STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF FINANCIAL SERVICES,
Petitioner,
vs.
JUDITH C. CLEARY,
Respondent.
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) Case No. 10-1504PL
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DEPARTMENT OF FINANCIAL SERVICES,
Petitioner,
vs.
CHARLES B. HOUCK,
Respondent.
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) Case No. 10-1505PL
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RECOMMENDED ORDER
Pursuant to notice, a formal hearing was held in the above-styled consolidated cases on October 26, 2010, by video teleconference at sites in Tallahassee and St. Petersburg, Florida, before Administrative Law Judge Elizabeth W. McArthur of the Division of Administrative Hearings.
APPEARANCES
For Petitioner: James A. Bossart, Esquire
Department of Financial Services 612 Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0333
For Respondent: Stacey L. Turmel, Esquire
Turmel Trial Law, LLC 721 First Avenue North
St. Petersburg, Florida 33701 STATEMENT OF THE ISSUES
The issues in this case are whether Respondents violated various provisions in Sections 626.611, 626.621, and 626.9541, Florida Statutes (2006),1 as charged in the Administrative Complaints, and, if so, what discipline should be imposed.
PRELIMINARY STATEMENT
By identical two-count Administrative Complaints dated February 22, 2010, Petitioner, Department of Financial Services (Petitioner or DFS), charged Respondents, licensed insurance agents Judith C. Cleary and Charles B. Houck (Respondents or Ms. Cleary and Mr. Houck), with inducing Phyllis and Joseph Leo Nagle (the Nagles), and their son Robert Nagle, to purchase annuities by misrepresentation. Respondents timely requested administrative hearings involving disputed issues of material fact, and the matters were forwarded to the Division of Administrative Hearings for the assignment of an Administrative Law Judge to conduct the hearings requested by Respondents.
The separate proceedings were consolidated, and after continuances requested by Respondents and by Petitioner, a final hearing was noticed and held on October 26, 2010, by video teleconference in Tallahassee and St. Petersburg, Florida.
Petitioner presented the testimony of Robert Nagle, and Petitioner's Exhibits 1 through 12 were received into evidence. These exhibits include transcripts of depositions of Joseph Leo Nagle and Phyllis Nagle, offered in lieu of live testimony.
Respondents testified on their own behalf. Respondents' Exhibits 1 through 4 were received into evidence.
A Transcript of the final hearing was filed on November 10, 2010. The parties timely filed Proposed Recommended Orders, which have been considered in the preparation of this
Recommended Order.
FINDINGS OF FACT
At all times relevant to this proceeding, Respondents have been licensed in Florida as annuity and insurance agents in the following categories: life and variable annuity agent; life and variable annuity and health agent; life and health insurance agent; health insurance agent; and life insurance agent.
Ms. Cleary has been licensed since 2000, and Mr. Houck has been licensed since 1999. According to Petitioner's certified licensure records, Respondents' licensure histories are clear of any prior discipline and clear of any active or inactive investigations or administrative complaints, with the exception of those pending here.
Petitioner is the state agency with the responsibility for licensing and regulating agents, such as Respondents, and
for taking disciplinary action for violations of the laws in its charge.
Sometime before January 2007, Phyllis Nagle completed and mailed in a card to request information on investments for seniors. The card included the home address for Mrs. Nagle and her husband, Joseph Leo Nagle, and their ages, then 82 and 87, respectively.
Respondents worked together as a team in the Nagles' area of Ellenton, Florida. Respondents' practice, upon receiving a card requesting information, was to go to the person's address identified on the card, show the card they received, and ask to set up an appointment at a later time, unless the person wanted to meet with them then and there. In early January 2007, in accordance with their practice, Respondents went to the Nagles' home to follow up on the card Mrs. Nagle had submitted to ask if they could set up an appointment.
When Respondents showed Mrs. Nagle the card that she had filled out, she recognized it and invited Respondents into the Nagles' home. For the first 20 minutes, Mrs. Nagle took Respondents on a tour through the home to show off the Nagles' many collections, including figurines, clocks, brass items that Mr. Nagle made in his workshop and music that Mrs. Nagle collected to use when teaching line dancing in the clubhouse of
the mobile home park where they lived. After the tour, Mrs. Nagle introduced Respondents to Mr. Nagle, explaining to him that Respondents were there because of a card she sent to request information. They all sat down at a round table in the Nagles' Florida room.
For more than an hour, Respondents and the Nagles discussed the Nagles' financial situation, their age, their investment objectives, and their concerns. The Nagles told Respondents that they were concerned about the yield they were making on their money in different accounts at the bank. One of these "bank" accounts was a fixed-rate annuity issued by an insurance company, and the Nagles were not happy with its yield. Respondents talked about the annuity investment product they were selling, but only in general terms at that meeting because the Nagles said that they did not make their financial decisions; instead, they allowed their son to make their financial decisions. The Nagles asked Respondents to call their son, Robert Nagle, and gave his phone number to Respondents.2
Another issue the Nagles talked about at that first meeting was their concern about qualifying for Medicaid. Having observed other seniors who had gone through a spend-down of their assets to qualify for Medicaid, the Nagles learned that while they would be allowed to keep one vehicle, there was an issue regarding whether their mobile home would be considered a
vehicle. The Nagles had been told there was a document they could use to designate their mobile home as their domicile and not a vehicle, so they could keep both the home and a vehicle during Medicaid spend-down. Ms. Cleary had heard of the same document, and in the days following the meeting, Ms. Cleary took it upon herself to research and find the appropriate document for the Nagles called a Declaration of Domicile.
Meanwhile, on the day after meeting the Nagles, Respondents called Robert Nagle, who knew that Respondents had met with his parents and was expecting their call. Respondents made an appointment to meet Robert Nagle at his residence in Indian Rocks Beach. That meeting took place a few days later.
At their first meeting with Robert Nagle, Respondents introduced themselves and discussed Robert's parents' financial status and investment objectives. They discussed Robert's parents' investments held in IRAs, CDs, and annuities and the Nagles' investment concern of making a better yield. Robert added his concern that he thought it was time for all of his parents' investments to be changed over to just his mother's name because of his father's age. They also talked about Robert's investments in CDs and an IRA, for which he had the statement out to review with Respondents.
Respondents told Robert about the company, Allianz, whose products they were offering, and Respondents went through
an Allianz product brochure with Robert, which they left with him for his further review. Respondents also gave Robert Nagle a financial disclosure from Allianz for the previous year. In addition, since Robert was very computer-savvy, Respondents gave him Allianz' website address so he could check out the company for himself.
Respondents reviewed with Robert Nagle the features of the MasterDex 5 annuity product, which was the product they suggested. This product allowed the purchaser to allocate their investment among three different choices: a Standard & Poor's (S&P) 500 index, a Nasdaq-100 index, and/or a fixed interest investment. The two stock market-based components had a greater potential upside return, but, also, a greater risk if the stock market did not perform well. One benefit of this annuity product, as Respondents explained, was that if the stock market went down, the initial investment would not lose value (as it would for direct stock purchases). Robert Nagle had invested in stocks and mutual funds, and so he understood the concept of greater-risk, greater-reward potential inherent in stock investments, versus fixed interest investments.
To show the actual recent performance of MasterDex 5 annuity investments, Respondents showed Robert Nagle actual annual statements recently received by clients whose names were blacked out. The actual yields shown on these statements ranged
from a low of around five percent to a high of around 14 percent.
Respondents also reviewed the terms of the annuity, which was considered a long-term investment of over ten years. Respondents reviewed the various options for withdrawals before the end of the annuity's term. Up to ten percent of the initial investment could be withdrawn annually without penalty or surrender charge. Alternatively, after the first year, a
five-year payout option could be invoked, allowing withdrawal of the entire initial investment, with interest, payable in six installments (one immediately, and then one each year for five years). Respondents also reviewed the surrender charges that would apply for early withdrawal of the whole investment, set forth in a schedule of decreasing surrender charges shown in the product brochure.
Respondents' first meeting with Robert Nagle lasted approximately 90 minutes. At the end of the meeting, they agreed that since Robert Nagle was looking for a job and was about to leave town for an interview, Respondents would initiate the next contact by calling Robert in a few days to see if he had any questions about the Allianz material.
Respondents' next encounter with any of the Nagles was a few days later, after Ms. Cleary had found the Declaration of Domicile form that had been of such concern to the senior
Nagles. Respondents had another appointment in the area, and so they volunteered to drop off the form at the Nagles' home.
Respondents did not discuss annuities with the Nagles that day; they simply dropped off the form.
A few days after they dropped off the form, Respondents called Robert Nagle back, as agreed. Robert said that he had gone over the Allianz product brochure and had also reviewed the company's website. Robert added that he had contacted his parents to give them his recommendation that they should fill out paperwork to purchase an annuity contract. Robert then said he was leaving town again, and when he got back, he wanted to set up another meeting with Respondents because he was probably going to purchase a contract of his own.
Respondents then called the Nagles to schedule the next appointment. The Nagles had spoken with their son and knew his recommendation, so they set up the appointment for
January 11, 2007.
Respondents received a warm reception when they returned to the home of the Nagles for their appointment.
Mrs. Nagle expressed excitement that Robert Nagle had given the go-ahead, and they were ready to go through the paperwork.
Respondents went over, in detail, all of the paperwork to be filled out, going through each question and answer on each form and filling them out side-by-side with the Nagles. The
paperwork included a five-page application, a statement of understanding, and a suitability form. Respondents also showed the Nagles the same actual recent annual statements showing yields earned in MasterDex 5 annuity investments, with client names blacked out, that they had shown the Nagles' son, Robert.
The application was completed for the MasterDex 5 annuity in the name of Phyllis Nagle alone, based on Robert's recommendation that his parents should transition all of their accounts to Phyllis Nagle's name alone. The application also included the beneficiary designation, and Joseph Nagle was named the sole primary beneficiary. Even though the Nagles have three children, with Robert being the youngest, for some reason that was not explained, their son Robert Nagle was named the sole contingent beneficiary. Finally, the application included the Nagles' investment allocation among the three options, and they chose 50 percent in the S&P 500 index, 25 percent in the
Nasdaq 100 index, and 25 percent in the lower-risk fixed- interest category.
The completed application form was signed by Phyllis Nagle on January 11, 2007, immediately below a statement of agreement that included the following:
It is agreed that (1) All statements and answers given above are true and complete to the best of my knowledge, . . . (5) I understand that I may return my policy within the free look period (shown on the
first page of my policy) if I am dissatisfied for any reason, and (6) I believe this annuity is suitable for my financial goals.
Although the policy was not introduced in evidence, the undisputed testimony was that the "free look period" referred to in Mrs. Nagle's acknowledgement was 30 days.
The second document that was completed to submit with the annuity application was the statement of understanding.
This document, reviewed with the Nagles, is a five-page detailed summary of the terms of the MasterDex 5 annuity contract. The summary sets forth the investment allocation options, guarantees, withdrawals, contract cancellation, and surrender charges. The last page included a chart illustrating how the terms would work for a hypothetical investment, with a column showing the decreasing surrender charges over the years from issuance of the annuity through the tenth contract anniversary. This chart is on the same page as, and immediately above,
Mrs. Nagle's signature as the annuity owner, who acknowledged the following by signing the document:
I have received a copy of this Statement of Understanding. The agent has answered my questions. I have also received the MasterDex 5 Annuity consumer brochure. I understand that any values shown, other than Guaranteed Minimum Values, are not guarantees, promises, or warranties. I understand that I may return my policy within the free-look period (shown on the
first page of the contract) if I am dissatisfied for any reason.
The third document that was completed for submission with the annuity application was the product suitability form. This document calls for information about the financial status of the annuity purchaser, including annual income and net worth (defined on the form as total assets, not including home and automobile, minus total debts). In addition, the form asks the purchaser to identify the financial objectives in purchasing the annuity. Finally, in a section called "Accessing your money," the form asks the purchasers how and when they expect to take money out of the annuity.
The product suitability form was reviewed by reading the questions and answer options aloud, with Ms. Cleary and
Mrs. Nagle reading the form together sitting side-by-side. Mrs. Nagle would discuss the answer with Mr. Nagle, and they agreed on the correct response for Ms. Cleary to check on the form.
For annual income, the Nagles agreed that the correct response was $25,000 to $49,999. For net worth excluding home and automobile, the Nagles discussed the answer option categories and agreed that the category $150,000 to $199,999 was the correct response. Respondents did not ask for back-up documentation to prove that the Nagles' income and net worth
answers were accurate, as neither Allianz, nor Petitioner requires proof of the purchasers' answers.
The Nagles identified the following as their financial objectives in purchasing the annuity: first, to pass on to beneficiaries; and second, for the guarantees provided. With respect to the guarantees, the Nagles considered that for the stock-market-indexed portion of their investment (75 percent of the total investment), the product guaranteed that they would not lose any of their principal, even if the stock market dropped. That was important to the Nagles, who liked the prospect for a higher return than fixed-interest investments allow, but without risking losing their principal if the stock market dropped (as it did in the year following their investment).
The product suitability form represented that the Nagles currently, or previously owned, financial products that included certificates of deposit and fixed annuities, but that the source of the premium for this annuity purchase would not be an annuity, certificate of deposit, or other investment; instead, it would be "other." That category was selected, because the premium was going to be paid by check from funds on deposit in a regular bank account.3
The product suitability form also represented that the Nagles had sufficient available cash, liquid assets, or other
sources of income for monthly living expenses and emergencies other than the money they planned to use to purchase the annuity contract.
Both Phyllis and Joseph Nagle were in agreement that they considered this to be a long-term investment, meaning ten years or more. That is because their goal was not to use the funds, but, rather, to have the investment to pass on to their beneficiaries. Therefore, the Nagles answered the questions about accessing their money by stating that they intended the money to be taken out of the annuity in a lump sum, in ten or more years.
After the form was filled out, Ms. Cleary read aloud the questions and the answers she marked down to confirm that she had marked the correct responses. The Nagles confirmed that the answers were completed correctly. Phyllis Nagle signed the completed product suitability form, acknowledging as follows by her signature:
I acknowledge that I have read the Statement of Understanding for the product listed and believe it meets my needs at this time. To the best of my knowledge and belief, the information above is true and complete.
When Robert Nagle returned to town, he met with Respondents and completed the same set of paperwork to apply for his own MasterDex 5 annuity contract. On his application, he designated his two sisters as primary beneficiaries (33 percent
each), and a friend, Cheri Davis, as the third primary beneficiary (34 percent). He allocated 75 percent of his annuity investment to the S&P 500 index choice and the remaining
25 percent to the Nasdaq-100 index choice, thus, taking the higher-risk, higher-potential reward avenue. Robert Nagle signed his application on January 22, 2007, agreeing to the same statements that his mother agreed to by signing her application.
Robert Nagle did not complete all the paperwork or fund his annuity that day. Instead, he wanted to read through the statement of understanding again before signing it, while deciding what source he was going to use to fund the annuity. He ultimately decided to cash in a certificate of deposit earning 1.5 percent interest. He met again with Respondents one week later, when he signed the same five-page statement of understanding that Phyllis Nagle had signed, summarizing the
terms of the MasterDex 5 annuity. Just as on the form signed by Mrs. Nagle, Robert Nagle's signature appears immediately below a chart that illustrates how the terms would apply to a hypothetical investment over the years, with a column showing the decreasing surrender charges that would apply if the entire initial investment were withdrawn before the tenth anniversary. By his signature on January 29, 2007, Robert Nagle acknowledged:
I have received a copy of this Statement of Understanding. The agent has answered my questions. I have also received the
MasterDex 5 Annuity consumer brochure. I understand that any values shown, other than the Guaranteed Minimum Values, are not guarantees, promises, or warranties. I understand that I may return my policy within the free-look period (shown on the first page of the contract) if I am dissatisfied for any reason.
Robert Nagle wrote a check to Allianz for $30,000 for his MasterDex 5 annuity contract on January 29, 2007. Respondents delivered Robert Nagle's policy to him on
February 15, 2007, and he signed a receipt acknowledging its delivery.
After a delay, because of some minor surgery
Mrs. Nagle had on March 6, 2007, Mrs. Nagle wrote a check to Allianz for $35,000 for her MasterDex 5 annuity contract. As they had done for Robert Nagle, Respondents personally delivered Phyllis Nagle's policy to her shortly thereafter in March 2007, as the Nagles acknowledged.
On April 7, 2007, Phyllis Nagle responded to an Allianz request that she complete a questionnaire about her recent annuity purchase. Mrs. Nagle's responses indicated that she found the service provided by Respondents to be "extremely" helpful and that she found the Allianz product descriptions and sales material to be "extremely" helpful.
The questionnaire also sought to establish
Mrs. Nagle's understanding of the terms of the product she
purchased. In this regard, Mrs. Nagle's responses showed that she knew the annuity would provide tax-deferred savings, that surrender charges are imposed on premature full withdrawal, that the investment options she chose include a guaranteed minimum interest rate, and that she "consider[s] this annuity to be a long-term investment and do[es] not intend to use these funds to meet current expenses." Mrs. Nagle also responded that the source of funds used to purchase her annuity was savings, either savings account or certificates of deposit. Finally, Mrs. Nagle acknowledged that Respondents reviewed her financial status, tax status, investment objectives, and other pertinent information to determine whether the annuity purchase was suitable for her and that Respondents personally delivered her policy to her.
Mrs. Nagle's only additional comment or suggestion was that she would like statements more than once a year.
Neither Robert, nor Phyllis Nagle raised any questions or concerns or voiced dissatisfaction with their annuity contracts within the 30-day free look period during which they could have cancelled their contracts without penalty or surrender charges.
Robert Nagle received his annual statement shortly after his one-year contract anniversary. The annual statement showed a yield of 5.00 percent for the policy year beginning January 28, 2007, and ending January 27, 2008. Mr. Nagle had no
complaints and voiced no concerns about this annual statement in the month following his receipt of the statement.
Phyllis Nagle received her annual statement shortly after her one-year contract anniversary. The annual statement shows a yield of 5.66 percent for the policy year beginning March 7, 2007, and ending March 6, 2008.
Inexplicably, Phyllis Nagle believed that her statement showed a yield of only one percent or 1.5 percent. Joseph Nagle also was under the impression that they had received an annual statement that reflected a yield of only one percent or 1.5 percent. But the only annual statement for Phyllis Nagle offered in evidence--part of Petitioner's certified investigation file--plainly shows a yield of 5.66 percent, and nowhere shows a yield of one percent or 1.5 percent. The Nagles were shown the annual statement in evidence and agreed that it shows rather clearly a yield of 5.66 percent. They did not have any explanation for their misunderstanding of what the statement plainly showed. The Nagles seemed to think there was a different statement or some other paper out there that showed a different yield of one percent or 1.5 percent, but the Nagles acknowledged that they only received one annual statement, which they did not have because they said that they turned over all of their papers, presumably to Petitioner.
The Nagles were very upset because of their misimpression that the Allianz annuity had only yielded one percent or 1.5 percent in its first year. Mr. Nagle testified that he did not expect the performance to be as high as what he had seen in 2007 on the other recent annual statements and that "I figured at worst it wouldn't be any more than four or five [percent]." Instead, "[i]t was either one or one-and-a-half percent, and I was shocked." Based on their misimpression, the Nagles took action to complain to the state, after talking to their son. But, Mr. Nagle made it clear that they would not have complained or taken any action if they had realized the annual statement showed a yield of 5.66 percent: "I would not have done anything if it was [five] point or whatever
percent. . . I wouldn't have cancelled everything out. But when I saw the figures that they showed me, [the yield was] one to one-and-a-half." When asked who showed him those figures, he said he got the information in the mail, and it was not five percent. When asked if it was on another statement, Mr. Nagle said no, but then he said he was not sure where the information came from. As to the 5.66 percent yield he saw clearly on the annual statement in evidence, Mr. Nagle said, "that does not ring a bell at all. I don't understand it. Because that was average money at the time for investments."
The Nagles immediately complained to Respondents.
Ms. Cleary spoke with Mrs. Nagle, who was very irate about her misimpression of the yield shown on the annual statement and started demanding complete return of the entire investment.
Ms. Cleary attempted to remind Mrs. Nagle of the annuity terms that allowed limited withdrawals without surrender charges, and Mrs. Nagle got angrier and ended the conversation.
Apparently upon consultation with Robert Nagle's and, possibly, attorneys, the Nagles agreed to complain to Petitioner. The Nagles complained to Allianz and to Petitioner. Robert Nagle complained to Respondents' agency and to Petitioner. These complaints asserted that the Nagles were told by Respondents that their investments were entirely liquid after the first year and could be completely withdrawn without penalty or surrender charge. The statement of understanding that Phyllis Nagle and Robert Nagle each signed plainly says otherwise. When he was asked at the final hearing about the numerous references in the papers he signed and in the brochure he reviewed to surrender charges for premature full withdrawal, with limited options for penalty-free partial withdrawals, Robert Nagle had no response other than to suggest that he was assured by Respondents that the written terms in the documents he signed would not apply. Robert Nagle's testimony, in this
regard, was not credible. Instead, he apparently had a change of heart about his intent to make a long-term investment.4
The Administrative Complaints charge that Respondents misrepresented the yields that the MasterDex 5 annuity would earn for the Nagles. The more credible testimony on this subject was that Respondents did not make any such misrepresentations. Instead, Respondents showed the Nagles' actual client annual statements for investments in the same MasterDex 5 annuity, with the client names blacked out, to demonstrate actual yields that others had obtained recently, and those yields ranged from approximately five percent to
14 percent.5 The Nagles testified that their review of these statements led them to expect they could make the same yields. But Respondents credibly testified that they never represented to any of the Nagles what their yields would be and never represented that their yields would be as high as the yields shown on any of the actual statements. Instead, Respondents represented the statements as what they were--actual statements showing yields recently earned by actual clients who purchased the same annuity product. The most credible evidence establishes only that the three Nagles optimistically inferred what they hoped would be true--that the recent past performance would repeat itself. Instead, they experienced the "higher- risk" part of the "higher-risk, higher reward potential" of
investments tied to stock market performance. But as promised, they did not lose any part of their initial investment, unlike those who directly invested in a dropping stock market.
The Administrative Complaints also charged Respondents with misrepresenting to the Nagles that they could withdraw their entire investment after one year with no penalty or surrender charges. But, Respondents credibly testified that they never made any such representation to any of the Nagles. Instead, Respondents reviewed the annuity's terms summarized in the consumer brochure and the statement of understanding multiple times with the Nagles, and with Robert Nagle. Indeed, the signature page of the statement of understanding shows, right above the signatures, a chart detailing the surrender charges by year, decreasing according to the schedule shown, for complete withdrawal before the end of the annuity's term.
The Nagles' complaint of not being able to withdraw their entire investment after one year without penalty was not based on any misrepresentation by Respondents. Instead, the complaint appears contrived after-the-fact, after the Nagles apparently misread their first annual statement as reporting a one percent or 1.5 percent yield, when, in fact, the annual statement reports a 5.66 percent yield. Mr. Nagle testified unequivocally that if he understood the yield was really 5.66 percent and not 1.5 percent, they would not have complained and
would have been satisfied to keep the annuity product (consistent with their original long-term intent). It was only when they attempted cancellation upon being dissatisfied with an imagined 1.5 percent yield that they first decided the goal of liquidity, with immediate access to their funds, was an objective that was important to them.
That the senior Nagles' complaints are contrived and based solely on their misreading of their annual statement, is clear from the consumer survey completed by Mrs. Nagle on
April 7, 2007, after the annuity purchase, but before the first anniversary. This completed survey, in evidence as part of Petitioner's certified investigation file for Respondents, was provided by Allianz upon Petitioner's request. Mrs. Nagle's survey responses show she knew that "Surrender charges are imposed on premature full withdrawal"; and "I consider this annuity to be a long-term investment and do not intend to use these funds to meet current expenses." Further, she confirmed that Respondents reviewed her "financial status, tax status, investment objectives, and other pertinent information to determine whether this annuity purchase" was suitable for the Nagles.
Finally, the Administrative Complaints charge Respondents with misrepresenting the Nagles' net worth on the product suitability form. Petitioner presented absolutely no
evidence to substantiate the charge that Respondents made any such misrepresentation. Petitioner elicited from Mrs. Nagle the testimony that the product suitability form falsely indicated the Nagles' net worth as in the range of $150,000 to $199,000; Mr. Nagle was more equivocal, saying only that the report range was "[u]ntrue, I think." However, the only evidence in the record as to the source of the net-worth information was Ms.
Cleary's detailed description of how the forms were completed, when she clearly and credibly testified that the Nagles discussed and determined what the correct answer was to the net worth question. Moreover, Petitioner failed to establish that, in fact, the information on the product suitability form was a misrepresentation (by the Nagles) at the time it was made.
Perhaps the net worth information was accurate in January 2007 when Mrs. Nagle signed the form and acknowledged that the information on it was accurate. Mr. Nagle testified that they probably had certificates of deposit at that time, and
Mrs. Nagle could not remember. There was also testimony that the Nagles were working on a spend-down of assets for Medicaid qualification, so their net worth may well have been intentionally reduced after January 2007. In any event, if the net worth information on the form signed by Mrs. Nagle was inaccurate, that inaccuracy was the fault of the Nagles and was not, as charged, a misrepresentation made by Respondents.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2010).
In this proceeding, Petitioner seeks to discipline Respondents and take action against their professional licenses. Petitioner bears the burden of proving the allegations in the Administrative Complaints by clear and convincing evidence. Dep't of Banking and Finance v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
As stated by the Florida Supreme Court:
Clear 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 testimony must be precise and 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 a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
In re Henson, 913 So. 2d 579, 590 (Fla. 2005), quoting Slomowitz
v. Walker, 492 So. 2d 797, 800 (Fla. 4th DCA 1983).
Petitioner failed to prove any of the charged violations by clear and convincing evidence. Instead, a preponderance of the more credible evidence demonstrates that Respondents acted honestly and fairly in their dealings with the
Nagles and with their son, Robert Nagle. The more credible evidence demonstrates that there were no misrepresentations or material omissions by Respondents, just faulty recollections, misunderstandings, and/or changes of heart on the part of the three Nagles, none of which were caused by or attributable to Respondents.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby:
RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, dismissing all charges in the Administrative Complaints against Respondents, Judith C. Cleary and Charles B. Houck.
DONE AND ENTERED this 22nd day of December, 2010, in Tallahassee, Leon County, Florida.
S
ELIZABETH W. MCARTHUR
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 2010.
ENDNOTES
1/ Unless otherwise indicated, all references to the Florida Statutes are to the 2006 codification in effect at the time of the conduct alleged in the Administrative Complaints.
2/ Mrs. Nagle had a different recollection. She thought Robert called up and found out Respondents were at his parents' home, and "he likes investments and he was kind of interested." But both Robert and the Respondents testified that Respondents called Robert to set up an appointment at his parents' request to give him information about the investment options they were selling. It was only as a result of Respondents' meeting with Robert that he expressed an interest in also investing, as well as advising his parents about the suitability of the investments for them.
3/ At the January 11, 2007, meeting with Respondents, the Nagles also had paperwork to close out another annuity, which was in Joseph Nagle's name alone. Mr. Nagle testified that the other annuity, purchased in 2002, was coming to the end of its term, and they were looking for another investment vehicle. The plan was for Joseph to close out the other annuity in his name and get a check back, and then Phyllis would write a check to put the majority of those funds into the new Allianz annuity in her name. That was ultimately accomplished, and Phyllis Nagle wrote a check directly to Allianz in an amount representing most of the proceeds received from the previous annuity in Joseph Nagle's name. Mr. Nagle testified that if they had not purchased the Allianz annuity from Respondents, they would have probably sought out another annuity at that time.
4/ When asked whether Robert Nagle had other annuity investments, Joseph Nagle testified in September 2010 that Robert was "in trouble. He's been out of work for two years and paying three mortgages with no income. I tell you, whether he had [other annuities] or not, he's in big trouble. That's all I know. Whether he had other things, which I think he did, where he stands today, I do not know." In January 2007, Robert Nagle completed his product suitability form to show that his annual income was $100,000+ and his net worth, excluding home and automobile, was $700,000 through $999,999. He also acknowledged that he intended the annuity to be a long-term investment, representing that it was his expectation to access his annuity funds in a lump sum in ten or more years.
5/ Robert Nagle testified that he remembered the yields on the statements being impressive and thought the range was between ten and 18 percent. His parents, who were shown the same statements of clients with the names blacked out during their next meeting with Respondents, had different recollections.
Mrs. Nagle remembers 14 percent, 16 percent, and 18 percent. Mr. Nagle recalls 12 percent and 14 percent. Mr. Houck had the most vivid recollection, remembering the lowest yield on the statements they showed the Nagles was 5.06 percent, because that statement was for a client who was a friend of his.
COPIES FURNISHED:
Honorable 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 32399-0307
Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services
200 East Gaines Street Tallahassee, Florida 32399-0390
James A. Bossart, Esquire Department of Financial Services 612 Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0333
Stacey L. Turmel, Esquire Turmel Trial Law, LLC
721 First Avenue North
St. Petersburg, Florida 33701
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 |
|---|---|---|
| Feb. 18, 2011 | Agency Final Order | |
| Dec. 22, 2010 | Recommended Order | Petitioner failed to prove Respondents misrepresented or materially ommitted information in connection with selling annuities to two related clients. Recommend that the Administrative Complaint be dismissed. |
