STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES,

Petitioner,

vs.

MICHAEL PAUL MATTHIAS,

Respondent.

/

Case No. 14-4133PL

RECOMMENDED ORDER

On October 21, 2014, F. Scott Boyd, Administrative Law Judge of the Division of Administrative Hearings, conducted a final hearing by videoconference in Lauderdale Lakes and Tallahassee, Florida.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Financial Services 612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: Michael P. Matthias

1813 Northwest 15th Avenue

Fort Lauderdale, Florida 33311 STATEMENT OF THE ISSUES

The issues are whether Respondent violated provisions of chapter 626, Florida Statutes, regulating insurance agents in

Florida, as set forth in the Administrative Complaint, and if so, what sanction is appropriate.

PRELIMINARY STATEMENT

On May 13, 2014, the Department of Financial Services (Department) filed an Administrative Complaint alleging that Mr. Michael Paul Matthias, licensed life insurance agent, violated statutes and rules regulating agents in Florida. The complaint alleges that Mr. Matthias had contracted with United Insurance Company of America (United) to collect premiums from insureds for liability insurance policies, but never remitted

some of the funds he collected to United, in violation of several provisions of Florida Statutes (2012).1/

Mr. Matthias timely requested an administrative hearing, which was set for October 21, 2014. The Department called one witness at hearing, Mr. Khalangi Ewers, who was Mr. Matthias’s supervisor at United. The Department also offered into evidence seven exhibits, P-1 through P-7, all of which were admitted without objection. Mr. Matthias testified and offered three exhibits, R-1 through R-3, into evidence, all of which were admitted without objection.

The one-volume Transcript was filed on November 26, 2014.

On December 1, 2014, the Department filed a Proposed Recommended Order, which was considered. Respondent filed a letter on December 16, 2014. Although this filing was late, no prejudice

to Petitioner is found, and the letter was considered in preparation of this Recommended Order.

FINDINGS OF FACT

1. At all times relevant to the complaint, Mr. Matthias was licensed in Florida as an insurance agent, including variable annuity and health.

2. Mr. Matthias entered into an agreement with United in March 2011 to collect premiums on debit insurance policies. Mr. Matthias’s job was to visit customers each month to collect the premiums, initial the customer’s receipt book to show proof of payment, and remit the premiums to United. About half of these customers paid in cash.

3. Mr. Matthias reported to Mr. Khalangi Ewers, who supervised five other agents in addition to Mr. Matthias.

4. Every month, Mr. Ewers reviewed the accounts on which the monthly premium had not been paid. In a usual month, this would vary from between five to eight percent. However, in early 2013, Mr. Ewers calculated that United had not received payments from 30 percent of Mr. Matthias’s accounts.

5. Mr. Ewers called Mr. Matthias and asked him why the premiums had not been received by United. When Mr. Matthias responded that the customers had not paid, Mr. Ewers decided to investigate by telephoning a few accounts that normally paid on

   
   

   time. He was told by each of the customers that they had paid Mr. Matthias.

6. Mr. Ewers then conducted a standard audit of

   
   

   Mr. Matthias’s accounts by visiting the homes of each of his customers and reviewing their receipt books. Mr. Ewers compared the amounts Mr. Matthias had indicated that he had received (by initialing that customer’s receipt book) with the amounts actually turned in to United. Over the five-week period beginning on January 14, 2013, and ending February 15, 2013, a total deficiency of $5,304.17 was revealed by the audit.

7. United continued to provide coverage to all of these customers.

8. Mr. Matthias admitted to United that customers had paid him but that he had not remitted these amounts to United. At hearing, Mr. Matthias did not dispute the deficiency, but sought to show that he had made restitution.

9. On January 7, 2013, Mr. Matthias gave Mr. Ewers a money order in the amount of $388.62. On January 24, 2013, he gave him another money order for $215.00 and, on February 11, 2013, gave him a third money order for $800.00. Mr. Ewers testified that the first two of these payments were credited to accounts before the calculation of the deficiency. All parties agree that the

   $800 payment should be applied to reduce the $5,304.17 deficiency.

   
   

10. It is also undisputed that Mr. Matthias paid some additional cash to Mr. Ewers. However, there is a conflict in the testimony as to the amount and purpose of any additional payments. Mr. Ewers testified that he made a personal loan to Mr. Matthias in the amount of $1,200.00 because he was sympathetic to the personal and financial difficulties

    Mr. Matthias was having. No written evidence of a personal loan was introduced into evidence, however. Mr. Ewers testified that Mr. Matthias gave him a cash payment of $900.00 (less $78.20 credited to a specific United account) in partial repayment of that personal loan. On the other hand, Mr. Matthias testified that he never borrowed any money from Mr. Ewers. He testified that Mr. Ewers went with him on several occasions to cash his pay checks in order to collect amounts due to United and that

    Mr. Ewers accepted not only the $900.00, but also two additional cash payments of $220.00 and $240.00 on behalf of United, but that these sums were never credited to reduce his deficiency.

11. The Department did not show by clear and convincing evidence that payments made to Mr. Ewers were made to repay a personal loan. However, even if Mr. Matthias is given credit for all payments he claimed to have made, totaling $2,675.42, along with a credit of $2,064.26 for his forfeited bond and interest, he still has not repaid the full $5,304.17 deficit he owed to United, despite its demands that he do so.

    
    

12. In collecting payments from United’s customers and failing to timely remit these funds to United, Mr. Matthias demonstrated a lack of fitness or trustworthiness to engage in the business of insurance.

13. It was fraudulent and dishonest for Mr. Matthias to collect money owed to United, not send it to them, and initially claim that the customers had not paid him when United asked him about these accounts.

14. Mr. Matthias engaged in misappropriation, conversion, and unlawful withholding of moneys belonging to United that he had received in the course of his insurance business.

15. Mr. Matthias received premiums belonging to United under his insurance license, but failed to account for these trust funds or pay them to United as required.

16. No information was presented to indicate that Mr.

    
    

    Matthias’s license has ever been subjected to any prior disciplinary orders or that he has received prior warnings from

    the Department.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes (2014).

    
    

18. A proceeding to suspend, revoke, or impose other discipline upon a license is penal in nature. State ex rel. Vining v. Fla. Real Estate Comm'n, 281 So. 2d 487, 491 (Fla.

    1973). Petitioner must therefore prove the charges against Respondent by clear and convincing evidence. Werner v. Dep’t of

    Ins. & Treasurer, 689 So. 2d 1211, 1212 (Fla. 1st DCA 1997) (citing Dep't of Banking & Fin. v. Osborne Stern & Co., 670 So.

    2d 932 (Fla. 1996)).

    
    

19. The clear and convincing standard of proof has been described 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 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 a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.

    
    

    In re Davey, 645 So. 2d 398, 404 (Fla. 1994)(quoting Slomowitz v.

    
    

    Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).

    
    

20. At the time of Respondent’s actions, section 626.611(7), Florida Statutes, provided that an agent’s license shall be suspended or revoked for a demonstrated lack of fitness or trustworthiness to engage in the business of insurance.

21. Petitioner proved by clear and convincing evidence that Respondent violated section 626.611(7).

    
    

22. Section 626.611(9) provided that an agent’s license shall be suspended or revoked if the agent engages in fraudulent or dishonest practices in conducting business under the license.

23. Petitioner proved by clear and convincing evidence that Respondent violated section 626.611(9).

24. Section 626.611(10) provided that an agent’s license shall be suspended or revoked if the agent engages in misappropriation, conversion, or unlawful withholding of moneys belonging to insurers received in conducting business under the license.

25. Petitioner proved by clear and convincing evidence that Respondent violated section 626.611(10).

26. Section 626.611(13) provided that an agent’s license shall be suspended or revoked if the agent willfully violates any provision of the insurance code. The insurance code includes the provisions of chapter 626. § 624.01, Fla. Stat.

27. Section 626.561(1) provided in part:

    
    

    All premiums, return premiums, or other funds belonging to insurers or others received by an agent, insurance agency, customer representative, or adjuster in transactions under the license are trust funds received by the licensee in a fiduciary capacity.

    
    

    * * *

    
    

    The licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, or other person entitled thereto.

    
    

28. Petitioner proved by clear and convincing evidence that Respondent willfully violated section 626.561(1).

29. The Administrative Complaint also charged a violation of section 626.621(4), which provided that Petitioner may suspend or revoke an agent’s license for failure or refusal, upon demand, to pay over to any insurer any money coming into his or her hands belonging to the insurer. However, section 626.621 cannot be applied if it has been determined that the agent has also violated a provision in section 626.611. Dyer v. Dep’t of Ins. & Treasurer, 585 So. 2d 1009 (Fla. 1st DCA 1991)(section 626.621

    is applicable only if the violation occurs under circumstances for which suspension or revocation is not mandatory under section 626.611). Thus, no violation of section 626.621(4) is found here.

30. Section 626.207(8) required Petitioner to adopt rules establishing specific penalties for violations of the insurance code. The statute also provided that the length of a suspension may be adjusted based on aggravating or mitigating factors, as established by rule.

31. Florida Administrative Code Rule 69B-231.080 established specific penalties for violations of section 626.611.

    It provided: a six-month suspension for a violation of section 626.611(7); a 12-month suspension for a violation of section 626.611(9); a 12-month suspension for a violation of

    
    

    section 626.611(10); and a six-month suspension for a violation of section 626.611(13).2/

32. Rule 69B-231.040 is entitled “Calculating Penalty” and provided in part:

    1. Penalty Per Count.

       
       

       1. The Department is authorized to find that multiple grounds exist under Sections 626.611 and 626.621, F.S., for disciplinary action against the licensee based upon a single count in an administrative complaint based upon a single act of misconduct by a licensee. However, for the purpose of this rule chapter, only the violation specifying the highest stated penalty will be considered for that count. The highest stated penalty thus established for each count is referred to as the “penalty per count.”

          
          

       2. The requirement for a single highest stated penalty for each count in an administrative complaint shall be applicable regardless of the number or nature of the violations established in a single count of an administrative complaint.

       
       

    2. Total Penalty. Each penalty per count shall be added together and the sum shall be referred to as the “total penalty.”

       
       

33. Although the Administrative Complaint alleges multiple statutory violations, all of these are based upon a single course of misconduct; only a single count is delineated in the complaint. The single highest stated penalty is therefore applicable. Cf. Faloon v. Dep't of Fin. Servs., 911 So. 2d 1286 (Fla. 1st DCA 2005)(under rule 69B-231.040, penalty cannot exceed the highest single penalty of a proven statutory violation).

    
    

34. Petitioner also adopted rule 69B-231.160, entitled “Aggravating/Mitigating Factors,” which provided in part:

    The Department shall consider the following aggravating and mitigating factors and apply them to the total penalty in reaching the final penalty assessed against a licensee under this rule chapter. After consideration and application of these factors, the Department shall, if warranted by the Department’s consideration of the factors, either decrease or increase the penalty to any penalty authorized by law.

    
    

    1. For penalties other than those assessed under Rule 69B-231.150, F.A.C.:

       
       

       1. Willfulness of licensee’s conduct;

          
          

       2. Degree of actual injury to victim;

          
          

       3. Degree of potential injury to victim;

          
          

       4. Age or capacity of victim;

          
          

       5. Restitution to victims;

          
          

       6. Motivation of licensee;

          
          

       7. Financial gain or loss to licensee;

          
          

       8. Financial loss to victim;

          
          

       9. Vicarious or personal responsibility;

          
          

       10. Related criminal charge; disposition;

           
           

       11. Existence of secondary violations in counts;

           
           

       12. Previous disciplinary orders or prior warning by the Department; and

           
           

       13. Violation of any part of Sections 626.9541, and 627.4554, F.S., in relation to

           
           

           the sale of a life insurance policy or annuity to a senior citizen; and

           
           

       14. Other relevant factors.

       
       

35. United continued to provide coverage to its insureds; the company was the actual victim. It suffered an initial financial loss of $5,304.17, much of which was later repaid by Respondent or covered by his bond. Had Respondent’s actions not been discovered, however, the “degree of injury” to a customer possibly unable to prove payment of the premium in support of an otherwise legitimate claim against United was potentially higher. Respondent was personally responsible for the violations.

36. The element of willfulness is inherent in any violation of sections 626.611(9) and 626.611(10) and so cannot be considered as an aggravating factor here. Respondent also made efforts to repay United, although he has not made a complete accounting. There were no related criminal charges and no evidence of previous disciplinary orders or prior warnings by Petitioner.

37. On balance, the nine-month suspension contained in Petitioner's Proposed Recommended Order is reasonable.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial

Services enter a final order finding Respondent in violation of

sections 626.561(1), 626.611(7), 626.611(9), and 626.611(10),

Florida Statutes, and suspending his license for nine months.

DONE AND ENTERED this 17th day of December, 2014, in Tallahassee, Leon County, Florida.

S

F. SCOTT BOYD 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 17th day of December, 2014.

ENDNOTES

1/ All references to statutes and administrative rules, except as otherwise indicated, refer to those versions in effect in early 2013, the time of the alleged violations.

2/ In its Proposed Recommended Order, Petitioner incorrectly cites rule 69B-231.080 as providing for a nine-month suspension for violation of section 626.611(10).

COPIES FURNISHED:

James A. Bossart, Esquire Department of Financial Services 612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333 (eServed)

Michael Paul Matthias Apartment F602

3530 Northwest 52nd Avenue Lauderdale Lakes, Florida 33319 (eServed)

Michael P. Matthias

1813 Northwest 15th Avenue Fort Lauderdale, Florida 33311

Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)

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.

Docket for Case No: 14-004133PL

Orders for Case No: 14-004133PL