621(5), Florida Statutes}; @) 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 Mar 12 2009 15:33 MAR-12-2009 THU 02:49 PM 618504880697 FAX NO. 488 0697 P, 23/39 this chapter, or having otherwise shown himself or herself to be a source of injury or Joss to the public. [Section 626,621(6), Florida! Statutes]; QW) As a life agent, violation of the code of ethics, [Section 626.621(9), Florida Statutes and Chapter 69B-215, Florida Administrative Code]; (k) Engaging in this state in any trade practice which is defined in this part as, or determined pursuant to s. 626.951 of 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(1), F.8. (2005)}; () Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, ilustration, circular, statement, sales presentation, omission, or comparison which: I, Misrepresents the|benefits, advantages, conditions, or terms of any insurance policy... 6. Is a mistepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy... (Section 626.9541(1)(a), F.8. (2005)]; (m) Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indireptly, to be made, published, disseminated, circulated, or placed before the public... 2. In the form ofa notice, circular, pamphlet, letter, or poster,.., 4, In any other way, 10 Mar 12 2009 15:33 MAR-12-2009 THU 02:50 PM 618504880697 FAX NO. 488 0697 P, 24/39 an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading. [Section 626.9541(1)(b), F.8, (2003); _ (1) Knowingly... b, Making, publishing, disseminating, circulating, ¢, Delivering to any person, d. Placing before the public, €, 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,, F.S. (2005)]; (0) 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, 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 in another insuret, [Section 626,9541(1)(1), F.S. (2005)]; (Pp) Using an annuity advertisement where the form and content of are not sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive, as determined by the Department froth the overall impression that the advertisement may be reasonably expected to create upon la person of average education or intelligence, within the segment of the public to which it ig directed. [Rule 69B-150.105(1), Florida Administrative Code}; (q) Using an annuity advertisement that is not truthful, is misleading in fact or in implication, or involves the use of| words or phrases, whose meanings are clear only by 11 MAR-12-2009 THU 02:50 PM 618504880697 Mar 12 2009 15:34 FAX NO, 488 0697 implication or by the consumer’s familiarity with insurance terminology. [Rule 69B-150,105(2), Florida Administrative Code]; ) Soliciting a resident of this State for the purchase of an annuity in connection with or as the result of the use of any advertisement which: a. untrue, deceptive Status, character of the sdvrtunles or b, c. [Rule 69B-150.105(4), Florida Admi (s) Contains any misleading representations, misrepresentations, or is otherwise or misleading with regard to the information imparted, the t tepresentative capacity of such person or the true purpose Otherwise violates the provisions of these rules; ot Otherwise violates the provisions of the Florida Insurance Code... nistrative Code}; Using an annuity advertisement that omits information or uses words, phrases, statements, references or illustrations where such omission’ or such use has the capacity, tendency or effect of misleading or nature or extent of any policy of co: fact that the policy or contract offer prior to consummation of the sale or not satisfied, does not remedy mi Administrative Code); @ that are not genuine, do not represent the policy advertised and are not Administrative Code}; sleading statements, deceiving purchasers or prospective purchasers as to the in benefit payable, loss covered or premium payable, The is made available to a prospective insured for inspection lan offer is made to refund the premium if the purchaser is [Rule 69B-150,107(1)(a), Florida Using an annuity advertisement that containg testimonials and endorsements used the current opinion of the author, are not be applicable to accurately reproduced. [Rule 69B-150,110(1), Florida P, 26/39 Mar 12 2009 15:34 MAR-12-2009 THU 02:51 PM 618504880697 FAX NO. 488 0697 P, 26/39 {u) Using an annuity advertisement without prior written approval or prior oral approval with subsequent written| confirmation of approval by the insurer. [Rule 69B- 150,114(10), Florida Administrative Code]. COUNT II 40. The general allegatidns are hereby realleged and fully incorporated herein, by reference, 41, Consumer J.A.5. is a male retiree who resides in Lake Worth, Florida. 42. Consumer J.A.S. was, at all times relevant to these proceedings, a resident and citizen of the State of Florida, 43. Consumer J.A.S. was| born in 1925, Currently and at all times pertinent to the dates and occurrences referred to hergin, Consumer J.A.S. was a “senior citizen” of “65 years of age or older” per Section 627.4554(3}(b), Florida Statutes (2005), 44, Sometime in July 2005, when Consumer J.A.S. was approximately 79 years old, he attended a free breakfast and seminar held by you, LARRY YALE KRAKOW, at the Men’s Club of the Covered Bridge. 45. On or about August] 23, 2005, you, LARRY YALE KRAKOW, met with Consumer J,A.8, at his home in Lake Worth, Florida. 46, Currently and at the time of that visit, the annual income of Consumer J.A.S. was less than $25,000, which consisted of a monthly social security check of $900 and a monthly annuity payment of approximately $400. 13 Mar 12 2009 15:34 MAR-12-2009 THU 02:51 PM 618504880697 FAX NO. 488 0697 P, 27/39 47. In his will, Consumer J.A.S. has a trust, known as the J.A.S. Trust, intended to distribute funds to his beneficiaries upon his death. 48. At the time of that visit, the primary priorities arid concerns of Consumer J.A.S. were to consolidate his investments into one account held by the J.A.S. Trust, to have ease of access for himself and his heirs, and|to have guarantees that the money would be passed on to his beneficiaries upon his death in a timely manner: 49, On or about August 23, 2005, you, LARRY YALE KRAKOW, willfully induced Consumer J.A.S, to surrender his Principal Financial Group annuity, issued on May 5, 1997, and replace it with an Allianz annuity, palicy number 70338667. The approximate surrender value of the Principal Financial Group annuity was $55,792.28. No surrender charges applied to this balance, 50, On or about August 23, 2005, you, LARRY YALE KRAKOW, willfully induced Consumer J.A.S. to surrender the Raymond James & Associates bank account, held in the name of the J.A.8, Trust, and replace it |with an Allianz annuity, policy number 70338664, The approximate value of the Raymond| James & Associates bank account, following an account closing fee of $75.00, was $42,530.83. The amount of $16,000 was transferred to Consumer J.A.8, for roofing charges that Consumer J.A.S, expected to incur, 51. On or about August 23, 2005, you, LARRY YALE KRAKOW, willfully induced Consumer J.A.S. to surrender the AIG SunAmerica Life Assurance Company annuity, held in the name of the J.A.S. Trust, issued on February 25, 2004, and replace it with an Allianz annuity, policy number 70338675. The approximate surrender value of the AIG SunAmerica Life Assurance Company annuity, following a surrender charge of $2,748.23, was $55,709.05, From August 23, 2005 to February 2, 2006, the transfer of funds from Consumer J.A.8.’s AIG 14 Mar 12 2009 15:35 MAR-12-2009 THU 02:51 PM 618504880697 FAX NO. 488 0697 P, 28/39 SunAmerica Life Assurance Company atmuity was denied five times for improper documentation. 52. On or about March 27, 2006, you, LARRY YALE KRAKOW, willfully induced Consumer J.A.S, to surrender his Certificate of. Deposit and replace it with an Allianz annuity, policy number 70433615, The approximate surrender value of the Certificate of Deposit was $10,000. No surrender charges applied to this balance, 53. The sale of the aforementioned annuities generated commissions of $11,021.13 for you, LARRY YALE KRAKOW, lor your agency, Global Financial Group of South Florida. 34. You, LARRY mi KRAKOW, failed to provide adequate assistance to Consumer J.A.8. to correct the errors in the aforementioned annuities, including his middle name, social security number, date of birth, and mailing address. Certain errors still exist as of the filing of this Administrative Complaint. 35. In the process of inducing the sale and purchase of the aforementioned annuities, you, LARRY YALE KRAKOW, willfully misrepresented and/or omitted material information regarding the nature and sale of the| annuity. The misrepresentations, both by omission and commission, include, but are not limited to, the following: (a) Stating that you did not have to explain the annuities you were selling because Consumer JAS. had previously owned annuities, {b) Stating that these transactions would consolidate Consumer J.A.8.’s investments into one account; (c) Stating the annuities you were selling had all the benefits of Consumer J.A.S.’s current annuities, when in fact, the current annuities (i) allowed access to the premium with little 15 Mar 12 2009 15:35 MAR-12-2009 THU 02:52 PM 618504880697 FAX NO. 488 0697 P, 29/39 to no surrender charges, (ii) had guaranteed annual interest rates that were approximately double of the guaranteed annual interest rates of annuities you were selling, and, (iii) upon death, paid out the entire accumulated ‘value to the beneficiaries without penalty or requirement of annuitization; (d) Stating that the annnities you were selling would be save Consumer J.A.8. from taxes from the Internal Revenue Service: (e) Stating that you would explain how the annuities you were selling would save Consumer J.A.8, from taxes from the Internal Revenue Service on a future date and failing to do 80, (f) Failing to disclose that 10% premium bonus credit does not actually credit to the account unless and until the policyholder annuitizes the entire policy after waiting at least five years (deferral period}, and then elkets to receive annuity income payments for a period of at least ten years; (g) , Failing to disclose that, although the annuities allow up to a 10% withdrawal once a year after the. first year, there wad a 12.5% 10-year declining surrender charge for any other withdrawals with forfeit of the bonus credit and any index gains for the life of the annuity. Consequently, in order for Consuther JAS. to fully access his annuities without penalty, Consumer J.A.S, would have to live wntil he was approximately 89 years of age. (bh) Failing to disclose thal when Consumer J AS, reached approximately 89 years of age, he would have to annuitize his investment over an additional ten years in order to benefit from any interest beyond the minimal interest rate of the cash surrender. 16 Mar 12 2009 15:35 MAR-12-2009 THU 02:52 PM 618504880697 FAX NO. 488 0697 P, 30/39 a) Failing to disclose that when Consumer J.A.S., reached approximately 89 ycars of age, he would have to annuitize his investment over an additional ten years in order to obtain the 10% bonus credit, (j) Failing to disclose that the beneficiaries would not receive the benefit of a fully Matured annuity, including the 10% bonus credit, unless they elected to annuitize the payout over a period of five years, (k) Failing to disclose to Consumer J.A.S. that interest increases are capped, but there is no cap on losses. r)) Failing to explain that the 20 day “free look” period, as required by Florida law, begins at the receipt of the policy rather than the date of purchase. 56. The conduct and actions described herein contain statements, comparisons, or material omissions that were false, fraudulent, dishonest, untrue, deceptive, or misleading. 57, You, LARRY YALE KRAKOW, knew or should have ktiown the conduct and actions described herein contained| statements, comparisons, or material omissions that were false, fraudulent, dishonest, untrue, deceptive, or misleading. 58. Consumer ‘J.A.S, justifiably relied on the representations and information conveyed to him by you, LARRY YALE KRAKOW, concerning the annuities, He would not have been purchased the annuity but/for these representations, 59, As Consumer J_A.S. |did not receive restitution until sometime after August 12, 2008, Consumer J.A.S. did not receive timely restitution. 60. You, LARRY YALE KRAKOW, failed to have reasonable grounds to believe that your recommendations to Consumer J.A.S. to purchase annuities and exchange annuities 17 Mar 12 2009 15:35 MAR-12-2009 THU 02:52 PM 618504880697 FAX NO. 488 0697 P, 31/39 that resulted in another insurance transaction or series of insurance transactions, were necessary, appropriate, or suitable for Consumer J.A.S, as to his investments and other insurance products as well as his age, financial situation, and needs. 61. You, LARRY YALE KRAKOW, through the conduct and actions described herein, did not accurately and completely present every fact essential to a client's decision. 62. The conduct and actions of you, LARRY YALE KRAKOW, described herein, were for the purpose of inducing, of tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, exchange or convert any insurance policy or to take out a policy of insurance with another insurer, 63. You, LARRY YALE KRAKOW, as demonstrated by the conduct and actions described herein, were motivated to increase sales numbers and commissions in disregard to the fiduciary duty you owed to your clients, 64. You, LARRY YALE KRAKOW, through the conduct and actions described herein, demonstrated a lack of fitness or trustworthiness to engage in the business of insurance, as well as a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by your insurance licenses. 65. You, LARRY YALE/KRAKOW, through the conduct and actions described herein, violated a public trust in viclation of the Life Insurance Code of Ethics set forth in Chapter 69B-215, Florida Administrative Code. TT IS THEREFORE CHARGED that you, LARRY YALE KRAKOW, have violated or are accountable under one or more ofthe following provisions of the Florida Statutes or Florida 18 Mar 12 2009 15:36 MAR-12-2009 THU 02:53 PM 618504880697 FAX NO. 488 0697 P, 32/39 Administrative Code, which constitute grounds for the suspension or revocation of your licenses as a Florida insurance agent: . (a) 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]; (b) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. [Section 626.611(7), Florida Statutes); (c) 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]; (d) ‘Fraudulent or dishonest practices in the conduct of business under the license or appointment. [Section 626.611(9), Florida Statutes); (e) Willful failure to “T. 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]; (f) 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]; (g) Violation of any lawful order or rule of the department, commission, or office. [Section 626.621(3), Florida Statutes]; (h) —- Violation of the provision against twisting, as defined in s. 626.9541(1)(). [Section 626.621(5), Florida Statutes]; Mar 12 2009 15:36 MAR-12-2009 THU 02:53 PM 618504880697 FAX NO. 488 0697 P, 33/39 (i) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfairlor deceptive acts or practices, as prohibited under part IX of this chapter, or having otherwise shbwn himself or herself to be a source of injury or loss to the public, (Section 626.621(6), Florid: Statutes); @) As a life agent, violation of the code of ethics. [Section 626,621(9), Florida Statutes and Chapter 69B-215, Florida Administrative Code]; (k) Engaging 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(1), F.8, (2005)]; () Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which: 1, Misrepresents the /benefits, advantages, conditions, or terms of any insurance policy... 6. Is a mistepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy... [Section 626.954 1(1)(a), F.S. (2005)]; (m) Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public,,, 2. In the form of a notice, circular, pamphlet, letter, or poster,... 20 Mar 12 2009 15:36 MAR-12-2009 THU 02:53 PM 618504880697 FAX NO. 488 0697 P, 34/39 4. Inany other way, an advertisement, announcement,| or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading. [Section 626.9541(1)(b), F.8. (2005); (n) —- Knowingly... b, G Making, publishing, disseminating, circulating, Delivering to any person, Placing before the public, 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)L., F.S. (2005)}; (0) Knowingly making any misleading representations or incomplete or fraudulent comparisons or fraudulent materiall 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 in another insurer. [Section 626,9541(1)(1), F.S. (2005)]; (Pp) Recommending to 4 senior consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, without reasonable grounds for believing that the recommendation is suitable for the senior consumer on the basis of the facts disclosed by the senior consumer as to his or her investments and other insurance products and jas to his or her financial situation and needs. [Section 627.4554(4)(a), Florida Statutes (2005)]; ‘al Mar 12 2009 15:37 MAR-12-2009 THU 02:54 PM 618504880697 FAX NO. 488 0697 P, 36/39 (q) Before executing a purchase or exchange of an annuity resulting from a recommendation to a senior consumer, failing to make reasonable efforts to obtain information concerning the senior consumer's financial status, tax status, and investment objectives and such other information used or soniaee to be reasonable by the insurance agent, or the insurer if no agent is involved, in making the recommendation. [Section 627,4554(4)(b), Florida Statutes (2005)]; | WHEREFORE, you, LARRY YALE KRAKOW, ate 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 624.310, 626.611, 626,621, 626.651, 626.681, 626,691, 626.692, 626.9521, and 626.9581, 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 28-106, 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 h. must be filed with the General Counsel acting as the 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-fitst day will not preserve your right to 4 hearing, 22 Mar 12 2009 15:37 MAR-12-2009 THU 02:54 PM 618504880697 FAX NO. 488 0697 P, 36/39 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 VEST A PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF SUSPENSION OR REVOCATION WILL BE ENTERED AGAINST YOU. If you réquest a proceeding, you must provide information that complies with the requirements of Rule 28-106.2015, 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, address, and telephone number, and facsimile number (if any) of the respondent (for the purpose of requesting a hearing in this matter, you are the respondent"). (b) The name, address,|telephone number, facsimile number of the attorney or qualified representative of the respondent (if any) upon whom service of pleadings and other papers shall be made. (c) A-statement requesting an administrative hearing identifying those material facts that are in dispute, Ifithere are none, the petition must so indicate. (d) A statement of when the respondent received notice of the administrative complaint, {e) A statement including the file number to the administrative complaint, If a hearing of any type is requested, you have the tight to be represented by counsel or other qualitied 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 23 Mar 12 2009 15:38 MAR-12-2009 THU 02:54 PM 618504880697 FAX NO. 488 0697 P, 37/39 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 telephonit conference call upon your tequest, 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 mi 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, DATED and SIGNED this jae day of Fe byyor \ , 2009, TAMMY TE@TON Deputy Chief Financial Officer MAR-12-2009 THU 02:55 PM 618504880697 Mar 12 2009 15:38 FAX NO, 488 0697 STATE OF FLORIDA DEPARTMENT OF FINANCIAL SERVICES DIVISION OF LEGAL SERVICES IN THE MATTER OF: CASE NO.: 94306-08-AG LARRY YALE KRAKOW / ELECTION OF PROCEEDING I have received and have read the A ("Department") against me, including the Noti disposition of this matter as indicated below. (C 0 I do not dispute any of the Depart ministrative Complaint filed by the Florida Department of Financial Services ie of Rights contained therein, and { understand my options. I am requesting HOOSE ONE) ment’s factual allegations and ¥ do not desire a hearing. | 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, appropriate, cluding suspending or revoking my licenses and appointments as may be 2. T donot 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 Statotes. In this regard, J desire to: 0 0 0 Submit a written st Personally attend al Altend that same hi I do dispute one or more of the 120.57(1}, Florida Statutes, to be ent and documentary evidence in lieu ofa hearing; or hearing conducted by a department hearing officer in Tallahassee; or aring by way of a telephone conference call. lepartment's factual allegations. | hereby réquest ¢ hearing pursuant to Section eld before the Division of Administratlve Hearings. sitetion fox the inforination. re ulired by ule 28. 106. 2015, Florida Adiminisaive Corle-ag seecif ied_in Sp 2 3 TO PRESERVE YOUR RIGHT TO A HEARI. FINANCIAL SERVICES WITHIN TWENT COMPLAINT, THE RESPONSE MUST BE TWENTY-FIRST DAY AFTER YOUR RECEI The address for filing is: General Counsel ac G, YOU MUST FILE YOUR RESPONSE WITH THE DEPARTMENT OF -ONE (21) DAYS OF YOUR RECEIPT OF THE ADMINISTRATIVE BY THE DEPARTMENT NO LATER THAN 5:00 P.M. ON THE OF THE ADMINISTRATIVE COMPLAINT, ing as Agency Clerk, Florida Department of Financial Services, 612 Larson Building, 200 Rast Gaines Street, Tallahassee, Florida 32399-0333. Signature Date: Date Administrative Complaint Received: Ifyou are represented by an attoritey or qualified representative, please attach to this election form hig or her name, address, telephone and fax mumbers Print Name Address: Phone No.: Fax No. 25 38/39 Mar 12 2009 15:38 MAR-12-2009 THU 02:55 PM 618504880697 FAX NO. 488 0697 P, 39/39 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTION oF PROCEEDING has been furnished to the following by certified mgil restricted delivery this (3""day of Felor wo eu , 2009: LARRY YALE KRAKOW Regina es 761) Eagle Point Drive Delray Beach, Florida 33446 Senior Attomey Florida Bar No. 0634948 Florida Department of Financial Services Division of Legal Services 200 East Gaines Street, 612 Larson, Tallahassee, Florida 32399-0333 Tel: (850) 413-4236 Fax: (850) 488-0697 regina, keenan@myfloridacfo,com 26

Docket for Case No: 09-001273PL