The Issue Whether the Department of Insurance (hereinafter referred to as the "Department") should remove Respondent from the office of President of Perry & Company, a premium finance company authorized to do business in Florida, pursuant to Section 624.310, Florida Statutes, for the reasons set forth in the Administrative Complaint?
Findings Of Fact Based upon the evidence adduced at hearing, the factual stipulations into which the parties have entered, and the record as a whole, the following Findings of Fact are made: Respondent's Early Employment After graduating from Miami Dade Community College with an A.A. degree in computer science, Respondent was employed as a teller, and then as the head teller, at Pan American Bank in Miami, Florida. He remained in the employ of Pan American Bank for approximately six months. Respondent then went to work for Brickell Bank, another bank located in the Miami area. He started as a new accounts representative, but ultimately became the bank's "in-house computer person" and worked on various computer- related projects for the bank. Respondent was employed by Brickell Bank for a period of two to three years. Respondent left Brickell Bank to become the Vice President of Computer Operations at General Bank. At the time, First Miami Insurance Company (hereinafter referred to as "First Miami"), as well as its immediate parent corporation, General Trust Mortgage Corporation, were wholly owned subsidiaries of General Bank. First Miami was a Florida domestic property and casualty insurer, specializing in the issuance of "non-standard" automobile insurance policies. It was initially licensed by the Department in 1988. The majority shareholders of General Bank were Pedro Ramon Lopez and his wife, Teresa Saldise, who, at all times material to the instant case were practicing attorneys licensed to practice law in the State of Florida. Lopez was General Bank's Chairman of the Board. Saldise was its Vice Chairman of the Board. In late 1988 or early 1989, Respondent, who at the time had no previous experience working in the insurance industry, was assigned by General Bank the task of better automating and otherwise improving the efficiency of First Miami's operations. First Miami was having problems with its telephone and computer systems which, combined with other operational deficiencies, were resulting in delays in policy issuance and claims payments. The Department had received complaints from consumers regarding these delays, which it was investigating. During the investigation, Respondent met with a Department official and explained to him First Miami's computer operations. In the middle of 1989, Respondent became a full-time employee of First Miami. He was given the same title that he had had with General Bank, Vice President of Computer Operations. As Vice President of Computer Operations, Respondent initially reported to Frank Santanaria, who at the time was First Miami's Chief Financial Officer. Subsequently, when he assumed greater responsibility for the operations of the company, he reported to Diana Madero, First Miami's then Executive Vice President. The "Spin Off" of First Miami In August or September of 1989, General Bank decided to "spin off" both First Miami and General Trust Mortgage Corporation and make them independent of the General Bank corporate structure. The "spin off" was intended to satisfy the concerns of federal banking regulators. At the time of the "spin off," Respondent was actively involved in the day-to-day operations of First Miami. Although he did not participate in the decision to "spin off" First Miami, nor was he involved in taking any of the steps necessary to effectuate the "spin off," he was aware, before the "spin off" occurred, that the "spin off" decision had been made and was in the process of being implemented. The Post-"Spin Off" First Miami Following the "spin off," Lopez transferred his ownership interest in First Miami to Saldise. From the date of this transfer until First Miami's liquidation, Saldise was the principal shareholder and President of First Miami and, as such, the person in effective control of the company. She exercised such control through a holding company, First Miami Holding Company, in which she had a 75 percent ownership interest. Respondent was either an officer or director, or both, of First Miami Holding Company from May 23, 1990, until the administrative dissolution of the company on October 9, 1992. Although Lopez was neither a shareholder, officer nor director of First Miami following the transfer, he served as a consultant to the company and, along with his wife, made strategic decisions about the company's direction, its business activities, and its investments. In making these decisions, Saldise and Lopez occasionally sought the legal advice of other attorneys, including Stephen Rubin, with whom they dealt directly. Rubin is a member of The Florida Bar 4/ who has been practicing law since 1969, following his graduation from Columbia University Law School. 5/ He is primarily a litigator who specializes in complex corporate, commercial and regulatory matters, however, he also does general transaction work. Respondent replaced Diana Madero as First Miami's Executive Vice President, in charge of the company's day-to-day operations, sometime around the time of the "spin off" 6/ and he remained in that position until the Department's takeover of the company in June of 1992, receiving a salary of approximately $75,000.00 a year. As Executive Vice President, Respondent reported to Saldise and Lopez. For a period of time following the "spin off" Respondent also held the office of Treasurer. From at least February of 1990, until the Department's takeover of First Miami, Respondent was on its Board of Directors. As of December 31, 1991, the other members of the Board were as follows: Saldise; Raimundo Aleman, the Vice President of Accounting and Treasurer, who was responsible, throughout the period that Respondent was Executive Vice President, for the preparation of all of company's financial statements and reports; Orlando Roberto Soto, the Secretary; and Juan Saldise. November, 1989 Petition for Order to Show Cause Following the "spin off," First Miami acquired approximately $5,000,000.00 of General Bank stock. In November of 1989, federal banking regulators placed General Bank into conservatorship and seized its assets. Such action rendered worthless the General Bank stock held by First Miami. Following the takeover, an article appearing in a Miami newspaper quoted the Department's General Counsel as having said that First Miami was insolvent and that its majority shareholder, Saldise, and her husband, Lopez, had "walked off" with the $5,000,000.00 that First Miami had paid for the General Bank stock that was now worthless. Shortly thereafter, the Department filed in Leon County Circuit Court a Petition for Order to Show Cause against First Miami alleging that there was reason to believe that the company was insolvent. First Miami's business declined after the publication of the newspaper article and the filing of the Petition for Order to Show Cause. Independent insurance agents and premium finance companies were reluctant to continue their dealings with the company. Representatives of two large premium finance companies that had done a considerable amount of First Miami business, Perry & Company and Equivest Premium Finance, visited with Respondent and others at First Miami's offices to inquire about First Miami's solvency. During the pendency of the Petition for Order to Show Cause, the Department, with the assistance of auditors employed by Coopers & Lybrand, conducted an investigation of First Miami. The investigation was headed by Curt O'Shields. During his investigation, O'Shields had discussions with Respondent regarding First Miami's capital and surplus position as of September 30, 1989. Following the investigation, in a February 7, 1990, memorandum to the Department's General Counsel, O'Shields recommended that the Department "settle with [First Miami] and drop the rehabilitation proceedings." O'Shields noted in his memorandum that "[o]perationally, the Company has greatly improved" and "[f]inancially, [it] ha[s] provided evidence to support admitting certain assets sufficient to make the Company solvent." O'Shields' recommendation was followed. On or about February 13, 1990, the Department and First Miami entered into a stipulation which provided as follows: THIS STIPULATION is by and between the State of Florida, Department of Insurance and Treasurer and First Miami Insurance Company. For and in consideration of the mutual promises and covenants set forth hereinbelow, the parties stipulate and agree as follows: The parties stipulate and agree to entry of an Order of Dismissal of Civil Action 89-4343 pending in the Circuit Court of the Second Judicial Circuit In and For Leon County, Florida, and further agree immediately upon the execution of this Stipulation to enter into the Stipulation for Dismissal attached hereto as Exhibit A. First Miami agrees that it will not carry as an admitted asset any stock it may own in General Bank. The parties stipulate and agree that because Forum Reinsurance Company Limited at this time is not an approved reinsurer for purposes of its 1989 annual statement First Miami may not carry as an admissible asset the amount of reinsurance ceded in excess of the amount of First Miami's trust; provided, however, that the Department agrees to promptly review an application for approval of Forum Reinsurance Company Limited as an approved reinsurer, or a request for approval of Forum Reinsurance Company Limited as a SNAR, in good faith and on the same basis as it would review an application from any other insurer. 7/ First Miami for purposes of its 1989 annual statement shall carry its wholly-owned subsidiary, PRLS, Inc. 8/ as an admitted asset at a value of $650,000.00; provided however, that said valuation is contingent on First Miami's obtaining a fully executed contract for sale of said subsid- iary by June 30, 1990. If First Miami does not obtain an executed contract for sale of said sub- sidiary by June 30, 1990, on its June 30, 1990 financial statement and thereafter it shall not carry PRLS, Inc. as an admitted asset. Respondent, approved, but did not execute, the stipulation. The Stipulation for Dismissal, attached to the stipulation as Exhibit A, provided that the parties had "resolved all matters relevant that gave cause to the filing of the PETITION FOR ORDER TO SHOW CAUSE" and that "THEREFORE, the parties agree[d] to entry of an Order by the Court dismissing this action." Such an order was entered on February 13, 1990. Carrera Insurance Underwriters and the "No Down Payment" Program After the entry of the Order of Dismissal, First Miami engaged in a campaign to repair its relationships with independent insurance agents and premium finance companies. It also formed, in June of 1990, a subsidiary, Carrera Insurance Underwriters (hereinafter referred to as "Carrera"), so as to reduce its reliance upon business generated by independent insurance agents. Saldise, Lopez, Madero, Soto and Respondent were the initial members of Carrera's Board of Directors. To attract business, Carrera, at the suggestion of Lopez, instituted a "no down payment" program. Based on the legal research he had done, Lopez concluded that the "no down payment" program was not unlawful. Other insurance companies, independent agents, and agent associations, such as the Latin-American Agents Association and the Specialty Agents Association, complained to the Department about the program. After having received these complaints, the Department contacted First Miami and a meeting between representatives of First Miami and the Department was arranged. The meeting was held in Tallahassee. Among First Miami's representatives at the meeting were Saldise, Lopez and Respondent. The primary spokesperson at the meeting for First Miami was Lopez. Respondent's role at the meeting was to address computer-related issues. Neither at the meeting, nor at any other time, did the Department advise First Miami that it had concerns regarding the legality of the "no down payment" program. The Forum and Munauto Reinsurance Agreements First Miami's reinsurance agreement with Forum Reinsurance Company Limited (hereinafter referred to as "Forum"), which was referred to in the February 13, 1990, stipulation between First Miami and the Department, had been entered into on November 27, 1989. The reinsurance agreement with Forum was negotiated, on First Miami's behalf, by Erin Doherty of Saturn Intermediaries. She received input regarding the preferences of First Miami primarily from Saldise, Lopez and Madero. Respondent assisted in the negotiations by providing computer-generated reports and data. Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez. In conjunction with this reinsurance agreement, a Trust Agreement was entered into by Forum (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). Under the Trust Agreement, First Miami, rather than Forum, had the authority to direct and control the investment of trust fund assets. This was an unusual arrangement inasmuch as it is generally the reinsurer which exercises such direction and control. First Miami directed that the assets of the Forum reinsurance trust fund be invested in insurance premium finance contracts of South Florida Premium Finance Company. South Florida Premium Finance Company was a "captive" premium finance company. It financed only premiums due on policies issued by First Miami. First Miami owned 9.09 percent of the shares of South Florida Premium Finance Company. General Trust Mortgage Corporation owned the remaining shares. Respondent was an officer and director of South Florida Premium Finance Company from February 21, 1990, until October 9, 1992, the date of the administrative dissolution of the corporation. From August 1, 1989, until June 5, 1992, Respondent was either an officer or director, or both, of General Trust Mortgage Corporation. First Miami sought the Department's approval of its reinsurance arrangement with Forum. By letter dated February 26, 1990, which read as follows, the Department granted the requested approval: This is pursuant to your request for the Department to approve Forum Reinsurance Co., Ltd. of Bermuda ("Forum Re") as a "Satisfactory Non-Approved Reinsurer" for purposes of taking credit in First Miami Insurance Company's ("First Miami") accounting and financial statements for calendar year ended December 31, 1989. Your request is hereby granted under Sec. 624.610(2)(b)1, F.S., with the condition that the reinsurance contract entered into by First Miami and Forum Re shall be commuted on or before December 31, 1990 and replaced with another reinsur- ance contract satisfactory to the department. 9/ Forum commuted its reinsurance agreement with First Miami in July or August of 1990. 10/ Forum notified Doherty of its action. Doherty then contacted First Miami and discussed the matter with Respondent. Respondent asked Doherty to find an admitted reinsurer for First Miami that would be agreeable to allowing First Miami to exercise control over the investment of reinsurance trust fund assets. Doherty unsuccessfully attempted to locate such a reinsurer for First Miami. On October 11, 1990, First Miami entered into a written reinsurance agreement with Munauto, S.A., a non-admitted Spanish reinsurer, which covered both current and prior business and was particularly advantageous to First Miami. In conjunction therewith, a Trust Agreement which permitted First Miami to direct and control the investment of trust fund assets was entered into by Munauto (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). 11/ The reinsurance agreement contained an addendum which was signed by Respondent in his capacity as First Miami's Executive Vice President. The Munauto reinsurance and trust agreements were drafted by First Miami's retained attorney, Stephen Rubin. Saldise and Lopez had negotiated these agreements on behalf of First Miami. They first met with Munauto representatives in Spain approximately two to three months before the written agreements were executed. Following this initial meeting, Munauto's Chairman of the Board and its President visited First Miami's offices in Miami where they continued their discussions with Saldise and Lopez. During their visit, they also met with Respondent, who provided them with information regarding First Miami's operations and introduced them to the department heads. Doherty was not in any way involved in the negotiations that culminated in the execution of these agreements. In fact, she was not even aware of the existence of the agreements. As requested by Respondent, Doherty continued her efforts to obtain a suitable reinsurer for First Miami even after these agreements had been executed. Respondent had made such a request at the direction of Saldise, who wanted to explore other reinsurance options. On its Quarterly Statement for the quarter ending September 30, 1990, which was signed by Respondent and filed with Department on November 15, 1990, First Miami provided the Department with the following advisement: Forum has cancelled the Reinsurance Agreement. Munauto S.A. has replaced Forum Reinsurance Co. (P's FOF 46, 1st and 2nd sent) The Munauto reinsurance and trust agreements, however, were never submitted to the Department for approval. Investment in Premium Finance Contracts First Miami was advised by its retained attorney, Stephen Rubin, that it was legally permissible for it invest in the premium finance contract accounts receivable of South Florida Premium Finance Company. Rubin further informed First Miami that it was his legal opinion that First Miami's ownership of these premium finance contract accounts receivable constituted an admitted asset of First Miami under the Insurance Code. He explained that, in his view, First Miami's "participations" in these accounts receivable, based upon promissory notes, were tantamount to "securities," within the meaning of Section 625.012, Florida Statutes. Respondent was among those at First Miami with whom Rubin discussed this matter, and he relied upon Rubin's legal advice. The $1,000,000.00 Dividend On January 29, 1991, at a meeting of the Board of Directors of South Florida Premium Finance Company, the Board declared a "cash dividend of $1,000,000 to the shareholders of record as of December 1, 1990:" First Miami, which held 9.09 percent of the shares; and General Trust Mortgage Corporation, which held 90.91 percent of the shares. Saldise and Respondent were among the Board members present at the meeting. After the meeting, South Florida Premium Finance Company issued the following checks to First Miami and General Trust Mortgage Corporation on the dates and in the amounts indicated: check number 003541, dated May 10, 1991, to First Miami in the amount of $61,325.80; check number 003542, dated May 10, 1991, to General Trust Mortgage Corporation in the amount of $613,325.51; check number 003543, dated April 26, 1991, to First Miami in the amount of $37,387.32; check number 003545, dated April 26, 1991, to General Trust Mortgage Corporation in the amount of $373,914.31. 12/ All four of these checks were signed by Respondent and Aleman for South Florida Premium Finance Company. They all cleared the bank on May 13, 1991. The Immediate Final Order On or about March 1, 1991, the Department received First Miami's Annual Statement for the year ending December 31, 1990. The Department reviewed the statement to ascertain, applying the principles of "statutory accounting" (which differ from generally accepted accounting principles or "GAAP accounting"), First Miami's current ability to meet its obligations. 13/ The review caused the Department to be concerned that First Miami was not currently able to meet its obligations. On March 12, 1991, the Department sent First Miami a letter in which it stated the following: A review of First Miami Insurance Company's Annual Statement indicates that real estate (page 2, line 4.1) was listed at appraised market value, instead of cost, less depreciation. Premium and Agents' balances and installments booked but deferred and not yet due were $6,732,243 at December 31, 1990. Please explain the justification for the admission of this asset. Further, please indicate, how much and when the unearned premium was set up for this asset. Page 72, Schedule P-part 2b, line 12 shows a redun[dan]cy figure of (833), please explain this. The above referenced filing inconsistencies reported in the 1990 Annual Statement should be revised and reported properly in the amended 1990 Annual Statement to be filed with the Department within fifteen (15) days from the date of your receipt of this letter. In addition to the above reporting inconsistencies, the Department has conducted a Diversification analysis of First Miami Insurance Company's Annual Statement, which indicates that the company is not diversified by approximately $4,192,253. With respect to the improper diversification, please submit a business plan to the Department within thirty (30) days from the date of your receipt of this letter, indicating the company's plan of action to correct this concern. Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Two days later, on March 14, 1991, the Department wrote to Respondent advising him that it was "imperative that [he] submit to this Department upon receipt of this letter, Premium Volume Written, Policyholders Surplus, Earned Premiums, and Losses Incurred for the months of January and February, 1991." Respondent responded immediately. In his cover letter to the Department, he stated the following: As per your request, I am attaching a copy of our total page of premiums written for January. The net premium written is $1,110,697.20, our Data processing Department is producing the end of month February reports and should be available by 3:00 p.m. on March 15, 1991. In order to determine our net surplus of January and February Mr. Raimundo Aleman, Vice President of Accounting, is presently working on producing these numbers. Please forgive us for not having these numbers available, but as you know we have spent January and February preparing the end of year blanket. Mr. Aleman will have a full set of Financial Statements for January ready for you by March 22nd. We believe that the February Financial Statement will be completed by the second or third week of April. Should you need further assistance in this matter, please do not hesitate to contact me. In a follow-up letter dated March 27, 1991, Respondent informed the Department of the following: As per your request, please be advised the accounting department has been able to finish the Financial Statement for January 1991. Our net surplus is $3,535,987.00. We are continuing to close February 1991 and as soon as the numbers become available we will forward them to you. Should you need further information regarding the aforementioned, please do not hesitate to call me. By letter dated April 9, 1991, the Department requested the following of Respondent: Pursuant to our conversation on April 1, 1991 concerning issues that are important to the Department of Insurance please confirm in writing. First Miami Insurance Company will not take credit for reinsurance because the reinsurer is an unauthorized Alien carrier, non-approved by the Department. First Miami Insurance Company, Mrs Teresa Saldise, nor her husband, Mr. Pedro Ramon Lopez, have any investments in banks in the United States or abroad. With regards to the 1990 Annual Statement, premiums, Agents Balances and installments booked but deferred and not yet due were $6,732,243, please provide documents substantiating unearned premiums excluding net of reinsurance. In addition, how much of that balance is over ninety days old? The Statement of Actuarial Opinion was not submitted with the Annual Statement, please remit within five (5) days from receipt of this letter. The company's short term assets less short term liabilities indicates a liquidity deficiency of $4,504,955. What is the company doing to improve this deficiency? Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Respondent wrote to the Department on April 15, 1991. In his letter, he stated the following: In response to your letter dated March 12th, 1991, in reference to our Annual Statement, please be advised of the following: Premiums and Agents balances and installments booked but deferred, and not yet due were $6,732,243 at December 31, 1990. This amount reflects premium finance contracts that have been purchased from South Florida Premium Finance. The total of this amount is all outstanding monthly payments from insureds. The amount is backed by unearned premiums in the amount of $11,627,613.73. The net of that amount is also reflected on page 3, number 9. Unearned premiums Part 2A, Column 5, Item 34. Page 72 Schedule P, Part 2B line 12 shows a negative figure of $833. Please see attached. I don't believe that an amended Annual Statement is necessary due to the fact that the above two numbers in my opinion are shown correctly. Should you have any further questions about them let me know. In reference to the Diversification analysis of the First Miami Insurance Company 1990 Annual Statement, I am not sure what statute you are basing yourself on to determine whether there is a diversification problem nor how you arrive at the $4,192,253.00 figure. Can you please refer me to a particular statute or explain the manner you calculate the diversification analysis. If this amount reflects the amount invested in premiums, I believe it is a fully admitted asset according to statute 625.012(3). "Premium notes policy, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest hereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy." Should you have any further questions regarding the above, please do not hesitate to call me. On Friday, May 10, 1991, the Department issued an Immediate Final Order (hereinafter referred to as the "IFO") in which it directed that First Miami "CEASE AND DESIST instanter from writing any new, reinsurance and/or renewal business effective 5:00 P.M. Friday, May 10, 1991," inasmuch as grounds "exist[ed] for the immediate suspension or revocation of FIRST MIAMI'S certificate of authority." The IFO alleged that FIRST MIAMI in the conduct of business under its certificate of authority Is in unsound financial condition. (Section 624.418(1)(a), Florida Statutes) Is using methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or the public. (Section 624.418(1)(b), Florida Statutes) No longer meets the requirements for the authority originally granted. (624.418(1)(d), Florida Statutes) Has violated any lawful order or rule of the department or any provision of this code. (Section 624.418(2)(a), Florida Statutes) Is impaired or insolvent. (Section 624.418(3)(a), Florida Statutes Has failed to have and keep to the extent of an amount equal to its entire reserve and the minimum capital and surplus required to be maintained. (Section 625.305(1), Florida Statutes Has entered into and ceded reinsurance to non-approved reinsurers. (Section 624.610(2)(b), Florida Statutes) Has excess investments in subsidiaries and affiliates. (Section 625.325(2), Florida Statutes) With respect to the issue of reinsurance, the IFO further, more specifically, alleged the following: FIRST MIAMI took a credit for reinsurance in Forum Reinsurance Company, Ltd., a non-approved reinsurer, in the amount of $3,479,939.00, which contract, pursuant to agreement with the DEPART- MENT, was to be replaced with another reinsurance contract satisfactory to the DEPARTMENT by December 31, 1990. In addition, FIRST MIAMI'S 1990 Annual Statement reflects a credit for reinsurance in Munauto Reinsurance, S.A., a non-approved reinsurer, in the amount of $6,358,231.00. The reinsurance contract was entered into in 1990 by FIRST MIAMI with a non-approved reinsurer and has not been approved by the Department in violation of Section 624.610, Florida Statutes. Since neither of these companies are approved by the Department, the Department cannot determine if either can satisfactorily pay current or future claims of the insureds in this state. With respect to the "Premium and Agents' balances and installments booked but deferred and not yet due" referred to in the Department's March 12, 1991, letter to First Miami, the IFO alleged the following: The balance of $6,732,243.00 due from FIRST MIAMI'S subsidiary and premium finance company, South Florida Premium Finance Company, consisting of FIRST MIAMI'S premiums, agents balances and installments shown on the books but deferred and not yet due was 201 percent of policyholders surplus. Such amounts should have been submitted to FIRST MIAMI at the time premiums were financed. As reflected on the 1990 Annual Statement, the amount represents a loan back to South Florida Premium Finance Company and as such, is a receivable from an affiliate which exceeds the allowable statutory limitation by $5,837,107.00 in violation of Section 625.325(2), Florida Statutes. In addition, such amount is not shown as a loan on the 1990 Annual Statement for South Florida Premium Finance Company. Pursuant to section 625.012, Florida Statutes, only those investments and loans held in accordance with the Florida Insurance Code may be considered in determination of financial condition. Therefore the $5.8 million cannot be considered an asset of the company. According to the IFO, although "FIRST MIAMI'S policyholders surplus as indicated on its 1990 annual statement was $3,347,596[, w]ith the adjustments of assets and liabilities required in order to comply with applicable statutes, FIRST MIAMI'S surplus [was] really a negative $7,498,838.00" and therefore it was "in violation of section 624.408, Florida Statutes which require[d] surplus of $1,370,321.00 and [was] impaired or insolvent." The IFO did not specifically address First Miami's "no down payment" program. First Miami received the IFO the afternoon of May 10, 1991, and immediately contacted its attorneys in Tallahassee for legal advice. Respondent was involved in discussions with First Miami's attorneys concerning the IFO. First Miami's Tallahassee attorneys sought and obtained, on Monday, May 13, 1991, an order from a Leon County Circuit Court judge enjoining the Department from enforcing the IFO. Doherty was among the witnesses who gave testimony at the injunction hearing for First Miami. She testified that an admitted carrier, namely U.S. Capital Insurance Company (hereinafter referred to as "U.S. Capital"), was ready, willing and able to enter into a reinsurance agreement with First Miami. Doherty had begun negotiating with U.S. Capital, on behalf of First Miami, in 1990. In addition to enjoining the enforcement of the IFO, the judge ordered First Miami to take the following action: Within twenty-four (24) hours of the time this Order is entered, [First Miami] shall provide to the [Department] an English Language version of any and all reinsurance Treaties or Agreements to which First Miami is currently a party, unless such English version treaties have been previously provided to [the Department]. No later than 5:00 p.m. on May 24, 1991, [First Miami] shall provide to the [Department] proof of existing reinsurance, if not already provided. No later than 4:00 p.m. on May 21, 1991, [First Miami] shall deposit the aggregate amount of One Million ($1,000,000.00) Dollars of its funds into the registry of the court or with the Division of Collateral Securities of the Office of the Treasurer as additional security for the issuance of this Order. No later than 5:00 p.m. on May 24, 1991, First Miami Insurance Company, shall receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars and in exchange therefor shall give to the contributor a surplus note in the form and on the terms customarily approved by the Department of Insurance, and the value of the contributed asset shall not be available for the purpose of writing insurance. [First Miami] shall file, in a timely manner, as required by law, any and all statutorily required, quarterly financial statements, and provide a copy of same immediately to the [Department]. After obtaining the injunction, First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover by the Department in June of 1992. The One Million Dollar Security Deposit On May 14, 1991, Respondent and Aleman, in their capacities as officers of General Trust Mortgage Corporation, gave Sun Bank of Miami written "authorization to debit General Trust Mortgage Corporation master Account #0189000017703 the amount of $1,000,000 and issue a cashier[']s check payable to Teresa Saldise." On or about May 15, 1991, Saldise deposited the check in her money market account at Commercial Trust Bank in Hialeah. On or about May 22, 1991, Saldise withdrew from this account $1,000,000.00, with which she purchased a $1,000,000.00 cashier's check made payable to the Leon County Clerk of the Court. The cashier's check was thereafter deposited with the Leon County Clerk of the Court on First Miami's behalf to comply with the judge's order enjoining the IFO. On May 21, 1991, First Miami executed a note promising to repay the $1,000,000.00 to Saldise and General Trust Mortgage Corporation at an interest rate of 12 percent per year. The note provided that the "principal [was] payable on demand." This note was secured by a mortgage on First Miami's home office property, Units A and D-1 of the Brickell Bay Club Condominium, as well as parking spaces 181 through 381 at the condominium complex. This property was valued at $2.7 million on First Miami's 1990 Annual Statement. In addition, First Miami agreed to pay $25,000.00 in loan points, $10,000.00 in attorney's fees and $63,024.36 for 12 months of "condominium association assessments." Respondent, along with Soto, signed the note and mortgage for First Miami. The documents were duly recorded and a UCC-1 form was filed. In order to facilitate First Miami's compliance with the judge's order, the Department approved the arrangements First Miami had made to obtain the $1,000,000.00 First Miami was required to deposit "as additional security for the issuance of this Order." Subsequently, on January 19, 1992, Saldise and General Trust Mortgage Corporation made a demand for full payment of the loan. First Miami then sought an extension of the repayment period. Saldise and General Trust Mortgage Corporation agreed to an extension of 60 days. In return for the extension, Saldise and General Trust Mortgage Corporation were given additional collateral for their $1,000,000.00 loan, in the form of four mortgage notes having a total value of $1,473,750.00. Respondent and Soto signed, on behalf of First Miami, the paperwork necessary to effectuate this mortgage note extension agreement. Before Respondent did so, though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan. Rubin told Respondent during their discussion regarding the matter that the additional collateral would still be considered assets of First Miami even after the agreement was executed. In its Quarterly Statement as of March 31, 1992, that it submitted to the Department, First Miami disclosed the following regarding the mortgage note extension agreement: The Company notes that certain promissory notes owned by the Company in the original principal amount of $1.47 million have been pledged as additional security for the note issued by the Company on May 21, 1991. The Company's note is also secured by the previously-disclosed mortgage on the Company's headquarters office. The "Company's headquarters office" was listed on the statement as a $2,700,000.00 asset of First Miami, as it had been on all previous quarterly and annual statements submitted to the Department since 1989 Annual Statement. The Saga Bay Property With respect to the requirement contained in the judge's order enjoining the IFO that First Miami "receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars," Saldise and/or Lopez contributed to First Miami 13 real estate parcels located in the Saga Bay development in Dade County, Florida. In exchange therefor, First Miami gave a surplus note, which the Department approved. Post-IFO Reinsurance On May 15 and 16, 1991, Jim Smith, a Reinsurance Financial Specialist with the Department, visited the offices of First Miami. The purpose of his visit was to analyze and review First Miami's reinsurance program. Smith issued a written report detailing his findings on May 20, 1991. In the "Summary" section of his report, Smith stated the following: Based on the information available, the current reinsurance program is highly suspect. I believe there is a possibility that First Miami is re- insuring itself or at a minimum only obtaining limited financial reinsurance. The use of the trust agreement would normally provide some assurance as to the availability of funds. However, the purchase of premium finance contracts from South Florida Premium Finance Company circumvents this normal protection feature. First Miami has purchased over 6 million [dollars] of these contracts since March 20, 1991. 14/ The lack of correspondence between First Miami and Silver Breeze, Ltd. 15/ and/or Munauto S.A. is also of concern. I find it unconscionable that a company would accept a potential $20 million liability without having some preliminary written negotiations or correspondence. Another concern is that Munauto S.A. accepted the previous reinsurer's contract without modifying the terms to protect its interest. 16/ Such action is not characteristic of an arm's length transaction in the reinsurance industry. Also atypical is the wire transfer of funds through General Trust Mortgage, an affiliate, to the intermediary and reinsurer. Smith went on to further state the following: I have reviewed the accounting entries in regard to the Munauto reinsurance treaty and they appear to be normal and booked correctly. I also reviewed debits and credits to the re- insurance trust account at Sun Bank. These entries appeared normal except for use of these trust funds to purchase or invest in South Florida Premium Finance contracts. The terms of the temporary restraining order (TRO) require First Miami Insurance Company to replace the current reinsurer with an approved reinsurer acceptable to the Department. I highly agree with this provision. I would suggest that First Miami has no effective reinsurance lacking supportive evidence to the contrary. Therefore, it is imperative they replace the current re- insurance with an approved reinsurance treaty which actually transfers the underwriting risk. At the request of First Miami, following the issuance of the IFO, Doherty, on First Miami's behalf, while still negotiating with U.S. Capital, commenced negotiations with another potential reinsurer, Dai Ichi Kyoto. In July of 1991, Doherty met with representatives of Dai Ichi Kyoto in London. Respondent was present at the meeting. The negotiations culminated in a signed, conditional reinsurance agreement. Respondent signed the agreement on behalf of First Miami. Under his signature he placed the following handwritten notation, which he initialed: "Subject to approval of the Florida Department of Insurance." The agreement never received the approval of the Department. In early August of 1991, First Miami entered into a series of reinsurance agreements with Warwick Re Insurance and Reinsurance Company, LTD (hereinafter referred to as "Warwick Re"). The agreements were drafted by Rubin, First Miami's retained attorney. In drafting the agreements, he utilized the Munauto reinsurance documents, making revisions where appropriate. Warwick Re was incorporated on August 7, 1991, in Anguilla. The subscribers, each with 250 shares, were General Trust Mortgage Corporation and Procesys, Inc. Respondent signed the necessary documents on behalf of General Trust Mortgage Corporation. Lopez signed on behalf of Procesys, Inc. Prior thereto, on July 31, 1991, in anticipation of its incorporation, Warwick Re had applied for registration as an insurer in Anguilla. Respondent was listed as a director of Warwick Re on the registration form and he signed the form in various places in his capacity as a director. The following day, August 1, 1991, the Boards of Directors of General Trust Mortgage Corporation and Procesys, Inc. each resolved to make a capital investment in Warwick Re in the amount of $100,000.00. Each resolution was signed by Respondent in his capacity as a director. According to a financial statement prepared by Mario Toca, a certified public accountant, as of September 30, 1991, Warwick Re had $20,988,714.00 worth of assets. On August 8, 1991, Bob King of U.S. Capital sent a memorandum to Respondent requesting a decision regarding the offer U.S. Capital had made to First Miami regarding reinsurance. That same day, Respondent sent King a letter in which he stated the following: In reference to the reinsurance treaty between U.S. Capital and First Miami Insurance Company, I would like to advise you that we are negotiating with the Helm Bank the possibility of them pur- chasing the Premium Finance Contracts from us, in consideration of our banking relationship. This means that we would establish a Trust for the outstanding reserves of your portion of the Quota Share. The Trust will invest in A plus Securities only. Should you have any questions, do not hesitate to contact me. On August 22, 1991, King sent Doherty a letter informing her of the following: As a result of First Miami's inability to conclude our proposed transaction, please be advised that we withdraw any and all offers as presented or amended. Unfortunately, we find ourselves unable to proceed with an organ- ization which cannot make a determination as to its objectives and method of transacting business. Respondent was furnished a copy of the letter by King. After receiving King's letter, Doherty faxed a copy of the letter to Lamont Wynn of the Department at Wynn's request. Whereas the Department was swiftly advised of the breakdown in negotiations between U.S. Capital and First Miami, it was not until January 27 1992, that the Department first learned of the reinsurance agreements between First Miami and Warwick Re. On that date, representatives of the Department, including Lisette Lozano, went to the offices of First Miami to review First Miami's books and records. While on the premises, Lozano spoke with Respondent, who, throughout the period he was the Executive Vice President of First Miami, served as First Miami's primary spokesperson in its dealings with the Department. Before speaking with Lozano, Respondent had received instructions from Saldise and First Miami's attorneys that he was to discuss with Department representatives only those matters relating directly to First Miami. Not deviating from these instructions, Respondent told Lozano that Warwick Re was "now the reinsurer of First Miami." Respondent volunteered that Warwick Re was an Anguilla company that owned more than 90 percent of South Florida Premium Finance Company. Lozano, who was not at all familiar with Warwick Re, asked Respondent the names of the officers and directors of the company. Following the instructions he had been given, Respondent told Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami. That same day, January 27, 1992, South Florida Premium Finance Company and General Trust Mortgage Corporation issued checks in the amounts of $200,000.00 and $703,549.16, respectively, payable to Warwick Re. Both checks were signed by Respondent. The next day the checks were deposited in Warwick Re's newly opened account at Sun Bank. The Department ultimately determined that the reinsurance agreements between First Miami and Warwick Re were not "appropriate reinsurance transactions," although it had no proof that Warwick Re was insolvent. Infusion of Additional Capital into First Miami In or about late 1991, Saldise and Lopez made Respondent aware of their plans to formally contribute additional assets to First Miami in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency. Among these assets were ownership interests in the following corporations: Warwick Properties, Inc.; Investors Arts and Antiques, Inc.; Community Broadcasters, Inc.; and Procesys, Inc. Respondent questioned Lopez as to whether the assets which were to be contributed to First Miami would be considered admitted assets under the Florida Insurance Code. Lopez told Respondent that he had researched the matter and come to the legal conclusion that they would be admissible, at least for a three year period. Furthermore, he showed Respondent a draft of a legal memorandum he was preparing which addressed the subject. Respondent subsequently reviewed a second legal memorandum, prepared by another attorney, Marc Cooper, which discussed the admissibility of these assets. Respondent was further advised that although no written contracts effectuating the contemplated transfer of assets had yet been executed, oral agreements to do so did exist. Saldise felt uncomfortable infusing these additional assets into First Miami without written agreements making it clear that it was her intention that the transfer of these assets would be effective only if the Department deemed them to be admitted assets. Rubin, First Miami's retained attorney, drafted these written agreements and related board resolutions. Although it was originally contemplated that these written agreements would be prepared and signed before the end of 1991, they were not ready for execution until March of the following year. 17/ Saldise instructed Respondent to sign the agreements on behalf of each of the parties. Respondent felt ill at ease doing so and asked Saldise whether it was appropriate for him to sign on behalf of more than one party. Saldise assured him that it was inasmuch as he was an officer of each of the parties on behalf of whom he would be signing. Respondent also sought Rubin's legal advice on the matter. Rubin told Respondent that there was no reason, from a legal standpoint, why he could not follow Saldise's instructions regarding execution of the written agreements. Respondent also asked Rubin if the agreements actually accomplished what Saldise and Lopez had intended: to give legal title of these assets to First Miami. Rubin responded in the affirmative to this inquiry, although he further advised Respondent, as he had Saldise, who nonetheless decided to proceed with the transfer of assets, that if a conservatorship or liquidation proceeding were initiated by the Department all of First Miami's assets would be frozen and unavailable to Saldise personally. 18/ Another matter about which Respondent was concerned was the effective date of the agreements, which the agreements indicated was December 31, 1991. He therefore raised the subject with Rubin. Rubin advised Respondent that there was "no problem" with the December 31, 1991, effective date since the written agreements, although they would be signed after that date, merely memorialized what had already been orally agreed upon by the parties prior to December 31, 1991. Relying on the advice he had been given, Respondent, in late March of 1992, executed the written agreements as he had been instructed, thereby formally effectuating the contribution of assets to First Miami, but only after one of the agreements, which had originally reflected a December 31, 1991, date of execution, had been modified, at his insistence, to accurately reflect the date he actually signed the agreement. Payment of Attorney's Fees First Miami authorized payment of past and future attorney's fees incurred by Saldise and Lopez in defending themselves in a federal court proceeding involving General Bank. In this federal court proceeding, which was initiated after the "spin off" of First Miami, the federal government was attempting to freeze the personal assets of Saldise and Lopez. These personal assets included many, if not all, of the assets that Saldise and Lopez planned to contribute, and that later actually were contributed, to First Miami. If these assets planned for contribution were frozen, they would be unavailable to First Miami. Accordingly, First Miami felt that it was appropriate to expend funds, in the form of payment of Saldise's and Lopez's attorney's fees, in an effort to prevent this from happening. Notice to the Department of the Capital Infusion First Miami notified the Department of the capital contributions made to the company by including in the 1991 Annual Statement it submitted to the Department the following footnote, footnote 18, which was drafted by Rubin and reviewed by Respondent: PURSUANT to contracts entered between Liborio Financial Group 19/ and First Miami Insurance Company, Liborio has agreed to contribute its ownership of four subsidiary corporations, including assets owned by these subsidiaries, to First Miami subject to the satisfaction by First Miami of the condition precedent with respect to two of the subsidiaries that the State of Florida Department of Insurance finds that all assets held by First Miami qualify as admitted assets, and that First Miami is in compliance with capital and surplus requirements. This footnote was included in the 1991 Annual Statement at the specific direction of Saldise and Lopez. Respondent had disagreed with Saldise's and Lopez's method of disclosure and had suggested that instead they meet with Department representatives prior to the filing of the 1991 Annual Statement to disclose the information contained in footnote 18. Saldise and Lopez, however, vetoed Respondent's suggestion. The Contributed Assets Warwick Properties, Inc. Warwick Properties, Inc., (hereinafter referred to as "WP") was incorporated on July 31, 1991. Respondent was one of the incorporators. From the date of its incorporation until its administrative dissolution on October 9, 1992, Respondent was an officer, director or both of the corporation. According to a financial statement prepared by CPA Toca, as of December 31, 1991, WP had total assets of $4,500,660.00 and total liabilities, excluding stockholders' equity of $1,176,638.00. Among its assets was an apartment complex known as the Marianna apartments. In October of 1989, these apartments were appraised by Philip Spool, ASA, who estimated their market value at $2,100,000.00. The apartments were valued at $2,300,000.00 in an appraisal conducted in June of the following year by Appraisal and Real Estate Economics Associates, Inc. The written appraisal report was issued on July 9, 1990. This appraisal was referred to in Note 6 of Toca's financial statement, which read as follows: As stated in Note 1, property is recorded at historical cost in accordance with generally accepted accounting principles. However, the estimated current value of land and building based on an independent appraisal performed on July 9, 1990 amounted to $2,300,000. Another asset held by WP was a third mortgage on Saldise's personal residence. In an appraisal conducted in August of 1988, by Appraisal and Real Estate Economics Associates, Inc. the residence was valued at $3,275,000.00 using a "cost approach" and $3,250,000.00 using a "sales comparison approach." Investors Arts and Antiques, Inc. Investors Arts and Antiques, Inc., owned works of art and antiques. These items had been appraised and assigned valuations. Investors Arts and Antiques, Inc., also owned 52.5 percent of Community Broadcasters, Inc. The other shareholders were Maria Elena Prio and Carrie Meek. Community Broadcasters, Inc., held a Federal Communications Commission license to operate a radio station in the Miami area and had obtained certain programing rights as a result of having entered into an agreement with Business Radio Network, Inc. Respondent was at no time an officer or director of either Investors Arts and Antiques, Inc., or Community Broadcasters, Inc. According to a financial statement prepared by CPA Toca, as of March 23, 1992, Investors Arts and Antiques, Inc., had total assets of $2,487,700.00, with donated capital amounting to $2,487,200.00. These donations of capital had been made by Saldise and Lopez. Procesys, Inc. According to a financial statement prepared by CPA Toca, as of December 31, 1991, Procesys, Inc., had total assets and liabilities of $75,065.00. In a note to his statement, Toca made the following comment: In accordance to the Statements of Accounting Standards (SFAS Nos. 2 and 86), the costs incurred internally in creating computer software are charged to expense until the completion of a working model. Thereafter, all costs are capitalized and amortized based on current and future revenues. Accordingly, subject to future revenues, the "Company's" management, estimates that the products developed have a market value of $3,000,000. Procesys, Inc. owned the ATRACK computer software system, which was designed for use by companies providing automobile insurance. First Miami used the ATRACK system pursuant to a licensing agreement it entered into with Procesys, Inc., which agreement the Department had approved. Although it was used extensively by First Miami to deal with day-to- day operational matters, the system did not have an accounting function and therefore was not used by First Miami for that purpose. Lopez helped to develop the ATRACK system when he was involved in another insurance company, International Bankers Insurance Company, prior to his involvement in First Miami. Respondent refined and modified the system to meet the particular needs of First Miami. In February of 1992, pursuant to Lopez's request, Respondent asked Alberto Alphonso, the owner of Microcare Service Corporation (hereinafter referred to as "Microcare"), the vendor which provided First Miami with computer-related goods and services, to appraise the value of the ATRACK system. 20/ Alphonso was a friend of Respondent's whom Respondent had known since his community college days. Alphonso's corporation, Microcare, had previously been owned by Respondent under the name Computer Technology Systems, Inc. Upon the transfer of his ownership interest to Alphonso, Respondent resigned his position as an officer/director of the corporation and has not held any similar position since his resignation. He did do some "moonlighting" work through Microcare, and his wife, Dania Campos, continued to work as a secretary for the corporation for a short period of time after the transfer. Otherwise, however, neither he nor his wife have had any involvement in the affairs of Microcare, nor have they received any dividends or corporate disbursements from the corporation. Alphonso agreed to do the appraisal. On or about February 17, 1992, he submitted his written report to Lopez. Alphonso stated in the report that in his "opinion, based upon potential revenues of this product, that obtaining exclusive marketing and copy rights would have a fair market value of $3,087,500." In early April of 1992, Respondent approached the owner of Nationwide Computer Systems, Inc., Mike Burns, an MIT graduate with an extensive computer background, requesting that he provide another opinion concerning the fair market value of the ATRACK system. Respondent explained to Burns that he was "in a rush to get the appraisal." Respondent did not specifically state why he needed the appraisal, but Burns was left with the impression that it was "just required to fill some requirement to have three appraisals." Respondent advised Burns of the appraisal Alphonso had done and showed Burns Alphonso's report. In doing so, Respondent commented that he was "comfortable with the appraisal." Burns was at first reluctant to undertake the task because he thought that someone else might be better qualified to do so. He felt more confident about his qualifications after learning of Alphonso's appraisal because he considered himself at least as qualified as Alphonso, with whom he was familiar, to do such an appraisal. He therefore ultimately agreed to accept the assignment. On or about April 13, 1992, Burns submitted his written report to Respondent. In the concluding paragraph of his report, Burns stated the following: It is my opinion that the ATRACK software uses the most modern tools and operating platform and the skills of programmers and designers are above- average, and that its modular design will give it an advantage in opening new markets. For this reason I have evaluated the software at $2.90 million in its current form. I am assuming that programmers associated with the software will bring their expertise and experience with the software. If a new programming staff is required, there will be substantial up-front learning curve costs. My estimate is based upon the information I could gather in a limited time-frame. The staff of First Miami Insurance was open to all my requests and no attempt was made to keep me from any data I required. Some supporting material is included. Valuation of First Miami's Home Office In January of 1989, First Miami's home office property was appraised by Appraisal and Real Estate Economics Associates, Inc., and given a market value of $1,600,000.00. Thereafter, the property was extensively renovated. Following the completion of these extensive renovations, a second appraisal of the property was done by Fred Carach. In his report, Carach opined that, as of October 29, 1989, the property had a market value of $2,700,000.00 In the IFO proceeding, the Department did not raise as an issue the value of the home office property. At no time did the Department voice any concerns regarding the appraisers that conducted these two appraisals for First Miami of its home office property. While they may not have shared their thoughts on the matter with First Miami representatives, Department officials did question whether First Miami was overstating the true value of its home office property. They therefore retained Charles Failla to provide them with an appraisal of the property. In his written report, Failla opined that, as of March 13, 1992, the date of the report, the property had a market value of $800,000.00. Valuation of South Florida Premium Finance Company Onyx Financial Group, Inc., (hereinafter referred to as "Onyx") is a company located in Miami, Florida, which South Florida Premium Finance Company retained to provide an appraisal of its market value in anticipation of making a public offering. (The public offering, however, was never made.) On or about December 11, 1991, Onyx provided such an appraisal. Onyx sent the appraisal to Respondent. First Miami used the appraisal to prepare financial statements that were later submitted to the Department. First Miami's Handling of Claims As noted above, at the time that Respondent was initially assigned to work for First Miami, the company was experiencing difficulty in timely paying claims and, as a result, was the subject of numerous consumer complaints made to the Department. In response to concerns expressed by the Department about these complaints, First Miami made improvements to its telephone and computer systems and hired additional claims adjustors as well as a new claims manager. It also, in large measure through the efforts of Respondent, developed and implemented a specific procedure to track and quickly respond to these complaints. Immediately after First Miami took these measures, there were fewer reported delays. As of May 13, 1991, the date the IFO was enjoined, the Department was satisfied with the remedial steps taken by First Miami and had "concluded that the consumer complaint problem [was] not related to any solvency problems." Statistics maintained by the Department's Division of Insurance Consumer Services, however, reveal that, for the entire calendar year of 1991 and for the first two months of 1992, the Department received a relatively large number of consumer complaints about First Miami, most of which related to alleged delays in paying claims. The numbers, by line of insurance, were as follows: 1991 Jan/Feb 1992 "P/P Auto No-Fault" 64 26 "Other P/P Auto Liab" 376 71 "P/P Auto Phys Damage" 317 86 The numbers for Allstate and State Farm Insurance Companies, which held much larger shares of the respective markets than did First Miami, in comparison, were as follows: Allstate 1991 Jan/Feb 1992 "P/P Auto No-Fault" 118 28 "Other P/P Auto Liab" 398 23 "P/P Auto Phys Damage" State Farm 154 19 1991 Jan/Feb 1992 "P/P Auto No-Fault" 133 23 "Other P/P Auto Liab" 267 42 "P/P Auto Phys Damage" 187 27 According to these statistics, however, First Miami did not have the highest "Complaint Index" (which is arrived at by dividing the insurer's 1991 complaint share by its 1990 market share) for all of the lines of insurance covered. As evidenced by the Department's statistics, "non-standard" insurers, like First Miami, tend to have a higher "Complaint Index" than other insurers. Following the hiring of its new claims manager, First Miami developed a written claims handling procedure, which provided, in part, as follows: Step 1. New claims are received via telephone, mailed or faxed to First Miami Insurance Company by the insured, claimant, attorneys or agent. Customer Service completes the automobile loss notice (ACCORD FORM), and verifies coverage. Step 2. Accord forms are given to the Data Entry Department to complete a new loss report form. Step 3. Claims manager or assistan[t] manager reviews accord form, assigns preliminary reserves and assigns claims to adjuster. The choice of adjuster to handle the claim will depend on the type and severity of the claim. The most qualified adjusters will handle the most serious claims. The initial reserves are as follows when the amount of loss cannot be reasonably estimated. PD, COLL 800 to 1,100 COMP 500 to 800 PIP 2,000 Ded 400 PIP full 1,000 BI-UM 1,000 Step 4. Data Entry Clerk sets up new loss [reserve] based on preliminary reviews. The adjuster must review the accuracy of the reserve or the files which are processed on diary. Adjustment, both upward and downward, must be made on all coverage where appropriate. The police report is requested and appraisal assignment is made. The file is returned to the cabinet to await 15 day diary cycle. File will be reviewed Bi-monthly by adjuster and manager/supervisor. SETTLEMENT OF CLAIM: The adjuster can settle claims up to $3,000. Anything over $3,000 requires the signature of the claims committee which meets once a week. After claim has been settled, the unit supervisor reviews claims file to verify coverage and liability. RELEASE OF PAYMENT: Proper release forms must be received before final payment/check is issued. Unit supervisor is allowed to release payments up to $2,000. If payment is from $2,000 to $3,000, it must be released by either the claims manager or his assistant. If over $3,000, payment must be released by Alex J. Campos, EVP. 21/ After payment is released, and outstanding reserves are closed out on the "Reserve History Sheet[,]" [t]his claims report is printed out on the "Daily Close Report" which indicates that the remaining reserves have been eliminated. . . . In addition, First Miami's adjusters were given written instructions they were expected to follow. Through these written instructions, the adjusters were advised of, among other things, the following: All of the adjuster's claims handling activities, should be directed towards achieving the major claims handling goals which are: Provide the best possible customer service. Comply with the insurance policy/contract and the law. Minimize our losses and expenses. In handling a claim, the adjuster not only deals with facts and figures, but also with people. Therefore, the adjuster is responsible for helping to build friendly and satisfactory relations with the insured-claimant and the public. The adjuster may be the only contact the insured-claimant has with the insurer, other than the sales agent. A person who receives prompt attention and fair treatment will want to continue his or her relationship with us. An insurer with a reputation for fast, fair claims service is likely to attract new policyholders. One of our primary goals is to comply with the insurance contract/policy[, a]s we have both a moral and legal obligation to assure the insured receives the protection purchased. This also includes complying with any applicable law. The adjuster is responsible for seeing that moral, legal, and contractual obligations are fulfilled. While we as an insurer are committed to fulfilling all our obligations, we are also committed to controlling and reducing our losses/expenses. This can be achieved by limiting our claims payments to only those legitimately established by contract and law. Thus, again, the adjuster is responsible for prompt and efficient processing of claims and claims data. As this last paragraph may suggest, First Miami, at the insistence of Saldise and Lopez, had a very "conservative" claims payment philosophy: to pay claims only after they had been thoroughly investigated and determined to be valid. Conducting such investigations necessarily delayed the processing of claims. 22/ The use of a claims committee to review claims was an essential component of First Miami's "conservative" approach to the payment of claims. First Miami's claims committee consisted of a core of three individuals: an attorney retained as a consultant by First Miami; the claims manager; and the assistant claims manager. The attorney on the claims committee was Carlos Lidsky. Lidsky has practiced personal injury and insurance law in the State of Florida for approximately the past 20 years. From time to time, Lidsky and his two colleagues on the claims committee would invite additional individuals, including Respondent, to sit on the committee for particular meetings and join in the discussions and deliberations. On those occasions that he sat on the claims committee and, as a member thereof, withheld approval of questionable claims, he reasonably believed that the committee's actions were in the best interest of First Miami's shareholders and policyholders. Assisting the claims committee in evaluating claims involving medical issues was a nurse and a physician that First Miami had hired for that purpose in an effort to combat fraudulent claims. The physician was a respected orthopedic specialist, who also was a minor shareholder of General Trust Mortgage Corporation, First Miami's parent corporation. Where the claims committee was presented with objective evidence of bodily injury, it invariably approved payment up to the policy limits. In those personal injury protection cases where there was no such evidence, however, the committee withheld its approval and contested the claim. In a significant number of personal injury protection cases, Lidsky advised First Miami to invoke the arbitration clause of the policy and First Miami followed his advice. This often led to a compromise and settlement of the claim. Where First Miami was presented with a subrogation claim and there was an indication that there may have been some comparative negligence, the matter was investigated before any payment was made. Lidsky had standing instructions to, on behalf of First Miami, negotiate in good faith all disputed subrogation claims, (including not only those filed against First Miami but those filed by First Miami as well) and enter into, what are referred to in the industry, as "bulk settlement" agreements. At one point in time during the latter stages of First Miami's existence, the aggregate amount of pending subrogation claims made against it by State Farm Insurance Company and Allstate Insurance Company and separate claims being handled by Bell Adjusting Company was $1,200,000.00. None of these claims were ever paid. 23/ First Miami, however, through Lidsky, who acted at the specific direction of Saldise and Lopez, did enter into "bulk settlement" negotiations with State Farm Insurance Company (whose pending subrogation claims against First Miami at the time amounted to approximately $492,000.00) in an effort to resolve these pending claims, as well as those unpaid subrogation claims First Miami had made against State Farm. 24/ These negotiations were not fruitful. They terminated without any agreement being reached. Lidsky believed that State Farm had not negotiated in good faith and so informed Respondent, who had not participated in the negotiations. Unable to reach a settlement with First Miami, State Farm resorted to litigation, suing the alleged tortfeasors. Other claims-related lawsuits were filed against First Miami policyholders. On occasion, First Miami was also sued. In some of these cases, the plaintiffs prevailed. Lidsky and First Miami's Claims Department were responsible for seeing to it that First Miami policyholders who were the subject of a lawsuit received the legal representation First Miami was obligated to provide. Respondent was not made aware of any case where First Miami refused to provide such representation. First Miami's Loss Reserves In his capacity as Executive Vice President of First Miami, Respondent did not himself establish the levels of the company's reserves. First Miami maintained two types of reserves: an individual case reserve regarding specific claims, and an IBNR ("Incurred But Not Reported") reserve. First Miami's Claims Department established claims reserves for individual cases. Two actuaries, one employed by First Miami, Jeff Cohn, and the other an independent contractor, James Stergiou, reviewed and certified the actuarial soundness of First Miami's IBNR reserve. Stergiou provided Respondent with written statements certifying the adequacy of First Miami's IBNR reserve for the years 1990 and 1991. In its communications with First Miami, the Department never raised any questions regarding Stergiou's qualifications to provide such certifications, and Respondent had no reason to believe that Stergiou was not so qualified. First Miami's Lawsuit Believing that the Department and Insurance Commissioner, in concert with the Latin-American Agents Association and the Specialty Agents Association, had acted in violation of civil rights and antitrust laws in its dealings with First Miami, Saldise and Lopez decided in December of 1991, or January of 1992, that First Miami should file a lawsuit against these parties to seek redress. Two attorneys, Sonny Meyers and Stephen Rubin, were retained to represent First Miami in connection with such contemplated legal action. Saldise requested Respondent, in preparation for a meeting with Meyers and Rubin, to review various matters pertinent to the lawsuit, including the chronology of events concerning the "no down payment" program about which the Latin-American Agents Association and the Specialty Agents Association had complained to the Department. The meeting was held on February 4, 1992. A court reporter was present at the meeting. Following the meeting, a transcript of the meeting was prepared. 25/ The lawsuit was ultimately filed in federal court in Miami. Disposition of Carrera Thereafter, as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the "no down payment" program that had generated so much controversy. Carrera was initially sold to Victor Madero, Diana Madero's husband, for between $900,000.00 and $1,000,000.00. At the time of the sale, Diana Madero had an insurance agency of her own and was not in any way connected with First Miami. The sale was negotiated by Lopez on behalf of First Miami. After Mr. Madero had made three or four payments, he decided that he did not want to remain in the insurance business. He made no further payments and First Miami "took back" Carrera from him. Thereafter, First Miami sold Carrera to Lewis Sands for approximately the same price Madero had paid. Payments were to be made over a 12 year period and interest was charged. Sands made payments of approximately $66,000.00 before defaulting. As a result of the default, First Miami again took possession of Carrera. It subsequently sold Carrera to Frank Davila for approximately the same price Madero and Sands had paid. Payments were to be made for a period of less than 12 years and interest was charged. Following the sale to Davila, which, like the sale to Sands, was negotiated by Respondent 26/ and another First Miami Vice President, Sergio Fonte, First Miami had no ownership interest or involvement in the operation of Carrera. Carrera was administratively dissolved on August 13, 1993. Financial Statements Raimundo Aleman, First Miami's Chief Financial Officer, reported to Respondent during the time Respondent was the company's Executive Vice President. As noted above, Aleman was responsible for formulating and placing the entries on the Quarterly and Annual Statements First Miami submitted to the Department. He was designated on the statements as First Miami's "contact person." As a general rule, before the statements were sent to the Department, Respondent reviewed Aleman's work product to determine if there were any obvious omissions or mistakes. With respect to the Quarterly Statement as of March 31, 1992, however, Respondent only reviewed the footnotes. All of First Miami's Quarterly and Annual Statements contained a sworn attestation, signed by certain of its officers, certifying that the information contained therein was complete and accurate "according to the best of their information, knowledge and belief." Respondent signed this attestation as Treasurer on the 1989 Annual Statement, the Quarterly Statement as of March 31, 1990, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990. He signed none of the other financial statements that First Miami submitted to the Department, with the exception of the Quarterly Statement as of September 30, 1991, which he executed on behalf of Saldise. These other financial statements that First Miami submitted to the Department, but which Respondent did not sign, were: the 1990 Annual Statement; the Quarterly Statement as of March 31, 1991; the Quarterly Statement as of June 30, 1991; the 1991 Annual Statement; and the Quarterly Statement as of March 31, 1992. Respondent was listed as a Vice President and Director on these statements, all of which were signed by Aleman in his capacity as Treasurer. Respondent was not aware, nor did he have any compelling reason to believe, that any of the financial statements that First Miami submitted to the Department during the time he was its Executive Vice President contained misleading or inaccurate information concerning First Miami's financial condition or any other matter of significance to the Department. There was no intent on Respondent's part to deceive the Department. In discharging his duties as First Miami's Executive Vice President, including those duties related to the preparation and filing of the financial statements the company submitted to the Department, Respondent reasonably relied upon the advice and opinions of attorneys, accountants, appraisers, actuaries and other professionals concerning matters which, by all appearances, were within the scope of these professionals' expertise. For instance, he reasonably relied upon the professional opinions that had been rendered regarding the admissibility and valuation First Miami's assets and the adequacy of the company's loss reserves. His views concerning the financial condition and solvency of First Miami, understandably, were shaped by these opinions. The On-site Review and Respondent's Deposition After First Miami filed its 1991 Annual Statement on or about March 15, 1992, the Department conducted an on-site review at First Miami's offices. Respondent served as First Miami's primary spokesperson during the review, answering questions posed by the Department's representatives concerning, among other things, the 1991 Annual Statement that First Miami had filed. In doing so, Respondent expressed the view that the transactions reflected in footnote 18 were "bona fide . . . with economic substance behind them" and that First Miami was not insolvent, which is what he reasonably believed. Subsequently, various First Miami officials were subpoenaed and deposed by the Department. Respondent was among those deposed. First Miami had designated Respondent as its representative for purposes of responding to a subpoena with which it had been served by the Department. Although Aleman was more knowledgeable than Respondent about the financial affairs of First Miami and the contents of its 1991 Annual Statement, he was not so designated because of his difficulty in orally communicating in the English language. Aleman, though, did retrieve documents for Respondent's use at the deposition. Prior to the deposition, Respondent consulted with Lopez and First Miami's attorneys with respect to the company's position concerning the admissibility of assets. During his deposition, in responding to questions, Respondent relied upon the documents he had been given by Aleman, as well as the notes he had taken during his pre-deposition meeting with Lopez and the other attorneys. Conservatorship and Liquidation of First Miami On or about May 14, 1992, First Miami filed its Quarterly Statement as of March 31, 1992, with the Department. Certain assets which appeared on the 1991 Annual Statement were not included in this Quarterly Statement. Saldise had directed Aleman to delete these assets in response to the concerns the Department had expressed regarding their inclusion in the 1991 Annual Statement. After the filing of this Quarterly Statement, the Department instituted conservatorship and liquidation proceedings in Leon County Circuit Court and, in conjunction therewith, sent personnel to First Miami's offices. During the conservatorship, which commenced on May 29, 1992, Respondent, who had been cooperative in his prior dealings with the Department, remained on the payroll of the company. He prepared computer programs to assist in the calculation of commission payments. In addition, he provided to Department personnel on the premises valuable information concerning the operations of First Miami, including its computer system. An unopposed order liquidating First Miami and appointing the Department Receiver was entered on June 5, 1992. Among the findings set forth in the order was that First Miami was "insolvent as defined in section 631.011(11), Florida Statutes (1991)." Among the directives set forth in the order was the following: All affiliated companies including, but not limited to General Trust Mortgage Corporation, Liborio Financial Group, Inc., First Miami Holding Corporation, South Florida Premium Finance Company, Procesys, Inc., Investors Arts & Antiques, Warwick Properties Inc., Carrera Insurance Underwriters, Inc., Camino Insurance Underwriters, Inc., and Warwick Re are hereby directed to make their books and records available to the Receiver . . . . The order further provided that "[a]ll officers, directors, agents and employees and all other persons representing [First Miami] or currently employed by [First Miami] in connection with the conduct of its business are discharged forthwith." The Department determined that, at the time of liquidation, First Miami had admitted assets totalling $4,203,356.00, which fell into the following categories: Mortgage loans on real estate: First liens $1,465,889.00 Real estate: Properties occupied by $800,000.00 27/ the company Cash on hand and on deposit: Cash on deposit $1,247,553.00 Short term investments $594,672.00 28/ Electronic data processing equipment $95,242.00 On its last financial statement, the Quarterly Statement as of March 31, 1992, First Miami had listed a total of $27,340,837.00 of admitted assets. The difference between the Department's June 5, 1992, total and First Miami's March 23, 1992, total was, in large measure, the product of the Department's disagreement with First Miami and with the professionals upon which First Miami relied 29/ as to the admissibility and valuation of certain of First Miami's assets. Post-Liquidation Activities Following the entry of the order of liquidation, Respondent was retained for a period of two or three weeks to continue to assist the Department/Receiver, as well as the Florida Insurance Guaranty Association, which had taken over the responsibility of processing and paying claims made against First Miami. No other First Miami officer or director was similarly retained. 30/ Saldise and Lopez left Miami for Madrid, Spain, a day or two after the entry of the liquidation order. First Miami had almost 600 claims-related cases in litigation at the time of liquidation. Lidsky's office handed the files in these cases over to the Florida Insurance Guaranty Association at the Department's request. As of January 31, 1994, for both loss claims and expenses, the Florida Insurance Guaranty Association had paid $12,397,234.35 on behalf of First Miami. As of March 7, 1994, it had reserved $1,638,369.14 to pay additional loss claims on First Miami's behalf. Respondent's Present Employment Situation Respondent is currently the President (but not a director) of Perry & Company, a premium finance company authorized by the Department to do business in the State of Florida. Perry & Company's Chairman of the Board is Richard Perry. Perry has known Respondent for approximately four or five years. He first became acquainted with Respondent when Respondent was employed by First Miami. At the time, Perry & Company was one of the companies that financed premium payments on insurance policies issued by First Miami. Perry was very much impressed with the operational efficiency of First Miami. On behalf of Perry & Company, he extended Respondent an offer of employment, at a higher salary than Respondent was receiving from First Miami. Respondent declined this initial offer of employment. Perry renewed the offer after he learned that First Miami had been liquidated and placed in receivership. Before he did so, though, he asked Harry Landrum, a Tallahassee consultant and lobbyist, to check with his sources at the Department to find out if, given Respondent's previous association with First Miami, Perry & Company's relationship with the Department would suffer if the company hired Respondent. Landrum reported back to Perry that his sources had only kind words to say about Respondent. Having received this favorable report about Respondent, Perry felt comfortable renewing his offer of employment to Respondent. This time Respondent accepted Perry's offer. Respondent began his employment with Perry & Company in July of !992, when he assumed the position of Executive Vice President. His primary responsibility as Executive Vice President was in the area of data processing. In December of 1992, Respondent became Perry & Company's President, the position he holds today. As President of Perry & Company, Respondent is responsible for virtually all of the company's day-to-day operations. To date, he has successfully discharged these duties. During his affiliation with Perry & Company, Respondent has not engaged in any conduct that has jeopardized the financial soundness of the company. He has not caused, nor is it likely, based upon his past performance with Perry & Company and as Executive Vice President of First Miami, that he will cause, Perry & Company or those with whom the company does business to suffer any unwarranted loss or damage.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994. STUART M. LERNER 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 18th day of October, 1994.
The Issue Whether Respondent discriminated against Petitioner on the basis of his age and handicap in violation of the Florida Human Rights Act of 1977 and the Florida Civil Rights Act of 1992, Chapter 760, Florida Statutes.
Findings Of Fact Petitioner, Harold Asher (Asher), was born on January 13, 1929, and as of April 1, 1992, he was 63 years old. Respondent, Barnett Banks, Inc. (BBI), is a holding company that owns and controls numerous banks in Florida and Georgia. The banks in Florida owned by BBI are located in three geographical regions: the north region, the central region, and the south region. In the south region there are nine banks: Barnett Bank of Key West, Barnett Bank of South Florida (Miami), Barnett Bank of Broward (Fort Lauderdale), Barnett Bank of Palm Beach County, Barnett Bank of Martin County, Barnett Bank of Treasure Coast, Barnett Bank of Lake Okeechobee, Barnett Bank of Naples, and Barnett Bank of Lee County (Fort Myers). Each bank has branches. Barnett Banks, Inc. is an employer subject to Section 760.10, Florida Statutes. Harold Asher was hired by Barnett Bank of Palm Beach County in 1983, at the age of 54 as a loan review officer and was later promoted to Vice President/Loan Review. His job responsibility was to review loans which had been granted by Barnett Bank of Palm Beach County. A loan review is an evaluation of the portfolio after a loan is made to insure that the loan was properly approved, that the analysis done to support the sources of repayment was adequate, that the loan is collectible, that the risk factors associated with the loan is in line with policy and regulatory standards, and that the loan is properly underwritten. The loan review is memorialized on a line or summary sheet. While employed by Barnett Bank of Palm Beach County, Asher had several supervisors, including Ken Parrish, Art Kite, James Kammert, Noel Coan, and Martin Streischek. Barnett Bank of Palm Beach County used a rating system of one to five in evaluating its employees, which equated as follows: 1.0 to 1.49 means fails to meet minimum position accountabilities; 1.5 to 2.49 means with few exceptions, meets position accountabilities; 2.5 to 3.49 means meets position accountabilities; 3.5 to 4.49 means exceeds position accountabilities; and 4.5 to 5.0 means significantly exceeds position accountabilities. In March, 1988, James Kammert rated Asher's performance as 3.0. On January 1, 1989, Art Kite rated Asher's performance for 1988 as 3.70. In June, 1989, Art Kite rated Asher as meeting or exceeding in the key result areas (KRAs) of Asher's position. On January 1, 1990, Art Kite performed an evaluation of Asher's performance for 1989 and rated him 3.45. On January 18, 1991, Neal Coan rated Asher's performance for 1990 as 3.0. While working for Barnett Bank of Palm Beach County, Asher was never disciplined. Prior to 1991, BBI and its banks had a dual system for loan reviews. Some of the banks such as Barnett Bank of Palm Beach County, had set up loan review sections which operated at the bank level only. The staff of these sections would report directly to the bank. BBI had a loan review section for each of its regions. The BBI regional loan review sections would review loans in each of the banks located in that particular region. In January, 1991 a decision was made by BBI to consolidate the loan reviews at the holding company level. On-site teams were established in Miami, Fort Lauderdale, and Palm Beach. A travel team reviewed loans at all the banks including the banks which had on-site teams. As a result of the consolidation, the local banks eliminated their loan review departments and the staff comprising those particular departments were terminated from their positions. At the time of the decision to consolidate, Barnett Bank of Palm Beach County's loan review section consisted of one secretary and three loan officers, one of whom was Asher. The three loan officers interviewed for positions with BBI. Asher and Steven Clapp were hired by BBI. Asher was 61 years of age when he was hired by BBI on January 1, 1991, as the on-site manager for Credit Quality Review at the Barnett Bank of Palm Beach County. His office was located on Datura Street in West Palm Beach. Part of Asher's duties included supervising Mr. Clapp. The BBI on-site manager for Credit Quality Review at Barnett Bank of South Florida (Miami) was Barry Goldberg, who was born on September 24, 1962. The BBI on-site manager for Credit Quality Review at the Barnett Bank of Broward County was Mark Tavoletti, who was born on December 19, 1961. Although the same methods were used to review loans for BBI as were used to review loans for Barnett Bank of Palm Beach County, there were some changes. Computers were used more at BBI. Instead of traveling to the 45 branches of Barnett Bank of Palm Beach to review loans, Asher received the files through the interoffice mail. BBI loan reviews focused more on a loan instead of the work of the loan officer. Monthly reports were required by BBI. BBI report formats differed from those of Barnett Bank of Palm Beach County. Asher no longer selected the loans to be reviewed. BBI selected the loans using specific criteria established by BBI. Asher reported to Scott Bechtle. While working with Mr. Bechtle, Asher did not receive any criticism or disciplinary action. In July, 1991, Edward Angulo (Angulo) took over Mr. Bechtle's position as the Regional Credit Review Director for the south region. Asher, Mr. Goldberg, and Mr. Tavoletti began reporting to Angulo. Angulo's primary duty was to review the line sheets that were generated by the on-site groups and the travel team. From July, 1991 to the end of December, 1991, Angulo met with Asher approximately three to five times and talked with Asher numerous times on the telephone. Angulo reviewed all the line sheets that were generated by Asher and Clapp during that six-month period. In reviewing the work done by the Palm Beach on-site group, Angulo noted that generally the line sheets did not have sufficient quantifiable information, did not contain information supported by an independent evaluation, and contained deficiencies regarding underwriting. He would make comments concerning these problems and call Asher to discuss them. Some times Asher would not provide additional information requested by Angulo or would provide it in an unsatisfactory manner. During the last six months in 1991, Angulo spent more time in connection with the Palm Beach loan reviews than he did with the other loan review teams because of the problems the Palm Beach team was having. Angulo sat in with Asher during an exit meeting with bank management wherein Asher appeared indecisive and unprepared, forcing Angulo to take over and conduct the meeting in its entirety. Angulo completed a performance evaluation on Asher for the period 1/91 to 12/91. Asher was evaluated on nine KRAs: 1) supervise staff, 2) analyze specific loans, 3) determine quality of credit analyses, 4) evaluate underwriting standards, 5) insure accuracy of CSS, 6) evaluate overall credit administration, 7) evaluate loan approval process, 8) prepare reports and exit meetings, and 9) train junior officers. Each KRA was weighted and rated on a scale of one to five, with one being the lowest rating and five being the highest. For KRAs 1, 5, and 9, Asher was rated as 3, which meant that his performance met expectations. For KRAs 2, 3, 7, and 8, Asher received a rating of 2, which stood for approaches expectations. In the KRA concerning evaluating underwriting standards, Asher received a rating of 1, which meant that Asher's performance failed to meet expectations. Angulo noted on the evaluation that Asher needed to improve his performance in the following areas: technical/analytical, independent/inquisitive attitudes, and judgement/decisiveness. Asher's total weighted rating was 2.25, which equates to an overall rating of 2. At the time of the evaluation, Asher and Angulo understood that Asher's position was a Review Officer III. Asher had been performing the work of a Review Officer III. Accordingly, Angulo evaluated his work using the standards for Review Officer III, and evaluated the work actually performed by Asher. However, at the hearing it was revealed that Asher had been a Review Officer II at the time of his employment with BBI and held that position until his termination. On or about April 1, 1992, Angulo met with Asher and discussed Asher's performance since January, 1992. Angulo cited a problem that had occurred concerning a review of Southside Investors which had been done by Asher's subordinate, Steven Clapp. Angulo had discussed with Asher several inconsistencies or omissions in the report relating to potential underwriting problems and asked Asher to have the deficiencies cleared up. As of April 1, 1992, the deficiencies had not been resolved. Angulo also discussed with Asher problems dealing with the adequacy of supervision of report preparation and the conduct of exit meetings with bank management. Deficiencies in these areas had been pointed out in Asher's 1991 annual performance evaluation. Since that evaluation, a monthly report by Steven Clapp had to be amended because of his erroneous conclusion that the bank's overall underwriting and lending practices were inadequate. The incorrect finding was not corrected until a draft of the report was reviewed by the regional office. As the on-site manager, Asher should have reviewed Mr. Clapp's report and caught the error before it was sent to the regional office. Angulo also pointed out to Asher that his performance at exit meetings with bank management still lacked decisiveness, resulting in the need for frequent changes in reports. As a result of the continued deficiencies in Asher's performance since his 1991 performance evaluation, Angulo felt that Asher needed technical training, improvement in supervisory skills, and familiarization with BBI policies and procedures. To assist Asher in reaching an acceptable level of performance, Asher was moved from his on-site manager position to Barnett Banks, Inc.'s Credit Review Office travel team on or about April 1, 1992. There was no decrease in salary, benefits, or pay grade. Additionally, Asher was placed on a 90-day probationary period. In mid-April, 1992, Asher wrote Ken Veniard, a Senior Vice President, stating that he disagreed with Angulo's evaluation and felt that the negative comments were "based on factors totally unrelated to performance, such as age, personality, or simply the lack of complete information." Asher requested to be considered for a transfer. Veniard received the memorandum on April 29, 1992. On or about April 1, 1992, Jack Shoben, a credit review officer with BBI since 1989, was moved into the position of on-site manager for Credit Quality Review at the Barnett Bank of Palm Beach County at the Datura Street location. Jack Shoben was born on October 1, 1947, and as of April 1, 1992, he was 44 years old. Angulo chose Shoben as the on-site manager because of Mr. Shoben's qualifications and experience. After Mr. Shoben became on-site manager, the work product from the on-site team at Barnett Bank of Palm Beach County began to improve; thus Angulo did not have to spend as much time on the Palm Beach site as he had when Asher was on-site manager. William Westland, who was born on October 26, 1927, was Asher's supervisor on the travel team. During Asher's first two weeks on the travel team, he worked in Broward County. His performance was satisfactory. The third week on the travel team was spent in Miami, where Asher was required to review real estate loans. Mr. Westland noted that Asher needed some training in the real estate loan area. On May 10, 1992, shortly after Asher returned from Miami, he suffered a brain seizure and was hospitalized for two days. Six weeks after his seizure, Asher returned to work. As a result of Asher's seizure, his doctors prohibited Asher from driving for at least six months and possibly longer and required his work-related travel to be kept to an absolute minimum, which included avoiding long travel trips of any type. An essential requirement for the position that Asher held on the travel team was that he be able to travel to the different banks in the south region to conduct loan reviews. Asher was aware that extensive travel was a requirement of his job and so advised his doctor by letter dated July 3, 1992. When Asher returned to work, he was temporarily placed on the on-site review team at Palm Beach under the supervision of Jack Shoben. Steven Clapp who had been at Palm Beach on the on-site review team was transferred to the travel team. Asher's probationary period was extended to August 7, 1992. The temporary placement was to accommodate Asher's non-travel status until December 31, 1992, and after such time Asher's continued employment was contingent upon his satisfactory completion of the probationary period and his ability to meet the requirements of all credit review officers of his level, which included travel. During June 1992 until Mr. Asher's termination, Jeff Asher, his son, often drove Asher to Barnett Bank's offices on Datura Street in West Palm Beach. He also drove him home from that location during the same time. Jeff Asher also drove Asher to and from branch locations within Palm Beach County during the same period. A memorandum dated July 28, 1992, was sent from Ken Veniard, Angulo's supervisor, to BBI Credit Quality Staff, stating that although BBI was committed to maintain the on-site loan review teams, that all on-site staff would be required to travel and assist the travel team as necessary. On August 7, 1992, Asher's probationary period lapsed. There was no evaluation of Asher's performance at that time. In August, 1992, Steven Clapp was transferred to the BBI office in Jacksonville to fill a position for which he had posted. The position on the travel team that Mr. Clapp had filled in Asher's absence was held open for Asher in the event that his travel restrictions would be lifted in January, 1993, thereby enabling him to return to his position on the travel. In November, 1992, Asher, Sarah Ketchum, Jack Shoben, and Angulo participated in a teleconference, at which time Angulo advised Asher that if Asher's doctor did not approve a full time travel schedule in January, 1993, Asher's employment with BBI would be terminated effective as of December 31, 1992. On December 28, 1992, Asher visited his doctor, who continued the travel restrictions. On December 30, 1992, Asher, Jack Shoben, Joan Slaughenhaupt, and Angulo participated in a teleconference. Asher stated that his travel restrictions had not changed. Angulo advised Asher that his employment would be terminated effective December 31 due to his inability to travel. Mr. Asher's employment ended on December 31, 1992. On January 1, 1992, the on-site teams in Miami and Fort Lauderdale were each reduced from three to two on-site personnel. The Palm Beach on-site team was reduced to one one-site person, Jack Shoben, who was the only loan review officer there from January 1, 1993 to December 31, 1993. In January, 1994, all on-site positions were eliminated. Mr. Asher's salary at the time of his termination was $47,339.96 annually. In the spring of 1993, Asher and his wife went to Huntsville, Alabama, traveling by automobile two days each way. In June, 1993, all Asher's travel restrictions were lifted. Prior to his driving restrictions being lifted, Asher began driving short distances in his neighborhood. In January, 1994, BBI made an offer of reinstatement to Asher, whereby he would have been reinstated as a Credit Review Officer II on the regional travel team with the same salary, same seniority, and same salary grade level as when he was terminated on December 31, 1992. In addition, a procedure was implemented whereby Asher could report directly to Janice Gurny, Director of Human Resources for BBI in the Jacksonville office, any complaints regarding harassment on the part of his supervisors. Asher received the offer but did not contact anyone at BBI regarding the offer of reinstatement. Asher did not take the offer because it was a Credit Review Officer II position (he was under the impression he was a Credit Review Officer III at the time of his termination); he felt the environment was hostile; and he had his house on the market to sell.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations enter a Final Order denying the Petition for Relief. DONE AND ENTERED this 8th day of June, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 8th day of June, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-5815 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact Paragraph 1: Accepted in substance. Paragraph 2: Accepted. Paragraphs 3: The first sentence is accepted in substance. The second sentence is rejected as constituting argument. The third sentence is accepted to the extent that Petitioner received two letters which advised him of his increase in salary and thanked him for his hard work and professionalism and advised him that the bank was glad that he was on the team. Paragraph 4: Accepted in substance. Paragraph 5: The first three sentences are accepted in substance. The last sentence is accepted to the extent that the methods to review loans were basically the same but rejected to the extent that the only changes were in the format of the loan review reporting process. Paragraphs 6-7: Accepted in substance. Paragraph 8: The third, fourth, and fifth sentences are rejected as constituting argument. The remainder of the paragraph is accepted in substance. Paragraph 9: Rejected as subordinate to the facts actually found. Paragraphs 10-11: Accepted in substance. Paragraph 12: The last sentence is rejected to the extent that it implies that Asher was rated on work for which he was not performing. He was doing the job of a level III but his personnel file reflected that he officially was placed in a level II position. The remainder of the paragraph is accepted in substance. Paragraph 13: Rejected as constituting argument. Paragraphs 14-16: Accepted in substance. Paragraph 17: The first sentence is rejected as recitation of testimony. The remainder of the paragraph is rejected as constituting argument. Paragraph 18: The first, second, sixth, and tenth sentences are rejected as not supported by the greater weight of the evidence. The third, fourth, fifth, eighth and ninth sentences are accepted in substance except as to the reference to the placement on the travel team as a demotion. The seventh sentence is rejected as unnecessary. Paragraph 19: The first sentence is rejected as not supported by the greater weight of the evidence. The second sentence is accepted. The last sentence is rejected as recitation of testimony. Paragraphs 20-23: Rejected as recitation of testimony and constituting argument. Paragraph 24: Rejected as constituting argument. Paragraph 25: The first, second, third, and fourth sentences are accepted in substance. The fifth, sixth, and seventh sentences are rejected as not supported by the greater weight of the evidence. The eight sentence is rejected as constituting argument. The ninth sentence is rejected as not supported by the greater weight of the evidence in that the charge against Asher was his failure to catch Mr. Clapp's errors before the report left the Palm Beach office. The last sentence is rejected as irrelevant. Paragraph 26: The first sentence is rejected as subordinate to the facts actually found. The second sentence is rejected as not supported by any evidence. The remainder of the paragraph is accepted in substance. Paragraph 27: Accepted in substance. Paragraph 28: The first, third, and fourth sentences are accepted in substance. The second and fifth sentences are rejected as subordinate to the facts actually found. Paragraph 29: The first sentence is accepted. The remainder of the paragraph is rejected as subordinate to the facts actually found. Paragraph 30: The first sentence is accepted in substance. The remainder of the paragraph is rejected as subordinate to the facts actually found. Paragraph 31: Rejected as mere recitation of testimony. Paragraph 32: Rejected as mere recitation of testimony. Paragraph 33: Rejected as subordinate to the facts actually found. Paragraph 34: Accepted in substance. Paragraph 35: Rejected as subordinate to the facts actually found. Paragraph 36: The first and second sentences are accepted in substance. The remainder of the paragraph is rejected as subordinate to the facts actually found. Paragraph 37: Rejected as constituting argument. Paragraph 38: Rejected as subordinate to the facts actually found. Paragraph 39: Rejected as constituting argument. Paragraph 40: Rejected as subordinate to the facts actually found. Paragraph 41: Accepted. Paragraphs 42: Rejected as subordinate to the facts actually found. Paragraph 43: The first sentence is rejected as not supported by the greater weight of the evidence as it applies to the time period from June, 1992 to June, 1993. The second sentence is accepted. The remainder of the paragraph is accepted in substance. Paragraph 44: Rejected as subordinate to the facts actually found. Respondent's Proposed Findings of Fact Paragraph 1: Accepted. Paragraphs 2-13: Accepted in substance. Paragraph 13: Accepted in substance. Paragraph 14: The first sentence is rejected as constituting argument. The remainder of the paragraph is accepted in substance. Paragraph 15: Accepted in substance. Paragraph 16: The first two sentences are accepted in substance. The remainder of the paragraph is rejected as constituting argument. Paragraphs 17-18: Accepted in substance. Paragraph 19: The first sentence is accepted. The remainder of the paragraph is accepted in substance. Paragraph 20: The first sentence is accepted. The remainder of the paragraph is rejected as unnecessary. Paragraphs 21: The sixth sentence is rejected as constituting argument. The remainder of the paragraph is accepted in substance. Paragraphs 22-24: Accepted in substance. Paragraph 25: The first sentence is accepted in substance. The third sentence is rejected as not supported by the greater weight of the evidence. The remainder of the paragraph is rejected as subordinate to the facts actually found. Paragraphs 26-27: Accepted in substance. Paragraph 28: The first sentence is accepted in substance. The remainder of the sentence is rejected as subordinate to the facts actually found. Paragraph 29: Accepted in substance. Paragraphs 30-34: Rejected as subordinate to the facts actually found. Paragraph 35-39: Accepted in substance. COPIES FURNISHED: James E. Moye, Esquire Patrick J. Kennedy, Esquire 201 East Pine Street, Suite 710 Orlando, Florida 32801 Richard Tannenbaum, Esquire Shea & Tannenbaum 204 Brazilian Avenue, Suite 210 Palm Beach, Florida 33480 Sharon Moultry, Clerk Commission on Human Relations 325 John Knox Road, Building F, Suite 240 Tallahassee, Florida 32303-4149 Dana Baird General Counsel Commission on Human Relations 325 John Knox Road, Building F, Suite 240 Tallahassee, Florida 32303-4149
The Issue The issue in the case is whether the allegations of the Administrative Complaint are correct and, if so, what penalty should be imposed.
Findings Of Fact At all times material to this case, Frederick L. Roberts (Respondent) was a licensed Florida mortgage broker, holding license number MB 316324569. In November 1993, a friend of the Respondent, Alan Petzold, introduced Tami Aaronson to him. Ms. Aaronson owned property in Maryland and was interested in securing a mortgage on the Maryland property to provide funding for a Florida home for herself and her son, Jarrett. According to Ms. Aaronson, Mr. Petzold is the father of a minor son, Jarrett Aaronson. The Respondent believed that such was the case at the time he met the family. The Respondent met several times with Ms. Aaronson. The Respondent gave a “Flagship Mortgage Company” business car to Ms. Aaronson. The business card had the Respondent’s name printed on it. The Respondent had been briefly employed by Flagship Mortgage Company, but apparently was not so employed at the time he met Ms. Aaronson. Frederick L. Roberts (Respondent) received check number 0170, dated November 22, 1993, from Tami Aaronson as “Custodian for Jarrett Aaronson” in the amount of three thousand dollars. The notation on the check states that it is for “refinancing.” Ms. Aaronson believed the check was payment for services the Respondent would render in obtaining refinancing of the Maryland property. There was no written agreement between the Respondent and Ms. Aaronson, or between the Respondent and Mr. Petzold. The Respondent completed no written documentation related to the Aaronson transaction. The Respondent did not place the Aaronson deposit into a segregated escrow account. The Respondent did not record the Aaronson deposit into an escrow transaction journal. During the period he held the Aaronson funds, the Respondent worked on unrelated business, and traveled to China for about thirty days. The Respondent performed no work on behalf of Ms. Aaronson, Mr. Petzold, or Jarrett Aaronson. There is no evidence that the Respondent intended to perform any work on behalf of Aaronson/Petzold. The Respondent asserted that he asked for a three thousand dollar “deposit” as a means of discouraging the couple from asking for his assistance. The assertion is not credible. The Respondent asserts that the three thousand dollars he received from Ms. Aaronson was a deposit against travel expenses he would incur during his examination of the property in Maryland. The assertion is not supported by credible evidence. In the spring of 1994, the Respondent received a telephone call from Ms. Aaronson. The Respondent asserts that he believed Ms. Aaronson to have called him from a mental hospital. For whatever reason, at that time he determined that he no longer wanted to be involved in the Aaronson/Petzold situation. Shortly after receiving the Aaronson phone call in spring 1994, the Respondent also received a call from a Department of Banking and Finance investigator, apparently looking into a complaint received from Ms. Aaronson. The Respondent thereafter contacted Mr. Petzold and made arrangements to return the funds to him. According to a notarized statement dated May 9, 1994, the Respondent returned the three thousand dollars to Jarrett R. Aaronson and Alan C. Petzold. The Respondent testified that the money had been returned on May 8, 1994 to Mr. Petzold. The Respondent offered into evidence a document dated May 8, 1994, purporting to be a receipt received from Mr. Petzold for return of the funds. The signature is not notarized. The Respondent did not return the Aaronson deposit to Tami Aaronson. There is no evidence that Ms. Aaronson authorized the return of the three thousand dollars to Mr. Petzold. There is no evidence that Ms. Aaronson authorized the return of funds to Jarrett. Ms. Aaronson has not received any part of the three thousand dollars allegedly refunded. There is no evidence that the funds have been redeposited into the minor child’s custodial account. The Respondent asserts that he was not acting as a mortgage broker and was merely investigating the property to determine whether the Aaronson property could be used as a source of funds for the purchase of Florida property. The Respondent asserts that had a refinancing situation arisen, he would have referred Ms. Aaronson to another licensed person who would assist in the actual refinancing. The assertion is not supported by credible evidence. The Respondent asserts that in the spring of 1994 he had reason to believe that Ms. Aaronson had been hospitalized in a mental facility, and therefore he returned the funds to Mr. Petzold. The rationale for the failure to return the funds to the appropriate party is not persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order suspending the mortgage broker license held by Frederick L. Roberts until the following conditions are met: Payment to Tami Aaronson of $3,000 plus appropriate interest calculated from November 22, 1993. Payment of an administrative fine in the amount of $5,000. After compliance with the above conditions, the license suspension shall be lifted, and a two-year probationary period shall begin RECOMMENDED this 22nd day of October, 1997, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 22nd day of October, 1997. COPIES FURNISHED: Clyde C. Caillouet, Esquire Department of Banking and Finance 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 Michael W. Carlson, Esquire Carlton Fields Ward Emmanuel Smith & Cutler, P.A. 215 South Monroe Street, Suite 500 Tallahassee, Florida 32301 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Hon. Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
Findings Of Fact The Applicant and the Department submitted Proposed Findings of Fact pursuant to Rule 3C-9.11, Florida Administrative Code. The Applicant's Proposed Findings are accepted except where they might specifically conflict with the Findings of the Hearing Officer's Report or where they may constitute conclusions of law.
The Issue The purpose of the public hearing was to review the application to consolidate New River Bank, Oakland Park, Florida, and 1st United Bank, Boca Raton, Florida, in accordance with Florida law.
Findings Of Fact 1st United Bancorp (Bancorp) is a Florida bank holding company which maintains its principal place of business at 980 North Federal Highway, Boca Raton, Florida. 1st United is a Florida chartered bank and is a wholly-owned subsidiary of Bancorp and operates full service banking facilities at seven locations in Palm Beach and Martin Counties. New River is a Florida chartered bank which maintains its executive offices at 2901 West Oakland Park Boulevard, Oakland Park, Florida, and operates two banking facilities in Broward County, Florida. The Department is the duly designated state agency vested with the responsibility of processing and approving or disapproving a plan of any financial entity to acquire the assets and assume the liabilities of another financial entity pursuant to Section 655.414, Florida Statutes. On July 13, 1993, Bancorp and New River entered into a Sale and Purchase Agreement which provides that Bancorp will cause 1st United to purchase substantially all of the assets and to assume substantially all of the liabilities of New River, after which New River will be liquidated and dissolved. The agreement noted above was duly adopted by majority vote of the respective Boards of Directors of Bancorp, 1st United and New River. In addition, the respective Boards of Directors of Bancorp, 1st United and New River duly adopted by majority vote a Plan of Acquisition of Assets and Assumption of Liabilities which summarized pertinent portions of the agreement and which includes all of the terms and conditions required by Section 655.414 (1), Florida Statutes. On September 7, 1993, 1st United and New River submitted an application to the Department seeking the Department's approval for the purchase of New River's assets and assumption of its liabilities as set forth in the agreement and as summarized by the plan. Submitted with the application were the requisite filing fee and all of the required documents including copies of the agreement, the plan and certified copies of the authorizing resolutions of the respective boards of directors. On September 17, 1993, the Department caused notice of the receipt of the application to be published in the Florida Administrative Weekly. This published notice met the requirements of Rule 3C-9.003(1), Florida Administrative Code. On September 7, 1993, Warren Orlando, in his capacity as president of 1st United, filed a petition for public hearing and notice of intention to appear on behalf of 1st United. On October 27, 1993, the Department referred the matter to the Division of Administrative Hearings for the purpose of conducting a public hearing pursuant to Section 120.60(5), Florida Statutes, and Rule 3C-9.004, Florida Administrative Code. Notice that a public hearing would be held on the application on December 13, 1993, was duly published in conformity with Rule 3C-9.005, Florida Administrative Code, in the Fort Lauderdale Sun-Sentinel, Palm Beach Post, and Stuart News, newspapers of general circulation in the communities in which 1st United and New River do business. The agreement provides that New River will receive a combination of cash and Bancorp common stock equal to the net asset value, as defined in the plan, of the assets and liabilities of New River being purchased or assumed. The agreement further provides that after the closing of the asset acquisition, New River shall cease operations and commence dissolution and liquidation proceedings. Substantially all of the Bancorp common stock and available cash received by New River from Bancorp will be distributed to New River shareholders, other than dissenting shareholders. New River stockholders will receive a pro rata portion of the Bancorp common stock and cash available for distribution. After the acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, 1st United will have adequate capital structure in relation to its activities and its deposit liabilities. The acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, if consummated, are not contrary to the public interest. The respective boards of directors of Bancorp and New River requested the opinion of Alex Sheshunoff & Co. Investment Banking with regard to the fairness to the respective shareholders of each corporation, from a financial point of view, of the terms and conditions of the agreement. Alex Sheshunoff & Co. Investment Banking is regularly engaged in and is an expert authority in the valuation of bank and bank holding company securities in connection with bank mergers and acquisitions. Thomas Mecredy is an expert in the valuation of bank and bank holding companies in connection with bank mergers and acquisitions. On December 8, 1993, Alex Sheshunoff & Co. Investment Banking through Thomas Mecredy issued its opinion to the respective Boards of Directors of Bancorp and New River that the terms and conditions of the agreement were fair and equitable to the shareholders of each corporation. Pursuant to the agreement, New River's Board of Directors duly adopted a plan of dissolution and complete liquidation for New River. The plan of dissolution provides that after the sale of assets and assumption of liabilities the Board of Directors will reserve a sufficient amount of Bancorp stock and cash for payment of liquidation expenses and payment of liabilities not assumed by 1st United, including contingent liabilities (general reserves). In addition to the general reserves, New River will create a special reserve (special reserve) in an amount which it considers sufficient to defend and satisfy certain potential claims which may be asserted against New River by shareholders of New River in conjunction with the organization and initial offering of common stock of New River. In determining the amounts necessary to establish the general reserves and special reserve, New River's board of directors consulted with the national law firm of Proskauer Rose Goetz and Mendelsohn with respect to both reserves and the Florida law firm of Shutts & Bowen with respect to the special reserve for advice concerning the potential liability on the part of New River in connection with both known claims and potential claims and the amounts, if any, for which New River could be held liable. Shareholder E.D. Hittson noted that the book value of the New River stock is approximately $11.00 per share versus the $4.50 per share value of the 1st United stock. In response, bank officials noted that 1st United has dividend and strong growth potential not available to New River. Shareholder James Weck questioned provisions being made to satisfy outstanding lawsuit liabilities, the future location of the facility, and the effect on New River employees. In response, bank officials stated that the potential lawsuit liability is included in the reserve amounts, that no decision has been made as to the future location of the banking facility but that the needs of the service area will be met, and that it is their intention to draw talent from the New River staff. Shareholder Amine Semaan questioned whether New River would be represented on the Board of Directors at 1st United, whether minority areas would be a priority for the future location of the facility, and whether another buyer would have paid $10.50 per share. In response, bank officials maintained that New River will have one member on the Board of Directors at 1st United, that the needs of the service area will be met, and that no other, more attractive, buyer is available. On January 11, 1994, MaryAnn Cassel, a shareholder who reportedly attended the public hearing on December 13, 1993, filed a motion for leave to become a party. Such motion alleged that the movant, a minority shareholder, will be forced to accept Bancorp common stock in exchange for her New River shares or be forced to accept appraisal rights in lieu of her shares. Further, movant claimed that the plan is not fair to all parties because the shares of New River have been undervalued. Having deemed such motion untimely, and having determined such request does not allege circumstances unknown to movant prior to the December 13, 1993 public hearing, it is denied. DONE AND ENTERED this 24th day of January, 1994, in Tallahassee, Leon County, Florida. Joyous D. Parrish 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 24th day of January, 1994. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Donald E. Thompson, II Proskauer Rose Goetz and Mendelsohn One Boca Place, Suite 340 2155 Glades Road Boca Raton, Florida 37431 Michael W. Ford Phillip T. Ridolfo, Jr. Mershon, Sawyer, Johnston, Dunwody & Cole Phillips Point East Tower 777 South Flagler Drive, Suite 900 West Palm Beach, Florida 33401 Jeffrey D. Jones Department of Banking and Finance Division of Banking The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 David S. Zimble Zimble Formoso-Murias, P.A. 1401 Brickell Avenue, Suite 730 Miami, Florida 33131
The Issue Whether petitioner's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes, should be approved.
Findings Of Fact Background Petitioner, Homesafe Mortgage Company (Homesafe), initially known as FMC Mortgage Company, a Florida corporation, was established on May 24, 1990, and has, since its inception, been owned by Orlando Monteagudo and his wife, Omaida. On September 16, 1990, Homesafe applied to respondent, Department of Banking and Finance (Department), for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's application was approved, and its mortgage brokerage business license was issued on October 24, 1990. A few days after Homesafe was licensed, the assets of another corporation wholly owned by Orlando and Omaida Monteagudo, First Miami Investments Corporation (FMIC), discussed more fully infra, were transferred to it, and Homesafe assumed the mortgage business of FMIC. At that time, FMIC became idle, and ceased doing business. On October 1, 1991, a new law, the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, became effective, which substantially changed the provisions of Chapter 494, Florida Statutes, and required businesses desirous of engaging in activities as mortgage lenders to be licensed as such. The Act also required such licensure for entities engaged in the business of servicing loans, if they proposed to service loans for more than four months, whereas previously no license was required for such activity. As a consequence of the amendments to chapter 494, Homesafe filed a timely application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. Pertinent to this case, that section provided: (1)(a) Any person in good standing who holds an active registration pursuant to former s. 494.039 . . . or any person who acted solely as a mortgage servicer on September 30, 1991, is eligible to apply to the department for a mortgage lender's license and is eligible for licensure if the applicant: 1. For at least 12 months during the period of October 1, 1989, through September 30, 1991, has engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both . . . . (Emphasis added) And, Section 494.001(17), Florida Statutes, defined a "person" to mean "an individual, partnership, corporation, association, or other group, however organized." Also pertinent to an evaluation of Homesafe's application by the Department was Rule 3D-40.202, Florida Administrative Code, which provided: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as defined s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. By letter of April 13, 1992, the Department notified Homesafe of its intention to deny Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause." The basis for the Department's denial was it conclusion that Homesafe had not "engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both" for "at least 12 months during the period of October 1, 1989, through September 30, 1991, as required by the "Saving Clause," and that the provisions of Rule 3D-40.202 were not applicable to Homesafe's circumstances, such that credit for FMIC's activities could be accorded Homesafe. Subsequently, the Department amended its notice of denial to include, as an additional basis for denial, its contention that Homesafe violated the provisions of Section 494.0072(2)(k), Florida Statutes, by acting as a mortgage lender subsequent to October 1, 1991, without a current, active license. Homesafe filed a timely request for formal hearing and disputed the bases upon which the Department proposed to deny its application. Homesafe's activities and those of its predecessor in interest, FMIC Orlando Monteagudo, the chief executive officer and co-owner of Homesafe, has personally held an active license as a mortgage broker since 1984, and has, through various entities, been active in the mortgage brokerage business since that date, without unfavorable incident. On July 20, 1989, Orlando and Omaida Monteagudo became the sole owners of OJM Enterprises, Inc. (OJM), then known as The R & M Group, Inc., a Florida corporation, through a structured buy out from his former partners, with whom Monteagudo apparently felt strong dissatisfaction. OJM was the parent company of First Mortgage Corporation (FMMC) and First Miami Investment Corporation (FMIC), both Florida corporations. FMMC had been licensed as a mortgage brokerage business since at least March 14, 1986; however, neither OJM nor FMIC were ever so licensed. 2/ In September 1990, Monteagudo, out of a desire to further distance himself from his former associates, and on the advice of his accountant as to the best way to wrap up the affairs of OJM, FMMC and FMIC, contemplated the merger of OJM and FMMC into FMIC by September 30, 1990, and the transfer of their assets and mortgage brokerage business activities to Homesafe, which until that time had been largely inactive. In furtherance of such plan, Homesafe, as heretofore noted, on September 16, 1990, applied to the Department for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's brokerage business license was issued on October 24, 1990. In the interim, a merger agreement was executed on September 29, 1990, on behalf of FMMC, FMIC and The R & M Group, Inc., whereby the parties agreed to merge The R & M Group, Inc., and FMMC into FMIC. [Use of the name "The R & M Group, Inc.," OJM's former name, was a mistake and would lead to a delay in filing with the Secretary of State as discussed infra.] Under the agreement, which was to have been effective September 30, 1990, FMIC would be the surviving entity, and "all the estate, property, rights, privileges, powers, franchises, and interests of each of the . . . corporations" would be vested in FMIC as the surviving corporation, without further act or deed. Considering the restructuring that was occurring, the proof is persuasive that at least by October 1, 1990, and more probably at some unidentifiable date shortly prior thereto, Homesafe began to service mortgage loans on behalf of FMIC. Thereafter, by October 30, 1990, following approval of its application for a mortgage brokerage business license, Homesafe received the assets of FMIC and assumed the mortgage brokerage business that had previously been operated through the corporate group, now FMIC. At that time, FMIC became idle and ceased doing business. Notwithstanding their efforts to effect a technical merger by September 30, 1990, the Secretary of State, by letter of January 4, 1991, rejected the merger agreement because The R & M Group, Inc., had changed its name on September 4, 1990, to OJM Enterprises, Inc. Accordingly, the parties were advised to correct their agreement to properly reflect the corporate parties if they desired the Secretary of State to accept such filing. Consequently, on January 14, 1991, the parties executed an amended merger agreement that properly reflected the corporate parties as FMMC, FMIC and OJM Enterprises, Inc. That agreement was duly filed with the Secretary of State on January 18, 1991, and FMIC became, technically, the surviving corporation that date. Under the terms of that agreement, as with the initial agreement, Orlando and Omaida Monteagudo, as the sole owners of OJM, became the sole owners of FMIC. The Department's Rule 3D-40.202 Pertinent to this case, Rule 3D-40.202, Florida Administrative Code, provides: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as deemed in s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. Here, the Department and Homesafe disagree as to the proper interpretation of the foregoing provision. The intent of the rule, according to the Department, was to permit those who were licensed as a mortgage brokerage business prior to the adoption of the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, but were not a corporate entity, to qualify under the "Saving Clause." Notably, under the amendments to chapter 494, only corporations are eligible for licensure as a mortgage lender. See Section 494.0061, Florida Statutes. Therefore, the Department interprets the rule to apply only when there has been an actual change in the form of the business entity, through incorporation of a sole proprietorship or partnership, and does not consider the rule applicable where, as here, a mere transfer of assets occurred between corporations. Contrasted with the Department's interpretation, Homesafe contends that the provisions of the rule are broad enough to cover the situation where, as here, the mortgage brokerage business of one corporation is assumed by another corporation, as long as the ownership interests remain the same. Under such interpretation, Homesafe and FMIC, the surviving corporation, would be considered the same "person" for purposes of determining eligibility under the "Saving Clause," and Homesafe could be credited, if necessary, with the time periods FMIC or its merged parts operated as a mortgage brokerage business to satisfy the "12-month" standard of the "Saving Clause." While Homesafe's interpretation may be a permissible interpretation of Rule 3D-40.202, so is the Department's. Indeed, the Department's interpretation of the rule is consistent with the intent of the rule and the doctrine of noscitur a sociis often applied as an aid to statutory construction. Under such circumstances, and for the reasons set forth in the conclusions of law, deference is accorded the agency's interpretation. Homesafe's activities subsequent to October 1, 1991 Pertinent to the Department's charge that Homesafe has acted as a mortgage lender subsequent to October 1, 1991, without a current, active license, the proof demonstrates that since October 1, 1991, Homesafe has made between 120-170 mortgage loans, sold those loans to investors, and thereafter serviced the majority of those loans. In response, Monteagudo retorts that Homesafe was entitled to licensure under the "Saving Clause," and that it was entitled to and needed to continue its business pending Department approval of its application.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered approving Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 28th day of April 1993. WILLIAM J. KENDRICK 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 28th day of April 1993.
The Issue Whether petitioner should impose fines and other administrative sanctions against respondents, and order them "to cease and desist from further violating Florida laws and take appropriate corrective action," for the reasons alleged in the administrative complaint?
Findings Of Fact Credicorp, Incorporated (Credicorp) is a Texas corporation whose principal place of business is located in Dallas, Texas. Credicorp is not licensed pursuant to Chapter 520, Florida Statutes, and never has been. Originally incorporated in 1990 under the name FAFCO, Credicorp began mailing solicitations to Florida in November of 1990. John Rheinfrank was president of Credicorp from November of 1990 until October of 1992. T. at 15. Since then, Stevan Brown, who has been corporate secretary at all pertinent times, has served as president. Credicorp has no employees or agents in Florida, and owns no property in Florida. Credicorp has not registered to do business in Florida and does not collect Florida sales or use taxes. Credicorp mails solicitations, also called invitations, to Florida residents and others. Before the corporate name change, invitations sent to prospects read as follows: TELEGRAM APPROVAL NO: [account number specified] APPROVAL EXPIRATION DATE: [date specified] [Name and address of targeted individual] YOU HAVE BEEN PRE-APPROVED FOR A GOLD CARD WITH A $10,000.00 LINE OF CREDIT. *MAIL YOUR $29.95 ANNUAL FEE BY CHECK OR MONEY ORDER BY (specified date) ALONG WITH THIS SIGNED NOTICE TO ACTIVATE YOUR CREDIT IMMEDIATELY. FAILURE TO DO SO WILL RESULT IN OUR REEVALUATION OF YOUR ELIGIBILITY. PLEASE RETURN THIS TELEGRAM WITH PAYMENT BY (date specified). MAKE CHECK OR MONEY ORDER PAYABLE TO FAFCO GOLD CARD. SINCERELY, ROBERT J. ARMSTRONG, NEW ACCOUNTS MANAGER RESPOND TODAY! Petitioner's Exhibit No. 19. Robert J. Armstrong, the putative accounts manager, does not exist. T. at 121. Recently invitations have included a 60- day money-back guarantee and a disclaimer in small type disclosing Credicorp's lack of affiliation with a financial institution. Petitioner's Exhibit No. 19. The solicitation arrives in an envelope stamped "DATED MATERIAL: YOUR IMMEDIATE REPLY REQUESTED," and the return address is shown as "CREDIT APPROVAL DEPT." Petitioner's Exhibits Nos. 8 and 21; Admission No. 13. Ordinarily the solicitation contains all the information an individual receives before paying money to Credicorp to secure its services. Respondents offer potential customers residing in Florida a "Gold Card" with "a $10,000 line of credit" at a 12 percent annual interest rate, in exchange for a $29.95 fee. Petitioner's Exhibits Nos. 19 and 20; Admission 46. The services Credicorp in fact provides to members are offers to sell merchandise, loans for purchasing the merchandise that Credicorp sells, assorted coupons, and hotel and rental car discounts. Petitioner's Exhibits Nos. 15 and 29, line 23. Not one of these services is clearly identified on the initial solicitation sent to potential members. Petitioner's Exhibit No. 19; T. at 120- 121. After the customer submits a pre-approved application and pays the membership fee, Credicorp mails a "fulfillment package." Petitioner's Exhibit No. 15, p.77, line 22. The customer must pay a $29.95 fee before Credicorp performs any service on the customer's behalf. Petitioner's Exhibit No. 20; Admission No. 47. The fulfillment package contains a letter that states, in part: WELCOME TO CREDICORP, YOUR LINE OF CREDIT IS $10,000 HERE IS YOUR CREDICORP MEMBERSHIP CARD! ACCOUNT # START USING YOUR CREDICORP MEMBERSHIP AND BONUS COUPONS IMMEDIATELY TO PURCHASE NAME BRAND PRODUCTS FROM OUR HOME VALUES AND GIFT CATALOG. ENCLOSED IS OUR GIFT TO YOU, YOUR PREFERRED MEMBER SAVINGS COUPON BOOKLET WORTH UP TO $1,000.00 IN COUPONS REDEEMABLE IN YOUR AREA. ALSO SEE INFORMATION ENCLOSED ABOUT 50 percent DISCOUNTS AT THOUSANDS OF LOCATIONS THROUGH OUT THE U.S. Petitioner's Exhibit No. 6. This letter is the first notice Credicorp gives the "new member" that he or she has joined a catalogue shopping club. The fulfillment package also contains a second letter addressed "Dear New Credicorp Member," a copy of the Credicorp Rules and Regulations, a collection of Home Values and Gifts Bonus Coupons, a booklet of Super Saver coupons, and the Home Values and Gifts catalogue. For the past six months or so, Petitioner's Exhibit No. 16, p.44, the package has contained an application for a "Privilege Card." Petitioner's Exhibits Nos. 1, 2 6, and 15, p. 78 1. 22. A member can purchase merchandise listed in the Home Values and Gifts catalogue by completing order forms contained in the catalogue and mailing them, along with payment, to Credicorp. T. at 108. Credicorp extends members a line of credit of up to $10,000 to purchase this merchandise. T. at 108, 111. The member's "Gold Card" number must be included when ordering products from the catalogue. Petitioner's Exhibit No. 15, p. 83, line 9. A member cannot use the "Gold Card" to purchase goods or services from retail sellers other than Credicorp. T. at 111-114. Members cannot use their "Gold Cards" or their membership to obtain cash from anybody. The Better Business Bureau of Texas received over 34,000 inquiries in 1992 regarding Credicorp's activities. T. at 122-123. Credicorp receives a mark-up on the merchandise it sells members. Petitioner's Exhibit No. 16, p.60, line 5. Members who purchase merchandise on credit must initially submit a specified down payment with the order. Petitioner's Exhibits Nos. 1, 2 and 14. Two prices are available to a Credicorp member, a cash price and a "credit price," which reflects a 12 percent financing fee. Petitioner's Exhibits Nos. 1, 2, 14. Merchandise purchased on credit arrives with an installment coupon book for each item ordered. Petitioner's Exhibit No. 6, Credicorp Rules and Regulations p. 2. The Credicorp Rules and Regulations, the order forms contained in the catalogue, and all other materials Credicorp provides members make no mention of any contingency once the member completes, signs and sends in a form order for merchandise with the amount of money required. Petitioner's Exhibits Nos. 1, 2, 6, 12, 14, 17. Many Florida residents complete and sign these order forms in Florida. Petitioner's Exhibit No. 17. Credicorp has received at least 378 form orders for merchandise from Florida residents. Id. Approximately 1,600,000 individuals have submitted to Credicorp membership applications, each accompanied by $29.95. New members' names and addresses are entered into a computer data base and "batch edit sheets," each listing 100 names of new members, are printed. Petitioner's Exhibits Nos. 4 and 5; Petitioner's Exhibit No. 15, page 73, line 1; T. at 47. Sample batch edit sheets obtained from Credicorp by the Department listed the names of 640 Florida residents who had sent a membership application form and $29.95 to Credicorp to obtain membership. Petitioner's Exhibit Nos. 4, 5, 18. On a single day, June 24, 1992, money and membership application forms from 243 residents of Florida reached Credicorp. Petitioner's Exhibit No. 18.
Recommendation It is, accordingly, RECOMMENDED: That petitioner order respondents Credicorp, John Rheinfrank and Stevan Brown to cease and desist violating Chapter 687, Florida Statutes. That petitioner levy an administrative fine against Credicorp in the amount of three million five hundred seventy-eight thousand dollars ($3,578,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent John Rheinfrank in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent Stevan Brown in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30 days of entry of the final order. DONE AND ENTERED this 4th day of October, 1993, in Tallahassee, Florida. ROBERT T. BENTON, II 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 4th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-911 Petitioner's proposed findings of fact Nos. 1-22, 24-38, 40, 41, 42, and 43 have been adopted, in substance, insofar as material. With respect to petitioner's proposed findings of fact Nos. 23 and 39, extrapolation is problematic. Respondent's proposed findings of fact Nos. 1, 2, 3, 5, 7, 8, 9, 11, 16, 24, 25, 26, and 27 have been adopted, in substance, insofar as material. Respondent's proposed findings of fact Nos. 4 and 21 pertain to matters that are not material to petitioner's allegations. Respondent's proposed findings of fact Nos. 6, 22 and 23 pertain to subordinate matters. With respect to respondent's proposed finding of fact No. 10, it is clear from all the circumstances that it was Credicorp's intent to mislead recipients into believing that there was no such restriction. With respect to respondent's proposed finding of fact No. 12, Credicorp lends money to finance merchandise it sells on credit. With respect to respondent's proposed findings of fact Nos. 13 and 14, it is clear from all the circumstances that Credicorp used the term "Gold Card" to mislead recipients of its solicitations into believing they were being offered a credit card. With respect to respondent's proposed finding of fact No. 15, the evidence did not show that the "Credicorp Gold Card is useful to members as a reminder of their membership." With respect to respondent's proposed finding of fact No. 17, the word card does appear. With respect to respondent's proposed findings of fact Nos. 18 and 19, Credicorp so held itself out. With respect to respondent's proposed finding of fact No. 20, the sales contract comes into existence when the member mails the order and payment. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Bridget L. Ryan, Esquire Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399 William E. Williams, Esquire Rex Ware, Esquire 106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
The Issue Whether Respondent properly denied Petitioner's application for licensure as a Life and Variable Annuity and Health Insurance Agent.
Findings Of Fact Petitioner applied for licensure as a Life and Variable Annuity and Health Insurance Agent. Petitioner's application was signed and mailed to the Department of Insurance on or about January 27, 1998. Petitioner's application for licensure was denied by the Department on or about May 5, 1998. Two months later, on July 6, 1998, the Department issued an Amended Denial Letter that set forth the basis for the denial. According to the Amended Denial Letter, Petitioner's license was denied because she failed to meet the licensure requirements set forth in Sections 626.611(1) and (7) and 626.785(1), Florida Statutes. As a basis for the alleged violations, the Department stated: The Office of the Attorney General filed a civil action against you as vice-president and a director of the H.O.M.E. Program, and the H.O.M.E. Program along with other directors, alleging that the Program was formed as a not-for-profit corporation. . . to help people buy a house for themselves to live in. The complaint alleges that the Program offered a variety of services for a "Service Fee," has not provided any services, and that those fees were deposited into an account with NationsBank and the money was then misappropriated by one Jerome Ellington. The Attorney General still has a case pending against the H.O.M.E. Program and has stipulated to dismiss the cause of action against you with prejudice only at the conclusion of the lawsuit against the remaining defendants. You Charita Strode, were terminated from employment with NationsBank for wiring funds out of the H.O.M.E. Program's account in November 1997, after specifically being told by the Regional Service Support Manager that the funds needed to remain in the account until all items had cleared. The bank was placed in a loss situation of over $6,000 and due to your behavior you were terminated because you abused your authority in order to achieve the funds transfer, and did not follow supervisory instructions. That is evidence of lack fitness and trustworthiness. Further, it was determined by the Unemployment Compensation Appeals Bureau that you were discharged for misconduct and the Appeals referee resolved the conflicts in favor of your former employer. Petitioner was employed by NationsBank in January 1994, and, except for a six-month voluntary leave of absence, worked there continuously until she was terminated in January 1998. Prior to going on voluntary leave, Petitioner was manager of the NationsBank Gunn Highway Banking Center. During her first year with NationsBank, Petitioner was a management trainee associate. Thereafter, Petitioner became a manager, a position in which she served for the remainder of her tenure with NationsBank. As a manager, Petitioner was assigned to several NationsBank banking centers and was responsible for the operations, sales, and service of the centers to which she was assigned. Additionally, Petitioner's responsibilities included training and supervising more than fifty associates. In the spring of 1997, Petitioner was promoted from bank officer to an assistant or associate vice-president. While employed at NationsBank, Petitioner received at least two awards for her job performance. In 1997, Petitioner was recognized by NationsBank as a member of Florida Team One, a commendation that recognizes excellence in sales. One of the banking centers managed by Petitioner also received an award for service quality, an award received by only 20 to 30 percent of NationsBank banking centers. In May 1997, Petitioner first met and became acquainted with Jerome Ellington, the owner and founder of the H.O.M.E. Program. According to its literature, the H.O.M.E. Program was a "Christian Home Building Program" designed to assist individuals in building or remodeling their homes. Petitioner was particularly interested in the program because of her desire to become a homeowner. Based on her interest, Petitioner asked Mr. Ellington questions about the H.O.M.E. Program, how to become a member, and how to help other people who might be interested in the program. Petitioner became a client of the H.O.M.E. Program. As a client, Petitioner was required to pay to the program an initial fee of $1700 and a monthly maintenance fee of approximately $170 for three months. Based on her belief that the H.O.M.E. Program was a legitimate organization whose purpose was to assist individuals in purchasing homes, Petitioner told several family members and friends about the program. She told these individuals that the program would allow them to purchase homes for themselves and encouraged them to "look into it." Eventually, like Petitioner, between six and eight of these individuals paid the required fees and became clients of the H.O.M.E. Program. In late June or early July 1997, Petitioner became involved with the H.O.M.E. Program, serving on the program's Financial Advisory Board. The purpose of the Financial Advisory Board was to act as an agent to control the finances of the H.O.M.E. Program. During the time Petitioner was a named member of the advisory board, it met in July or August 1997, to organize that board. Other than this initial organizational meeting, the advisory board never met nor did it ever function in any official manner. In late July 1997, at about the time the H.O.M.E. Program was incorporated, Petitioner was selected by Mr. Ellington to serve as a member and elected as vice-president of the H.O.M.E. Program's Board of Directors (Board or Board of Directors). While Petitioner was on the Board, it seldom met. In July or August 1997, the H.O.M.E. Program set up three bank accounts at NationsBank. Each of the accounts had three signators, all of whom were officers of the H.O.M.E. Program: Bernadette Orsley, treasurer; Jerome Ellington, president; and Petitioner, vice-president. The address of record listed on the H.O.M.E. Program account was 7819 North Dale Mabry Highway, Suite 208, Tampa, Florida. From August 1997 through January 1998, Petitioner took a voluntary leave of absence from NationsBank to do work for the H.O.M.E. Program and to explore the possibility of going into business for herself. Petitioner's work with the H.O.M.E. Program involved setting up "outside services to clients once they got into their homes." Jerome Ellington was the chief executive officer and president of the H.O.M.E. Program. During the time that Petitioner was on the H.O.M.E. Program's Board and the Financial Advisory Board, Petitioner found that Mr. Ellington was not open about the expenditures he claimed to be making on behalf of the H.O.M.E. Program. Attempts were made by Petitioner and one other Board member to develop, initiate, and implement better accounting practices, operational procedures, and financial controls for the H.O.M.E. Program. For example, one recommendation was that two signatures be required on all checks written on the H.O.M.E. Program accounts. However, these efforts proved futile because Mr. Ellington was unwilling to implement any changes and relinquish financial control of the program's finances. By letter dated October 28, 1997, NationsBank advised the H.O.M.E. Program that due to the chargeback activity involving its three accounts, the bank was closing the accounts, effective ten days from the date of the letter. The letter acknowledged that the relationship between NationsBank and the H.O.M.E. Program was "a contractual one and under the terms of our Deposit Agreement either party can terminate the relationship at any time without cause." Chargeback activity occurs when items that are deposited or credited to the account are returned to the bank dishonored for a variety of reasons. NationsBank's concern with the H.O.M.E. Program accounts was that the excessive chargeback activity might possibly place the bank at risk of loss. In October 1997, Patricia McSweeney, then Regional Service Manager for NationsBank, spoke to Petitioner about the H.O.M.E. Program accounts and reiterated the contents of the October 28, 1997, letter from NationsBank. Upon learning from Ms. McSweeney that NationsBank was closing the H.O.M.E. Program's three accounts, Petitioner requested that the bank allow the three accounts to remain open to receive two electronic deposits that were scheduled to be made in November 1997. The electronic deposits were to be made on or about November 5 and 20, 1997. Ms. McSweeney agreed to leave the H.O.M.E. Program accounts open to receive the November electronic deposits and told Petitioner that there could be no check activity on the accounts. This agreement between Petitioner and Ms. McSweeney modified the terms of the October 28, 1997, letter and the accounts remained open beyond the time designated in that letter. However, the modification was not memorialized in writing and no date was established for closing the H.O.M.E. Program accounts once the November electronic deposits were made. With regard to the agreement between Petitioner and Ms. McSweeney, there was a material misunderstanding of how the H.O.M.E. Program accounts were to be handled during this extension. Ms. McSweeney's intent and understanding was that the account would remain open on a "credits-only" basis so that the credits could be received and posted to the account, and then allowed to age. Moreover, Ms. McSweeney believed there would be no check activity in the H.O.M.E. Program account, thereby eliminating or reducing the likelihood that the bank would be placed in a loss situation. On the other hand, Petitioner understood the agreement to mean that no checks could be written on the account or deposited into the H.O.M.E. Program account. However, Petitioner also believed that once the electronic deposits were made to the account, funds could be withdrawn from the account to cover the H.O.M.E. Program's expenses. The anticipated electronic deposits were made to the H.O.M.E. Program account as scheduled on or about November 5 and 20, 1997. After the November 5, 1997, electronic deposit of between $8,000 and $10,000, on November 10, 1997, Petitioner went to the NationsBank Carrollwood Banking Center and withdrew approximately $9,000 from one of the H.O.M.E. Program accounts to make a payment to the H.O.M.E. Program's line of credit. Petitioner believed that this withdrawal was permissible and not inconsistent with or in violation of the agreement with Ms. McSweeney. Furthermore, when Petitioner made the withdrawal, she was unaware of any flag on the account and no bank representative informed her that the account was so designated. At no time, either on November 10, 1997, or later, did any NationsBank representative notify Petitioner that the account was flagged and that the $9,000 withdrawal was improper and should not have been allowed. On or about November 20, 1998, the second electronic deposit was received and posted to the H.O.M.E. Program account. On the morning of November 20, 1997, Petitioner telephoned the NationsBank's Gunn Highway Banking Center and spoke with Michelle Shumate. Petitioner and Ms. Shumate knew each other because prior to Petitioner's going on leave, she was a bank officer and/or manager of the Gunn Highway Banking Center. During her telephone conversation with Ms. Shumate, Petitioner requested that two cashier's checks be drawn from the H.O.M.E. Program account and that the checks be made payable to the H.O.M.E. Program. The funds were to be used for operating expenses of the H.O.M.E. Program. When Petitioner requested the two cashier's checks, she did not perceive the requested transaction as being inconsistent with or in violation of the agreement she and Ms. McSweeney had made. Petitioner's interpretation of the agreement was that the H.O.M.E. Program was only precluded from writing checks to third parties on checks issued on the program's accounts. Because the cashier's checks were certified funds, Petitioner knew that there was no potential, at that time, for a loss situation. After Ms. Shumate's telephone conversation with Petitioner, Ms. Shumate immediately called Ms. McSweeney, her supervisor, and advised her of Petitioner's request for two cashier's checks. At hearing, in explaining her reason for calling Ms. McSweeney, Ms. Shumate made no mention of the account being flagged. Rather, Ms. Shumate stated, "I had knowledge of chargeback activity of the account, and I made it a policy for myself that before doing anything for any H.O.M.E. Program accounts, I would call a supervisor." Based on Ms. Shumate's testimony and written statement concerning Petitioner's request for two cashier's checks, it appears that Ms. Shumate's decision to call Ms. McSweeney was not because the accounts were flagged, but rather because of her personal knowledge of the problems with the H.O.M.E. Program accounts. In response to Ms. Shumate's call, Ms. McSweeney told her that the H.O.M.E. Program accounts were "credit only" accounts and withdrawals or debits were not to be made on the account. Thirty minutes after Petitioner requested the cashier's checks, she came to the drive-through window of the NationsBank Gunn Highway Banking Center to pick up the checks. Ms. Shumate then told Petitioner that Ms. McSweeney had advised her that the H.O.M.E. Program account was a "credit only" account and that there could be no check activity on the account. Pursuant to Ms. McSweeney's directive, Ms. Shumate told Petitioner that if she had any questions, she should call Ms. McSweeney. Petitioner then immediately called Ms. McSweeney from her cellular telephone. However, when Petitioner was unable to reach Ms. McSweeney, she left a voice mail message for her. After leaving the Gunn Highway Banking Center, Petitioner then went to pick up a Ms. Barnes for a 9:00 a.m. meeting. When the meeting concluded, Petitioner took Ms. Barnes back to the H.O.M.E. Program Office located at 7819 North Dale Mabry Highway. Petitioner then went to the NationsBank Carrollwood Banking Center, the banking center closest to the H.O.M.E. Program Office. Petitioner signed in as a representative of the H.O.M.E. Program to request customer service. Petitioner then met with a consumer banker regarding having a wire transfer made from one of the NationsBank H.O.M.E. Program accounts to the program's new account at First Union. Petitioner gave the consumer banker the H.O.M.E. Program account number and the Petitioner and the consumer banker filled out the required forms necessary to effectuate the wire transfer. When the form was completed, the consumer banker initiated the wire transfer in the system and Petitioner left the Carrollwood Banking Center. Immediately prior to the wire transfer, the H.O.M.E. Program account from which the funds were taken had a balance of approximately $23,000. The amount that Petitioner had wire transferred from the NationsBank's H.O.M.E. Program account was $19,800. The purpose of the transfer was to put funds into the H.O.M.E. Program's account at First Union to meet the program's expenses. Petitioner was aware there had been a history of minimal chargebacks on the account, in the form of drafts. Based on this knowledge, when Petitioner initiated the wire transfer, she left a balance in the account that she believed would be sufficient to cover any potential chargebacks from the electronic drafts. Petitioner based the estimate on the past experience of the chargebacks from electronic drafts. When Petitioner requested that funds be removed from the H.O.M.E. Program account, she never anticipated that it would result in or contribute to a loss by NationsBank. When Petitioner requested the wire transfer, neither the consumer banker nor anyone else at the bank told her that the account was flagged and that funds could not be wired from the H.O.M.E. Program account. The transfer went smoothly and in accordance with NationsBank's routine business practices. On the afternoon of November 20, 1997, after the wire transfer was made, Petitioner spoke to Ms. McSweeney, who asked her why she had made the wire transfer. During that conversation, it became clear that there was a misunderstanding between Petitioner and Ms. McSweeney regarding how the H.O.M.E. Program's NationsBank accounts were to be handled in November 1997. Ms. McSweeney told Petitioner that she had told Petitioner "not to do that," apparently referring to their October agreement regarding Petitioner's request to allow the H.O.M.E. Program accounts to remain open in November. Petitioner then told Ms. McSweeney that she had never said that to her. Petitioner indicated to Ms. McSweeney that the H.O.M.E. Program needed funds from the account for its operating expenses and that she never would have asked that the accounts be allowed to remain open to receive the electronic deposits if the organization were absolutely prohibited from accessing the funds. In the days or weeks after the funds were wired from one of H.O.M.E. Program accounts at NationsBank, the chargebacks on the accounts were in excess of any amount that they had ever been. Between November 20, 1998, the date the wire transfer was made, and January 30, 1998, the date Petitioner's termination, NationsBank sustained a loss of approximately $6,000. This loss has not yet been recovered by the bank. Had the wire transfer not been made, NationsBank may not have sustained this loss. However, the approximate $6,000 loss by NationsBank may not be attributable to the November 20, 1997, wire transfer. Two other individuals on the H.O.M.E. Program accounts, including Jerome Ellington, were authorized signators on the H.O.M.E. Program accounts and could have made withdrawals. At the hearing, personnel of NationsBank did not state unequivocally that the other authorized persons on the H.O.M.E. Program accounts had not made withdrawals from the accounts between November 1997 and January 1998. NationsBank personnel did not rule out that such withdrawals had been made, but stated only that to confirm whether such withdrawals had been made, the bank records, which were unavailable, would have to be reviewed. If, in fact, such withdrawals were made, those withdrawals could have contributed to or been responsible for the bank's financial loss. In November 1997, the previously existing problems and disputes within the H.O.M.E. Program organization exacerbated. Mr. Ellington, president and founder of the H.O.M.E. Program, who had previously encouraged Petitioner's involvement in the program, both as a client and officer, now would no longer allow Petitioner to transact business on the H.O.M.E. Program accounts. Consequently, once the excessive chargebanks in the H.O.M.E. Programs account surfaced, Petitioner was unable to move funds back to NationsBank. Her requests to Mr. Ellington that he move funds to NationsBank were disregarded. When Petitioner was on the H.O.M.E. Program's Board of Directors, the Board not only failed to meet on a regular basis, but was also prohibited by Mr. Ellington from functioning as a governing body. Mr. Ellington controlled the H.O.M.E. Program, including the "purse strings" of the organization. Petitioner lost approximately $2,000, the total amount of the funds she invested as a client in the H.O.M.E. Program. Moreover, Petitioner also lost a substantial part of approximately $3,000 to $4,000 of her personal funds that she had used for the H.O.M.E. Program to cover some of its operating expenses. In one instance, during her early involvement with the H.O.M.E. Program, Petitioner co-signed a loan agreement for the organization to have a phone telephone system installed in the program's office. After the H.O.M.E. Program failed to make the payments, Petitioner paid off the loan and received no reimbursements. In the first week of December 1997, Petitioner received a copy of minutes from Special Meeting of the Board held on November 18, 1997. Petitioner received no notice of that meeting and, consequently, was not in attendance. The minutes of the meeting reflect that the only three Board members and/or officers present at the meeting were: Jerome Ellington, president; Jacqueline Garcia Ellington, secretary; and Bernadette Orsley, treasurer. Pursuant to the minutes of the November 18, 1997, Special Meeting of the Board, under the category of "New and Urgent Agenda Items," Mr. Ellington initiated a discussion regarding his dissatisfaction with Petitioner, one other Board member, and two staff members. The minutes reported that Mr. Ellington stated that the organization was facing "certain and immanent (sic) insurrection" by Petitioner and the other three individuals. Moreover, the minutes indicated that the labor force was "being manipulated into a confused state of loyalty and that this along with a confrontation of gross insubordination" by Petitioner and the other three individuals was "usurpatous (sic) to the general operations of the Firm and extremely deleterious to Client confidence." According to the minutes, following the discussion, Mr. Ellington moved to vote on the removal or termination of Petitioner and the other three individuals "in view of their attempted take over of the business and a number of other possible infractions of the law." Following Mr. Ellington's motion, by a unanimous vote of the three Board members/officers attending the Special Meeting, Petitioner and the other absent Board member were removed from the Board and the two staff members were terminated, effective immediately. Prior to Petitioner's receiving the minutes of the Special Meeting, she was unaware of her removal from the Board. On January 30, 1998, near the end of her voluntary leave, Petitioner met with officials of NationsBank. Petitioner was advised that her employment with NationsBank was being terminated, effective immediately, because she had failed to follow and had directly violated instructions of the service support manager, Ms. McSweeney. These charges stemmed from the incident involving the transfer of funds on November 20, 1997. Petitioner explained to NationsBank officials that she did not understand that the agreement with Ms. McSweeney prevented the removal of funds from the H.O.M.E. Program accounts. Petitioner also told the NationsBank officials that her behavior with regard to the accounts was consistent with her understanding of the agreement. In this regard, Petitioner informed NationsBank staff that prior to the wire transfer, in November 1997, she had made a withdrawal from the account to pay on the program's line of credit with no problem. Petitioner also told the bank officials that when that withdrawal was made, no one at the bank advised her that the withdrawal was improper or that the account was flagged. Notwithstanding Petitioner's explanation, NationsBank terminated Petitioner's employment, effective immediately. After Petitioner was terminated from NationsBank, she applied for unemployment benefits. The application was denied and Petitioner appealed. In the Notice of Decision issued on the matter, the appeals referee concluded that the Petitioner, claimant in that proceeding, "intentionally violated direct orders from her supervisor." Petitioner had fiduciary duties with regard to her position as vice-president and member of the Board and member of the Financial Advisory Board of the H.O.M.E. Program. However, for the reasons stated above, Petitioner's efforts to perform these duties were thwarted by tactics employed by Mr. Ellington. On January 10, 1998, Petitioner first learned that the Florida Attorney General's Office had been investigating the H.O.M.E. Program, when she was served with a civil action brought by the Attorney General. The Complaint, filed on December 13, 1997, named the H.O.M.E. Program, Inc., Jerome Ellington, and Board members, including Petitioner, as defendants. Among the allegations contained in the Complaint were that the funds collected by the H.O.M.E. Program had not been placed in an escrow account as had been represented to members and that the program had not initiated construction on any residence for any of its 140 clients. The Complaint also alleged that Mr. Ellington withdrew or transferred approximately $31,000 from a H.O.M.E. Program account and of that amount, $23,000 was transferred by Mr. Ellington from a H.O.M.E. Program's account at NationsBank to First Union on November 27, 1997. Moreover, the Complaint alleged that a substantial amount of those funds were used by Mr. Ellington for his personal expenses and approximately $17,000 of the program funds, at one time in Mr. Ellington's possession, remained unaccounted for. The Complaint contained no allegations that Petitioner or any other Board member had misappropriated H.O.M.E Program funds or, at any time, had organization funds in their possession which could not be accounted for. Pursuant to a Stipulated Settlement Agreement (Agreement) entered into on May 18, 1998, the Complaint was dismissed without prejudice against Petitioner "until the conclusion of the lawsuit against each of the remaining Defendants at which time the cause of action against [Petitioner] shall be dismissed with prejudice, provided that [Petitioner] has complied with the terms of the Agreement." In this regard, the Agreement requires the Petitioner to cooperate and assist the Attorney General's Office in the investigation and litigation relating to the Complaint. The Agreement acknowledged and expressly stated that Petitioner's acceptance of the Agreement did not constitute an admission that she violated the laws of Florida as alleged in the Complaint. To determine fitness and trustworthiness of applicants for insurance licenses, the Department looks at the applicant's history and activities in which the applicant participated. Also, the Department considers other issues, such as whether there were victims of the applicant's activities; whether someone was financially harmed; whether money and/or fiduciary duties were involved; and whether the actions were willful. In evaluating Petitioner's application, the Department had several concerns. First, the Department determined that Petitioner had willfully violated or refused to obey a supervisor's direct orders by moving funds out of the H.O.M.E. Program account and that as a consequence thereof, the bank lost several thousand dollars. In the Amended Denial Letter, the Department alleged that Petitioner accomplished this by "abusing" her position with the bank. From this uncorroborated information the Department received from NationsBank, the Department concluded that Petitioner's conduct demonstrated a lack of fitness and trustworthiness. Second, in making the final decision to deny Petitioner's application, the Department considered the fact that Petitioner had been a named defendant in the aforementioned Complaint filed by the Attorney General. Prior to the Department's issuing the Amended Denial Letter, it was aware that the Complaint had been dismissed as to Petitioner. Nonetheless, the Department found it significant that the Complaint had been dismissed without prejudice and that the Agreement had been reached in exchange for Petitioner's cooperation and testimony. The Department believed that the Agreement did not suggest that the underlying events that gave rise to the allegation in the Complaint did not occur. Finally, as a basis for its decision with regard to Petitioner's application, the Department relied on an Unemployment Appeals Bureau decision denying Petitioner unemployment benefits. The Department apparently found it significant that the referee in that proceeding found Petitioner's account of the events less credible than that of NationsBank and concluded that Petitioner "intentionally violated direct orders from her superior." Based on these considerations, the Department then concluded that the allegations raised in the Complaint demonstrated that Petitioner lacked the fitness to fulfill the fiduciary responsibilities required of an insurance agent. When the Department issued the Amended Denial Letter, it was unaware that Petitioner had been removed from the H.O.M.E Program Board in November 1997, because of her efforts to have the program implement financial controls for the funds it was collecting and expending. The Department was also unaware or failed to consider the short period of time Petitioner was associated with the Board, that Petitioner was a client of the H.O.M.E. Program, and that she lost money as a result of her involvement with the program.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue to Petitioner, Charita Michelle Strode, a license as a Life and Variable Annuity and Health Issuance Agreement. DONE AND ENTERED this 16th day of February, 1999, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 16th day of February, 1999. COPIES FURNISHED: Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Plaza Level 26 Tallahassee, Florida 32399-0300 Steve E. Baker, Esquire Delano Stewart, Esquire Stewart, Joyner, Jordan-Holmes, P.A. 1112 East Kennedy Boulevard Tampa, Florida 33672 Elenita Gomez, Esquire Mechelle R. McBride, Esquire Department of Insurance 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The applicant Flagship Bank of Orlando is a subsidiary of the Flagship Banks of Florida in Miami, which owns 23 banks with 66 banking offices and had assets of $1,847,000,000.00 at the end of 1979. The main office of the applicant is located at 1400 East Colonial Drive in Orlando, some nine miles from the proposed branch site. The applicant presently has two branch banking facilities in operation in Orlando: the West Branch Office, located at 3500 West Colonial Drive, and the Sand Lake Road Office, located at 6707 Sand Lake Road, which opened in September of 1979. The West Branch Office has assets of approximately $8,000,000.00 and the Sand Lake Road Office has deposits of approximately $2,700,000.00. As of June 30, 1979, the applicant had 3.8 percent of the total amount of deposits in Orange County, Florida. As of June 30, 1979, the applicant's total deposits were $60,063,000.00. For the year 1979, its net profit to asset ratio was 1.19 percent. At the end of February, 1980, the applicant's after-tax net income was $177,379.00, giving it a 1.3 percent ratio on an annual basis. As of February 29, 1980, the adjusted capital asset ratio was 11.88 percent. The applicant's liquidity ratio is 34 percent or 35 percent, and it presently has approximately $6.00 in reserve for each classified asset dollar. The applicant's president, H.E. Davis, has been with the applicant since 1973 and has been in banking since 1956. The proposed branch manager is Mike A. Fettig, who has been with the applicant for three and a half years and is presently an assistant branch manager with the applicant's Sand Lake branch office. Dean Murdock is the proposed branch loan officer and has been in banking since 1965. Vicky McHoy is the proposed branch assistant manager. She has been in banking with the applicant for 12 years. Additional staff at the proposed branch will be experienced bank personnel pulled from the applicant's main office or other branches. Due to their active training program, the applicant's president does not believe that this will have a detrimental effect upon its management capabilities. The proposed branch bank will offer extended weekday drive-in teller hours and Saturday banking hours, in addition to a full range of services including an automatic teller machine, night depository, foreign currency exchange, commercial and installment lending at the branch level, safety deposit boxes, and Visa and Master Charge. Only one other bank in the Orlando area offers foreign currency exchange services. According to the application, the interior of the proposed branch bank will contain a lobby area of approximately 1,300 square feet, with provisions for four inside teller stations. One drive-in teller will operate from within the building with provision for two remote teller lines. The building will also contain an employee lounge, two restrooms, a bookkeeping and/or work area, a storage area, a meeting room, two offices and customer booths. Based upon the applicant's actual experience at its Sand Lake Road Office, it is estimated that the cost of the building will be $162,000.00. The applicant presently owns the land and there was no evidence of any insider transaction in the purchase of the land. The applicant estimates that it will have total deposits at the end of the first year of operation in the amount of $3,000,000.00, and that it will have total deposits of $5,000,000.00 and $6,000,000.00 at the end of the second and third years of operation. The site selected for the proposed branch is located on Oak Ridge Road west of the intersection of said Road and South Orange Blossom Trail at the southwest corner of Texas Avenue and Oak Ridge Road. Oakridge Road is a main east/west thoroughfare in the area, and the proposed site is adjacent to a shopping center containing 23 stores, including a Winn Dixie and Eckerds Drug Store. The applicant's primary service area (PSA) is bordered by four main highways: the Florida Turnpike, some 2 1/4 miles to the west of the proposed site; Interstate 4 and Pinelock Avenue, some 3 3/4 miles north; Orange Avenue, some 2 3/4 miles east; and Sand Lake Road, some 1 3/4 miles south. The area is a mixture of residential housing, retail, wholesale, distribution facilities and light manufacturing. The applicant's goal in operating the proposed branch office is to acquire new customers in a rapidly growing area and to service its existing customers in the area. Presently, the applicant has 250 deposit customers and 70 loan customers residing or doing business within the designated primary service area. The applicant estimates the population of the PSA to be approximately 38,800, with the greater density of population being on the east side of Orange Blossom Trail. The majority of persons in the PSA are employed in clerical, sales and other lower income categories. The average per capita income within the PSA was $10,882.00 in 1979. According to data published by the University of Florida, Division of Population, the estimated population of Orlando on April 1, 1979, was 124,658, indicating an annual average growth rate of 2.9 percent since the 1970 population figure of 99,006. According to the same data, the total population of Orange County in April of 1979, was estimated at 441,337, indicating an average annual growth rate of 3.1 percent since the 1970 population of 344,311. Net migration into Orange County between 1970 and 1979 accounted for 73.07 percent in population growth. Between April of 1970 and July 1, 1978, the weight of retirees (the 65+ age group) in the County's total population increased from 9.6 to 10.5 percent; and the weight of the labor force (ages 15 - 64) increased from 61.7 to 66.0 percent. The per capita personal income for Orlando increased from $5,985 in 1976 to $6,535 in 1977, and the increases for Orange County were from $6,496 in 1976 to $7,093 in 1977. The state averages for the same two years increased from $6,101 to $6,697. The December 1979 issue of the Orlando SMSA Labor Market Trends shows an average unemployment rate of 5.8 percent for the twelve month period ending in November 1979, as compared to 6.4 percent for the comparable 1978 period. Within the applicant's designated PSA, there are three operating main offices of commercial banks - Landmark Bank of Orlando, Royal Trust Bank of Orlando and ComBank/Pine Castle Bank. These banks are located at a distance from 1.8 miles to 3 miles from the proposed site. There are two opened and operating branch bank facilities and four approved but unopened branch banks within the PSA. The closest existing banking office, the branch of the Sun First National Bank of Orlando, is located 1.0 mile east of the proposed site. The proposed sites of the approved, but unopened branch banks are located between 1.5 miles and 2 miles from the proposed site. The approved branch site of the protestant, Pan American Bank of Orlando, is located some 641 yards from the applicant's proposed site, and it is expected to open in April of 1980. There are also three branch offices of savings and loan associations in operation and two branches approved but unopened. The existing banking and savings and loan facilities in the area have all experienced significant increases in deposits over the past two years. Data as of June 30, 1979, from the Comparative Figures Report of the Florida Bankers Association indicate that the banks in Orlando experienced the following increases over the year's period: 18.7 percent in total loans, 13.8 percent in time deposits, 6.8 percent in demand deposits and 10.8 percent in total deposits. The name selected for the proposed branch banking facility is Flagship Bank of Orlando - Oakridge Office. No evidence was produced that such name would be misleading or confusing to the public. There was no testimony adduced at the hearing that the applicant was not in substantial compliance with all state and federal laws effecting its operations. In accordance with the provisions of Florida Statutes, 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 24th day of April, 1980, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Lawrence O. Turner, Jr. Comptroller Gerald A. Lewis Pan American Bancshares, Inc State of Florida 150 Southeast Third Avenue The Capitol Post Office Box 010831 Tallahassee, Florida 32301 Miami, Florida 33101 Benjamin F. Smathers, Esquire Smathers and Kemp 801 North Magnolia Avenue Post Office Box 3267 Orlando, Florida 33802 Karyln Anne Loucks Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING PAN AMERICAN BANK OF ORLANDO, Petitioner, vs. CASE NO. 80-235 FLAGSHIP BANK OF ORLANDO and OFFICE OF THE COMPTROLLER, Respondents. /
The Issue The issue in this case is whether Respondent discriminated against Petitioner based on Petitioner's disability.
Findings Of Fact Mr. McMahon was a member of Suncoast beginning in approximately 1986. In 2008 and 2009, Mr. McMahon had a checking account, a VISA card, a savings account, and a loan with Suncoast. Mr. McMahon claims that he is disabled and that he suffers from personality disorders, post-traumatic stress, passive aggression, and obsessive compulsive disorder. No medical evidence was presented to substantiate his claims. He has been receiving benefits from the Social Security Administration based on a personality disorder since approximately 1996. Suncoast perceived Mr. McMahon as having a disability, based on his repeated assertions that he was disabled. In November 2008, Mr. McMahon filed a complaint with the Better Business Bureau of West Florida, Inc. (BBB), alleging that Suncoast was discriminating against him by not accommodating his communication disability. The BBB investigated and found that Suncoast had blocked access to Mr. McMahon's accounts because he was delinquent on a loan. The BBB contacted Suncoast concerning the complaint, and Suncoast provided Mr. McMahon a three-month payment due date extension on the loan, lowered his monthly payments, and unblocked his account. In January 2009, Mr. McMahon was delinquent on his loan. Again Suncoast tried to help Mr. McMahon with his delinquent account. At some point, Mr. McMahon's loan payments were put on automatic payments in order to reduce his delinquencies. Money would automatically be taken out of his account to make the monthly loan payments. Mr. McMahon had a direct deposit for his Social Security benefits payments. After the loan payments began being deducted automatically, Mr. McMahon canceled his direct deposits into the account from which his payments were automatically being deducted. Thus, there was no money in the account to make the monthly payments on his loan, and Mr. McMahon ceased making payments on the loan and again became delinquent on his loan. When one of Suncoast's members becomes overdrawn with regards to either a checking or savings account or credit card, or is delinquent in making payments on any credit card or loan obligation, that member loses access to his or her services, including use of all internet services, ATM cards, ATM machines, credit cards, and debit cards. The member would also be unable to access his or her account balance or make deposits into overdrawn accounts if the member attempted to make a deposit via ATM, as those services are suspended. These restrictions are typically automatically placed upon the accounts of any member with a delinquent loan account after 60 days of delinquency, and within 30 days of any overdrawn share draft account. Any member with a delinquent or overdrawn account, where services were suspended would be prevented from applying for a mortgage loan. If the member contacted Suncoast staff to apply for a mortgage loan or to utilize any other services, the member would be directed to the loss mitigation section of Suncoast, and loss mitigation would attempt to collect the debt or rectify the delinquency. Because Mr. McMahon again became delinquent on his loan payments after stopping the direct deposits, his accounts were restricted, meaning that he could not access the accounts. Mr. McMahon began a campaign of making repeated calls to Suncoast, screaming and yelling at Suncoast representatives, talking over the representatives, making vulgar statements, and using profanity. Mr. McMahon attributes his behavior to his communication disability and requested on numerous occasions that Suncoast accommodate his disability with "patience and understanding." A note was placed in the loss mitigation's note system and in Suncoast's host system, so that all employees of Suncoast who were working with Mr. McMahon could see and accommodate his request for patience and understanding. Suncoast representatives did provide Mr. McMahon with an abundance of patience and understanding. However, nothing seemed to appease Mr. McMahon, and his repeated calls were unproductive. Because of the repeated nature of Mr. McMahon's calls and his behavior during the telephone calls, there were numerous complaints by Suncoast's representatives to management. Jacqueline Gilbert (Ms. Gilbert), vice president of loss mitigation, determined that in order to protect Suncoast's representatives from Mr. McMahon's harassing behavior that all calls should be directed to her; Linda Fales (Ms. Fales), vice president of risk management, cardholder disputes, and DSA compliance for Suncoast; or Ben Felder (Mr. Felder), Suncoast's general counsel. Suncoast's representatives were advised that Mr. McMahon's calls should be transferred to Ms. Gilbert, Ms. Fales, or Mr. Felder. When the representatives would tell Mr. McMahon that they could not help him and that his call would have to be transferred, Mr. McMahon was verbally abusive to the representatives. Many times, if Mr. McMahon was going to be transferred, he would hang up and call right back to speak with a different representative. Sometimes, Mr. McMahon would call and hang up when a representative answered the call. At different times, Ms. Gilbert, Ms. Fales, and Mr. Felder talked with Mr. McMahon to attempt to discuss the reasons that his account was restricted. However, they had little success in communicating with Mr. McMahon because of his behavior. Although Mr. Felder was not able to service Mr. McMahon's account, he decided to handle all Mr. McMahon's requests and assign any work to be done to the appropriate employee because Mr. McMahon's behavior toward Ms. Gilbert and other Suncoast employees was unacceptable. Mr. McMahon did not make any loan payments between May 2009 and August 2009. During this same time period, Mr. McMahon's VISA credit card was well overdrawn. Carolyn Stepp (Ms. Stepp) had cosigned on Mr. McMahon's loan. On or about September 4, 2009, Suncoast exercised its "right of offset" and used funds in both Mr. McMahon's and Ms. Stepp's accounts to pay off the loan. There was still an outstanding balance of $1,046.86 on his VISA credit card. On September 10 and 14, 2009, Mr. McMahon asked to apply for a mortgage loan by telephone. He was not sure that Suncoast would give him a loan because of his delinquent accounts, but he felt that he should have the opportunity to apply because the loan had been satisfied when Suncoast exercised its right of offset. Although the loan was satisfied, Mr. McMahon still had an outstanding balance on his VISA credit card, which he had not been able to use for several months because his accounts had been restricted. He was advised that he would have to contact Mr. Felder to discuss the status of his account. On September 11, 2009, Mr. Felder and Mr. McMahon discussed his account. Part of the discussion concerned Suncoast's writing off Mr. McMahon's loan and VISA credit card balance, returning the offset amounts to Mr. McMahon's and Ms. Stepp's accounts, disbursing the remaining amounts in Mr. McMahon's account to him, and closing Mr. McMahon's accounts. At the conclusion of the conversation, Mr. Felder understood that Mr. McMahon was in favor of this solution and began to take steps to accomplish the tasks. Mr. Felder advised Mr. McMahon by telephone on September 17, 2009, that the tasks had been completed and that Mr. McMahon's accounts with Suncoast were closed, meaning that services at Suncoast were terminated and that Mr. McMahon's access to information was no longer available. Mr. Felder followed up the telephone conversation with a letter dated September 17, 2009, confirming the telephone conversation. Individuals who are not members of Suncoast are not qualified to apply for a mortgage loan with Suncoast. At the time that Mr. McMahon applied for a mortgage loan on September 14, 2009, his accounts at Suncoast were in the process of being closed. Mr. McMahon's requests to apply for a mortgage with Suncoast were not denied because Mr. McMahon was disabled. They were denied because Mr. McMahon had various account delinquencies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Suncoast did not commit an unlawful housing practice and dismissing Mr. McMahon's Petition. DONE AND ENTERED this 27th day of April, 2011, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 27th day of April, 2011.
