STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF FINANCIAL | ) | |||
SERVICES, | ) ) | |||
Petitioner, | ) | |||
vs. | ) ) | Case | No. | 09-1662PL |
) | ||||
MITCHELL BRIAN STORFER, | ) | |||
) | ||||
Respondent. | ) | |||
) |
RECOMMENDED ORDER
Pursuant to notice, a due process hearing was held in this case on July 22 and 23, 2009, in Vero Beach, Florida, before June C. McKinney, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: David J. Busch, Esquire
Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-0333
For Respondent: Douglas J. Kress, Esquire
Debra A. Jenks, Esquire Schwed McGinley & Kahle
11376 North Jog Road, Ste. 101 Palm Beach Gardens, Florida 33418
STATEMENT OF THE ISSUES
The issues for determination in this case are whether Respondent violated the law as charged by Petitioner in its
Administrative Complaint, and, if so, what discipline is appropriate.
PRELIMINARY STATEMENT
On March 4, 2009, the Department of Financial Services ("Petitioner" or "Department"), filed a three-count Administrative Complaint ("AC") involving three separate customers against Mitchell Brian Storfer ("Respondent" or "Storfer"). Respondent was accused of violating Sections 624.11(5), 624.611(7), 626.611(9), 626.611(13); 626.621(2),
626.621(6), 626.9541(1)(a)1., and 616.95(1)(e)1., Florida
Statutes1. Also cited are Florida Administrative Rules 69B- 215.210 and 69B-215.230.
Respondent requested a hearing to contest the charges of the AC, and the matter was referred to the Division of Administrative Hearings on March 31, 2009, to conduct a formal hearing.
At the final hearing, Petitioner presented the testimony of Doris R. Jorgensen, Robert West, Kikuko West, Celina Grubicy (by deposition testimony), and Alberto L. Grubicy (by deposition testimony). Petitioner offered Exhibits 1 through 72, which were received into evidence. Respondent testified on his own behalf. Respondent's Exhibits numbered 1 through 114 were admitted into evidence.
The hearing was completed on July 23, 2009, and the parties requested that the proposed recommended order filing deadline be
30 days after the date the transcript was filed with the Division of Administrative Hearings. On August 17, 2009, the Transcript, consisting of three volumes, was filed. The undersigned granted the Joint Motion for Extension of Time to File proposed recommended order and the parties were given until September 30, 2009, to file proposed recommended orders. The parties filed timely Proposed Recommended Orders, and each has been considered in this matter.
FINDINGS OF FACT
Petitioner is the state agency with the statutory authority and duty to license and regulate insurance agents in Florida.
Respondent has been licensed as a life including variable annuity and health agent, life insurance agent, and life and health insurance agent. At the time of the events which are the subject of this case, Respondent held the aforementioned licenses and was the president of Seniors Financial International, Inc., an insurance agency located in Vero Beach.
Storfer is licensed to sell fixed annuities for most of the insurance companies licensed to transact business in the
State of Florida, including Allianz, IMG, Aviva, North American, Old Mutual, and American Equity.
Storfer keeps himself abreast of the suitability requirements and features of annuities by regularly attending and participating in the quarterly, if not monthly, training presented by insurance companies. The companies also provide seminars at Storfer's office. He goes to their offices or views webinars that can last two-to-three hours. The companies also offer assistance by providing people in-house to answer questions about their products. Even though Storfer could have the option for each client to submit cases to the companies for the company to help prepare and work to find a suitable product for each customer/individual, there was no testimony he did so with the individuals in this case. He also testified that he understood and was knowledgeable about all the products sold, relating to the three clients, from which the AC stems.
Storfer regularly holds luncheon/dinner workshops and seminars at restaurants in and around Vero Beach that focus on financial issues. He invites the attendees by mailing them a flier. Each attendee receives a free meal while listening to Storfer's financial presentation. During the luncheons, Storfer does not offer any investment products for sale. However, attendees are asked to complete a "Senior Financial Survival Workshop Evaluation Form" and are invited to request an in-
office appointment if they are interested in discussing specific investment products. The form elicits information including family background, financial history, current expenses, and tax liabilities. The attendees are asked to put "yes" or "no" at the top of the form. If an attendee puts yes, then a follow-up appointment is scheduled in Storfer's office. Storfer's wife picks up the forms and sets the appointment.
Storfer's procedures at the appointment typically start by filling out a client profile. He goes through the form with the client and asks the client questions to obtain the details regarding age, contact information, beneficiaries, health, estate, plans for money, rate of return, percentage of life saving willing to lose, risk tolerance, liquidity, income needed form investment accounts, what needs to be fixed, income, assets and liability inventory, life insurance, and long-term care insurance/disability insurance.
After completing the profile, Storfer reviews the documents that he has requested the client bring in to the appointment. This includes tax returns, an investment portfolio, and list of how much money they have and where it is, including life insurance or long-term care. There is no fee for the appointment. Typically, after the first meeting, Storfer reviews the documents and the client returns for a second appointment.
At the client's next appointment, Storfer has reviewed everything and put together a product that he wants to sell the client. He also provides an illustration of the product demonstrating the product's growth and how it would work. If the client decides to go forward and invest in one of the products Storfer has recommended, Storfer gets an application for the product and his wife fills it out.2
After the application has been completed, Storfer's office procedure is to submit it to the company the same day to await approval. Once the application has been approved, then the policy is funded either by transferring from another type of product (direct transfer rollover) or by a 1035 exchange. The policy can not be issued if not funded.
Once the policy is funded and issued, the company mails the policy and the documents for the client to sign to Storfer, as the agent to deliver. Storfer's operating procedure is to call the client to set an appointment for policy delivery. The appointment's purpose is to go over the policy with the client, including the amount of money that went into the policy, where the funds came from and what the policy will do for them, including liquidation and charges.
Storfer keeps documents which he refers to as client notes in each client's file. After client meetings, he uses a service to dictate what he wants as a summary of the client
meeting. The service types up what he says and emails it back to him. It is printed, reviewed, and scanned into his system.
Alberto and Celina Grubicy
Celina Grubicy ("C.G."), a native of Argentina, was born on April 6, 1940. She was married at age 19 to Alberto Grubicy ("A.G."), who was also born and raised in Argentina. They moved to the United States in 1965; English is their second language.
The Grubicys opened a repair shop in New York in 1964.
Then, they went in the construction business in Connecticut for about ten years before retiring to Florida. In both successful businesses, C.G. handled the paper work and kept the books. The Grubicys retired in the early 90's and purchased a condominium in Florida, where they now reside.
On February 5, 2007, the Grubicys attended Respondent's luncheon seminar at Carrabbas Italian Grill in Vero Beach. At the seminar, the Grubicys listened to the presentation and completed the seminar evaluation form confirming an estate in excess of one million dollars. At the time, A.G. was 65 years old and C.G. was 66 years old. The Grubicys thought the presentation sounded good, so they made an appointment to see Storfer in his office.
Prior to any interaction with Storfer, C.G. was the owner of a Transamerica variable annuity with a contract date of
September 23, 2002, an AXA Equitable variable annuity with a contract date of June 17, 2005, and a Hartford variable annuity with a contract date of July 25, 2005. Each of the annuities was doing well and approaching dates when surrender charges would no longer apply.
The Grubicys met with Storfer on February 7, 2007. At the meeting, the Grubicys informed Respondent that their investment goals were two-fold. They explained that their primary financial goal was safety. Their plan included selling their residential building complex from which they were currently collecting rental payments for income.3 Their goal in five years was to have an investment that would provide their income after they sold the property.4 The Grubicys wanted an investment to replace the rental money that they would no longer receive after the sale of their building. The Grubicys also stressed to Storfer that the security of the investment was a paramount concern. C.G. wanted out of variable annuities because she was concerned about the stock market risk and did not want annuitization to take place.
At their second meeting on February 12, 2007, knowing the Grubicys' goals, Storfer misrepresented the advantages for the product he recommended with a graphic illustration on a blackboard. He showed the MasterDex annuity with Allianz in such a fashion, that, when the market advanced in relation to a
base line, the return on the annuity would also advance, up to a three percent cap per month on the gain, but that when the market fell below the base line, there would be a zero percent return, but never a loss of the gain made in the previous months, or a loss of invested capital.
Storfer recommended and proceeded to sell the Grubicys the Allianz MasterDex 10 ("MasterDex") policy, being fully aware of the Grubicys' goals. He insisted that was the way for the Grubicys to invest because they would never lose their principal compared to the other annuities that have high risk plus excess fees. Storfer did not provide the Grubicys any other investment option.
The annuity was a long-term investment that provided for surrender penalties on a declining scale for fifteen years even though Storfer told the Grubicys that the Allianz annuity would mature in five years from the day it started.5 Storfer assured the Grubicys that they were not going to lose anything by investing in the MasterDex annuity with Allianz. They were not accurately informed of the provisions in the contract by Storfer during the meeting nor did Storfer fully review the relevant terms and conditions, including the length of the policy.6
The Grubicys knew that when they surrendered the three variable annuities there would be surrender charges. However,
Storfer told them that the product he was selling them had a 12 percent bonus that would offset the monetary lost from surrender penalties of the transferring funds.7
The Grubicys decided to follow Storfer's recommendation with his assurances that they wouldn't lose money, and they surrendered their three annuities to purchase two MasterDex annuities in excess of about one million dollars. After Storfer completed the numerous forms and documents, the Grubicys authorized the transfers of money to Allianz by way of assignment on or about March 2, 2007, and authorized him to buy the new policies.
Storfer allocated 100 percent to the Standard & Poors ("S&P") 500 instead of allocating the total investment among three possible choices in smaller increments. Respondent's 100 percent allocation choice on the Supplemental Application contravenes both of the Grubicys' requests on each of their Liquidation Decision forms, which specifically state "the decision to liquidate . . . based solely on . . . desire to eliminate market risk and fees "
The annuity product Storfer sold the Grubicys provided for three different values: annuitization value, cash surrender value, and guaranteed minimum value. The Statement of Understanding provided:
* * *
Cash surrender value The cash surrender value is equal to 87.5% of premium paid (minus any withdrawals) accumulated at 1.5 percent interest compounded annually. The cash surrender value does not receive premium bonuses or indexed interest. The cash surrender value will never be less than the guaranteed minimum value (which we define below).
The cash surrender value will be paid if you choose to receive a) annuity payments over a period of less than 10 years for Annuity Option D and five years for Alternate Annuity option IV, or over a period of less than 10 years for all other annuity options,
b) annuity payments before the end of the first year for Alternate Annuity Option IV or before the end of the fifth policy year for all other annuity options, or c) a full surrender at any time.
The Grubicys signed the numerous forms and documents without reading them because they trusted Storfer and he sounded as if he knew what he was talking about. They relied on his
advice. Storfer sold the Grubicys a policy completely different from what he had described.8 The monthly cap was opposite of the way Storfer explained it.
A description of the "monthly cap" stated:
Actual annual indexed interest may be lower (or zero) if the market index declines from one month anniversary to the next, even if the market index experienced an overall gain for the year. (emphasis in original)
The Grubicys later learned that the advice Storfer provided them regarding how the MasterDex annuity worked was erroneous. Respondent provided them misleading representations regarding the sale of the annuity products.
On April 5, 2007, C.G. received her annuity contract for a MasterDex annuity for approximately $1,123,000, and she executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form.
On April 12, 2007, A.G.'s annuity contract for a MasterDex annuity for approximately $35,000 was delivered and he executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form.
The sale of the Allianz annuities generated commissions of approximately $95,000.00 for Storfer or his agency, Senior Financial International, Inc.
The Grubicys became concerned about the MasterDex product Storfer sold them while watching television at home one day, and seeing a class action lawsuit advertisement about their purchased product. They called Storfer immediately to discuss Allianz. He set up an appointment with the Grubicys to meet with him about their concerns.
When Storfer met with the Grubicys, he assured them that they didn't need to change anything, their product was fine. He also informed them that their product was six percent up and not to worry because if the S&P 500 went down, they didn't have to worry because they had already made six percent.
In May 2007, the Grubicys went to Connecticut and attended another investment seminar. Afterwards, they set up a meeting with the financial advisor, Mr. Ray ("Ray"). The Grubicys took their investment paperwork to Ray and he reviewed it. Ray explained how the MasterDex worked and called an Allianz customer service representative while they were in the office to further explain how the product worked. The Grubicys were informed that there was a monthly cap of three percent when it went up but no monthly cap on stock market losses.
Such a description of the cap combined with the description in the contract support a finding that the MasterDex annuity did not meet the Grubicys' financial goals and was not a suitable investment for them. In particular, the Grubicys had been clear that they did not want to have any market risk.
Subsequently, the Grubicys contacted Storfer again and questioned his declaration regarding the cap on stock market losses. Respondent continued to describe the crediting method incorrectly and told them Ray was just trying to sell them something. He insisted that the S&P 500 is the way he explained it earlier and that Ray's interpretation was wrong. Ray eventually sent the Grubicys an article from the Wall Street
Journal, which they testified reemphasized that the investment worked completely different from what Storfer continued to tell them.
The Grubicys requested a refund from Allianz.
Approximately one year later, Allianz eventually set the contract aside and refunded the investment principal, surrender charges for the three annuities, and some interest.
The evidence convinces the undersigned that Storfer knowingly made false representations of material facts regarding the MasterDex annuity and its downside cap.
Kikuko West
Kikuko West ("K.W."), a native of Japan, was born in 1933. She marrried a U.S. soldier and moved to the United States when she was 18 years old. Together they had four children. She is now married to Robert West ("R.W.").
K.W.'s employment history started with her working in a bakery, then as a waitress in a Chinese restaurant, and her ultimately owning and operating a successful flower shop for over 30 years in West Warwick, Rhode Island. She sold it in 2006.
K.W. sold her house in Rhode Island and used the money to invest in a Smith-Barney mutual fund and an AXA Equitable Life Insurance Company (AXA) annuity (contract # 304 649 121), which she purchased in June 30, 2004. West purchased a condominium in Florida and has been a permanent resident for the past five years.
On January, 15, 2008, Robert and Kikuko West ("Wests") attended Respondent's seminar. They scheduled an appointment for January 23, 2008, but didn't show. They attended a second workshop on or about June 3, 2008, and scheduled a meeting for July 9, 2008, but didn't show.
The Wests rescheduled their appointment with Storfer on August 4, 2008, and met with him in his office for the first time. Even though K.W.'s husband attended the meeting, the focus of the meeting was her finances. K.W. explained that
their monthly income was $2,900 and their monthly living expenses were $2,100, but a majority of it came from her husband's pension so she was worried about income if he passed. She only received $600 a month in social security and wanted income in the future. She had $100,000 for emergencies in a money market account.
K.W. also informed Storfer that when she dies she wants her four daughters and six grandchildren to inherit her money. K.W. wanted to stop receiving various statements from each of her numerous investment accounts and bundle her assets. She told Storfer that she wanted to keep everything that she had and would be happy with a rate of return of four or five percent. She emphasized she had zero risk tolerance.
K.W. provided the following information for her asset/liability inventory: an AXA variable annuity(non- qualified) in the amount of about $119,589.58; mutual fund (non- qualified) of $253,289.55; IRA (qualified) $80,039.33; CDs (nonqualified) for $25,000 and $35,000; a Fidelity and SunTrust (nonqualified) totaling $40,000; and a Vanguard equaling
$60,000. West explained that she didn't have life insurance but had prepaid funeral. Her husband had three life insurance policies.
K.W. had a second meeting with Storfer on August 6, 2008. At that meeting, K.W. provided income tax and other
paperwork to detail the stocks that she wanted consolidated into one statement.9 Storfer went over the financial illustrations and company profiles he had compiled as proposed investments.
Unbeknowest to the Wests, Storfer's plan for restructuring K.W.'s reinvestments was to transfer funds from her variable annuity (approximately $215,000) to a fixed annuity and transfer assets from K.W.'s existing brokerage accoung (approximately
$80,000) to a new brokerage account, which were both with American Equity.
During the meeting, Storfer also introduced the Wests to Kevin Kretzmar, a broker for Summit Brokerage Services, by speakerphone.10 The discussion consisted of how the money would be transferred.11 The Wests thought Kretzmar worked for Storfer as his assistant and were unaware that he brokered for a separate company. Storfer brought Kretzmar into the transaction to handle the brokerage account because he was not a broker, but he did not make this plain to the Wests.
In the meeting, Strofer emphasized to the Wests that
deciding to follow Storfer's recommendation to purchase the American Equity annuity selected by Storfer.
Respondent provided two letters to K.W. on Seniors Financial International, Inc., letterhead that stated:
Kikuko:
This would replace the Mutual Funds $253,
289.00. You will receive a bonus w[h]ich is added the first day of $25,329.00. Your account will start with $278,618.00. With an 8% guaranteed growth for income. With no risk.
Mitchell Kikuko
This would replace the AXA Variable Annuity
$119,589.00. You will receive a bonus w[h]ich is added the first day of $11,
959.00. Your account will start with
$131,548.00. With an 8% guaranteed growth for income. With no risk.
Mitchell
After the meeting, the Wests decided to go forward with Storfer's recommendation for K.W.'s investments. On August 8, 2008, the Wests returned to Storfer's office and K.W. agreed to transfer the funds. She signed the applications and
contracts including 14 documents, which would transfer the money and invest in the annuity. K.W. did not read everything that she was signing because she couldn't understand all the terminology and trusted and relied upon Storfer. Storfer told
K.W. that even after she signed, if she didn't like the product,
she could call and everything would get put back to the way it was before.
K.W. thought she was purchasing one policy.
Respondent sold her two policies numbered 693752 ("the SunTrust transfer" or "the 80K contract") and 693755 ("the AXA transfer" or "the 215K contract"). Both applications indicate each is replacing an AXA policy. K.W.'s SunTrust is not mentioned in the 80K application. The documents attached to the applications
K.W. signed without reading also detail that the American Equity Bonus Gold (BG) has a 10 percent bonus; Various "values"; and the minimum guaranteed interest rate is only one percent. The Lifetime Income Benefit Rider (LIBR) document states "a lifetime income that you cannot outlive" is tied to the owner's age.
On the BG contract, the income account value (IAV), the second option, was checked at a rate of eight percent rider guaranteed income. The cash surrender penalty listed for the BG contract in the application is 80 percent of the first year premiums.13
The BG application also described a nine percent interest crediting method. Out of the nine options listed, Respondent admitted that he chose the S&P monthly Pt. to Pt. w/Cap & AFR for K.W. The option was not defined in the application, and K.W. had to rely solely on Storfer to define and explain the product. Specific terms and conditions of the
annuity such as the penalty free withdrawals14 were defined in the policy contracts, which K.W. never received.15
In the car on the way home from the August 8, 2008, meeting, K.W. looked at the back page of the brochure for American Equity Insurance and read that she could only earn one percent a year with the annuity. This caused her some concern.
Subsequently, K.W. called her son-in-law, a director at Merrill Lynch on Wall Street, who agreed to review the documents during K.W.'s upcoming visit to New York. K.W. then called Storfer's office back and left a message not to process the applications. The Wests also attempted to fax Storfer a letter that stated, "I do have to hold off on any changes . . . do no process until I review all papers."
On Saturday, August 9, 2008, the Wests met briefly with Storfer in his office16 to request the original paperwork back that had been signed on Friday and stop the process. K.W. instructed Storfer to do nothing until her son-in-law approved it. She and her husband were pleased that Storfer agreed not to process the forms until her son looked at them and said that the investment was good.17 Stofer gave K.W. a yellow manila envelope with copies of the paperwork West had signed and a note.
At some point, Storfer processed K.W.'s application for the purchase of the American Equity annuity, contrary to his
agreeing not to finalize the purchases until the Wests gave the go-ahead.18
The Wests left for North Carolina to start their vacation on Sunday, August 10, 2008. While on vacation, K.W. opened the manila envelope and discovered that it did not contain the originals of the signed forms she had requested. Additionally, a letter was enclosed dated August 11, 2009,19 on Seniors stationary that stated:
Dear Kikuko,
Attached is transfer paperwork to transfer the brokerage account from Suntrust to us. We will not sell any investments until you approve them.
If you and your son in law have any questions please contact me I will be more then happy to assist.
Sincerely,
K.W. had her son-in-law review the investment paperwork and requested that he talk to Storfer. After K.W. talked to her son, she decided the investment was not good for her. Ultimately, K.W. learned that her money had been transferred out of the Suntrust account without her permission. She called Storfer's office numerous times to get him to cancel the annuity transactions, but was unable to reach him.20
K.W. was eventually provided Kretzmar's contact information and he instructed her how to reverse the transfer of
funds. K.W. had communications with Kretzmar and representatives from American Equity that lead to her funds being refunded. The American Equity annuities were ultimately cancelled.
Viewing the evidence as a whole, the undersigned determines that Respondent made false promises not to process K.W.'s annuity applications in connection with the investments and did so contrary to K.W.'s instructions, as well as made false misrepresentations to her regarding the details of the annuity.
Doris Jorgensen
Ms. Doris Jorgensen ("Jorgensen") was born in New York City on December 20, 1921. She grew up in Connecticut. She married William Jorgensen. While married she owned and operated an antique shop out of her house in Connecticut. She started investing with her husband, William, before he passed in 1999. She and her husband would discuss their investments and decide how to invest together. She has no children and lives alone in Sebastian, Florida.
Prior to meeting with Storfer, Jorgensen was the owner of an Integrity Life Insurance Company (Integrity) variable annuity with a contract date of July 28, 2003, and Aviva Life and Annuity Company (Aviva; formerly AmerUs) deferred annuity with a contract date of December 26, 2003.
Jorgensen's net worth, before meeting Respondent was approximately a million dollars.
Jorgensen attended two luncheon seminars presented by Respondent on April 2, 2007, and on October 23, 2007. She was
86 years old at the time. At the first seminar, Jorgensen filled out a Senior Financial Survival Workshop Evaluation Form, indicating she was a widow, had an estate from $25,000-$200,000, and had concerns in the area of Social Security Tax Reduction, Variable Annuity Rescue, and Equity Index Annuity.
When Jorgensen attended the second workshop, she filled out the form identical to the previous one, except she also circled Asset Protection from Nursing Home as a concern.
On or about November 5, 2007, Jorgensen met Storfer in his office for the first time. Storfer prepared her client profile and Jorgensen described her risk tolerance as "none" and indicated that she was unwilling to lose any of her life savings through investments. She also informed him that she intended to leave her entire estate to numerous charities and had set up a trust for that purpose.
Jorgensen provided Storfer income information at the meeting that indicated that she lived off her monthly social security and pension payments, a total monthly income of
$1,800.00, and her expenses were $1,100.00. She also had
$120,000 cash and a net worth of $900,000.00.
At another meeting, Jorgensen provided Storfer her financial portfolio to review.
One meeting Jorgensen had with Storfer was attended by her brother, who did not provide her any advice regarding what to do with her investments.
Ultimately, Storfer recommended and sold Jorgensen an Allianz Life Insurance Company Equity Indexed Annuity. Upon his advice, Jorgensen surrendered her $208,015.74 Integrity Life Policy #2100073292 issued on July 28, 2003. The transfer resulted in the initial funding of the Allianz MasterDex,21 which became effective November 16, 2007.
Jorgensen told Respondent that she had a problem with monetary loss and Storfer said he could make it up with the Allianz Life. The policy provided that she could start withdrawing the money in five years and then must annuitize the policy and withdraw the money over a 10-year period. The Allianz annuity was delivered on December 12, 2007.
The Allianz Life contract, a MasterDex, contract #70610993, included a 10 percent bonus. Respondent placed 100 percent of Jorgensen's funds in the S&P 500 index like the Grubicys.
Later, on or about January 16, 2008, Storfer also had Jorgesen authorize an additional transfer of $306,507.21 in funds from her Aviva/AmerUS policy purchased December 1, 2003,
to Allianz. The policy was $330,137.95. Surrender charges on the AmerUs annuity would have expired December 1, 2014. On February 4, 2008, the money was sent to Allianz into contract #70610993.
Together, Jorgensen's transfers totaled over half-a million dollars and she incurred surrender charges totaling in excess of $29,000.
Jorgensen was unable to understand the annuity application and contract language. She trusted Storfer and took him at his word and signed a lot of forms without filling them out or asking questions. Jorgensen testified that she always followed the directions of whoever gave her business advice.
Jorgensen also testified in this matter that she was "not certain," "I don't really remember," and "I have no idea whether it was or not" regarding numerous questions relating to the transactions and policy receipts.
At some point, Jorgensen attended another investment seminar presented by insurance agent, Ms. Jones ("Jones").22
On February 11, 2008, Allianz gave Jorgensen a receipt for her payment of $306,423.03. Jorgensen contacted Allianz and directed the company to return the transferred funds to Aviva. Jorgensen directed Allianz to "rescind this policy in full." On or about February 14, 2008, Jones also helped Jorgensen with a
typewritten letter dated February 15, 2009, from Jones' office to Allianz following up the request.
Jorgensen ultimately dealt with Storfer instead of Jones regarding rescission of the Aviva/AmerUs to Allianz transaction. Storfer ultimately placed the funds with Old Mutual/OM Financial annuity ("OM").
An application, transfer/1035 exchange, was executed in Jorgensen's name and other documents relating to the OM annuity on or about March 14, 2008. The policy is signed Doris Jorgensen not "Doris R. Jorgensen." Jorgensen testified she typically signs her name to include the middle initial "R" "Doris R. Jorgensen" on official papers.23 Jorgensen discovered the policy when she received the annuity confirmation letters from OM. Respondent earned a commission of nearly $7,000 on the OM transaction.
The policy delivery receipt dated May, 1, 2008, six weeks after the purchase date of the OM policy, also has a signature without a "R" initial and Jorgensen denies the signature is hers. Storfer's signature is not on OM's required policy delivery certification form. The Delivery Receipt for the OM policy is dated May 1, 2008. Jorgensen still has the OM annuity.
The undersigned finds that the evidence fails to show that Storfer misrepresented the sale of the two annuities or
made false representations regarding the annuities sold to Jorgensen.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes (2009).
The Department seeks to impose penalties against Storfer through the AC that include mandatory and discretionary suspension or revocation of his licenses. Therefore, the Department has the burden of proving the specific allegations of fact that support its charges by clear and convincing evidence. See Department of Banking and Finance, Division of Securities
and Investor Protection v Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 1292 (Fla. 1987); and Pou v. Department of Insurance and Treasurer, 707 So. 2d 941 (Fla. 3d DCA 1998).
What constitutes "clear and convincing" evidence was described by the court in Evans Packing Co. v Department of Agriculture and Consumer Services, 550 So. 2d 112, 116, n. 5 (Fla. 1st DCA 1989), as follows:
. . .[C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The
evidence must be of such weight that it produces in the mind of the trier of fact the firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
Slomowitz v Walker, 429 So. 2d 979, 800 (Fla. 4th DCA 1983).
See also In re Graziano, 696 So. 2d 744 (Fla. 1997); In re Davey, 645 So. 2d 398 (Fla. 1994); and Walker v. Florida Department of Business and Professional Regulation, 705 So. 2d 653 (Fla. 5th DCA 1998).
Section 626.611, Florida Statutes, mandates that the Department suspend or revoke the license of any insurance agent if it finds that the agent has committed any of a number of acts specified in that Section.
Section 626.621, Florida Statutes, gives the Department the discretion to suspend or revoke the license of any insurance agent if it finds that the agent has committed any of a number of acts specified in that Section.
The AC in this case contains three counts. In all three counts it is alleged that Storfer violated the following statutory provisions: Sections 626.611 (5),(7),(9), and (13); 626.621(2),(6); and 626.9541(1)(a)1. and (1)(e)1. Florida Statutes.
It has also been alleged that he violated Florida Administrative Code Rules 69B-215.210 and 69B-215.230.
Section 626.611(5),(7), (9) and (13) Florida Statutes, provides the following:
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(5) 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.
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(7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance.
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(9) Fraudulent or dishonest practices in the conduct of business under the license or appointment.
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(13) 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 626.621(2) and (6), Florida Statutes, provides the following:
626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, adjuster's, customer representative's, service representative's, or managing general agent's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, adjuster, customer representative, service representative, or managing general agent, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:
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(2) 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.
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(6) 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.(emphasis in original)
91. Section 626.9541(1)(a)1. and (1)(e)1., Florida Statutes provide the following:
UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices:
Misrepresentations and false advertising of insurance policies.-- 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.
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(e) False statements and entries.--
1. Knowingly:
Filing with any supervisory or other public official,
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.
Florida Administrative Code Rule 69B-215.210 provides the following:
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.
Finally, Florida Administrative Code Rule 69B-215.230 provides the following:
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.
No person shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, 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 statement 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.
Summarizing the charges against Storfer, the Department has charged him with essentially ten offenses:
Willfully making misrepresentations to, or willfully deceiving all three victims in this case;
Demonstrating lack of fitness or trustworthiness;
Fraudulent of dishonest practices;
Willful failure or to comply with, or willful violation of any proper order or rule of Department of violation of the Insurance Code;
Violating any provision of the Insurance Code or any other law applicable to do business in insurance under a license;
Engaging in unfair or deceptive acts;
Knowingly making, causing to be made, issued, sales presentation which misrepresents the benefits, advantages, conditions or terms of any insurance policy;
Knowingly delivering to any person or causing directly or indirectly to be delivered to any person any false material statement;
Violating the public trust; and
Misrepresenting the terms of a policy issued or to be issued or the benefits or advantages promised.
The Department proved clearly and convincingly that each of the individuals in this case relied on Storfer's advice and assurances when making their investment decisions. Further, the record demonstrates Storfer knew what he was doing when he sold insurance products to the individuals involved in this case. His training, education, and experience, combined with his testimony of his knowledge, demonstrate such.
Petitioner also proved by clear and convincing evidence that Respondent misrepresented the MasterDex annuity and its downside cap to the Grubicys and willfully deceived the Wests and processed their application after both being instructed not to and agreeing not to. Storfer's actions with regard to the Grubicys and Wests were so contrary to the interests of those individuals that he also had to have knowingly and, thus, willfully misrepresented the products he sold them in violation of Section 626.611(5), Florida Statutes; in so doing, his actions demonstrate a lack of trustworthiness to engage in the insurance business in violation of Section 626.611(7), Florida Statutes; his actions also constituted dishonest practices in the conduct of insurance business in violation of Section 626.611(9), Florida Statutes; and, finally, as to the Grubicys and Wests, Storfer's actions were inconsistent with the duty imposed upon him by Florida
Administrative Code Rules 69B-215.210 and 69B-215.230, in violation of Section 626.611(13), Florida Statutes.
The final alleged violation, that Storfer engaged in unfair or deceptive acts or practices, was also proven clearly and convincingly by the Department as to his dealings in Count I, the Grubicys, and Count II, the Wests. Respondent misrepresented the nature of the annuities as to the cap if there was a market loss to the Grucibies and he processed the investment applications of the Wests contrary to their instructions. It is concluded that, as to Counts I and II, the Department has proved that Storfer also misrespresnted the benefits, advantages, conditions, and terms of the policies as defined in Section 626.9541(1)(a)1. and (1)(e)1., Florida Statutes, in violation of Section 626.621(2) and (6),Florida Statutes.
As to Count III, Petitioner asserted that Respondent sold two annuities to Jorgensen without her knowledge. The Department further alleges that Respondent also willfully misrepresented the following: the MasterDex as a suitable product with a guarenteed eight percent per annum interest income without reduction of the principal; a penalty free withdrawal; the surrender penalties on her previously purchased annuities; the 10 percent bonus; the free look period; the OM annuity; and his client notes as to the these matters.
Petitioner failed to present clear and convincing evidence to support the allegations since the only witness presented to demonstrate Count III did not distinctly remember the facts and could not precisely testify regarding the details of the transactions.
Penalty
Florida Administrative Code Rule 69B-231.080 provides guideline penalties for violations of Sections 626.611 and 626.621, Florida Statutes. Florida Administrative Code Rule 69B-231.080 provides the following penalty guidelines for the violations proved in this case:
If it is found that the licensee has violated any of the following subsections of Section 626.611, F.S., for which compulsory suspension or revocation of license(s) and appointment(s) is required, the following stated penalty shall apply:
(5) Section 626.611(5), F.S. – suspension 9 months
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(7) Section 626.611(7), F.S. – suspension 6 months
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(9) Section 626.611(9), F.S. – suspension 9 months
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(13) Section 626.611(13), F.S. – suspension
6 months
Florida Administrative Code Rule 69B-231.090(2), the stated penalty for violation of Section 626.621(2), is a three- month suspension.
Florida Administrative Code Rule 69B-231.090(6) refers to Florida Administrative Code Rule 69B-231.100, for the appropriate penalty for a violation of Section 626.621(6), Florida Statutes:
If a licensee is found to have violated subsection 626.621(6), F.S., by engaging in unfair methods of competition or in unfair or deceptive acts or practices as defined in any of the following paragraphs of subsection 626.9541(1), F.S., the following stated penalty shall apply:
(1) Section 626.9541(1)(a), F.S. –
suspension 6 months
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(5) Section 626.9541(1)(e), F.S. –
suspension 6 months; except that the penalty for a violation of Section 626.9541(1)(e)1., F.S., shall be a suspension of 12 months.
Florida Administrative Code Rule 69B-231.130 provides that the stated penalty for a willful violation of a Department rule is a six-month suspension.
Florida Administrative Code Rule 69B-231.040 provides the following with regard to the calculation of the appropriate penalty where multiple violations are found:
(d) In the event that the final penalty would exceed a suspension of twenty-four
(24) months, the final penalty shall be revocation.
In this case, no mitigating factors were presented.
And, calculating the penalty with Respondent's numerous violations is in excess of a three-year suspension of Respondent's license. However, Section 626.641(1), Florida Statutes (2008), limits the authority of Petitioner to suspend a license to a period of two years. Therefore, the required final penalty is revocation of the license pursuant to Florida Administrative Code Rule 69B-231.040(3)(d).
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the final order be entered by the Department (1) finding that Mitchell Storfer violated the provisions of Chapter 626, Florida Statutes, described, supra, and (2) revoking his licensure.
DONE AND ENTERED this 31st day of December, 2009, in Tallahassee, Leon County, Florida.
JUNE C. McKINNEY
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 2009.
ENDNOTES
1 The events at issue in this case took place in 2007 and 2008. The pertinent Florida Statutes during this period of time remained materially the same. All references, unless otherwise noted, will be to the statute applicable to the events for which findings of fact or conclusions of law are made.
2 Storfer has residual feelings in his hands from a car accident and has bad handwriting so his wife fills out documentation for the office.
3 C.G. keeps the company's books for the residential building income just as she had in the two previous businesses the Grucibys owned. Such experience leads the undersigned to find that C.G. is credible when testifying regarding the detailed repetitive conversations held with Respondent regarding the cap for a market loss.
4 Respondent claims the Grubicys had no intention to access the funds being invested and they intended to leave their money to their children. The Grubicys' testimony that they wanted access
to their investment money after five years as income is more persuasive on this issue.
5 The record has conflicting testimony regarding the maturity date. The Grubicys' testimony is found to be more credible since five years correlates with the time period the Grubicys would have sold their rental property and wanted to start receiving income from their investment.
6 Respondent claims that he fully reviewed the relevant terms and conditions and all details of the policies with the Grubicys. The testimony of the Grubicys that Storfer did not fully review the relevant terms and conditions is found to be more credible.
7 C.B.'s testimony regarding the 12 percent bonus is found to be credible.
8 Storfer's testimony that he fully reviewed the relevant terms and conditions of the policy, including the length of the policy, the surrender penalties and the methods for calculating interest, both before application and at the time of delivery of the policy is rejected as not credible. The Grubicys' consistent testimony combined with their letter dated May 31, 2007, and affidavit dated August 30, 2007, is deemed to be more credible.
9 K.W. was tired of getting numerous investment statements and wanted one consolidated statement.
10 The persuasive evidence presented at hearing is the testimony of the Wests that they were not introduced to Kretzmar as working for another company as a broker.
11 K.W. testified that Kretzmar only participated for a minute when introduced to the Wests. Both R.W. and Storfer testified that Kretzmar participated in the discussion of the transfer of the money. Thus, the undersigned finds R.W. and Storfer's testimony more persuasive.
12 The undersigned finds the Wests' testimony more persuasive regarding the guarantee based on the review of the transcripts and evidence including the language in the two memos stating "This would replace the Mutual Funds $253,289.00. . .With an 8 percent guaranteed growth for income. With no risk."
13 Such a penalty could be a 20 percent loss.
14 In the contract, penalty free withdrawals are deducted "first from the portion of Your Values representing interest until all interest is withdrawn, then from the portion representing premium," which would not allow K.W. to receive her approximate eight percent interest rate return.
15 The Bonus Gold Indexed Annuity Disclosure detailed that "this disclosure is intended to summarize this Annuity. Consult your contract for specific terms and conditions of your annuity." It also stated "SEE YOUR CONTRACT FOR CURRENT INTEREST, CAPS, PARTICIPATION AND ASSET FEE RATES."
16 The record has conflicting testimony regarding a meeting taking place between the Wests and Storfer on Saturday,
August 9, 2008. Mr. and Mrs. West's testimony is held more credible regarding the meeting held the day before they left for vacation on August 10, 2008.
17 Respondent claims that the Wests told him they didn't want to go forward with the broker transfer of funds. Such testimony is not credible for it defies logic since the Wests initially didn't even understand there was a separate broker for the transfer. Additionally, the Wests' testimony that they informed him to stop the process until their son-in-law looked at the paperwork is deemed more persuasive.
18 Storfer's client notes to the contrary are rejected as self- serving and the letter that is erroneously dated August 11, 2009, confirms Storfer's agreement not to go forward with any investments with the language, "We will not sell any investments until you approve them." Additionally, the undersigned rejects the credibility of the client notes and deems them self serving.
19 The undersigned finds that no meeting took place on August 11, 2009, because the Wests had already left for North Carolina. Nor did they have discussions with Kretzmer on that day. The Wests' testimony to such is found to be more persuasive.
20 Storfer testified that he did not talk to K.W. after their last meeting, and American Equity contacted him, which is how he learned about her dissatisfaction with the transaction. After reviewing the transcripts and exhibits, the undersigned finds K.W.'s testimony more credible in that she called his office numerous times.
21 This policy is essentially identical to the MasterDex policy sold to the Grucibys discussed above, supra. Therefore, a detailed description will not be repeated.
22 There is conflicting testimony regarding the Jones' first name. The undersigned will refer to the agent as Jones, the common last name Petitioner and Respondent agree upon.
23 The OM purchase is signed Doris Jorgensen, not Doris R. Jorgensen. The policy delivery receipt and letter of instruction are also missing the middle initial "R" and the Respondent's own signature does not appear on OM's required policy delivery certification form. However, the undersigned can not make a determination on such matters as no evidence was presented to demonstrate the standard for forgery or fraud regarding such.
COPIES FURNISHED:
Mitchell B. Storfer
2001 9th Avenue, No. 114 Vero Beach, Florida 32960
Debra A. Jenks, Esquire Schwed, McGinley & Kahle
11376 North Jog Road, Suite 101 Palm Beach Gardens, Florida 33418
Douglas J. Kress, Esquire Schwed McGinley & Kahle
11376 North Jog Road, Suite101 Palm Beach Gardens, Florida 33418
Austin B. Neal, Esquire Foley & Lardner LLP
106 East College Avenue, Suite 900 Tallahassee, Florida 32301
David J. Busch, Esquire Department of Financial Services
Division of Legal Services 612 Larson Building
200 East Gaines Street Tallahassee, Florida 32312
Mitchell Brian Storfer
578 Cross Creek Circle Sebastian, Florida 32958
Alex Sink, Chief Financial Officer Department of Financial Services The Capitol, plaza Level 11 Tallahassee, Florida 32399-0300
Benjamin Diamond, General Counsel Department of Financial Services The Capitol, plaza Level 11 Tallahassee, Florida 32399-0300
Julie Jones, Agency Clerk Department of Financial Services Division of Legal services
200 east Gaines Street Tallahassee, Florida 32399-0390
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 19, 2010 | Agency Final Order | |
| Dec. 31, 2009 | Recommended Order | Petitioner proved by clear and convincing evidence that Respondent violated certain provisions of the Florida Insurance Code. Recommend revocation.
 |
