The Issue Should Respondent's license as a real estate broker be revoked, suspended or otherwise disciplined?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: The Department is the agency charged with the responsibility of investigating and enforcing the provisions of Chapter 475, Florida Statutes. At all times material to this proceeding, Respondent was a licensed real estate broker in the State of Florida, issued license number 0152815 in accordance with Chapter 475, Florida Statutes. Robert L. Purlee and Doris A. Purlee (Purlees) conveyed certain real property located at Unit 1303-A, Jamestown Condominiums, within Pinellas County, Florida, to Ralph F. Marotte and Eve K. Marotte (Marottes), on June 18, 1993, for an agreed upon sum of $15,000, with installments due over a period of 120 months, at the rate of $181,99 per month, beginning July 15, 1993. Since there was no express language in the deed to express a contrary intent, the conveyance to the Marottes created an estate by the entirety which was not available to answer for the individual debts of either of the tenants. The Marottes executed a mortgage and ad promissory note creating a lien against the property in favor of the Purlees, to secure the timely payment of the sum owed by the Marottes. At the time the Marottes purchased the property in question from the Purlees, there were no other liens or encumbrances against the property. At the time the deed was recorded, there was two personal judgments filed of record against Ralph F. Marotte, individually, but no personal judgments filed of record against Ralph F. Marotte and Eve K. Marotte, jointly or as husband and wife, or Eve K. Marotte, individually. Since no copies of these judgments, certified or otherwise, were introduced as evidence, and David Eaton appeared to be confused about these judgments, this finding is based on the testimony of Eve K. Marotte which I find credible. On November 10, 1993, the Marottes authored and caused to be delivered to the Purlees a letter which provides in pertinent part: We are unable to financially own this unit, therefore, we wish to deed it back to you and your wife, and record it in the courthouse. Rather than go thru foreclosure proceedings and lawyer’s fees etc., thought the simplest best way for both of us is to just return the property back to you both, and have the tenant send her rent payment directly to you. We have prepared the deed - and after it is recorded - have the courthouse send it to you directly. (Emphasis Supplied) * * * On December 8, 1993, the Marottes authored and caused to be delivered to the Purlees a letter which provides in pertinent part: Attached is a copy of the Quit Claim Deed - which is being recorded and will be mailed to you directly. (Emphasis Supplied) * * * On January 6, 1994, the Marottes authored and caused to be delivered to the Purlees a letter which provides in pertinent part: We went to the courthouse to record the deed, and realized that we did not take the mortgage off, so we are enclosing a satisfaction of mortgage, so that we can turn the property back to you- and you will then own it free and clear as you did before. As soon as we received this paper from you, will turn over everything, to you, that is, keys, etc. (Inventory remains the same). (Emphasis Supplied) * * * From the notation on the quit claim deed it appears that the Marottes attempted to record the deed at the courthouse but changed their mind as indicated in the letter. The Purlees executed the satisfaction of mortgage and posted it with the United States Postal Service for delivery to the Marottes. Subsequently, the Purlees discussed the matter with their attorney, David A. Eaton, who advised the Purlees to have the satisfaction of mortgage retrieved from the postal service. This was accomplished, and the Marottes did not receive the satisfaction of mortgage. Therefore, the Marottes did not record the quit claim deed transferring title back to the Purlees. Based on the testimony of Eve K. Marotte which I find credible, Eve K. Marotte continued in her effort to deed the property back to the Purlees, and even discussed the possibility of satisfying the personal judgments against Ralph F. Marotte in the process. In fact, Respondent even arranged for the sale of the property but that did not prove fruitful either. At the time the Marottes attempted to deed the property back to the Purlees, the Marottes did not advise the Purlees of the personal judgments against Ralph F. Marotte, individually. Since the conveyance of the property to the Marottes created an estate by the entirety, the property would not have been subject to any judgments against Ralph F. Marotte, individually upon the Marottes deeding the property back to the Purlees. There was no intent on the part of the Respondent to “saddle” the Purlees with Ralph F. Marotte’s personal judgments. Likewise, there was no intent on the part of Respondent to mislead or misrepresent the circumstances surrounding the attempt to “deed back” the property or to induce the Purlees to execute a satisfaction of mortgage so that the Marottes could record such satisfaction or mortgage without recording the quit claim deed and thereby have the property free and clear of the mortgage. Although the Marottes did make some of the mortgage payments, they did not make all of the payments as contemplated by the mortgage and promissory note. Their failure to make mortgage payments was due to their financial condition and not that the Marottes were intentionally attempting to deprive the Purlees of the property without paying for the property. The Marottes collected some rent from the property but apparently did not apply this money toward the mortgage payment. However, there was no evidence, other than the requirement of making the mortgage payments, that the Marottes were required to pay the rent over to the Purlees. On or about November 6. 1995, the Purlees filed a complaint with the Circuit Court of the Sixth Judicial Circuit of the State of Florida, in and for Pinellas County, against the Marottes alleging, inter alia, that Respondent committed fraud and dishonest dealing in a real estate transaction. On a Motion for Summary Judgment filed by the Purlees, the court entered a Final Judgment Against Licensed Real Estate Broker, Eve K. Marotte, for Monetary Damages Arising Out of Fraudulent Conduct in a Real Estate Brokerage Transaction on March 1, 1996. Additionally, the court entered a Final Judgment Against Eve K. Marotte and Ralph F. Marotte for the total sum of $95, 454.95 which included $22, 284.54 in actual damages, $66,853.62 in trouble damages pursuant to Section 772.11, Florida Statutes, $5,250.00 in attorney’s fees, and $1,066.79 in taxable costs. Because of this judgment and other financial and personal circumstances surrounding the Respondent’s life at that time, the Respondent filed for bankruptcy which eventually “wiped out” this judgment. Subsequently, the Purlees filed a separate proceeding for foreclosure of the mortgage, and obtained title to the property by foreclosure sale on or about August 1997. Between the time of the initiation of the foreclosure proceeding and gaining title to the property, the Purlees had a receiver appointed to receive the rent on the property. Although David Eaton testified that the Marottes failed to turn over rents during this period, there is insufficient evidence to show that the Marottes received any rent during this period or that the property was rented at all times during this period. Clearly, after engaging an attorney and obtaining the large judgment, the Purlees were not interested in taking the property back without the judgment being satisfied. Likewise, it is equally clear that Respondent was not financially able to pay the judgment. Respondent did not intentionally or otherwise misrepresent the facts in order to induce the Purlees to accept the deed back and release her from her obligation, or act in a fraudulent manner in order to convince the Purlees to release Respondent from her obligation, or act dishonestly in her dealings with the Purlees.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Florida Real Estate Commission enter a final order dismissing both Count I and Count II of the Administrative Complaint. DONE AND ENTERED this 19th day of December, 1997, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 Filed with the Clerk of the Division of Administrative Hearings this 19th day of December, 1997. COPIES FURNISHED: Henry M. Solares Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Lynda Goodgame General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Geofrrey T. Kirk, Esquire Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street Suite N-308 Orlando, Florida 32801 Eve K. Marotte, pro se 2616 46th Terrace North St. Petersburg, Florida 33714
The Issue The issue is whether Respondent operated as a real estate broker or sales associate without a license, in violation of Section 475.42(1)(a), Florida Statutes, and, if so, what penalty should be imposed.
Findings Of Fact Respondent has not been licensed as a real estate broker, broker sales-associate, or sales person in the state of Florida. Respondent entered into an arrangement with Tina Mathews, who holds a valid broker or sales person's license, to find buyers in return for which she would split the commission with him. Although Respondent never showed the properties to prospective buyers, after finding them, he performed other, unspecified tasks to ensure that the deals closed and he would be paid. Respondent's defense is that he did not know that what he was doing was illegal. In fact, this case arose by a complaint filed by Respondent against Ms. Mathews, who had paid him several times in the past for similar work in connection with other transactions. When Ms. Mathews declined to pay Respondent in connection with three other transactions described in the Administrative Complaint, Respondent contacted Petitioner, which, after an investigation, brought these charges against Respondent for two transactions, as identified in the Administrative Complaint, for which Ms. Mathews paid him. In one letter (received June 12, 2007) from Mr. Haque to Petitioner, he acknowledges that he has "done 10 more deals with [Ms. Mathews] in the past for which she compensated me 1/3 of her commission. Enclosed are the HUDS for Ronald Nicolas and Beryl George . . .." These are the two transactions that are the subject of the Administrative Complaint, so there is no doubt that Respondent received compensation for his work on these two transactions. It is difficult to determine exactly what Respondent did to "earn" his share of the commission, although clearly he found the buyers. Although Respondent claims to have substantial work on each of these transactions, he is vague about what he did, and the weight to be accorded this admission is limited due to Respondent's persistent misunderstanding of this case as some sort of vehicle by which he can obtain payment for his share of the commission for the three subsequent transactions about which he filed a complaint against Ms. Mathews. The only remaining element of Petitioner's case against Respondent involves any ownership interest that Respondent may have had in the two properties identified in the Administrative Complaint. A summary of the investigator's interview with Ms. Mathews, who did not testify, states that she told the investigator that the deals that she did with Respondent were with properties that he owned. However, Respondent supplies the needed evidence as to this critical point when, in his post- hearing statement, he refers to this statement from the investigator and disputes it by stating: "The fact is, this is the only property in my complain [sic] I own with Ms. Mathews as agent of record." It is impossible to determine whether this admission applies to one of the two transactions that are the subject of the Administrative Complaint or one of the transactions for which he is, even now, seeking payment. At minimum, though, even if the statement applies to one of the two subject transactions, it applies to only one of them, and, by negative implication, Respondent concedes that he was not an owner of the other property. On the basis of this record, Petitioner has proved all of the above-cited allegations of the Administrative Complaint in connection with both transactions that underlie Count I.
Recommendation Based on the foregoing, it is RECOMMENDED that the Department of Business and Professional Regulation enter a final order finding Respondent guilty of operating as a broker or sales person without a license and imposing an administrative fine against him of $5000. DONE AND ENTERED this 22nd day of June, 2009, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 22nd day of June, 2009. COPIES FURNISHED: Thomas W. O'Bryant, Jr., Director Division of Real Estate 400 West Robinson Street, Suite 802 North Orlando, Florida 32801 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Syed Haque 10100 Country Brook Road Boca Raton, Florida 33428
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Columbus Equities International, Inc. (Columbus Equities), was registered as a broker/dealer with petitioner, Department of Banking and Finance, Division of Securities and Investor Protection (Division), having been issued broker/dealer registration number 30936. The business address of the firm was 6321 East Livingston Avenue, Reynoldsburg, Ohio. Respondent, Roger L. Parsons, was registered with the Division as an agent with Columbus Equities. He was also registered with the National Association of Securities Dealers (NASD) as the financial and operations principal, general principal and representative of Columbus Equities. As such, Parsons was responsible for supervising the employees of Columbus Equities. Similarly, under the terms of Rule 3E-600.002(4), Florida Administrative Code, Columbus Equities was also responsible for the acts of its employees. Prior to June 1990, Columbus Equities was known as Parsons Securities, Inc. The business was originally formed in 1978 by Parsons, who is majority stockholder and serves as its president, secretary and director. In June 1990, the firm's name was changed to Columbus Equities International, Inc. In January 1991, Columbus Equities filed for protection under Chapter 7 of the Federal Bankruptcy Law. When the events herein occurred, Vincent C. Lombardi was registered with the NASD as general securities principal, representative and registered options principal of Columbus Equities. Lombardi's business address was 450 Tuscarora Road, Crystal Bay, Nevada, where he managed the Nevada branch office of Columbus Equities. Except for Ohio, Lombardi was not registered to sell securities in any other state, including Florida. In the fall of 1990, a Division financial analyst, Joanne Kraynek, received a letter from the Nevada Securities Commission. Based upon that letter, Kraynek wrote a letter on November 21, 1990, to "Parsons Securities/Columbus Equities International, Inc." regarding that firm's alleged sale of unregistered securities to a Florida resident. The letter requested various items of information. On December 6, 1990, Lombardi replied to Kraynek's letter on behalf of Columbus Equities and enclosed a number of documents in response to her request. Based upon this information and a subsequent investigation by the Division, the following facts were determined. On May 31, 1990, Charles D. Flynn conducted a transaction on behalf of his wife, Susan, for the purchase of 4,933 shares of World Videophone, an unregistered security. On June 22, 1990, Flynn purchased 2,500 shares of White Knight Resources Limited on behalf of his wife. That security was also not registered in the State of Florida. On July 9, 1990, Flynn purchased an additional 2,000 shares of White Knight Resources Limited on behalf of his wife. In each transaction, the trade was executed by Lombardi from the Nevada branch office of Columbus Equities. When the sales occurred, Flynn and his wife resided at 2045 Parkside Circle South, Boca Raton, Florida. In finding that the Flynns were Florida residents at the time of the trades, the undersigned has rejected a contention by Parsons that Flynn purchased the stocks while residing in Canada and thus the transactions were not subject to the Division's jurisdiction. Evidence of these transactions and the Flynns' Florida domicile is confirmed by the deposition testimony of Mr. Flynn, admissions by Lombardi, and copies of the order tickets from the Nevada branch office. The order tickets reflect the code "MM" (market maker), which means that Columbus Equities held the securities in its own inventory and did not have to go to an outside source to obtain the stocks. Thus, Parsons (on behalf of Columbus Equities) should have been familiar with these securities. However, at hearing he acknowledged that he was not. This in itself is an indication that Parsons was not properly supervising his employees. Finally, there was no evidence that the three transactions were exempt within the meaning of Sections 517.051 and 517.061, Florida Statutes, and thus were beyond the Division's jurisdiction. As the principal for Columbus Equities, Parsons was responsible for supervising the activities of both Lombardi and the Nevada branch office. Indeed, section 27, article III of the NASD Rules of Fair Practice requires that a NASD member such as Parsons supervise the activities of all associated persons to insure that those persons are complying with all securities laws and regulations. In order to fulfill this duty, Parsons should have reviewed on a timely basis the monthly statements generated by the Nevada office as well as that office's new account applications. For the reasons stated hereinafter, Parsons' review of Lombardi's activities was neither complete nor timely. The Flynn account was opened by Lombardi in April 1990 and Lombardi was the only employee who dealt with the Flynns. Parsons had no knowledge that the Flynn account had been opened because he did not review new account applications. This failure to review new account applications prevented Parsons from detecting whether Lombardi was selling securities in states such as Florida where he was not registered. Lombardi was required to send Parsons a monthly statement reflecting the activity of the branch office. During his review of the May statement in the second or third week of June 1990, Parsons became aware of the first Flynn transaction. Just prior to that, Parsons had learned that Lombardi had also engaged in another illicit trade. In addition, Parsons subsequently became aware of at least four other transactions (including two more with the Flynns) involving the sale of securities by Lombardi in states where he was not registered. However, except for a verbal warning given to Lombardi to discontinue that type of trade, Parsons took no disciplinary action against Lombardi until September 13, 1990, when Lombardi was terminated as an employee and the Nevada branch office closed. By failing to review the new account applications and to take prompt action against Lombardi after having learned of his indiscretions, Parsons failed to properly supervise his employees. Rule 3E-600.014(6), Florida Administrative Code, requires that each member establish, maintain and enforce written procedures governing the conduct of its employees to ensure compliance with all security laws and regulations. To this end, Parsons developed a policy (compliance) manual which was to serve as a guide in the conduct of all employees of Parsons Securities, Inc. and its successor, Columbus Equities. A copy of this manual should have been given to each employee, including Lombardi, for his or her review. However, Parsons did not know if Lombardi ever received and reviewed the manual. In addition, the manual itself was deficient in that it failed to indicate whether employees were to be given a copy for review, and it contained no provisions for taking disciplinary action against an agent if he violated a manual proscription. By failing to develop and utilize an appropriate manual, respondents violated the above cited rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by petitioner finding respondents guilty of all violations alleged in the administrative complaint, ordering respondents to cease and desist all unlawful activities, and imposing a $5,000 fine, jointly and severally, against them. DONE and ENTERED this 26th day of May, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of May, 1992.
The Issue Whether the Respondents committed the offenses alleged in the Administrative Complaint and, if so, the penalties that should be imposed.
Findings Of Fact Petitioner is the state licensing and regulatory agency charged with the responsibility and duty to regulate the practice of real estate, pursuant to the laws of the State of Florida. At all times pertinent to this proceeding, Respondent, Lynton Oliver Thomas, was a licensed real estate broker, having been issued license number 0504596 in accordance with Chapter 475, Florida Statutes. The last license issued to Respondent Thomas was as a broker-salesperson at Pagliari Realty, Inc., 323 Northeast 167 Street, North Miami Beach, Florida 33162. At all times pertinent to this proceeding, Respondent, L T Express Realty Corp., was a corporation registered as a Florida real estate broker, having been issued license number 0273473 in accordance with Chapter 475, Florida Statutes. At all times pertinent to this proceeding, Respondent Thomas was licensed and operating as qualifying broker and officer of Respondent L T Express Realty Corp. The office for this corporate entity was located at 2124 Northeast 123 Street, North Miami Beach, Florida. There was no evidence that Respondent Thomas operated his corporate entity from any other office. On May 7, 1995, Respondent Thomas, a licensed real estate broker, d/b/a L T Express Realty Corp., negotiated a contract for the sale of a house between Bruce and Ann McCormick (as sellers) and Marie S. Saintel and Carita Luc (as buyers). The buyers gave Respondent Thomas an earnest money deposit in the amount of $5,528.00. The transaction failed to close. The sellers, through their agent, attempted to make a demand upon Respondent Thomas for delivery of the earnest money deposit. The sellers' agent was unable to serve the demand on the Respondents because the Respondents had closed their offices and could not be located. Respondents had, or should have had, a good faith doubt as to the proper way to disburse the escrowed funds. Respondent Thomas, without authorization from the sellers, returned $3,000.00 of the original $5,528.00 deposit to the buyers. The balance of the earnest money deposit, in the amount of $2,528.00, has not been recovered from the Respondents. Rule 61J2-10.032(1), Florida Administrative Code, provides the procedure real estate brokers are required to follow when competing demands are made for funds that have been received in escrow or when a broker has a good faith doubt as to how escrowed funds should be disbursed. At no time did Respondents attempt to invoke those procedures. Kenneth G. Rehm, Petitioner's investigator, visited Respondent L T Express Realty Corp. and discovered that Respondent Thomas had abandoned his registered office. Respondent Thomas failed to notify Petitioner that he closed his real estate office at 2124 Northeast 123 Street, North Miami Beach, Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered that finds Respondents guilty of the violations alleged in Counts I-VIII of the Administrative Complaint. As a penalty for these violations, the Final Order should revoke all licenses issued by Petitioner to Respondents. DONE AND ENTERED this 18th day of November, 1997, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Daniel Villazon, Esquire Department of Business and Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Mr. Lynton Oliver Thomas L T Express Realty Corp. 10810 Northeast Tenth Place Miami, Florida 33161 CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1997 Henry M. Solares, Division Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The issue is whether the Petitioner's application for registration as an associated person of Koch Capital, Inc. should be denied.
Findings Of Fact Petitioner, Glenn D. Whaley submitted a Form U-4, Uniform Application for Securities Industry Registration, seeking registration as an associated person of Koch Capital, Inc. One of the states in which Petitioner sought registration was the State of Florida. The Department of Banking and Finance (Department) is the Florida agency charged with the administration and enforcement of Chapter 517, Florida Statutes, the Florida Securities and Investor Protection Act (the Act), and its implementing rules. The Department denied Mr. Whaley's application for registration as an associated person in a letter dated August 27, 1990, based upon its determination that he had violated the Act, that he had filed an application for registration which contained a material false statement; and that his disciplinary history within the securities industry constituted prima facie evidence of his unworthiness to transact the business of an associated person. Mr. Whaley has been employed in the securities industry since approximately 1984, and has been employed with several different securities dealers, including Rothschild Equity Management Group, Inc. (Rothschild), Fitzgerald Talman, Inc., and H. T. Fletcher Securities, Inc. The effective date for Mr. Whaley's registration as an associated person of Rothschild in the State of Florida was April 18, 1985. In October 1985, Department examiner Michael Blaker, conducted an examination of the books and records of Rothschild. The examination revealed violations of the provisions of the Act, including the sale of securities by unlicensed representatives. The commission reports and sales journals prepared by Rothschild revealed that Mr. Whaley, while unregistered with the Department, had effectuated approximately sixteen (16) sales of securities during the period of April 1 through 17, 1985. On May 15, 1989, the State of Missouri Commissioner of Securities issued a cease and desist order against Fitzgerald Talman, Inc. and Glenn D. Whaley. The order found that Mr. Whaley had offered for sale and sold securities on behalf of Fitzgerald Talman, Inc. in the State of Missouri without benefit of registration for himself or the securities. On or about November 8, 1989, the Department issued an Administrative Charges and Complaint against Mr. Whaley seeking revocation of his registration as an associated person of H. T. Fletcher Securities, Inc. based on his failed to timely notify the Department of the Missouri Cease and Desist Order, as required by Rule 3E-600.010(1)(a), Florida Administrative Code. The Administrative Charges and Complaint were served on November 13, 1989. On or about December 12, 1989, the Department issued a Default Final Order revoking Mr. Whaley's registration with H. T. Fletcher Securities, Inc., based upon his failure to request a hearing regarding the Administrative Charges and Complaint. The Form U-4 requires the applicant to swear and affirm that the information on the application is true and complete to the best of his knowledge and that false or misleading answers will subject him to administrative penalties. The Form U-4 application contains no disclosure of the Department's December 1989, revocation of Petitioner's registration with H. T. Fletcher Securities, Inc., as required by Question 22E.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Banking and Finance enter a Final Order denying the application of Mr. Whaley for registration as an associated person of Koch Capital, Inc., in the State of Florida. RECOMMENDED this 25th day of January, 1991, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of January, 1991. COPIES FURNISHED: Margaret Karniewicz, Esquire Department of Banking and Finance The Capitol, Legal Section Tallahassee, Florida 32399-0350 Glenn D. Whaley 5400 Northwest Fifth Avenue Boca Raton, Florida 33487 Honorable Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
The Issue The issues in the case are whether Respondent's real estate broker's license had been revoked when he applied for a mortgage broker's license and whether Respondent falsely answered certain questions on his application for a mortgage broker's license.
Findings Of Fact Respondent is currently licensed as a mortgage broker in the State of Florida. He holds license number HA 056265422-5P. He had been licensed continuously since August 5, 1986. Respondent previously has been licensed as a real estate salesman in the State of Florida. By Administrative Complaint filed March 1, 1985, the Department of Professional Regulation, Division of Real Estate, alleged, among other things, that Respondent was guilty of fraud, misrepresentation, concealment, and breach of trust, among other things, in connection with an improper disbursement from an escrow account. Following a hearing on January 17, 1986, a Recommended Order entered April 18, 1986, found that Respondent was, as to the above-described allegations, guilty "at least of culpable negligence and breach of trust" and recommended that Respondent's license be suspended for one year. After a hearing on June 17, 1986, the Division of Real Estate entered a Final Order June 30, 1986, effective 30 days thereafter, adopting the findings of fact and conclusions of law of the Recommended Order, but revoking rather than suspending Respondent's license. By Application for Registration as a Mortgage Broker signed by Respondent on March 22, 1986, Respondent applied for a mortgage broker's license (March Application). The application was filed on March 25, 1986. Question 19 of the March Application asks: Has any judgement or decree of a court or other judicial, administrative or quasi-judicial tribunal been entered against you, or is any such case pending in this or any other state, province, district, territory, possession or nation, in which you were charged in the petition, complaint, declaration, answer, counterclaim or other pleading with any fraudulent or dishonest dealing? (If your answer is in the affirmative, attach complete signed notarized statement of the charges and facts, together with the name and location of the court in which the proceedings were had or are pending.) Respondent answered this question, "no." By Application for Registration as a Mortgage Broker signed by Respondent on July 1, 1986, Respondent applied for a mortgage solicitor's license (July Application). The application was filed on July 9, 1986, and approved by Petitioner on July 31, 1986. Question 16 on the July Application asks whether the applicant is currently licensed in any state as a real estate broker or salesman. Respondent answered this question, "no." Question 17 on the July Application asks: "Has your license of any kind ever been denied, suspended or revoked?" The question then asks for a complete signed statement of the charges and facts in full detail. Respondent answered Question 17, "no." On July 28, 1986, Respondent sent a notarized letter to Petitioner concerning the July Application. In the letter, he elaborated upon the circumstances surrounding the answer to an unrelated question, but did not elaborate upon the above-described answers Respondent did not answer accurately Question 19 on the March Application. Over a year earlier, Respondent had been charged with fraudulent dealing. Respondent had no basis for omitting this item from the application because, even though he had not received the recommended order, the case obviously was still pending at the time of submitting the March Application. Respondent's incorrect answer was an intentional attempt to conceal from Petitioner the license-revocation proceeding. Although Respondent's answer to Question 16 on the July Application may have been accurate because he had relinquished his license, his answer to Question 17 was inaccurate. Respondent testified that he understood that the Final Order, which had just been issued, had not yet taken effect, so that his license had not yet been revoked. However, without further elaboration, the answer to Question 17 was incomplete and misleading, regardless of Respondent's understanding of the technical status of his license. Respondent knew that his answer was incomplete and would mislead Petitioner.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Banking and Finance, Division of Finance, enter a Final Order revoking the mortgage broker's license of Respondent. DONE and ENTERED this 26th day of June, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 88-4380 Treatment Accorded Petitioner's Proposed Findings 1-7 Adopted or adopted in substance. 8 Rejected as irrelevant. 9-29 Adopted or adopted in substance. 30-32 Rejected as subordinate and recitation of testimony. 33-34 Rejected as legal argument. 35-36 Adopted. 37-38 and 40 Rejected as legal argument. 39 and 41-42 Adopted or adopted in substance. Rejected as legal argument. Rejected as irrelevant. 45-50 Rejected as recitation of testimony. Treatment Accorded Respondent's Proposed Findings 1-7 Adopted or adopted in substance. 8 Rejected as irrelevant. 9-13 Adopted. 14 Rejected as against the greater weight of the evidence. 15-21 Adopted or adopted in substance. 22-23 Rejected as against the greater weight of the evidence. 24-29 Adopted or adopted in substance. 30-31 Rejected as recitation of testimony. Adopted in substance. Rejected as against the greater weight of the evidence. 34-38 Rejected as irrelevant. 39 Rejected as against the greater weight of the evidence. COPIES FURNISHED: Michael J. James 258 East Altamonte Drive Altamonte Springs, FL 32701 Elise M. Greenbaum Assistant General Counsel Office of the Comptroller 400 West Robinson Street, Suite 501 Orlando, FL 32801 Hon. Gerald Lewis Comptroller The Capitol Tallahassee, FL 32399-0350 Charles L. Stutts General Counsel The Capitol, Plaza Level Tallahassee, FL 32399-0350
The Issue At issue in this proceeding is whether Petitioner is entitled to registration as an associated person of Brookstone Securities, Inc. ("Brookstone"), either by virtue of the default provision of Subsection 120.60(1), Florida Statutes, or by virtue of the substantive merits of his application.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Parties The Office of Financial Regulation, a part of the Financial Services Commission, is the state agency charged with regulation of the securities industry. § 20.121(3)(a)2., Fla. Stat. Chapter 517, Florida Statutes, is the "Florida Securities and Investor Protection Act." § 517.011, Fla. Stat. Pursuant to Section 517.012, Florida Statutes, OFR is responsible for the registration of persons associated with broker-dealers. Victor Alan Lessinger is 62 years old. He has been involved in the securities industry since 1976. He was registered with the State of Florida as an associated person from April 23, 1991, until October 31, 1994. He was later registered as an associated person with the State of Florida from June 5, 1997, through April 29, 2006, with the exception of the eight-day period between January 23, 2002, and February 1, 2002. This eight-day lapse was caused by Mr. Lessinger's changing jobs, which necessitated that he re-apply for registration. An associated person must be registered through the broker-dealer that employs him. From February 2005 until April 2006, Mr. Lessinger was a broker associated with Archer Alexander Securities Corporation, and was registered as such with the State of Florida. Archer Alexander went out of business in April 2006, and Mr. Lessinger accepted an offer of employment from Brookstone, a company based in Lakeland. Mr. Lessinger was to work as an associated person in Brookstone's Coral Springs branch. The Application Process and the Notice On July 5, 2007, Mr. Lessinger submitted his application for registration as an associated person with Brookstone to OFR through Web CRD, the central licensing and registration system for the U.S. securities industry operated by the Financial Industry Regulatory Authority ("FINRA").2 Mr. Lessinger's initial application for registration as an associated person with Brookstone disclosed the following disciplinary events: a 1993 Consent Order that Mr. Lessinger entered into with the relevant authorities in the State of Maine; a 1998 "Division Order" from the State of Ohio denying Mr. Lessinger's application for a securities salesman license; a 2000 letter of acceptance, waiver and consent ("AWC") issued by the National Association of Securities Dealers ("NASD"), the predecessor to FINRA; a 2002 arbitration award issued by NASD Dispute Resolution, Inc.; and two related actions taken by the Securities and Exchange Commission ("SEC") in 2005. The 2000 AWC letter, the 2002 arbitration award, and the 2005 SEC actions all related to incidents and/or transactions that occurred in 1999. By letter dated July 18, 2007, Justin Mills, a financial analyst for OFR, notified Mr. Lessinger as follows: In order for the application to be deemed complete, it will be necessary to provide this office with a complete response to the following [sic] a copy of the complete Form U-4, as amended, and all documents pertaining to disciplinary matters, whether disclosable on the U-4 or not.[3] Documentation submitted must be certified by the issuer of such documents. Additionally, explain in detail the status of each pending action, and for each final action, summarize the action and the disposition. Specifically, but not limited to the following: * Certified copies of any regulatory actions by any state or federal regulator, or any self-regulatory organization, including but not limited to, the complaint, answer or reply, and final order or sanction. Certified documentation must be certified by the appropriate agency. Also, provide a brief narrative describing the causes that lead [sic] to the actions. Pursuant to Rule 69W-301.002(3), Florida Administrative Code, additional information shall be submitted within sixty (60) days after a request has been made by the Office. Failure to provide all the information may result in the application being denied. Mr. Lessinger responded with a package of documents and a cover letter dated July 23, 2007. OFR received the package and letter from Mr. Lessinger on July 24, 2007. On October 9, 2007, Ryan Stokes, a financial analyst supervisor for OFR, sent an e-mail to David Locy, then the executive vice president and compliance officer of Brookstone. Mr. Stokes requested the following documents in order to complete Mr. Lessinger's application: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC, State of Maine, State of Pennsylvania,[4] NASD, and State of Ohio. Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando and Muriel Hecht. Certified copy of the petition for bankruptcy and a discharge of bankruptcy. If any of the documents are unavailable due to age, a statement from the appropriate regulator/court to that effect, will suffice. At the hearing, Pamela Epting, chief of OFR's regulatory review bureau, testified that an e-mail such as that sent by Mr. Stokes is not OFR's usual method of doing business. OFR typically sends only an initial deficiency letter such as that sent by Mr. Mills on July 18, 2007. Richard White, director of OFR's division of securities, described Mr. Stokes' e-mail as a "courtesy" that provided Mr. Lessinger "with a reminder and greater detail as to what had not yet been provided." Mr. Lessinger responded with a package of documents and a cover letter dated November 5, 2007, which were received by OFR on November 6, 2007. The cover letter stated as follows, in relevant part: As requested, I am enclosing certified copies of all of the following: SEC, State of Maine (with additional prior correspondence), NASD. Joseph Orlando and Muriel Hecht (there were no payments made since Orlando was dismissed in its entirety with regard to me and Hecht was absolved as a result of my bankruptcy). Certified copy of the Petition for Bankruptcy and Discharge. I believe the State of Pennsylvania will be submitting directly to your office. I have not yet received the certification from the State of Ohio yet [sic]. I have enclosed the original Division Order which is signed and sealed by the Commissioner of Securities. If needed, I will forward the certification as soon as I receive the documents. . . . OFR did not respond in writing to Mr. Lessinger's November 5, 2007, submission. At some point in December 2007 or January 2008, Ms. Epting spoke to Mr. Locy by telephone. She told Mr. Locy that the agency intended to deny Mr. Lessinger's application and offered him an opportunity to withdraw the application in lieu of outright denial. In an e-mail to Ms. Epting dated February 4, 2008, Alan Wolper, attorney for Brookstone and Mr. Lessinger, wrote that his clients had decided not to withdraw the application, "notwithstanding the fact that you have indicated OFR's intent to deny that application." Mr. Wolper requested that Ms. Epting send a written notice of intent to deny, stating the particular grounds for the denial of Mr. Lessinger's application. At some point after writing the February 4, 2008, e-mail, Mr. Wolper wrote a letter to OFR asserting that Mr. Lessinger's registration should be deemed granted by default due to CFR's failure either to notify Mr. Lessinger of the application's incompleteness within 30 days of his November 5, 2007, submission or to act upon the completed application within 90 days of the November 5, 2007, submission, as required by Subsection 120.60(1), Florida Statutes. In a letter dated April 23, 2008, OFR assistant general counsel Jennifer Hrdlicka responded to Mr. Wolper with the assertion that the statutory default provision had not been triggered because Mr. Lessinger had yet to submit a completed application: Mr. Lessinger's application is still deficient. He has not provided to the Office the information requested in its July 18, 2007, letter to him. Still missing from his application are: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC; Certified copies of the resolution for the actions taken by the State of Ohio; and Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando. Mr. Lessinger did submit a certified copy of the Notice of Intent to Deny Application for Securities Salesman License from the State of Ohio, dated July 9, 1997. However, he did not submit any document, certified or not, regarding the resolution from that Notice of Intent of July 9, 1997, such as a Final Order. * * * Mr. Lessinger was timely notified of deficiencies in his application on July 18, 2007, thirteen days after submittal of his application and well within the thirty (30) day period set by the Administrative Procedures [sic] Act and the Office's corresponding Rule [Florida Administrative Code Rule 69W-301.002]. Your interpretation of Florida's Administrative Procedure Act and the Office's Rules contemplates an additional thirty day time period from Mr. Lessinger's November 6, 2007, submittal of additional information; this is a mistaken interpretation of Florida statutes. Mr. Lessinger's application was not considered complete on December 5, 2007. In fact, he has not yet delivered to the Office all requested information and so his application is currently not considered complete. His application will not be considered complete until such time as all requested information is received by the Office. . . . (Emphasis added.) On April 30, 2008, Mr. Lessinger submitted to Ms. Epting an affidavit attesting that the additional documents requested by Mr. Stokes on October 9, 2007, had been submitted to the agency on November 6, 2007. At the hearing, OFR continued to assert that Mr. Lessinger's November 6, 2007, submission did not contain all the information requested by Mr. Stokes. OFR submitted into evidence a sheaf of documents purporting to be Mr. Lessinger's November 6, 2007, submission. The documents had been unstapled for copying and re-stapled, and bore no consistent marks of date stamping or numbering that would allow a fact finder to conclude with confidence that the documents had been maintained in the form they were submitted by Mr. Lessinger. Ms. Epting could testify only as to OFR's general practice in maintaining its files, not as to the manner in which this particular file had been maintained. At the hearing, Mr. Lessinger stated under oath that he had provided OFR with every document it had asked for with the exception of the final order in the 1998 Ohio denial of his application. Mr. Lessinger conceded that he had only provided OFR with the notice of intent to deny in that case. Ms. Epting testified that OFR obtained the final order directly from the State of Ohio some time during the Spring of 2008. The only other item that OFR asserted was missing from the November 6, 2007, submission was a certified copy of the SEC's 2005 order barring Mr. Lessinger from association in a supervisory capacity with any broker or dealer for a period of two years. Mr. Lessinger's November 6, 2007, submission contained what appeared to be a non-certified copy of the order. The faint image of a seal is visible on the last page, with Mr. Lessinger's notation: "Raised seal unable to make darker." Ms. Epting testified that Mr. Lessinger submitted a certified copy of the order some time around May 2008. It is found that Mr. Lessinger submitted a certified copy of the SEC's 2005 order with his November 6, 2007, submission. On May 5, 2008, OFR issued the Notice to Mr. Lessinger. In the Notice, OFR identified a third "completeness" issue that Ms. Epting testified she discovered only during her inquiry to the State of Ohio regarding the final order in the 1998 denial. As to this issue, the Notice recited as follows under heading, "Statement of Facts": On October 3, 2007, the State of Ohio, Department of Commerce, Division of Securities, issued a Notice of Intent to Deny Application for Securities Salesperson License for Lessinger, Order No. 07-387. On April 7, 2008, the State of Ohio, Division of Securities issued a Final Order against Lessinger Denying the Application for a Securities Salesperson License, Order No. 08-052. The Final Order states that on October 15, 2007, Lessinger requested an adjudicative hearing of the Notice of Intent to Deny; the Final Order further states that such a hearing was held on December 18, 2007, and on January 23, 2008, the Hearing Examiners Report and Recommendation was issued, upholding the Division's Notice of Intent. The Final Order states that the Division found that Lessinger was not of "good business repute" as that term is used in Ohio Revised Code 1707.19(A)(1) and Ohio Administrative Code 1301:6-3-19(D)(2),(6),(7),(9), and (D)(11) . . ." Notice was not given to the Office of these administrative actions by the State of Ohio. Lessinger did not update his Form U-4 until April 23, 2008, and subsequent to the Office's inquiry as to this matter; further, his update to his Form U-4 is misleading in that it cites that the date of initiation of this matter was April 7, 2008. Under the heading "Conclusions of Law," the Notice states that Mr. Lessinger's failure to update his Form U-4 constitutes a violation of Florida Administrative Code Rule 69W-600.002(1)(c)5 and therefore a basis for denial pursuant to Subsection 517.161(1)(a), Florida Statutes, which provides that violation of any rule promulgated pursuant to Chapter 517 constitutes grounds for denial of registration. The parties agreed that Mr. Lessinger's application file at OFR was complete at the time of the hearing. The Notice cited additional grounds for denial based on Subsections 517.161(1)(h) and (m), Florida Statutes, which provide: (1) Registration under s. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the office if the office determines that such applicant or registrant: * * * (h) Has demonstrated unworthiness to transact the business of dealer, investment adviser, or associated person; * * * (m) Has been the subject of any decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order by any court of competent jurisdiction, administrative law judge, or by any state or federal agency, national securities, commodities, or option exchange, or national securities, commodities, or option association, involving a violation of any federal or state securities or commodities law or any rule or regulation promulgated thereunder, or any rule or regulation of any national securities, commodities, or options exchange or national securities, commodities, or options association, or has been the subject of any injunction or adverse administrative order by a state or federal agency regulating banking, insurance, finance or small loan companies, real estate, mortgage brokers or lenders, money transmitters, or other related or similar industries. For purposes of this subsection, the office may not deny registration to any applicant who has been continuously registered with the office for 5 years from the entry of such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order provided such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order has been timely reported to the office pursuant to the commission's rules. . . . As the basis for OFR's conclusions that Mr. Lessinger had demonstrated "unworthiness" as described in Subsection 517.161(1)(h), Florida Statutes, and that Mr. Lessinger was the subject of decisions, findings, injunctions and/or prohibitions as set forth in Subsection 517.161(1)(m), Florida Statutes, the Notice cited the 1993 Maine consent order, the 1998 Ohio final order denying Mr. Lessinger's application for a securities salesman license, the 2000 AWC letter from NASD, the 2002 arbitration award issued by NASD Dispute Resolution, Inc., the 2005 SEC actions, and the April 7, 2008, Ohio final order denying Mr. Lessinger's application for a salesperson's license. Petitioner's Disciplinary History During his career, Mr. Lessinger has been employed in various capacities: as a broker/registered representative, a supervisor, and a general securities principal. He has lived and worked in Florida since 1997. From November 1976 through October 1994, Mr. Lessinger was employed by First Investors Corporation ("First Investors") in New York, working his way up to senior vice president and director of the company. On December 20, 1993, Mr. Lessinger entered into a Consent Agreement with the Attorney General of the State of Maine, "for the sole purpose of effecting a settlement of the civil action against Lessinger," First Investors and other individual defendants commenced by the Attorney General and the Maine Securities Administrator in 1991. Mr. Lessinger did not admit or deny that his conduct violated the Revised Maine Securities Act. The Consent Agreement does not provide the details of the grounds for the civil action. Mr. Lessinger testified that First Investors sold mutual funds, one of which was a junk bond fund that lost a great deal of money for investors in the late 1980s. First Investors had an office in Maine, and the Attorney General instituted a civil action against First Investors and certain supervisory personnel, including Mr. Lessinger, for failure to disclose to investors the risk inherent in these bond funds. Mr. Lessinger had no customers in Maine and did not personally sell the junk bond fund to any of his clients. Under the Consent Agreement, Mr. Lessinger agreed not to apply for a license as a sales representative in Maine for a period of one year. Mr. Lessinger also agreed to pay the sum of $50,000 to the State of Maine; First Investors paid the money for Mr. Lessinger. He eventually reapplied and was approved as a sales representative in the State of Maine. In mid-1997, Mr. Lessinger moved from New York to Boca Raton, becoming president of Preferred Securities Group, Inc. ("Preferred"). Mr. Lessinger was obliged to seek licensure in the states in which Preferred had brokers, which included Ohio. In March 1998, the State of Ohio, Department of Commerce, Division of Securities issued a "Division Order" denying Mr. Lessinger's application for securities salesman license. The Division Order found that Mr. Lessinger was not of "good business repute" under the Ohio statutory and rule provisions named in the quotation portion of Finding of Fact 20, supra. The only factual basis stated for the Division Order's "good business repute" finding was the 1993 Consent Agreement with the State of Maine. On November 16, 2000, Mr. Lessinger entered into the NASD AWC letter along with Preferred and Kenneth Hynd, Preferred's financial operations principal ("FINOP"). The recipients of the AWC letter agreed that the letter would become part of their permanent disciplinary record and may be considered in any future actions brought by NASD against them. They also agreed to the following: We may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any allegation in this AWC or create the impression that the AWC is without factual basis. Nothing in this provision affects our testimonial obligations or right to take legal positions in litigation in which the NASD is not a party. Only one of the allegations that prompted the AWC letter directly involved Mr. Lessinger. Without admitting or denying the alleged violation, Mr. Lessinger and Preferred consented to the entry of the following finding by NASD Regulation, Inc.: During the period from about March 22, 1999, until about April 21, 1999, Respondent [Preferred], acting through Respondent Lessinger, allowed an inactive registered representative to effect three securities transactions for customers, in violation of NASD Membership and Registration Rule 1120 and Conduct Rule 2110. Mr. Lessinger and Preferred also consented to the entry of a $3,000 fine, imposed jointly and severally. Mr. Lessinger paid the fine. Mr. Lessinger testified that the representative who effected the improper transactions was in Preferred's Pompano Beach branch office, which was open only from March to June 1999. The manager on premises had not notified Mr. Lessinger that a registered representative in the office was deemed "inactive" for failure to complete mandatory continuing education. On April 30, 2002, a NASD Dispute Resolution, Inc.6 arbitration panel issued an award against Mr. Lessinger in a case that had been filed by a former Preferred customer against Preferred, Mr. Lessinger, and three other individuals associated with the firm, including the owner, Anthony Rotonde, and two brokers. The initial statement of claim in the matter was filed in 1999. The claims included misrepresentation, unsuitability, breach of fiduciary duty, failure to supervise, violations of Section 517.301, Florida Statutes, and common law fraud and negligence. Mr. Lessinger was not the broker of record for the complaining customer and never had anything directly to do with her account. He did not know her. She had been a client of the two brokers for several years. As president of the company, Mr. Lessinger was ultimately responsible for supervision of the brokers, though he was not their direct supervisor. Preferred, Mr. Rotonde, and Mr. Lessinger were found jointly and severally liable on the claims of suitability and failure to supervise and were required to pay damages of $42,294.90, plus interest, costs, and attorneys' fees. The liability for attorneys' fees was expressly based on Sections 517.301 and 517.211, Florida Statutes. Section 517.301, Florida Statutes, generally prohibits fraud and deception in connection with the rendering of investment advice or in connection with securities transactions. Section 517.211, Florida Statutes, sets forth the remedies available for unlawful sales, including those in violation of Section 517.301, Florida Statutes. Subsection 517.211(6), Florida Statutes, provides for attorneys' fees to the prevailing party unless the court finds that the award of such fees would be unjust. After the arbitration award, Preferred went out of business. Mr. Rotonde was a non-licensed owner and simply walked away from the matter. Thus, Mr. Lessinger was left on the hook for the entire arbitration award. He was unable to pay it, and was forced to declare bankruptcy. In April 2004, Mr. Lessinger was named in a civil action filed by the SEC in the United States District Court for the Southern District of Florida. The SEC alleged that Preferred's Pompano Beach office was opened in March 1999 to operate as a boiler room for a "pump and dump" operation involving a penny stock, Orex Gold Mines Corporation ("Orex"). Orex claimed to be in the business of extracting gold from iron ore by means of an environmentally safe process. The SEC alleged that Orex was in fact a shell corporation owned by a "recidivist securities law violator and disbarred attorney." Though its promotional video, literature, and website touted Orex as an active, established company with gold mines, employees, and a revolutionary gold extraction process, Orex in fact owned no mines or mining equipment and had never commercially tested its claimed extraction process. As to Mr. Lessinger, the SEC's complaint alleged as follows: According to Preferred's written supervisory procedures, the form prohibited the solicitation of "penny stocks" as defined under Exchange Act Rule 3a51-1, and restricted the purchase of penny stocks unless it received an unsolicited letter, signed by the investor, requesting to purchase a particular penny stock. Despite the firm's prohibition against soliciting transactions in penny stocks, Lessinger authorized the Pompano Beach branch office's request to solicit transactions in Orex. Prior to authorizing the firm's solicitation of Orex, Lessinger simply reviewed the Orex brochure, the Orex private placement memo, and an Orex press release. He did not conduct any independent research or assessment regarding Orex's officers, assets, or prospects for success. Orex quickly accounted for a high percentage of the overall transactions conducted by Preferred's Pompano Beach branch. Although Lessinger retained responsibility for reviewing, authorizing, and approving customers' transactions in Orex stock, and although he was the senior official of Preferred and functioned as a compliance officer, he failed to exercise appropriate supervision and to take the necessary steps to ensure that Preferred, and the personnel operating out of Preferred's Pompano Beach branch in particular, complied with applicable procedures, securities laws and regulations in connection with transactions in Orex stock. The brokers in the Pompano Beach branch sold more than $3 million in Orex stock between March and July 1999 through fraudulent representations regarding the company, forgery of penny stock disclosure forms, bait and switch tactics, refusal to execute sell orders, or delaying sell orders until a buyer for the shares could be found. The stock ballooned to a value of $7.81 in late May 1999. By late July, it was trading for pennies per share. To his credit, Mr. Lessinger closed the Pompano Beach branch of Preferred after a site visit in June offered him a glimpse of the office's actual operations. However, had Mr. Lessinger showed more curiosity at the outset, or had he merely enforced the company policy against soliciting penny stock sales, the situation in Pompano Beach might never have developed. On September 7, 2005, the court entered final judgment as to Mr. Lessinger. He was permanently restrained and enjoined from: violating the fraud provisions of the Securities Exchange Act of 1934; violating the NASD Conduct Rule regarding supervision of the activities of registered representatives and associated persons; and participating in any offering involving penny stocks. He was also ordered to pay a civil penalty of $20,000. On September 23, 2005, the SEC also issued an Administrative Order making findings and imposing remedial sanctions in connection with the Orex matter. The order barred Mr. Lessinger from association in a supervisory capacity with any broker or dealer for two years, with a right to reapply at end of the two-year period. The SEC's Administrative Order left Mr. Lessinger free to continue to act as a registered representative. However, the two SEC actions rendered Mr. Lessinger statutorily disqualified from membership in the securities industry under FINRA rules. To remain active in the industry, Mr. Lessinger was required to go through the MC-400, or "Membership Continuance," process with FINRA. The Form MC-400 must be filed by a member firm on behalf of the disqualified person. In this case, Archer Alexander Securities, Mr. Lessinger's employer at the time of his disqualification, filed the MC-400 application on his behalf. However, Archer Alexander went out of business before the application could be considered. Mr. Lessinger was hired by Brookstone in April 2006. Brookstone filed a Form MC-400 with FINRA on Mr. Lessinger's behalf on May 15, 2006. Brookstone is owned by Antony Turbeville, a certified financial planner who has been licensed in the securities industry since 1987. Mr. Turbeville has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. David Locy is currently the president of Brookstone. At the time Brookstone filed the MC-400 application for Mr. Lessinger, Mr. Locy was Brookstone's chief compliance officer. He has been a certified public accountant since 1974, licensed in the securities industry since 2003, and has never been the subject of regulatory or disciplinary action by any professional or licensing entity. Michael Classie is the branch manager and supervisor of Brookstone's Coral Springs office, where Mr. Lessinger works.7 He has been licensed to sell securities since 1995 and has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. In its MC-400 application, Brookstone stated that Mr. Lessinger did not seek licensure as a supervisor or control person, and that Brookstone would not allow him to work in a supervisory capacity. Brookstone agreed that Mr. Lessinger would work only as a registered representative, and then only under highly controlled supervisory conditions. FINRA's Department of Member Regulation, which conducts the initial review of all MC-400 applications, recommended that Brookstone's application on behalf of Mr. Lessinger should be denied. By order dated December 13, 2006, following an evidentiary hearing, FINRA's National Adjudicatory Council ("NAC") disagreed with the recommendation of the Department of Member Regulation and granted the application, subject to approval by the SEC. The NAC's order provided as follows: After considering all of the facts, we approve Lessinger as a general securities representative with Brookstone, supervised by Classie and Locy, and subject to the following terms and conditions of employment: Classie and Locy will review, initial, and date all of Lessinger's order tickets on a daily basis; Classie will review all of Lessinger's incoming correspondence daily and will review all of Lessinger's outgoing correspondence prior to its being sent. Lessinger will print out a daily log of faxes from the fax machine for Classie to review; Classie and Locy will review every new account form for Lessinger and, if approved, sign such form; Classie will be in the office with Lessinger at least four times per week from 8:00 a.m. until 5:00 p.m. If Classie is not in the office, Lessinger will be prohibited from effecting trades on the computer and will, instead, call them in to Locy for approval; Locy will make random unannounced office visits to Lessinger's home office at least once during each calendar quarter; Brookstone will amend its written supervisory procedures to state that Classie is the primary responsible supervisor for Lessinger, and that Locy is the backup supervisor; Lessinger will provide a list of all sales contacts to Classie, including the nature of the contacts, on a daily basis; Classie will review Lessinger's written sales contacts and investigate any irregular activity; Locy will conduct five random telephone calls per quarter to Lessinger's customers to verify information or ascertain the customers' level of satisifaction; Lessinger will not participate in any manner, directly or indirectly, in the purchase, sale, recommendation, or solicitation of penny stocks (this is defined in the Court Judgment as "any equity security that has a price of less than five dollars, except as provided in Rule 3a5-1 under the Exchange Act [17 C.F.R. 240.3a51-1]"); Classie must certify quarterly (March 31st, June 30th, September 30th, and December 31st) to the Compliance Department that Lessinger and Classie are in compliance with all of the above conditions of heightened supervision; and For the duration of Lessinger's statutory disqualification, Brookstone must obtain prior approval from Member Regulation if it wishes to change Lessinger's responsible supervisor from Classie to another person. On June 29, 2007, the SEC issued a letter approving the NAC's decision to permit Mr. Lessinger to register with Brookstone as a registered representative under the heightened supervisory restrictions set out in the NAC's order. Brookstone and Mr. Lessinger have agreed that they will abide by the same list of heightened supervisory restrictions should the State of Florida approve the application at issue in this proceeding.8 As noted at Findings of Fact 20 and 21, supra, the Notice alleged that Mr. Lessinger failed to timely update his Form U-4 to disclose receipt of a Notice of Intent to Deny Application for Securities Salesperson from the State of Ohio, Department of Commerce, Division of Securities ("Ohio Notice") dated October 5, 2007. The Ohio Notice stated that on July 9, 2007, Mr. Lessinger had applied for a securities salesperson license via submission of his Form U-4, and that his application disclosed the September 23, 2005, SEC order, the April 2004 filing of the SEC complaint in the United States District Court for the Southern District of Florida, the 2000 NASD AWC letter, the NASD Dispute Resolution arbitration award, the 1998 Ohio application denial, and the Maine Consent Agreement. Based on these disclosures, the Ohio Division of Securities alleged that Mr. Lessinger was not of "good business repute" according to Ohio statutes and rules, and stated its intent to issue an order denying Mr. Lessinger's application for a salesperson's license. The Ohio Notice provided that Mr. Lessinger had 30 days in which to request an administrative hearing contesting the agency's intended denial of his application. Mr. Lessinger timely filed the appropriate documents contesting the Ohio Notice and requesting an evidentiary hearing. Immediately after receiving the Ohio Notice, Mr. Lessinger brought it to the attention of Mr. Locy, then Brookstone's chief compliance officer, in order to determine whether his Form U-4 should be amended. Only Brookstone, as the broker/dealer employing Mr. Lessinger, had authority to amend his Form U-4. Mr. Lessinger did not have independent access to the Web CRD database and thus had no ability to amend the document on his own. Mr. Locy considered the situation and decided that the Ohio Notice did not require an amendment to Mr. Lessinger's Form U-4. Because Mr. Lessinger had appealed the intended denial of his Ohio application, Mr. Locy concluded that that matter was not reportable until the Ohio action ripened into a final order. Mr. Lessinger deferred to Mr. Locy's greater expertise regarding compliance issues. Though Mr. Lessinger could not amend his Form U-4, there was no obstacle to Mr. Lessinger's directly informing OFR of the Ohio Notice. However, there was also no evidence that Mr. Lessinger attempted to conceal the existence of the Ohio Notice, or was anything other than forthright in his dealings with employers and regulatory authorities. The credible evidence established that he simply relied on the opinion of Mr. Locy. The State of Ohio issued a final order denying Mr. Lessinger's application on April 7, 2008. Upon receipt of the final order, Mr. Lessinger promptly notified his employer, and Brookstone updated Mr. Lessinger's Form U-4 on April 23, 2008, to reflect the actions of the Ohio regulators. At the hearing, Mr. Lessinger emphasized that he seeks only to act as a registered representative. Most of his clients are retirees invested in fixed-income mutual funds. They are conservative to moderate in their risk tolerance. Mr. Lessinger does not trade in their accounts on margin, and does not have discretion to make trades without express client authorization. Mr. Lessinger gets new customers through referrals. He makes no cold calls to prospective customers. Mr. Lessinger has never been the subject of a complaint by one of his own customers, and had never been disciplined for any actions he has taken as a registered representative. All of the disciplinary proceedings involving Mr. Lessinger concerned his actions in a supervisory capacity. Mr. Lessinger has forsworn any intention to ever again act in a supervisory capacity in the securities industry. Mr. Turbeville and Mr. Locy were emphatic that Mr. Lessinger would not be permitted to act in a supervisory capacity at Brookstone. Mr. Classie convincingly testified that he would closely monitor Mr. Lessinger's actions in accordance with the NAC order, and understood that failure to do so could place his own registration in jeopardy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order granting Petitioner's application for registration as an associated person with Brookstone Securities, subject to such heightened supervisory restrictions as the Office of Financial Regulation shall deem prudent. DONE AND ENTERED this 15th day of December, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 15th day of December, 2008.
The Issue Whether respondent's license as a real estate salesman should be revoked or otherwise disciplined on the ground that she is guilty of misrepresentation, false promises, false pretenses, dishonest dealing, culpable negligence, and breach of trust in a business transaction in violation of Section 475.25(1) (b), Florida Statutes (1979).
Findings Of Fact At all times material to the charges, respondent Margaret Perry was a licensed Florida real estate salesman holding license No. 0147966. Her business address is Key Place Realty, 513 West Vine Street, Kissimmee, Florida. (Stipulation of Parties.) I. The Offer On December 12 and 13, 1980, Perry W. Ripple, Jr., and Carol C. Ripple, his wife, signed a contract to purchase a 5-acre tract, with residence, located on Hickory Tree Road, Osceola County, Florida. The contract was prepared by respondent, who had previously shown the property to the Ripples. (Testimony of Perry, P. Ripple, C. Ripple; Joint Exhibit No. 1.) On Saturday, December 13, 1980, the contract constituted only a written offer to purchase the property since Novie P. Cleveland and Pamela A. Cleveland- -the owners of the property--had not yet accepted the offer by signing the contract. Pursuant to the contract, the offer was accompanied by a $1,000 earnest money deposit and an assignment of a certificate of deposit. (Testimony of P. Ripple, Perry.) On Saturday, December 13, 1980, when respondent received the signed offer, with earnest money deposit and certificate of deposit assignment, she mailed a copy to the American Title Insurance Company and ordered title insurance. Before mailing the contract offer to the title insurance company, she typed two dates above the contract signature lines: "December 13, 1980" as the date it was signed by the buyers; 3/ and "December 15, 1980" as the date it would be signed by the sellers (the sellers had not yet signed the contract; she inserted December 15, 1980, in anticipation of their signing on that date). She used December 15, 1980, because, under the terms of the contract, that was the last day the offer could be accepted by the sellers. (Testimony of Perry, Carlyon; P-1.) II. The Acceptance At approximately 6:00 p.m. on Sunday, December 14, 1980, respondent telephoned the sellers, Novie P. and Pamela A. Cleveland, and arranged for them to meet her at Mr. Cleveland's office and accept the offer by signing the contract. Respondent expedited the signing of the contract because the Ripples were in a hurry to close the transaction. (Testimony of N. Cleveland, P. Cleveland, Perry.) A few minutes later, the Clevelands met respondent at the designated place and signed the contract. Although they signed the contract on December 14, 1980, respondent inadvertently failed to correct the December 15, 1980, date which she had earlier placed in the contract as the date of execution by the sellers. (Testimony of Perry, N. Cleveland, P. Cleveland; Joint Exhibit No. 1.) III. Buyers' Attempt to Withdraw Offer Later on that evening--between 8:00 p.m. and 9:00 p.m. on December 14, 1980--Mr. Ripple telephoned respondent at her home. He questioned her about the boundaries and size of the property and, for reasons not material here, told her that he no longer wanted to buy the property, that he wanted the earnest money deposit returned. The conversation was abrupt and heated; both parties became upset with each other. The subject of whether the contract had been accepted and signed by the sellers was not mentioned. (Testimony of Perry, C. Ripple, P. Ripple.) The critical dispute in this case is the time of Mr. Ripple's telephone call to respondent. The Ripples testified it was between 5 p.m. and 6 p.m.; respondent testified it was between 8 p.m. and 9 p.m. If the Ripples' testimony is accepted, then respondent presented an offer to the sellers for acceptance after the buyers had told her they wanted to withdraw the offer and not proceed with the contract; this is the essence of respondent's alleged misconduct. If respondent's testimony is accepted, the buyers did not notify her that they wanted to withdraw their offer until after the offer was accepted by the sellers; under such circumstances, her conduct was clearly proper. Respondent's testimony on the timing of the Ripples' telephone call is accepted as persuasive; (see paragraph 7 above) the Ripples' testimony concerning the time of the call is rejected. In earlier testimony, Mr. Ripple's memory of the events in question was shown to be unreliable: [Respondent's Counsel] Q: You say you signed the contract on December the 13th, on a Saturday. [Mr. Ripple] A: Yes. Q: Isn't it true that you signed the contract at the Sun Bank in St. Cloud on Friday, December 12th, on the hood of your car or Marge's car? That's possible, yes. Q: So you were mistaken when you said you signed it on Saturday. A: Yes, I was. I probably was. (Tr. 23.) More importantly, if the Ripples' testimony is correct, respondent deliberately presented an offer for acceptance which the purchasers no longer wished to make. Assuming such conduct occurred, it is inconceivable that she would inadvertently fail to correct the date on the contract to indicate that the sellers signed on December 14, 1980 (the same day the Ripples attempted to withdraw), not December 15, 1980. The events occurred close together and timing was critical. By not changing the date, she allowed the contract to incorrectly reflect that the sellers signed the contract a day later than they actually did: the time between the buyers' attempt to withdraw and the sellers' acceptance becomes greater than it was and even more difficult for her to explain. In short, her failure to correct the date of the sellers' signing of the contract is not a mistake she would have made if, as the Department alleges, she knowingly presented an offer and completed a contract against the expressed wishes of the buyers. IV. No Damage to Parties Involved On Monday, December 15, 1980, the Ripples stopped payment on their earnest money deposit check. The sellers did not pursue any legal rights or remedies they may have had against the Ripples. Eventually, the property in question was sold to another party. There is no evidence that the Ripples or Clevelands were financially harmed as a result of the events in question. (Testimony of Perry, C. Ripple, P. Ripple, N. Cleveland.)
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department's administrative complaint dated October 20, 1981, be dismissed. DONE AND RECOMMENDED this 26th day of March, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of March, 1982.
Findings Of Fact Seaton made application to the Division under the provisions of Section 517.12, Florida Statutes, for registration as a salesman of securities. Subsequently, the Division issued its intent to refuse or deny license or registration along with administrative charges and complaint alleging that Seaton was unworthy to transact the business of a salesman. On February 22, 1977, the Securities Commissioner of the State of South Carolina issued his order to cease and desist directed to Seaton on the dual grounds that Seaton engaged in conduct inconsistent with just and equitable principles of trade in that he offered for sale limited partnerships constituting securities while failing to register them as required and that Seaton failed to register as a broker, dealer or agent in South Carolina. On June 7, 1977, the District Business Conduct Committee for District number 4 of the National Association of Securities Dealers, Inc., issued its complaint against Seaton for violations of Article III, Sections 1, 18 and 27 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc.
Findings Of Fact Jeralne C. Burt is registered with the Florida Board of Real Estate as a salesperson and was so registered at all times here involved. In the fall of 1977, Barbara Rogers came to Respondent's home seeking to purchase residential real estate and was shown several houses by Respondent. One of these houses she agreed to purchase. When asked how she wanted the contract made out, Barbara Rogers said make the contract in the name of Louise Rogers, her sister. The contract to purchase was prepared and given to Barbara Rogers to have executed. When this contract (Exhibit 1) was returned to Respondent it was signed Louise Rogers as the buyer, but the signature was not witnessed. After being assured that Louise had signed the contract to purchase, Respondent signed as a witness to the previously unwitnessed signature of Louise Rogers. At the time this offer was executed by the buyer, Respondent understood that Barbara Rogers was putting up the money for the cash required over the mortgage. Thereafter, Louise Rogers proceeded to the bank where the necessary documents were executed to qualify for an FHA morgage on the property. At the designated closing date Respondent drove to Barbara Rogers' house where Barbara was picked up and they went to the place Louise worked to pick her up. Louise came out to the car and told Respondent that she couldn't get off work and that Barbara could sign the papers for her. When Respondent said she thought Louise should come to the closing to sign, Louise replied that she and her sister signed each other's names all the time and that it was all riht for Barbara to execute the papers. Respondent and Barbara Rogers proceeded to the closing. No one inquired if Barbara Rogers was Louise Rogers, nor was she ever introduced as Louise Rogers. At the closing Barbara Rogers signed Louise Rogers' name on the various documents presented for signature. Due to the house requiring some repairs the closing was kept in escrow for approximately one week to ten days. During this escrow period the mortgage processor at the Barnett Bank, who had processed the application of Louise Rogers, received a phone call from a woman identifying herself as Louise Rogers inquiring when the closing on the house was to take place. When Louise Rogers said she had not executed any papers for the closing the bank officials quickly re-assembled the parties and this time all documents were executed by the real Louise Rogers. Although Respondent realized Louise Rogers should have signed the documents at closing, because of Louise's insistence that Barbara could sign for her and Respondent's previous experience of signing her grandmother's name for her the past two years of her grandmother's life, Respondent assumed the authorization for Barbara to sign Louise's name had been given.
