The Issue Whether Respondent engaged in conduct proscribed by the Insurance Code as is particularly set forth in the Administrative Complaint filed December 7, 1993.
Findings Of Fact During times material, Respondent, Nelson Speer Benzing, was licensed with Petitioner, Department of Insurance and Treasurer, as a life insurance and as a life and health insurance agent. During times material, Respondent was an employee of U.S. Savings Trust Management (herein USSTM). During times material, Respondent was never appointed with Petitioner to represent Wisconsin National Life Insurance Company (herein Wisconsin). However, Respondent did attend a workshop sponsored by Wisconsin. At some time prior to March 5, 1992, Respondent met with George Cantonis, President of Mega Manufacturing, Inc. (herein Mega) in order to obtain Cantonis' permission to make a sales presentation to Mega's employees. Cantonis granted Respondent permission to make a sales presentation to Mega's employees. On March 5, 1992, Respondent made a sales presentation to Mega's employees. The purpose of said presentation was to enroll the employees of Mega in a "savings plan" offered by USSTM. The presentation lasted approximately 15- 30 minutes. Employees were told that the plan, as presented, incorporated an insurance savings plan which had a "liquid" component as well as a long term savings component. At no time during this sales presentation did Respondent explain to employees of Mega that he was a licensed life insurance agent. During the course of his presentation, Respondent described USSTM's product variously as an "insurance saving plan", as an "investment in insurance companies" and as a "retirement savings plan". At no time during the presentation did Respondent specifically state that he was selling life insurance. At the conclusion of the presentation, Respondent enrolled all interested employees in USSTM's plan. During the enrollment procedure, Respondent told the employees to complete portions of at least three documents which included a form entitled "Employee History", a Wisconsin's life insurance application, and an employee payroll deduction authorization. Cantonis enrolled through the above procedure and signed a blank Wisconsin National Life Insurance application. Subsequent to the group sales presentation, Respondent made a similar presentation to Tina Netherton, Mega's office manager, who was working in the office and answering the telephone. At the conclusion of the presentation to Netherton, she enrolled in the plan and also signed a blank Wisconsin National Life Insurance application pursuant to instructions from Respondent. Both Netherton and Cantonis believed that the "savings plan" consisted of both a short term "liquid cash element and a long term investment". Neither were aware that they had purchased life insurance. Both Netherton and Cantonis had, in their opinion, adequate life insurance at the time of Respondent's sales presentation, and would not have purchased additional life insurance if they had been told (by Respondent) that they were purchasing life insurance. Both Netherton and Cantonis executed beneficiary designations on their belief that such was needed so that disbursements, if any, could be made to their designee in the event of their death. Approximately three weeks after enrollment, Netherton and Cantonis received brochures from USSTM which acknowledged their enrollment and detailed the benefits of the "savings plan". The brochure advised that Netherton and Cantonis had enrolled in an insurance "savings plan" and failed to state that they had purchased life insurance. Cantonis and Netherton attempted to withdraw funds from the liquid portion of the plan and were unable to do so. Four to five months after their enrollment, Cantonis and Netherton received life insurance policies from Wisconsin. Pursuant to the insurance applications, Cantonis and Netherton were issued Wisconsin life insurance policy numbers L00566485 and L00566483, respectively. Cantonis and Netherton maintained their Wisconsin policies in order to realize some gain from their overall loss in dealing with Respondent and USSTM. At the time that Respondent made his presentation to Mega's employees and officials, he had never before made sales presentations in order to enroll employees in plans offered by USSTM. Respondent's general manager, Vincent Radcliff, was the agent of record of Wisconsin. The insurance application and policies issued to Cantonis and Netherton were signed by an agent other than Respondent. Respondent's supervisor, Vincent A. Radcliff, III, was disciplined by Petitioner and Respondent cooperated with the Petitioner in investigating the complaint allegations filed against his supervisor, Radcliff. Respondent was first licensed by Petitioner on November 15, 1989. Respondent has not been the subject of any prior disciplinary actions by Petitioner.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Petitioner enter a Final Order suspending Respondent's life and health insurance licenses for a period of three (3) months. It is further RECOMMENDED that Petitioner order that Respondent engage in continuing education respecting the manner and means of soliciting on behalf of insurance companies, and to the extent that he completes the required courses within an acceptable time frame, that the suspension be suspended pending the outcome of Respondent's satisfactory completion of such continuing education courses. 1/ RECOMMENDED this 1st day of July, 1994, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 1st day of July, 1994.
The Issue The issue to be resolved in this proceeding concerns whether the Respondent violated various provisions of the Florida Insurance Code, as alleged in the Amended Administrative Complaint, and if so, what penalty, if any, is warranted.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with regulating and licensing the entry of insurance agents into the profession of insurance and with regulating the practice of agents and other insurance professionals already licensed by the State of Florida. The Respondent, at all times pertinent hereto, was and is licensed by the State of Florida as a non-resident life and health insurance agent. The Respondent procured applications for life insurance to be issued from Pacific to the 30 named individuals and entities set forth in the Amended Administrative Complaint in its 25 counts. Pacific was not authorized to transact insurance business in the State of Florida because the company was not yet licensed. However, it was in the process of becoming licensed and licensure was imminent. The company Regional Director, C. Manley Denton, and other company officials, when they recruited the Respondent to sell insurance policies in Florida, assured him that licensure was imminent, that there was no impediment to finalization of the licensure procedures in the very near future, and that the Respondent could legally obtain life insurance policy applications and sell policies in Florida if he took the applications and dated them in and from his Tulsa, Oklahoma, office. He was assured that this procedure would render his activities legal. In reliance on these representations by officials of Pacific, the Respondent undertook to and did obtain the applications for, and sell the insurance policies, referenced above and in the Amended Administrative Complaint. The Respondent, for many years, has transacted insurance business as a general agent of life and health insurance in Oklahoma and in Florida. He is a resident of both states, spending part of each year in each state. Many of the policyholders referenced above and in the Amended Administrative Complaint were clients of the Respondent, who had already had other insurance policies issued by him through companies he represents. In the particular instances involved in this proceeding, many of these clients had been policyholders of the First Capital Life Insurance Company, which had experienced financial difficulties and gone into receivership. Because of his policyholders' concern and his own concern about the possibility of the future inability to pay claims by the company in receivership, the affected clients and the Respondent were desirous of replacing those policies with policies in a different and sounder insurance company. This desire dovetailed neatly with the desire by the executives at Pacific to obtain a large block of insurance policy business in Florida and in other states in the mainland United States. This desire by Pacific executives was due to a recent merger of that company with the Hawaiian Life Insurance Company, a company which was owned by Meiji Mutual Life of Tokyo Japan (Meiji). The resulting merged company, Pacific, was owned by Meiji. The executives at Pacific, which had historically been headquartered in San Jose, California, desired to continue to maintain the company domicile and their own personal residences in California and avoid having to relocate to Hawaii. This was the reason they desired to secure a large block of insurance business very rapidly in order to enhance the sales record of the "stateside branch" of the company. They believed that this would insure that their relocation would not have to be accomplished. With this interest in the forefront of their plans, the executives of Pacific began to search for the best insurance agents in the nation who have a record of successfully writing large volumes of life insurance policy business. The Respondent is such an insurance agent. He had recently achieved a nationally-recognized ranking as one of the highest volume life insurance producer agents in the country. Because the Respondent was desirous of placing a high-dollar volume of life insurance policies for the clients referenced above, who had had policies in the financially-troubled First Capital Life Insurance Company, the Respondent agreed, at the behest of the officials of Pacific, to attempt to write a large block of life insurance business in the State of Florida. The Respondent is a well-respected general life insurance and health insurance agent. He is widely known throughout the insurance profession and industry, throughout the United States, as an ethical, competent and successful life insurance policy producer. He has no blemish on his licensure and practice record as an agent, throughout the approximate 40 years he has engaged in the profession. When the Respondent obtained the insurance policy applications and policies at issue in this proceeding, he engaged in one course of conduct. That is, he contacted the clients and obtained their applications and arranged for the sale of the insurance policy contracts to them, as either new policies and clients, or as replacement policies for his existing clients, as the case might be. He engaged in this essentially-identical transaction with all 30 of these policyholders, in the genuine, good-faith belief that he was legally writing insurance policy business in the State of Florida based upon the circumstances related to him by officials of Pacific, upon which he relied. He candidly acknowledges, through counsel, that, in so relying, he knew that the company was not actually licensed in the State of Florida, but that that eventuality was imminent in the very near future, and that based upon the method the company assured him of writing the policies through the Tulsa, Oklahoma, office, he would be obtaining and transacting this business in a legally acceptable way. He also candidly acknowledges that, in fact, he understands, from his contact with the Department since that time, this was not the case and that he was writing the business for a company not legally authorized to do business in the State of Florida. The Respondent has freely admitted these above-found facts and does not dispute that he was in violation of the portion of the charges that do not depend on intent. He has established, however, through the exhibits admitted as explanatory hearsay and the agreed-upon proffer of his counsel, that the transactions at issue, all of which were the result of one essentially-identical course of conduct, were accomplished with no intent to defraud the policyholders, the company, or the Florida Department of Insurance. There was no willful, dishonest or deceitful intent by the Respondent during the course of his engagement in these transactions. There was no such willful wrongful intent in the course of his contact and relations with the company, those policyholders, or the Department of Insurance since that time. No policyholder or company suffered any financial detriment as a result of the Respondent's conduct, nor did any insurance coverage lapse at any time. Although there were some 30 policyholders who were sold insurance by the Respondent, as the agent for a company not actually licensed in the State of Florida, that circumstance had no effect on the validity of the policy coverages involved and there were no actual "victims" of the Respondent's conduct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Petitioner, Department of Insurance, finding the Respondent, Wayne Harland Creasy, guilty of a violation of Section 626.901(1), Florida Statutes, in the manner found and concluded above and that a penalty of $3,000.00 be imposed, together with the award of $500.00 in attorney's fees. DONE AND ENTERED this 1st day of April, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, 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 1st day of April, 1996. APPENDIX TO RECOMMENDED ORDER Petitioner's Proposed Findings of Fact 1-32. Accepted. Rejected, as constituting a conclusion of law and not a finding of fact. Accepted, in part, but subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted, in a technical sense, but not in the sense that any overt, intentional effort to circumvent Florida law was committed by the Respondent. Rather, it was a negligent failure to act in a legal way due to being misled by Pacific Guardian Life Insurance Company, Ltd. or its officers or employees. Accepted, as to the factual allegations of the Administrative Complaint, but not as to their legal import, and subordinate to the Hearing Officer's findings of fact on this subject matter. Respondent's Proposed Findings of Fact The Respondent's proposed findings of fact are not ruled upon or considered because they were not timely filed, being approximately one month out of time with no motion for extension of time, during the originally-set time period, being filed. Consequently, the Petitioner's motion to strike the Respondent's proposed findings of fact and conclusions of law is granted. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 C. Rabon Martin, Esquire Martin and Associates 403 South Cheyenne Avenue Tulsa, Oklahoma 74103 Bill Nelson, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Acting General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that all charges in Counts I and II against Respondent be DISMISSED. DONE AND ENTERED this 24th day of September, 1981, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 1981. COPIES FURNISHED: David A. Yon, Esquire 428-A Larson Building Tallahassee, Florida 32301 J. Charles Shores, Esquire 310 Southeast 13th Street Fort Lauderdale, Florida 33316 Mr. George Edison 2090 S.W. 29th Avenue Fort Lauderdale, Florida 33312
The Issue Whether Respondent, The Medical Escrow Society, Inc., violated Section 626.989(6), Florida Statutes, as alleged in the twenty-six counts of the Administrative Complaint issued by Petitioner, Department of Financial Services, on January 6, 2003; and If Respondent is found to have violated any of the twenty- six counts of the Administrative Complaint, whether any such violations were committed willfully or non-willfully.
Findings Of Fact Petitioner, the successor agency to the Department of Insurance, regulates the viatical industry operating in Florida pursuant to the section of the Insurance Code referred to as the Viatical Settlement Act, Part X, Chapter 626. Prior to enactment of the Viatical Settlement Act in 1996, Petitioner did not have jurisdiction to regulate viatical settlement transactions. Respondent is a Florida corporation which was and is licensed as a viatical settlement broker in Florida, as well as a number of other states. Respondent, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlement contracts between a viator resident, in this state or other states, and one or more viatical settlement providers, and did so at all times material hereto. Respondent is currently owned by Christopher Lane (Lane), who purchased the company from the prior owner in a transaction which was approved by Petitioner on November 6, 2001. Lane is the current president of Respondent. At all times material to the allegations of the Administrative Complaint, Lane neither owned nor controlled Respondent. At all times material to the allegations of the Administrative Complaint, Lane was an employee of Respondent, as a vice president who handled marketing and new client relations. Lane did not have any knowledge of the facts or circumstances giving rise to the allegations of the Administrative Complaint. Furthermore, under Lane's ownership and management, Respondent has adopted and filed with Petitioner an anti-fraud plan, pursuant to Section 626.99278, which was first enacted in 2000. In general, the business of viatical settlements involves the sale by a policyholder to an investor or group of investors of the policyholder's life insurance policy, prior to the policyholder's death, for an amount that is less than the face value of the policy. Viatical settlement transactions typically have been used by terminally ill individuals as a means to obtain cash prior to their death, which could be used for life-sustaining treatments or to relieve financial stress during their lifetime. Recently, viatical settlement transactions have also been marketed to elderly individuals who are healthy but may no longer need life insurance and who want to obtain money during their lifetime for any number of reasons, such as paying for health care. There are various categories of persons involved in a typical viatical settlement transaction. The policyholder who is selling a life insurance policy is referred to as a "viator." A viator is typically represented by a viatical settlement "broker" who represents the viator by obtaining quotes from potential purchasers of the viator's policy, called viatical settlement "providers." Viatical settlement providers, in turn, seek investors to fund the viatical settlement transactions. Viatical settlement brokers and providers are required to be licensed under the Viatical Settlement Act. As part of its duties under the Viatical Settlement Act, Petitioner issues licenses to viatical settlement brokers through its Bureau of Agents and Agencies. In each of the twenty-six counts of the Administrative Complaint, Petitioner has alleged that Respondent possessed a copy of an insurance policy application form, which when compared to information submitted on Respondent's forms, demonstrates evidence of a fraudulent insurance act committed by the particular viator. In that respect, paragraph 4 of the Administrative Complaint states as follows: Information available to the Department reflects that Medical Escrow has, from offices located in this state, offered or attempted to negotiate viatical settlement contracts between viators and one or more viatical settlement providers in the presence of circumstances whereby Medical Escrow knew, or in the exercise of reasonable diligence should have known or been caused to believe, that the underlying insurance policy had been procured through fraud, or dishonesty, or misrepresentations made by the viator on his application to the insurance company issuing the policy in question. Consequently, as a threshold matter Petitioner must prove that Respondent actually possessed the documents referenced in the Administrative Complaint. Petitioner's financial specialist, Janice S. Davis (Davis), testified that she obtained copies of the documents referenced in the twenty-six counts of the Administrative Complaint from a variety of sources as follows: (1) the documents referenced in Counts One and Eight were obtained by Petitioner in 1999 from an examination of a viatical settlement provider named Mutual Benefits Corporation; (2) The documents referenced in Counts Two, Three, Four, Five, Six, and Seven were obtained by Petitioner in 2000 in response to a document production request to a viatical settlement provider named Future First Financial Group; (3) the documents reference in Count Nine were obtained by Petitioner in 2002 from an examination of a viatical settlement provider named William Page & Associates; and (4) the documents referenced in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, Twenty, Twenty-one, Twenty-two, Twenty- three, Twenty-four, Twenty-five, and Twenty-six were obtained by Petitioner in 2000 from files which had been obtained from Respondent by execution of a search warrant by the Offices of Statewide Prosecution and Petitioner's Division of Insurance Fraud. With respect to the documents obtained from the first three sources-Mutual Benefits Corporation, Future First Financial Group, and William Page & Associates-Petitioner has failed to offer proof that the referenced documents were ever actually in the possession of Respondent. Although it may be reasonable to presume that the actual forms of Respondent were in the possession of Respondent at some point in connection with the referenced viatical settlement transactions, Petitioner has offered no testimony regarding how those records were maintained by the three viatical settlement providers. Moreover, Petitioner failed to offer any evidence that the insurance policy applications were ever in the possession of Respondent. Petitioner has offered no evidence upon which to make a finding that Respondent actually possessed the particular insurance policy applications which were obtained from the three viatical settlement providers. While Petitioner offered testimony from former employees of Respondent to the effect that Respondent obtained insurance policy applications from viators in general, such testimony does not establish that the particular insurance policy applications in the possession of the three viatical settlement providers were actually obtained by Respondent. None of Respondent's application forms referenced by Petitioner in the Administrative Complaint required submission of an insurance application. Because Petitioner has failed to offer any evidence that the particular insurance policy applications referenced in Counts One, Two, Three, Four, Five, Six, Seven, Eight, and Nine were ever actually possessed by Respondent, there is no basis upon which to make a finding of fact that Respondent should have reported to Petitioner anything set forth in such insurance policy applications. Petitioner may not penalize Respondent based upon a mere assumption that Respondent possessed the insurance policies referenced in those nine counts of the Administrative Complaint. With respect to the documents referenced by Petitioner in Counts Ten through Twenty-six, Davis testified that copies of those documents were obtained from Respondent's files which had been obtained by the Office of Statewide Prosecution and the Division of Insurance Fraud through execution of a search warrant in 2000. Although Davis had no involvement in or personal knowledge concerning the circumstances surrounding the execution of that search warrant, this evidence is sufficient to substantiate its allegations that Respondent actually possessed the insurance applications referenced by Petitioner in Counts Ten through Twenty-six of the Administrative Complaint in its files. In Count Ten of the Administrative Complaint, Viator Eight submitted to Philadelphia Life Insurance Company an insurance policy application, dated March 21, 1996, which represented that Viator Eight had not been treated for or diagnosed with Acquired Immune Deficiency Syndrome (AIDS) within the last ten years. Viator Eight submitted to Respondent an application form, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989. The question on Respondent's application asks for the date of first diagnosis of the "current medical condition" which is described in the preceding question. While Viator Eight's description of his "current medical condition" on Respondent's application includes "AIDS," it also includes a "history of Hodgekins Lymphoma" as well as other conditions. The information on Respondent's application does not specify whether the 1989 diagnosis was for AIDS or the other disorders listed as Viator Eight's "current medical condition"; however, this information is sufficient to alert Respondent's employees that a fraudulent insurance act is being or has been committed and trigger the reporting requirement of the statute. In Count Eleven of the Administrative Complaint, Viator Eight submitted to Manhattan Life Insurance Company an insurance policy application, dated July 3, 1996, which represented that Viator Eight had not consulted with or been treated by any licensed physician or medical practitioner within the last five years and was in excellent health. Viator Eight submitted to Respondent an application, dated July 8, 1998, which represented that Viator Eight had first been diagnosed with AIDS in 1989 and was being attended by Dr. Ronald Wiewora. The "current medical condition" described by Viator Eight in Respondent's application form states a diagnosis in 1989 of AIDS and Hodgekins Lymphoma, and "recent difficulties with protein inhibitors . . ." This is sufficient information to require the reporting of potential fraud under the statute. In Count Twelve of the Administrative Complaint, Viator Nine submitted to Time Insurance Company an insurance policy application, dated August 6, 1996, which represented that Viator Nine had not had a physical examination, diagnostic test, medical treatment, health impairment, or been advised to undergo any treatment within the past five years. However, the application also represented that he had not been diagnosed with AIDS or AIDS-related complex (ARC) or received treatment for it within the past ten years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed Human Immunodeficiency Virus (HIV) positive in February 1991. This was sufficient information to require the reporting of potential fraud under the statute. In Count Thirteen of the Administrative Complaint, Viator Nine submitted to Jackson National Life Insurance Company an insurance policy application, dated March 5, 1992, which represented that Viator Nine had not been treated by a physician or other medical practitioner, or been a patient in a clinic or medical facility, or been diagnosed or treated for AIDS or any other immunological disorder, within the past five years. Viator Nine submitted to Respondent an application, dated August 15, 1997, which represented that Viator Nine had first been diagnosed with AIDS in February 1991 and was not presently employed. This was sufficient information to require the reporting of potential fraud under the statute. In Count Fourteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, date March 21, 1993, which represented that within the last ten years Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991. Although the insurance application did not specifically request disclosure of a diagnosis of HIV positive and did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent to report the potential for fraud under the statute and to require that this information be reported. In Count Fifteen of the Administrative Complaint, Viator Nine submitted to Interstate Assurance Company an insurance policy application, dated March 4, 1994, which represented that, within the last ten years, Viator Nine had not been diagnosed or treated by a member of the medical profession for an immune system disorder and that within the last five years he had not been hospitalized or treated by a member of the medical profession or consulted a physician or been prescribed any medication. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS and had first been diagnosed HIV positive in February 1991 and that Dr. Leslie Diaz represented on Respondent's "Physician's Questionnaire-HIV Disease" form, dated, September 4, 1997, that Viator Nine had the HIV disease and a life expectancy of five to ten years. Although the insurance application did not define the term "immune system disorder" to include a diagnosis of HIV positive, Viator Nine's disclosure on Respondent's application of a diagnosis of HIV positive was sufficient to alert an employee of Respondent of the need to report the potential for fraud under the statute. In Count Sixteen of the Administrative Complaint, Viator Nine submitted to Security Mutual Life Insurance Company an insurance policy application, dated November 4, 1997, which represented that Viator Nine had not been treated for or had any known indication of AIDS, ARC, or tested positive for HIV antibodies. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. This is sufficient to trigger the reporting requirement of the statute. In Count Seventeen of the Administrative Complaint, the evidence submitted indicated that Viator Nine submitted to Columbia Universal Life Insurance Company an insurance policy application for a face amount coverage of $70,000, dated August 28, 1998, which represented that Viator Nine had not been diagnosed with any immune deficiency disease. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive February 1991, and was being treated by Dr. Leslie Diaz. On Respondent's form submitted in 1997, Viator Nine indicated that he had a preexisting life insurance policy, in the face amount of $200,000, with Columbia Universal Life issued on December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Columbia Universal Life application, dated August 28, 1998, that would trigger the necessity of an employee of Respondent to make a report. In Count Eighteen of the Administrative Complaint, Viator Nine submitted to Philadelphia Life Insurance Company an insurance policy application, dated August 28, 1998, which represented that Viator Nine had not been told that he had tested positive for exposure to the HIV infection and that to the best of his knowledge, his health was not impaired in any way. Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Respondent's application relates to an individual life policy issued by the Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the Philadelphia Life Insurance Company policy application, dated August 28, 1998. Therefore, there was no obligation to report. In Count Nineteen of the Administrative Complaint, Viator Nine submitted to Respondent an application, dated August 15, 1997, which stated that Viator Nine had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Nine submitted to United Home Life Insurance Company an insurance policy application, dated April 23, 1999, which represented that within the last ten years Viator Nine had not tested positive for exposure to the HIV infection, had not tested positive for antibodies to the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent's application relates to an individual life policy issued by Columbus Mutual Insurance Company, in the face amount of $200,000, dated December 28, 1985. There is no apparent connection between Respondent's application, dated August 15, 1997, and the United Home policy application, dated April 23, 1999. Therefore, there was no obligation to report. In Count Twenty of the Administrative Complaint, Viator Ten submitted to Respondent an application form, dated August 15, 1997, which represented that Viator Ten had AIDS, had first been diagnosed HIV positive in February 1991, and was being treated by Dr. Leslie Diaz. Viator Ten submitted to Federal Home Life Insurance Company an insurance policy application, dated October 20, 1997, which represented that within the last ten years Viator Ten had not tested positive for exposure to the AIDS virus, had not been treated for the AIDS virus, and had not consulted a medical practitioner within the last five years. Respondent withheld this insurance policy from sale for a period of time because Respondent knew that Viator Ten had not yet submitted the application for the policy to the life insurance company and that it contained false information. Respondent had an obligation to report these discrepancies. In Count Twenty-one of the Administrative Complaint, Viator Eleven submitted to Manhattan Life Insurance Company an insurance policy application, dated April 25, 1996, which represented that Viator Eleven had not consulted, been examined or treated by any licensed physician or medical practitioner within the last five years. Viator Eleven submitted to Respondent an application, dated April 14, 1998, in the attachments it stated that Viator Eleven had first been diagnosed HIV positive in September 1991, and as of November 1995 had been diagnosed with AIDS and had received treatment from a physician since that time. Although the insurance application does not request any information regarding any diagnosis or treatment for AIDS or HIV, Viator Eleven stated that he did not have a family physician, had not seen a physician in the past, and was not taking any medication. This was obviously false, and Respondent should have reported it. In Count Twenty-two of the Administrative Complaint, Viator Twelve submitted to Southern Farm Bureau Life Insurance Company an insurance policy application, dated July 1, 1996, which represented that Viator Twelve had not been told that he had or had been treated for an immune deficiency disorder, AIDS, ARC, or had test results indicating exposure to the HIV virus. Viator Twelve submitted to Respondent an application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-three of the Administrative Complaint, Viator Twelve submitted to Primerica Life Insurance Company an insurance policy application, dated July 30, 1996, which represented that Viator Twelve had not within the past ten years been diagnosed or treated for AIDS or any immune deficiency disorder or tested positive for exposure to the HIV virus. Viator Twelve submitted to Respondent and application, dated December 3, 1996, which represented that Viator Twelve had "asymptomatic HIV" and had first been diagnosed in 1991. This was sufficient to trigger the reporting requirement. In Count Twenty-four of the Administrative Complaint, Viator Thirteen submitted to Nationwide Life Insurance Company an insurance policy application, dated July 25, 1997, which represented that Viator Thirteen had not within the past five years been diagnosed or treated for AIDS, ARC, or any other immune deficiency syndrome and had not been examined or treated by any physician or medical practitioner, or by any hospital, clinic, or medical facility not previously mentioned on the application. Viator Thirteen submitted to Respondent an application, dated January 12, 1998, which represented that Viator Thirteen had been diagnosed HIV positive in 1992 and had been diagnosed with AIDS in 1994 and that information supplied by Viator Thirteen's physician on Respondent's "Physician's Questionnaire-HIV Disease" form confirmed those representations. Although Respondent withheld Viator Thirteen's policy from sale for a period of time, Respondent's personnel noted that Viator Thirteen had lied on the application. Respondent failed to report this fact to Petitioner. In Count Twenty-five of the Administrative Complaint, Viator Three submitted to Respondent an application, dated April 11, 1995, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS in March 1995. Viator Three submitted to Allstate Life Insurance Company an insurance policy application, dated July 31, 1995, which represented that Viator Three had never been diagnosed with or treated for AIDS, ARC, or an AIDS-related condition. Since the application for the life insurance policy and the application to Respondent were submitted prior to the enactment of the Viatical Settlement Act, Respondent had no duty to report possible fraud in this instance, since it occurred prior to July 1, 1996, the effective date for the statute. In Count Twenty-six of the Administrative Complaint, Viator Three submitted to Respondent an application, dated December 3, 1996, which represented that Viator Three had been diagnosed HIV positive in May 1986 and had been diagnosed with AIDS on September 4, 1996, and that on Respondent's "Physician's Questionnaire-HIV Disease" form, dated May 18, 1995, submitted by Dr. Carroll L. Cook, confirmed those representations. Viator Three submitted to Nationwide Life Insurance Company an insurance policy application, dated October 20, 1995, which represented that Viator Three had not, within the last five years, been diagnosed with or treated for AIDS, ARC, or any other immune deficiency disorder. This is sufficient to trigger the reporting requirement. The evidence is clear and convincing, as to Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint that Respondent, in the performance of its role as a viatical settlement broker, routinely received from viators and reviewed written information about their medical condition, particularly regarding the presence of an HIV/AIDS diagnosis, that directly and materially contradicted information supplied by that same viator on one or more written and corresponding insurance policy applications, also routinely received and reviewed by Respondent. The same viators who represented on the relevant life insurance policy applications that they did not have HIV or AIDS represented on viatical applications that they did have that condition during the same material times. This is especially true, wherein Viator Nine submitted eight applications to Respondent on the same date, August 15, 1997. In each instance, the contrast is so great that any reasonable person, especially an employee of Respondent in the viatical industry, would have to know or believe that the life insurance policy being offered for sale through Respondent had been obtained through misrepresentations made by the viator on or in support of the insurance policy application. Respondent not only failed to report those circumstances to Petitioner, but proceeded to offer many of those policies for sale to viatical settlement providers. The evidence is clear and convincing that Respondent, during the relevant time period, had no company policy requiring or even acknowledging an obligation to report such matters to Petitioner and that the usual and prevalent custom of Respondent was to send the applications to providers without comment. Only after 1999 did Respondent instruct its employees to direct such suspicious viatical applications to the attention of a company vice-president. Even then, no reports were filed with Petitioner. Thus, Respondent's admitted failure to report cannot be ascribed to the negligence or inattention of a company officer or employee to his or her duty to fulfill a company policy requiring such reports, since there was no such policy. It is clear that Respondent simply ignored the reporting requirements in the statute and, in most instances, offered the tainted viatical applications/insurance policies for sale to viatical settlement providers without comment. Accordingly, it is found that any and all admitted failures to report the circumstances alleged in Counts Ten through Sixteen, Twenty through Twenty-four, and Twenty-six in the Administrative Complaint were willful.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order as follows: Dismissing Counts One through Nine, Seventeen, Eighteen, Nineteen, and Twenty-five. Finding Respondent guilty of violating Section 626.989(6) in Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Twenty, Twenty-one, Twenty-two, Twenty-three, Twenty-four, and Twenty-six of the Administrative Complaint; and In conformity with the Joint Pre-hearing Stipulation and the earlier, seven-page stipulation of the parties, finding the violations in question willful, and imposing an administrative fine in the amount of $30,000 and subjecting Respondent to two years of probation under the terms and conditions set forth in the seven-page stipulation, paragraph 5. DONE AND ENTERED this 7th day of November, 2003, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 7th day of November, 2003. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thomas J. Maida, Esquire N. Wes Strickland, Esquire Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues for determination in this case are whether Respondent violated the law as charged by Petitioner in its Administrative Complaint, and, if so, what discipline is appropriate.
Findings Of Fact Petitioner is the state agency with the statutory authority and duty to license and regulate insurance agents in Florida. Respondent has been licensed as a life including variable annuity and health agent, life insurance agent, and life and health insurance agent. At the time of the events which are the subject of this case, Respondent held the aforementioned licenses and was the president of Seniors Financial International, Inc., an insurance agency located in Vero Beach. Storfer is licensed to sell fixed annuities for most of the insurance companies licensed to transact business in the State of Florida, including Allianz, IMG, Aviva, North American, Old Mutual, and American Equity. Storfer keeps himself abreast of the suitability requirements and features of annuities by regularly attending and participating in the quarterly, if not monthly, training presented by insurance companies. The companies also provide seminars at Storfer's office. He goes to their offices or views webinars that can last two-to-three hours. The companies also offer assistance by providing people in-house to answer questions about their products. Even though Storfer could have the option for each client to submit cases to the companies for the company to help prepare and work to find a suitable product for each customer/individual, there was no testimony he did so with the individuals in this case. He also testified that he understood and was knowledgeable about all the products sold, relating to the three clients, from which the AC stems. Storfer regularly holds luncheon/dinner workshops and seminars at restaurants in and around Vero Beach that focus on financial issues. He invites the attendees by mailing them a flier. Each attendee receives a free meal while listening to Storfer's financial presentation. During the luncheons, Storfer does not offer any investment products for sale. However, attendees are asked to complete a "Senior Financial Survival Workshop Evaluation Form" and are invited to request an in- office appointment if they are interested in discussing specific investment products. The form elicits information including family background, financial history, current expenses, and tax liabilities. The attendees are asked to put "yes" or "no" at the top of the form. If an attendee puts yes, then a follow-up appointment is scheduled in Storfer's office. Storfer's wife picks up the forms and sets the appointment. Storfer's procedures at the appointment typically start by filling out a client profile. He goes through the form with the client and asks the client questions to obtain the details regarding age, contact information, beneficiaries, health, estate, plans for money, rate of return, percentage of life saving willing to lose, risk tolerance, liquidity, income needed form investment accounts, what needs to be fixed, income, assets and liability inventory, life insurance, and long-term care insurance/disability insurance. After completing the profile, Storfer reviews the documents that he has requested the client bring in to the appointment. This includes tax returns, an investment portfolio, and list of how much money they have and where it is, including life insurance or long-term care. There is no fee for the appointment. Typically, after the first meeting, Storfer reviews the documents and the client returns for a second appointment. At the client's next appointment, Storfer has reviewed everything and put together a product that he wants to sell the client. He also provides an illustration of the product demonstrating the product's growth and how it would work. If the client decides to go forward and invest in one of the products Storfer has recommended, Storfer gets an application for the product and his wife fills it out.2 After the application has been completed, Storfer's office procedure is to submit it to the company the same day to await approval. Once the application has been approved, then the policy is funded either by transferring from another type of product (direct transfer rollover) or by a 1035 exchange. The policy can not be issued if not funded. Once the policy is funded and issued, the company mails the policy and the documents for the client to sign to Storfer, as the agent to deliver. Storfer's operating procedure is to call the client to set an appointment for policy delivery. The appointment's purpose is to go over the policy with the client, including the amount of money that went into the policy, where the funds came from and what the policy will do for them, including liquidation and charges. Storfer keeps documents which he refers to as client notes in each client's file. After client meetings, he uses a service to dictate what he wants as a summary of the client meeting. The service types up what he says and emails it back to him. It is printed, reviewed, and scanned into his system. Alberto and Celina Grubicy Celina Grubicy ("C.G."), a native of Argentina, was born on April 6, 1940. She was married at age 19 to Alberto Grubicy ("A.G."), who was also born and raised in Argentina. They moved to the United States in 1965; English is their second language. The Grubicys opened a repair shop in New York in 1964. Then, they went in the construction business in Connecticut for about ten years before retiring to Florida. In both successful businesses, C.G. handled the paper work and kept the books. The Grubicys retired in the early 90's and purchased a condominium in Florida, where they now reside. On February 5, 2007, the Grubicys attended Respondent's luncheon seminar at Carrabbas Italian Grill in Vero Beach. At the seminar, the Grubicys listened to the presentation and completed the seminar evaluation form confirming an estate in excess of one million dollars. At the time, A.G. was 65 years old and C.G. was 66 years old. The Grubicys thought the presentation sounded good, so they made an appointment to see Storfer in his office. Prior to any interaction with Storfer, C.G. was the owner of a Transamerica variable annuity with a contract date of September 23, 2002, an AXA Equitable variable annuity with a contract date of June 17, 2005, and a Hartford variable annuity with a contract date of July 25, 2005. Each of the annuities was doing well and approaching dates when surrender charges would no longer apply. The Grubicys met with Storfer on February 7, 2007. At the meeting, the Grubicys informed Respondent that their investment goals were two-fold. They explained that their primary financial goal was safety. Their plan included selling their residential building complex from which they were currently collecting rental payments for income.3 Their goal in five years was to have an investment that would provide their income after they sold the property.4 The Grubicys wanted an investment to replace the rental money that they would no longer receive after the sale of their building. The Grubicys also stressed to Storfer that the security of the investment was a paramount concern. C.G. wanted out of variable annuities because she was concerned about the stock market risk and did not want annuitization to take place. At their second meeting on February 12, 2007, knowing the Grubicys' goals, Storfer misrepresented the advantages for the product he recommended with a graphic illustration on a blackboard. He showed the MasterDex annuity with Allianz in such a fashion, that, when the market advanced in relation to a base line, the return on the annuity would also advance, up to a three percent cap per month on the gain, but that when the market fell below the base line, there would be a zero percent return, but never a loss of the gain made in the previous months, or a loss of invested capital. Storfer recommended and proceeded to sell the Grubicys the Allianz MasterDex 10 ("MasterDex") policy, being fully aware of the Grubicys' goals. He insisted that was the way for the Grubicys to invest because they would never lose their principal compared to the other annuities that have high risk plus excess fees. Storfer did not provide the Grubicys any other investment option. The annuity was a long-term investment that provided for surrender penalties on a declining scale for fifteen years even though Storfer told the Grubicys that the Allianz annuity would mature in five years from the day it started.5 Storfer assured the Grubicys that they were not going to lose anything by investing in the MasterDex annuity with Allianz. They were not accurately informed of the provisions in the contract by Storfer during the meeting nor did Storfer fully review the relevant terms and conditions, including the length of the policy.6 The Grubicys knew that when they surrendered the three variable annuities there would be surrender charges. However, Storfer told them that the product he was selling them had a 12 percent bonus that would offset the monetary lost from surrender penalties of the transferring funds.7 The Grubicys decided to follow Storfer's recommendation with his assurances that they wouldn't lose money, and they surrendered their three annuities to purchase two MasterDex annuities in excess of about one million dollars. After Storfer completed the numerous forms and documents, the Grubicys authorized the transfers of money to Allianz by way of assignment on or about March 2, 2007, and authorized him to buy the new policies. Storfer allocated 100 percent to the Standard & Poors ("S&P") 500 instead of allocating the total investment among three possible choices in smaller increments. Respondent's 100 percent allocation choice on the Supplemental Application contravenes both of the Grubicys' requests on each of their Liquidation Decision forms, which specifically state "the decision to liquidate . . . based solely on . . . desire to eliminate market risk and fees " The annuity product Storfer sold the Grubicys provided for three different values: annuitization value, cash surrender value, and guaranteed minimum value. The Statement of Understanding provided: * * * Annuitization value The annuitization value equals the premium you pay into the contract, plus a 10% premium bonus and any annual indexed increases (which we call indexed interest) and/or fixed interest earned. This will usually be your contract's highest value. Withdrawals will decrease your contract's annuitization value. Cash surrender value The cash surrender value is equal to 87.5% of premium paid (minus any withdrawals) accumulated at 1.5 percent interest compounded annually. The cash surrender value does not receive premium bonuses or indexed interest. The cash surrender value will never be less than the guaranteed minimum value (which we define below). The cash surrender value will be paid if you choose to receive a) annuity payments over a period of less than 10 years for Annuity Option D and five years for Alternate Annuity option IV, or over a period of less than 10 years for all other annuity options, b) annuity payments before the end of the first year for Alternate Annuity Option IV or before the end of the fifth policy year for all other annuity options, or c) a full surrender at any time. Guaranteed minimum value. The guaranteed minimum value will generally be your lowest contract value. The guaranteed minimum value equals 87 5% of premium submitted, minus any withdrawals. The guaranteed minimum value grows at an annual interest rate that will be no less than 1% and no greater than 3%. (emphasis in original) The Grubicys signed the numerous forms and documents without reading them because they trusted Storfer and he sounded as if he knew what he was talking about. They relied on his advice. Storfer sold the Grubicys a policy completely different from what he had described.8 The monthly cap was opposite of the way Storfer explained it. A description of the "monthly cap" stated: Although there is a monthly cap on positive monthly returns, there is no established limit on negative monthly returns. This means that a large decrease in one month could negate several monthly increases. Actual annual indexed interest may be lower (or zero) if the market index declines from one month anniversary to the next, even if the market index experienced an overall gain for the year. (emphasis in original) The Grubicys later learned that the advice Storfer provided them regarding how the MasterDex annuity worked was erroneous. Respondent provided them misleading representations regarding the sale of the annuity products. On April 5, 2007, C.G. received her annuity contract for a MasterDex annuity for approximately $1,123,000, and she executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. On April 12, 2007, A.G.'s annuity contract for a MasterDex annuity for approximately $35,000 was delivered and he executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. The sale of the Allianz annuities generated commissions of approximately $95,000.00 for Storfer or his agency, Senior Financial International, Inc. The Grubicys became concerned about the MasterDex product Storfer sold them while watching television at home one day, and seeing a class action lawsuit advertisement about their purchased product. They called Storfer immediately to discuss Allianz. He set up an appointment with the Grubicys to meet with him about their concerns. When Storfer met with the Grubicys, he assured them that they didn't need to change anything, their product was fine. He also informed them that their product was six percent up and not to worry because if the S&P 500 went down, they didn't have to worry because they had already made six percent. In May 2007, the Grubicys went to Connecticut and attended another investment seminar. Afterwards, they set up a meeting with the financial advisor, Mr. Ray ("Ray"). The Grubicys took their investment paperwork to Ray and he reviewed it. Ray explained how the MasterDex worked and called an Allianz customer service representative while they were in the office to further explain how the product worked. The Grubicys were informed that there was a monthly cap of three percent when it went up but no monthly cap on stock market losses. Such a description of the cap combined with the description in the contract support a finding that the MasterDex annuity did not meet the Grubicys' financial goals and was not a suitable investment for them. In particular, the Grubicys had been clear that they did not want to have any market risk. Subsequently, the Grubicys contacted Storfer again and questioned his declaration regarding the cap on stock market losses. Respondent continued to describe the crediting method incorrectly and told them Ray was just trying to sell them something. He insisted that the S&P 500 is the way he explained it earlier and that Ray's interpretation was wrong. Ray eventually sent the Grubicys an article from the Wall Street Journal, which they testified reemphasized that the investment worked completely different from what Storfer continued to tell them. The Grubicys requested a refund from Allianz. Approximately one year later, Allianz eventually set the contract aside and refunded the investment principal, surrender charges for the three annuities, and some interest. The evidence convinces the undersigned that Storfer knowingly made false representations of material facts regarding the MasterDex annuity and its downside cap. Kikuko West Kikuko West ("K.W."), a native of Japan, was born in 1933. She marrried a U.S. soldier and moved to the United States when she was 18 years old. Together they had four children. She is now married to Robert West ("R.W."). K.W.'s employment history started with her working in a bakery, then as a waitress in a Chinese restaurant, and her ultimately owning and operating a successful flower shop for over 30 years in West Warwick, Rhode Island. She sold it in 2006. K.W. sold her house in Rhode Island and used the money to invest in a Smith-Barney mutual fund and an AXA Equitable Life Insurance Company (AXA) annuity (contract # 304 649 121), which she purchased in June 30, 2004. West purchased a condominium in Florida and has been a permanent resident for the past five years. On January, 15, 2008, Robert and Kikuko West ("Wests") attended Respondent's seminar. They scheduled an appointment for January 23, 2008, but didn't show. They attended a second workshop on or about June 3, 2008, and scheduled a meeting for July 9, 2008, but didn't show. The Wests rescheduled their appointment with Storfer on August 4, 2008, and met with him in his office for the first time. Even though K.W.'s husband attended the meeting, the focus of the meeting was her finances. K.W. explained that their monthly income was $2,900 and their monthly living expenses were $2,100, but a majority of it came from her husband's pension so she was worried about income if he passed. She only received $600 a month in social security and wanted income in the future. She had $100,000 for emergencies in a money market account. K.W. also informed Storfer that when she dies she wants her four daughters and six grandchildren to inherit her money. K.W. wanted to stop receiving various statements from each of her numerous investment accounts and bundle her assets. She told Storfer that she wanted to keep everything that she had and would be happy with a rate of return of four or five percent. She emphasized she had zero risk tolerance. K.W. provided the following information for her asset/liability inventory: an AXA variable annuity(non- qualified) in the amount of about $119,589.58; mutual fund (non- qualified) of $253,289.55; IRA (qualified) $80,039.33; CDs (nonqualified) for $25,000 and $35,000; a Fidelity and SunTrust (nonqualified) totaling $40,000; and a Vanguard equaling $60,000. West explained that she didn't have life insurance but had prepaid funeral. Her husband had three life insurance policies. K.W. had a second meeting with Storfer on August 6, 2008. At that meeting, K.W. provided income tax and other paperwork to detail the stocks that she wanted consolidated into one statement.9 Storfer went over the financial illustrations and company profiles he had compiled as proposed investments. Unbeknowest to the Wests, Storfer's plan for restructuring K.W.'s reinvestments was to transfer funds from her variable annuity (approximately $215,000) to a fixed annuity and transfer assets from K.W.'s existing brokerage accoung (approximately $80,000) to a new brokerage account, which were both with American Equity. During the meeting, Storfer also introduced the Wests to Kevin Kretzmar, a broker for Summit Brokerage Services, by speakerphone.10 The discussion consisted of how the money would be transferred.11 The Wests thought Kretzmar worked for Storfer as his assistant and were unaware that he brokered for a separate company. Storfer brought Kretzmar into the transaction to handle the brokerage account because he was not a broker, but he did not make this plain to the Wests. In the meeting, Strofer emphasized to the Wests that K.W. was paying too much in income tax and her investments should be set up to reduce the income tax. Storfer also informed the Wests that K.W. would get a guaranteed eight percent interest each year and would be able to withdraw 10 percent a year with no penalty,12 which K.W. relied upon in deciding to follow Storfer's recommendation to purchase the American Equity annuity selected by Storfer. Respondent provided two letters to K.W. on Seniors Financial International, Inc., letterhead that stated: Kikuko: This would replace the Mutual Funds $253, 289.00. You will receive a bonus w[h]ich is added the first day of $25,329.00. Your account will start with $278,618.00. With an 8% guaranteed growth for income. With no risk. Mitchell Kikuko This would replace the AXA Variable Annuity $119,589.00. You will receive a bonus w[h]ich is added the first day of $11, 959.00. Your account will start with $131,548.00. With an 8% guaranteed growth for income. With no risk. Mitchell After the meeting, the Wests decided to go forward with Storfer's recommendation for K.W.'s investments. On August 8, 2008, the Wests returned to Storfer's office and K.W. agreed to transfer the funds. She signed the applications and contracts including 14 documents, which would transfer the money and invest in the annuity. K.W. did not read everything that she was signing because she couldn't understand all the terminology and trusted and relied upon Storfer. Storfer told K.W. that even after she signed, if she didn't like the product, she could call and everything would get put back to the way it was before. K.W. thought she was purchasing one policy. Respondent sold her two policies numbered 693752 ("the SunTrust transfer" or "the 80K contract") and 693755 ("the AXA transfer" or "the 215K contract"). Both applications indicate each is replacing an AXA policy. K.W.'s SunTrust is not mentioned in the 80K application. The documents attached to the applications K.W. signed without reading also detail that the American Equity Bonus Gold (BG) has a 10 percent bonus; Various "values"; and the minimum guaranteed interest rate is only one percent. The Lifetime Income Benefit Rider (LIBR) document states "a lifetime income that you cannot outlive" is tied to the owner's age. On the BG contract, the income account value (IAV), the second option, was checked at a rate of eight percent rider guaranteed income. The cash surrender penalty listed for the BG contract in the application is 80 percent of the first year premiums.13 The BG application also described a nine percent interest crediting method. Out of the nine options listed, Respondent admitted that he chose the S&P monthly Pt. to Pt. w/Cap & AFR for K.W. The option was not defined in the application, and K.W. had to rely solely on Storfer to define and explain the product. Specific terms and conditions of the annuity such as the penalty free withdrawals14 were defined in the policy contracts, which K.W. never received.15 In the car on the way home from the August 8, 2008, meeting, K.W. looked at the back page of the brochure for American Equity Insurance and read that she could only earn one percent a year with the annuity. This caused her some concern. Subsequently, K.W. called her son-in-law, a director at Merrill Lynch on Wall Street, who agreed to review the documents during K.W.'s upcoming visit to New York. K.W. then called Storfer's office back and left a message not to process the applications. The Wests also attempted to fax Storfer a letter that stated, "I do have to hold off on any changes . . . do no process until I review all papers." On Saturday, August 9, 2008, the Wests met briefly with Storfer in his office16 to request the original paperwork back that had been signed on Friday and stop the process. K.W. instructed Storfer to do nothing until her son-in-law approved it. She and her husband were pleased that Storfer agreed not to process the forms until her son looked at them and said that the investment was good.17 Stofer gave K.W. a yellow manila envelope with copies of the paperwork West had signed and a note. At some point, Storfer processed K.W.'s application for the purchase of the American Equity annuity, contrary to his agreeing not to finalize the purchases until the Wests gave the go-ahead.18 The Wests left for North Carolina to start their vacation on Sunday, August 10, 2008. While on vacation, K.W. opened the manila envelope and discovered that it did not contain the originals of the signed forms she had requested. Additionally, a letter was enclosed dated August 11, 2009,19 on Seniors stationary that stated: Dear Kikuko, Attached is transfer paperwork to transfer the brokerage account from Suntrust to us. We will not sell any investments until you approve them. If you and your son in law have any questions please contact me I will be more then happy to assist. Sincerely, K.W. had her son-in-law review the investment paperwork and requested that he talk to Storfer. After K.W. talked to her son, she decided the investment was not good for her. Ultimately, K.W. learned that her money had been transferred out of the Suntrust account without her permission. She called Storfer's office numerous times to get him to cancel the annuity transactions, but was unable to reach him.20 K.W. was eventually provided Kretzmar's contact information and he instructed her how to reverse the transfer of funds. K.W. had communications with Kretzmar and representatives from American Equity that lead to her funds being refunded. The American Equity annuities were ultimately cancelled. Viewing the evidence as a whole, the undersigned determines that Respondent made false promises not to process K.W.'s annuity applications in connection with the investments and did so contrary to K.W.'s instructions, as well as made false misrepresentations to her regarding the details of the annuity. Doris Jorgensen Ms. Doris Jorgensen ("Jorgensen") was born in New York City on December 20, 1921. She grew up in Connecticut. She married William Jorgensen. While married she owned and operated an antique shop out of her house in Connecticut. She started investing with her husband, William, before he passed in 1999. She and her husband would discuss their investments and decide how to invest together. She has no children and lives alone in Sebastian, Florida. Prior to meeting with Storfer, Jorgensen was the owner of an Integrity Life Insurance Company (Integrity) variable annuity with a contract date of July 28, 2003, and Aviva Life and Annuity Company (Aviva; formerly AmerUs) deferred annuity with a contract date of December 26, 2003. Jorgensen's net worth, before meeting Respondent was approximately a million dollars. Jorgensen attended two luncheon seminars presented by Respondent on April 2, 2007, and on October 23, 2007. She was 86 years old at the time. At the first seminar, Jorgensen filled out a Senior Financial Survival Workshop Evaluation Form, indicating she was a widow, had an estate from $25,000-$200,000, and had concerns in the area of Social Security Tax Reduction, Variable Annuity Rescue, and Equity Index Annuity. When Jorgensen attended the second workshop, she filled out the form identical to the previous one, except she also circled Asset Protection from Nursing Home as a concern. On or about November 5, 2007, Jorgensen met Storfer in his office for the first time. Storfer prepared her client profile and Jorgensen described her risk tolerance as "none" and indicated that she was unwilling to lose any of her life savings through investments. She also informed him that she intended to leave her entire estate to numerous charities and had set up a trust for that purpose. Jorgensen provided Storfer income information at the meeting that indicated that she lived off her monthly social security and pension payments, a total monthly income of $1,800.00, and her expenses were $1,100.00. She also had $120,000 cash and a net worth of $900,000.00. At another meeting, Jorgensen provided Storfer her financial portfolio to review. One meeting Jorgensen had with Storfer was attended by her brother, who did not provide her any advice regarding what to do with her investments. Ultimately, Storfer recommended and sold Jorgensen an Allianz Life Insurance Company Equity Indexed Annuity. Upon his advice, Jorgensen surrendered her $208,015.74 Integrity Life Policy #2100073292 issued on July 28, 2003. The transfer resulted in the initial funding of the Allianz MasterDex,21 which became effective November 16, 2007. Jorgensen told Respondent that she had a problem with monetary loss and Storfer said he could make it up with the Allianz Life. The policy provided that she could start withdrawing the money in five years and then must annuitize the policy and withdraw the money over a 10-year period. The Allianz annuity was delivered on December 12, 2007. The Allianz Life contract, a MasterDex, contract #70610993, included a 10 percent bonus. Respondent placed 100 percent of Jorgensen's funds in the S&P 500 index like the Grubicys. Later, on or about January 16, 2008, Storfer also had Jorgesen authorize an additional transfer of $306,507.21 in funds from her Aviva/AmerUS policy purchased December 1, 2003, to Allianz. The policy was $330,137.95. Surrender charges on the AmerUs annuity would have expired December 1, 2014. On February 4, 2008, the money was sent to Allianz into contract #70610993. Together, Jorgensen's transfers totaled over half-a million dollars and she incurred surrender charges totaling in excess of $29,000. Jorgensen was unable to understand the annuity application and contract language. She trusted Storfer and took him at his word and signed a lot of forms without filling them out or asking questions. Jorgensen testified that she always followed the directions of whoever gave her business advice. Jorgensen also testified in this matter that she was "not certain," "I don't really remember," and "I have no idea whether it was or not" regarding numerous questions relating to the transactions and policy receipts. At some point, Jorgensen attended another investment seminar presented by insurance agent, Ms. Jones ("Jones").22 On February 11, 2008, Allianz gave Jorgensen a receipt for her payment of $306,423.03. Jorgensen contacted Allianz and directed the company to return the transferred funds to Aviva. Jorgensen directed Allianz to "rescind this policy in full." On or about February 14, 2008, Jones also helped Jorgensen with a typewritten letter dated February 15, 2009, from Jones' office to Allianz following up the request. Jorgensen ultimately dealt with Storfer instead of Jones regarding rescission of the Aviva/AmerUs to Allianz transaction. Storfer ultimately placed the funds with Old Mutual/OM Financial annuity ("OM"). An application, transfer/1035 exchange, was executed in Jorgensen's name and other documents relating to the OM annuity on or about March 14, 2008. The policy is signed Doris Jorgensen not "Doris R. Jorgensen." Jorgensen testified she typically signs her name to include the middle initial "R" "Doris R. Jorgensen" on official papers.23 Jorgensen discovered the policy when she received the annuity confirmation letters from OM. Respondent earned a commission of nearly $7,000 on the OM transaction. The policy delivery receipt dated May, 1, 2008, six weeks after the purchase date of the OM policy, also has a signature without a "R" initial and Jorgensen denies the signature is hers. Storfer's signature is not on OM's required policy delivery certification form. The Delivery Receipt for the OM policy is dated May 1, 2008. Jorgensen still has the OM annuity. The undersigned finds that the evidence fails to show that Storfer misrepresented the sale of the two annuities or made false representations regarding the annuities sold to Jorgensen.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the final order be entered by the Department (1) finding that Mitchell Storfer violated the provisions of Chapter 626, Florida Statutes, described, supra, and (2) revoking his licensure. DONE AND ENTERED this 31st day of December, 2009, in Tallahassee, Leon County, Florida. JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 2009.
