The Issue Whether the Respondent committed the violations alleged in the Amended Administrative Complaint and Notice of Rights dated June 16, 2009, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The OFR is the state agency responsible for regulating mortgage brokerage and mortgage lending in the State of Florida and for licensing and regulating mortgage brokers. §§ 494.0011(1); 494.0033(2), Fla. Stat. At the time of the final hearing, Mr. Razor held an inactive mortgage broker's license. The license was inactive because Mr. Razor did not apply for a renewal of his license when it expired on August 31, 2009. His license could be reactivated should he submit an application for renewal. Mr. Razor was a member of the Florida Bar and a practicing attorney in Florida until, in an opinion issued September 11, 2007, the Florida Supreme Court ordered Mr. Razor suspended from the practice of law for a period of 18 months. See Florida Bar v. Razor, 973 So. 2d 1125 (Fla. 2007). In its opinion, the court approved the findings of fact contained in the Report of the Referee; approved the Referee's findings that Mr. Razor had violated Rules Regulating the Florida Bar 3-4.2, 3-4.3, 4-5.3(b), and 4-8.4(a); and approved the Referee's recommendation that Mr. Razor's license to practice law be suspended for a period of 18 months. Pertinent to this proceeding, Rules Regulating the Florida Bar 3.4-3 provides: The standards of professional conduct to be observed by members of the bar are not limited to the observance of rules and avoidance of prohibited acts, and the enumeration herein of certain categories of misconduct as constituting grounds for discipline shall not be deemed to be all- inclusive nor shall the failure to specify any particular act of misconduct be construed as tolerance thereof. The commission by a lawyer of any act that is unlawful or contrary to honesty and justice, whether the act is committed in the course of the attorney's relations as an attorney or otherwise, whether committed within or outside the state of Florida, and whether or not the act is a felony or misdemeanor, may constitute a cause for discipline. The Referee based his recommendation that Mr. Razor's license to practice law be suspended for 18 months on "Respondent's [Mr. Razor's] conduct in allowing his collaborator (a suspended attorney) to practice law in an attempt to extort money; his ratification of the misconduct by failing to take immediate remedial action; his attempts to cover for the suspended attorney by defending the letter during the Bar investigation; and his inconsistent defense (lack of knowledge) at the live and final hearings." These acts constitute dishonest dealing. Mr. Razor's license to practice law was suspended 30 days after September 11, 2007, or on October 11, 2007. Mr. Razor did not report the suspension to the OFR because he did not believe it to be a reportable offense.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order finding that Arthur Nathan Razor violated Section 494.0041(2)(i) and (p), Florida Statutes, and revoking his Florida mortgage broker's license. DONE AND ENTERED this 9th day of June, 2010, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 9th day of June, 2010.
The Issue The issue in this case is whether Respondent, Joseph John Ripa, committed the offenses alleged in a First Amended Administrative Complaint issued by Petitioner, the Department of Financial Services, on May 11, 2006, and amended on October 16, 2006, and, if so, what penalty should be imposed.
Findings Of Fact The Parties. Petitioner, the Department of Financial Services (hereinafter referred to as the "Department"), is the agency of the State of Florida charged with the responsibility for, among other things, the investigation and prosecution of complaints against individuals licensed to conduct insurance business in Florida. Ch. 626, Fla. Stat.1 Respondent Joseph John Ripa was, at the times relevant, licensed in Florida as a life and health (2-18) insurance agent. Mr. Ripa's license number is A220906. At the times relevant to this matter, Mr. Ripa was associated as an agent with Fidelity Assurance, Inc. (hereinafter referred to as "Fidelity Assurance"), an insurance agency. As an agent for Fidelity Assurance, Mr. Ripa sold annuities, including equity indexed annuities, to a target clientele of individuals 65 years of age or older. Equity Indexed Annuities. Very broadly speaking, an "annuity" is an insurance/investment product whereby a person invests money in exchange for regular payments over a period certain, over one or more specified individuals' lifetimes, or over a combination of life(s) and a period certain. There are two primary types of annuities: one is called a "fixed" annuity because payments are made in fixed amounts or in amounts that increase by a fixed percentage; the other is called a "variable" annuity because payments vary according to the investment performance of a specific type of investments, typically bond and equity mutual funds. Fixed annuities maybe "deferred" or "immediate." With a deferred fixed annuity, an investment of money is made and the earnings thereon are deferred both in payment and for tax purposes until payment at a later time. An immediate fixed annuity is one where an investment of money is made and payments (a potion of principal and earnings) begin immediately. Immediate annuities usually have "mortality" component also: upon the death of the annuitant, payments are made to a beneficiary. Within the past ten years or so, equity indexed deferred annuities, a form of fixed annuity, has been developed and marketed in Florida. The features of this type of annuity are far more complex than the traditional fixed annuity. For any annuity, and especially an equity indexed deferred annuity, a prospective annuitant must understand a number of things about the annuity: (a) the overall product features; (b) investing; (c) tax impacts of the annuity; (d) the projected rates of return and how certain those rates are; (e) the risks associated with the insurance company, or "credit risk"; (f) liquidity of the investment; and (g) fees or costs associated with the annuity. There are several features of deferred annuity products, including equity indexed deferred annuities, which can have adverse consequences for some annuitants: (a) it is far more complex than traditional fixed annuities; (b) the uncertainty of the return on the annuitant's investment; (c) the treatment of income from the annuity as ordinary income rather than capital gains; (d) the treatment for tax purposes to beneficiaries (no stepped-up basis or capital gains); (e) the lack of liquidity and surrender charges; (f) inflexibility in changing or "rebalancing" the mix of assets invested in; and (g) fees associated with the annuity. Count I: The VandenBosch Transactions. In December 2003 Mr. Ripa met with Emil and Georgette VandenBosch at their Boynton Beach, Florida home. Emil was 88 years of age at the time and Georgette was 89 years of age. While the evidence failed to prove their exact net worth, they were retired and of relatively modest means.2 As a consequence of the December 2003 meeting, Mr. Ripa sold a fixed deferred annuity in the amount of $108,900.69, contract number 449001, from American Investors Life Insurance Company (hereinafter referred to as "American Investors")(hereinafter referred to as the "First VandenBosch Annuity"). The annuitant was Georgette VandenBosch. The First VandenBosch Annuity, while allowing up to a 10 percent withdrawal from the annuity, after the first year the annuity was in force, once a year. For any other withdrawal from the annuity the contract provided for a 12 percent, 12-year declining surrender charge. Consequently, in order for the VandenBosches to fully access the annuity without penalty, Ms. VandenBosch would have to live until she was at least 101 years of age. Her life expectancy at the time she purchased the First VandenBosch Annuity was only 5.35 years, a fact that Mr. Ripa knew or should have been aware of. The sale of the First VandenBosch Annuity generated commissions of $7,895.30 for Mr. Ripa or his agency, Fidelity Assurance. In January 2004, Mr. Ripa again met with the VandenBosches, this time selling them a $26,520.11 deferred annuity, half in a traditional fixed annuity and half in an equity indexed annuity, contract number 449729, from American Investors (hereinafter referred to as the "Second VandenBosch Annuity"). The annuitant was Emil VandenBosch. Within four months after purchasing the Second VandenBosch Annuity, Mr. VandenBosch, through Mr. Ripa, invested an additional $22,200.00 into the annuity, for a total investment of $48,620.11. The Second VandenBosch Annuity, while allowing up to a 10 percent withdrawal of the annuity once a year after the first year, provided for a 12 percent, 10-year declining surrender charge for any other withdrawals. Consequently, in order for Mr. VandenBosch to fully access the annuity without penalty, Mr. VandenBosch would have to live until he was at least 99 years of age. His life expectancy at the time he purchased his annuity was only 4.85 years, a fact that Mr. Ripa knew or should have been aware of. The sale of the Second VandenBosch Annuity generated commissions of $4,862.02 for Mr. Ripa or his agency, Fidelity Assurance. It has been the practice of the VandenBosches, that Mr. VandenBosch handled all financial transactions impacting the family. It is, therefore, inferred that Mr. VandenBosch was responsible for the purchase of the First and Second VandenBosch Annuities. While neither Emil nor Georgette VandenBosch testified at the hearing of this matter,3 one of their children, Donald VandenBosch did. While much of his testimony constituted hearsay, not subject to any exception under Chapter 90, Florida Statutes,4 he did testify credibly that Mr. VandenBosch was, at the times relevant to this matter, experiencing declining health. His declining health included macular degeneration, which impacted his eye sight, and a decline in his mental capacity. While the evidence failed to prove clearly and convincingly that Mr. VandenBosch was unable to read the documents involved with the purchase of the First and Second VandenBosch Annuities, it is found that, due to his declining mental capacity and the complexity of the contracts for the annuities, Mr. VandenBosch relied heavily, if not exclusively, on Mr. Ripa's representations concerning the policies Mr. Ripa sold them. In January 2005, the VandenBosches, along with their son, Donald VandenBosch, arranged to meet with Ripa. During that meeting the VandenBosches told Mr. Ripa that they desired to access their investments and needed his assistance to avoid the high penalties associated with withdrawals.5 Mr. Ripa accurately explained that the only way to avoid the surrender penalties and access their investments currently would be to make a once-a-year withdrawal of up to 10 percent of the annuities. After emphasizing to Mr. Ripa that they did not want to incur any penalties, Mr. Ripa was instructed to arrange for them to make a 10 percent withdrawal from the First VandenBosch Annuity, which Mr. Ripa explained would amount to the equivalent of approximately $950.00 to $970.00 per month. At no time during the meeting was their any instruction given to Mr. Ripa to arrange for the cancellation of either of the annuities or the purchase of any other product. Mr. Ripa agreed to prepare the necessary paperwork to carry out the VandenBosches' instructions. The events of the January 2005 meeting support a finding that the First and Second VandenBosch Annuities did not meet the VandenBosches' financial goals and were not suitable investments for them. In particular, it is inferred that the VandenBosches did not want to invest in a product that so severely restricted their access to their assets. Despite the clear instructions to Mr. Ripa concerning the VandenBosches' wishes,6 Mr. Ripa presented the VandenBosches with forms for their execution subsequent to their January 2005 meeting which resulted in the cancellation of the First VandenBosch Annuity and the purchase of a new immediate fixed annuity from American Investors, contract number 473129. As a result of these transactions, the VandenBosches incurred a surrender penalty of $11,301.65, the very result they had explicitly told Mr. Ripa they wished to avoid. The monthly payments received by the VandenBosches through the newly purchased fixed annuity were very close to the amount of money they would have received by taking a penalty- free yearly withdrawal and dividing that amount on a monthly basis. There was, therefore, no apparent reason why the VandenBosches would have incurred the penalty of $11,301.65 imposed upon them for canceling the First VandenBosch Annuity. These transactions were carried out by Mr. Ripa despite instructions to contrary, despite the severe penalty incurred by the VandenBosches, and without any discernable reason. It is, therefore, inferred that Mr. Ripa, at best, simply failed to adequately explain the transactions or, at worst, deceived the VandenBosches into believing the documents he provided for their signature were consistent with their instructions during the January 2005 meeting. Count II: The Tuinstra Transaction. In May of 2004, Gerald Tuinstra met with Mr. Ripa at his Boynton Beach home. Mr. Tuinstra was 83 years of age at the time. His wife, Marcella, was 80 years of age and had recently moved into a nursing home. Mr. Tuinstra contacted Mr. Ripa because he was interested in creating an income source with money he had received from the sale of some property. He wanted to create an income source in order to help with the funding of his wife's nursing home expenses, while avoiding the exhaustion of his limited assets. Additionally, Mr. Tuinstra was interested in protecting his property against possible loss which might be caused by the need to seek government funding for his wife's nursing home costs. At the time of his meeting with Mr. Ripa, the money which Mr. Tuinstra was interested in investing was deposited in a bank where it was earning approximately 4 percent interest. Mr. Tuinstra explained his investment goals to Mr. Ripa during their meeting and Mr. Ripa assured him that both goals could be achieved through products offered by Mr. Ripa. As to the goal of creating an income source, Mr. Ripa told Mr. Tuinstra that he would earn 7.37 percent interest on his investment for the first year and would likely earn more in following years. Mr. Ripa told Mr. Tuinstra that he would receive $391.05 per month, writing this amount on notes he left with Mr. Tuinstra. Mr. Ripa did not inform Mr. Tuinstra that the annuity he was proposing was subject to the risk of earning even less then he was currently earning from his bank account or even earning nothing. Mr. Ripa also assured Mr. Tuinstra that his investment would be protected, meeting his second investment goal. Based upon Mr. Ripa's representations, which were, at best, misleading, Mr. Tuinstra purchased a $40,000.00 equity indexed deferred annuity from American Investors, contract number 458412, recommended by Mr. Ripa (hereinafter referred to as the "Tuinstra Annuity"). Mr. Tuinstra's wife was made the annuitant. The money used to make this purchase constituted substantially all of Mr. Tuinstra's liquid assets. The commission on the sale of the Tuinstra Annuity was $4,200.00. The Tuinstra Annuity provided for a 17 percent surrender charge for the first three years of the contract, declining to a 3 percent charge in the 13th year. Mr. Tuinstra's life expectancy at the time of the purchase was 6.65 years. Mr. Tuinstra was not informed of these provisions of the contract by Mr. Ripa during their meeting. In fact, Mr. Ripa led Mr. Tuinstra to believe that he would be receiving monthly payments throughout the term of the annuity. The Tuinstra Annuity that Mr. Ripa had assured Mr. Tuinstra would provide the monthly income he desired, actually failed to provide for any payment. The only provision for a return of his investment without penalty during the first 13 years of the contract was the allowance of a 10 percent withdrawal, after the first year of the contract, on an annual basis, which was not what Mr. Tuinstra asked for or was told he was limited to. When the actual contract for the Tuinstra Annuity was received by Mr. Tuinstra from American Investors, he read the contract and realized that much of what Mr. Ripa had told him about what he was purchasing was incorrect. He then began making efforts to cancel the policy, which he was ultimately able to do. It was during these efforts that he learned for the first time about the withdrawal penalties, not from reading the rather lengthy contract, but from an unidentified man he spoke to about the contract at Fidelity Assurance. Count III: The Putnam Transaction. In March of 2005, the son of Louis Bruno, who was 90 years of age at the time, was pursuing court proceedings to be appointed Mr. Bruno's guardian. Mr. Bruno was living in Boyton Beach, Florida at the time with his companion of 15 or so years, Irene Putnam. Due to his advanced age and lack of short-term memory, Mr. Bruno was unable to manage his own finances, instead, relying upon Ms. Putnam, who had a power of attorney from Mr. Bruno. Ms. Putnam was 82 years of age at that time. At some time shortly before a hearing was scheduled to be held on the guardianship matter, Ms. Putnam and Mr. Bruno discussed the upcoming proceeding with Mr. Ripa, whom Mr. Bruno and Ms. Putnam had known as a friend for a number of years. Mr. Ripa agreed to testify at the court proceeding on behalf of Mr. Bruno. At some point during their discussion, Mr. Ripa asked Mr. Bruno and Ms. Putnam whether they realized that, if Mr. Bruno lost the court proceeding, his son would have authority over all of his assets, including $18,000.00, which Mr. Bruno maintained in two separate bank accounts. This money represented Mr. Bruno's liquid assets at the time. The possibility of losing control of his money was not something that Mr. Bruno or Ms. Putnam had considered and, in response to Mr. Ripa's warning, they asked him if he knew how they could avoid this result. Mr. Ripa told Mr. Bruno and Ms. Putnam that he knew how the money could be protected until after the proceeding. They unequivocally explained to Mr. Ripa that they did want to protect the money, but for only a short period of time. Their intent, which was fully explained to Mr. Ripa, was to re-take possession of the money immediately after the guardianship proceeding ended, in which they expected to prevail. Instead of carrying out Mr. Bruno's clear, unequivocal goal, Mr. Ripa, no more than two or three days before the March 2005 guardian proceeding, sold Mr. Bruno an $18,000.00 equity indexed deferred annuity from American Investors, contract number 476076, with Ms. Putnam as the annuitant7 (hereinafter the "Putnam Annuity"). The Putnam Annuity provided for penalties for withdrawal of the annuity during the first 10 years of the contract, starting at 12 percent during the first year and declining thereafter. Ms. Putnam, whose life expectancy was 8.45 years, would have had to survive to age 92 in order to withdraw the full annuity without penalty. Mr. Bruno would have had to live to age 100 to do so. The commission on the sale of the Putnam Annuity was $1,800.00. Following Mr. Bruno's successful defense of the guardianship proceeding, Ms. Putnam spoke to Mr. Ripa about the retrieval of the $18,000.00 investment. Having received the actual contract, however, Ms. Putnam realized that the Putnam Annuity was not what Mr. Bruno and she had believed they were purchasing. Indeed, having relied totally on Mr. Ripa to protect Mr. Bruno's money for a very short time, including allowing him to complete all of the paperwork for them, she had not even realized that Mr. Bruno had purchased an annuity of any kind prior to receiving the contract. In response to her inquiry, Mr. Ripa suggested that Ms. Putnam have Mr. Bruno surrender another annuity which he owned, one without surrender charges, thereby obtaining cash for his immediate needs and avoiding any surrender charges on the Putnam Annuity. While this suggestion would have allowed Mr. Bruno to replace the $18,000.00 he had tied up in the Putnam Annuity, it was not an option that had ever been discussed with Mr. Bruno or Ms. Putnam and was contrary to what they had requested that Mr. Ripa do with the $18,000.00. Count IV: The LaValley Transactions. In September 2005, Mr. Ripa met with Virginia LaValley at her Boyton Beach, Florida home. Ms. LaValley, who lived alone, was 75 years of age at the time. Ms. LaValley had been evidencing signs of dementia as early as 2003, and her symptoms had continued to increase up to the time Mr. Ripa met with her.8 She had begun to have difficulty remembering simple words to describe objects as early as 2003. During 2005 (prior to September), she had expressed the belief that a computer-generated form letter had been personally written to her; she had begun piling her mail on the dining room table rather than deal with it; she believed that she would "go to jail" if she threw out any of the mail sent to her; she had sealed return envelopes from solicitations she had received and written words to the effect that she would not mail them until the addressees provided her with stamps, a demand that the addressees could not be aware of without the letters being mailed to them, a fact that Ms. LaValley did not understand; and she had stopped reconciling her checkbook or otherwise keeping up with her personal finances.9 Janet Yocum, a friend and an individual who had sold annuities to Ms. LaValley in the 1990's, noticed as early as 2003 that Ms. LaValley was having difficulty following simple instructions concerning the completion and return of a form that Ms. Yocum had sent to Ms. LaValley. It was obvious to Ms. Yocum, although she did not see Ms. LaValley on a regular basis, that Ms. LaValley was losing her ability to understand even simple matters long before Mr. Ripa's meeting with Ms. LaValley. While Mr. Ripa was not aware of some of the foregoing events, it is found that Ms. LaValley's state of health in September 2005 should have been evident to Mr. Ripa when he met with her. If nothing else, Mr. Ripa should have realized that Ms. LaValley was not capable of understanding the complexities of fixed annuity contracts, much less equity indexed deferred annuity contracts. Despite what must have been obvious to him, Mr. Ripa convinced Ms. LaValley during his September 2005 meeting to surrender six annuities which she had purchased from Jackson National Life Insurance Company (hereinafter referred to as "Jackson National") between 1993 and 1997. Mr. Ripa also convinced Ms. LaValley to use the proceeds from the Jackson National annuities, which were old enough to avoid any surrender charges for their surrender and provided for a minimum return of at least 3 percent, to purchase two American Investors annuities (hereinafter referred to jointly as the "LaValley Annuities"). One of the LaValley Annuities, contract number 499901, was an equity indexed deferred annuity for which Ms. LaValley paid $19,500.00. The other, contract number 500794, was also an equity indexed deferred annuity in the amount of $19,079.49. Both provided surrender penalties over 15 years, with a penalty for the first year of 19 percent. Ms. LaValley, whose life expectancy at the time was 12.6 years, would have to live until she was 91 years of age to avoid any surrender penalty. The minimum interest on the annuities was 2 percent compared to the minimum 3 percent rate of the Jackson National policies. During his meeting with Ms. LaValley, Mr. Ripa gave her a company brochure from American Investors' parent, "Amerus." There were a number of handwritten notations on the brochure written by Mr. Ripa. One notation indicates "7%" and is followed by Mr. Ripa's initials. Next the heading "Fixed Strategy" is the notation "3%." While there was no evidence explaining what was said about these notations, they all emphasize "positive" aspects or selling points for the annuity products sold to Ms. LaValley. What Ms. LaValley took from the meeting and, likely, the notations, is that she would be earning 7 percent each year on the LaValley Annuities.10 As further evidence of her declining mental state, when Ms. LaValley received a letter from American Investors' parent company within two weeks after purchasing the LaValley Annuities congratulating her on her purchases. Ms. LaValley, apparently not realizing what the letter meant, wrote a note dated "10/4/200[5]"11 on it stating that "I do not want American Investors Life. Please Cancel." Her signature followed this note. This letter, with her handwritten reply, was returned to American Investors. Whether Ms. LaValley intended to "cancel" the LaValley Annuities or simply thought the letter was a solicitation to purchase insurance is not clear. If the former, she clearly evidenced intent to cancel the LaValley Annuities; if the latter, she evidenced a lack of understanding about what she had done only two weeks before. American Investors apparently treated Ms. LaValley's instructions literally as evidence of her intent to cancel the LaValley Policies, apparently informing Mr. Ripa. Mr. Ripa then revisited Ms. LaValley and prepared a letter for her signature repudiating her attempt to cancel the annuities. The letter, Petitioner's Exhibit 10, was faxed from Fidelity Assurance's fax machine on October 13, 2005. The Unsuitability of the VandenBosch, Tuinstra, Putnam and LaValley Annuities. Given the ages of the annuitants at the time of the purchase of the various annuities at issue in this case (all except one of which were equity indexed deferred annuities; the other was a deferred fixed annuity), their relatively modest financial situations, the long-term nature of the annuities and the high penalties associated with accessing their investments should the need arise (all of the individuals involved would have had to outlive their life expectancies in order to access their investments without penalty), the VandenBosch Annuities, the Tuinstra Annuity, the Putnam Annuity, and the LaValley Annuities were not suitable investments for those individuals, a fact which Mr. Ripa knew or should have known. The foregoing conclusion is also supported by the VandenBosches' efforts not too long after purchasing their annuities to unsuccessfully access their investments and their expression of disappointment upon learning of the severe withdrawal penalties associated with accessing their investments; Mr. Tuinstra's explanation of his intended investment goals when he purchased his annuity and the failure of the Tuinstra Annuity to meet those goals; Ms. Putnam's and Mr. Bruno's explanation of their intended short-term investment goal when the Putnam Annuity was purchased and the failure of the Putnam Annuity to meet that goal; and Ms. LaValley's obvious impaired ability to understand the nature of the transactions carried out by Mr. Ripa, transactions that make no sense from a financial point of view. Finally, the conclusion that the investments at issue in this case were sold to inappropriate purchasers is based upon the obvious failure of Mr. Ripa to perform a basic suitability analysis at the time he sold the annuities to the any of the individual involved or, if he did perform such an analysis, his failure to recognize that the annuities were not a suitable investment for those individuals. The VandenBosches, the Tuinstras, Ms. Putnam and Mr. Bruno, and Ms. LaValley were all individuals of somewhat advanced age and modest financial resources. It is hard to imagine how Mr. Ripa could have performed the type of financial risk analysis he should have performed for these individuals and still concluded that the annuities sold to them were appropriate. None of the individuals were looking for such long-term investments and it was proved that some expressed interest in short-term investments or investments that would create an immediate income stream: the VandenBosches expressed their desire for a return of their funds shortly after Mr. Ripa sold them their annuities; Mr. Tuinstra testified convincingly of his desired investment outcome (income producing and asset protection); and Ms. Putnam testified convincingly that she and Mr. Bruno only wanted to protect his funds for a few weeks. Despite these known goals, Mr. Ripa sold the VandenBosches, the Tuinstras, and Ms. Putnam and Mr. Bruno a product which did nothing but thwart those goals. Jurisdiction.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department finding that Joseph John Ripa violated the provisions of Chapter 626, Florida Statutes, described, supra, requiring that he pay an administrative fine of $40,000.00 and revoking his licensure as a life and health agent. DONE AND ENTERED this 16th day of May, 2007, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN 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 May, 2007.
The Issue The issues in this case are whether Respondent violated Sections 494.0043(1)(b), 494.0038(1)(a) and (b)1, and 494.0038(2)(a), Florida Statutes (1997), by failing to provide a mortgagee's title insurance policy; by obtaining a mortgage broker fee without a written agreement; and by failing to disclose the receipt of rates, points, or fees on behalf of a lender; and, if so, what, if any, penalty should be imposed. (All chapter and section references are to Florida Statutes (1997) unless otherwise stated.)
Findings Of Fact Petitioner is the state agency responsible for regulating mortgage brokers in Florida. Until September 1999, Respondent was licensed in the state as a mortgage broker pursuant to license number MB9804519. Respondent's license became inactive when Respondent did not renew her license. At all times material to this proceeding, Respondent was the sole owner and operator of Blackstone. Blackstone is licensed in the state as mortgage brokerage business pursuant to license number MBB9901308. On January 8, 1996, Mr. Brian S. Carter and Ms. Lisa G. Carter closed on the purchase of real property located at 1503 Mobile Avenue, Holly Hill, Florida 32117. A non-institutional lender provided a purchase money second mortgage of $19,100 through Karlis and Uldis Sprogis, as co-trustees of the K. E. Sprogis Trust. Respondent was the mortgage broker responsible for the loan in the Carter transaction (the "Carter loan"). On November 12, 1995, Respondent entered into a mortgage brokerage contract with the Carters on behalf of Blackstone. Respondent failed to obtain, or retain in the Carter loan file, a written receipt from the non-institutional lender for the title policy, an opinion of title by an attorney licensed to practice law in Florida, a binder of the title insurance or a conditional opinion of title, or a waiver thereof by the non- institutional lender. In her Petition for Hearing, Respondent admits the foregoing findings pertaining to the Carter loan. On July 11, 1996, Ms. Kay George closed on the purchase of real property located at 2753 Foxdale Drive, Deltona, Florida 32738. Ms. George obtained a purchase money first mortgage in the amount of $56,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the George transaction (the "George loan"). On June 15, 1996, Respondent entered into a mortgage brokerage contract with Ms. George on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by Ms. George would not exceed $400. However, the contract disclosed that Respondent would receive between $500 and $2,000 in additional compensation from the lender. The loan-closing documents in the George loan disclose that Respondent received additional compensation of $1,140 comprised of $840 in loan origination fees and $300 in processing fees. The mortgage broker contract failed to disclose the loan origination and processing fees paid by the lender to Respondent. On December 29, 1997, Mr. Roy J. Piper and Ms. Laura A. Piper closed on the purchase of real property located at 30 Arrowhead Circle, Ormond Beach, Florida 32174. EMB Corporation ("EMB") provided a purchase money first mortgage of $68,400. Respondent was the mortgage broker responsible for the loan in the Piper transaction (the "Piper loan"). On December 1, 1997, Respondent entered into a mortgage brokerage contract with the Pipers on behalf of Blackstone. The mortgage broker contract failed to state the amount of the mortgage brokerage fee to be paid by the Pipers. The contract also failed to disclose any additional compensation Respondent was to receive from EMB. The closing documents show that EMB paid Respondent $1,926.25 in additional compensation as a "broker service release premium." On April 9, 1998, Ms. Sunday S. Reiland closed on the purchase of real property located at 300 Chipeway Avenue, Daytona Beach, Florida 32118. Ms. Reiland obtained a first mortgage in the amount of $96,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Reiland transaction (the "Reiland loan"). On March 9, 1998, Respondent entered into a mortgage brokerage contract with Ms. Reiland on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by Ms. Reiland would not exceed $250. However, the contract disclosed that Respondent would receive between $960 and $3,000 in additional compensation from the lender. The loan closing documents in the Reiland loan disclose that Respondent received additional compensation of $730 comprised of a $480 "cash out fee" and a $250 processing fee. The mortgage broker contract failed to disclose the "cash out fee" and processing fee the lender paid to Respondent. On April 23, 1998, Mr. Brian M. Reigel closed on the purchase of real property located at 931 Aspen Drive, South Daytona, Florida 32119. Mr. Reigel obtained a first mortgage in the amount of $39,425 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Reigel transaction (the "Reigel loan"). On April 8, 1998, Respondent entered into a mortgage brokerage contract with Mr. Reigel on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee for the Reigel loan would not exceed $550. However, the contract also stated that Respondent would receive additional compensation from the lender ranging between $0 and $3,000. The loan closing documents in the Reigel loan disclose that Respondent received additional compensation of $1,038 from the borrower's funds for a loan discount fee and a processing fee. On October 16, 1998, Mr. William M. Netterville, III, closed on the purchase of real property located at 808 South Grandview Avenue, Daytona Beach, Florida 32118. Mr. Netterville obtained a first mortgage in the amount of $66,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Netterville transaction (the "Netterville loan"). On September 10, 1998, Respondent entered into a mortgage brokerage contract with Mr. Netterville on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by the Mr. Netterville would not exceed $1,000. The loan-closing documents in the Netterville loan disclose that an additional mortgage broker fee of $500 was paid from the borrower's funds to Grandview Financial. The mortgage broker contract failed to disclose the fee paid to Grandview. The mortgage broker contract in the Carter loan stated that the mortgage broker "can make loan commitments." However, Respondent could not make loan commitments. Only the lender could make loan commitments pursuant to a written commitment or "lock-in" for the loan. There is no evidence that the Carters ever obtained the necessary loan commitment from the lender. Respondent represented that the mortgage broker was able to provide loan commitments without disclosing the necessity for a written commitment from the lender.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent not guilty of violating Section 494.038(1) in the George, Reiland, and Reigel transactions; guilty of violating Sections 494.043(1)(b) and 494.038(2) in the Carter transaction; guilty of violating Section 494.038(1) in the Piper and Netterville transactions; and issuing a written reprimand for Respondent's violations in the Carter transaction; and imposing fines totaling $2,426.25 for Respondent's violations in the Piper and Netterville transactions. DONE AND ENTERED this 27th day of January, 2000, in Tallahassee, Leon County, Florida. DANIEL MANRY 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 27th day of January, 2000. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350 Chris Lindamood, Esquire Department of Banking and Finance Hurston Tower South, Suite S-225 400 West Robinson Street Orlando, Florida 32801 Teresa M. Steininger 8907 Roberts Drive Dunwoody, Georgia 30350
Findings Of Fact In his application for registration as a mortgage broker (Exhibit 2), David Stain, Petitioner, in response to question 7 "Have you any judgments against you?" answered "No". By letter dated May 12, 1980 (Exhibit 1), Respondent advised Stein that background investigation revealed numerous judgments against him and stated it would he necessary for Stein to advise why he chose to answer question 7 in the negative. After receiving no response from Stein, Respondent, on 2 July 1980, entered a Final Order denying Stein's application for registration as a mortgage broker. Grounds given in this Order were based upon numerous unsatisfied judgments entered against Stein in Pennsylvania. Exhibit 3, a composite exhibit of court records from Allegheny County, Pennsylvania, shows judgements entered against David Stein and in favor of: Pennsylvania Department of Revenue (2), Diner's Club, Ford Motor Credit Company, Charles Arnold, Alan Shaffer, Carl Kronander, and CNA Financial Corporation.
Findings Of Fact Respondent Frank Lamb has been a mortgage broker licensed in the State of Florida for approximately nine years. Respondent Next Step Brokerage, Inc., a Florida corporation, was incorporated on June 20, 1989. As stated in its Articles of Incorporation, the corporation was organized for the purpose of operating a mortgage brokerage business. Respondent Lamb was the only incorporator of the corporation, and he and his wife were the only directors of the corporation. A bank account was opened in the name of Respondent Next Step Brokerage, Inc. Respondent Next Step Brokerage, Inc., has never been registered with the Department as a mortgage brokerage business. At the time that Respondent Lamb incorporated Respondent Next Step, and until December of 1989, Respondent Lamb was a Senior Vice President in charge of lending at Bay Savings Bank, a savings and loan association. Earlier in 1989, a Reginald McNaughton entered into a contract with the bank's chairman to purchase the bank. As part of the contractual arrangement, McNaughton would bring loan applications to the bank. If the bank could fund those loans, part of the points received by the bank would be credited to McNaughton toward the purchase price of the bank. If the bank did not fund the loans, but another lender did, then the bank would take a brokerage commission and credit part of it to McNaughton. Although no mortgage broker's license is required for the bank to fund loans, a mortgage broker's license is required for a bank to broker loans to another lender. McNaughton brought in a large number of loans to be funded by the bank and to be brokered to other lenders. He entered into an agreement with Respondent Lamb whereby he would pay Lamb additional compensation for his services in reviewing and processing the volume of loan applications which McNaughton engendered. One of the loan applications brought in by McNaughton was the Fourth Executive loan. Bay Savings Bank funded that loan. Points, amounting to approximately $40,000, were received by the bank on the transaction. Part of this "points" money was credited to McNaughton's purchase. Sometime after the Fourth Executive loan, it was discovered that McNaughton was a disreputable character with a criminal history, and his purchase agreement with the chairman was terminated. Prior to that time, however, McNaughton had given Respondent Lamb two payments pursuant to their agreement. The first payment was made on June 19, 1989, in the amount of $5,000 and was payable to Respondent Lamb. The second check, in the amount of $14,000, was dated July 7, 1989, and was paid to Next Step Brokerage's account. On February 22, 1991, the Department of Banking and Finance, Division of Banking, issued an Administrative Complaint for Prohibition and Notice of Rights against Respondent Lamb seeking to prohibit him from serving as an officer, director, committee member, employee, or other person participating in the affairs of a financial institution in the State of Florida. Respondent Lamb, who was no longer employed in the banking industry, entered into a stipulation with the Department expressly stating that he neither admitted nor denied the Department's allegations, but was permitting an order of prohibition to be entered barring him from future services as an officer, director, committee member, or employee of any financial institution. Such an order was entered in April of 1991. Accordingly, no judicial or administrative determination has ever been made that Respondent Lamb was guilty of the allegations contained in the Department's Administrative Complaint for Prohibition and Notice of Rights. The allegations in the Department's prohibition action arose out of the Fourth Executive loan and involved two matters. The first was not requiring a written "take out" commitment for permanent financing prior to closing since the loan from Bay Savings Bank was only a temporary loan. The second was Respondents' receipt of the $5,000 and $14,000 payments, alleged to be a conflict of interest unless there was written authority from the bank's board of directors. As to the first matter, a $30,000 "take out" commitment fee was sent to Holliday Fenoglio Co. from the closing proceeds, which fee was never returned to the bank. Further, the commitment letter from Bay Savings Bank to Fourth Executive which requires the "take out" commitment for permanent financing does not specify that the commitment be in written form. In June of 1990, the Department of Banking and Finance, Division of Finance, conducted an examination of Respondent Lamb's activities from July 1, 1989, through May 30, 1990. During the first part of the audit, Respondent Lamb was employed by Bay Savings Bank. During the remainder of the examination period, Respondent Lamb was, for the most part, unemployed. He was primarily trying to work out an arrangement with a Jacksonville bank, Community Savings. He was working out of a room in his home while looking for office space and employees in furtherance of that arrangement whereby he would set up a loan production office for Community Savings in South Florida. He was to produce SBA loans for Community Savings and began receiving funds as a draw against future commissions in order to set up the office and begin operations. Also in furtherance of that arrangement, Respondent Lamb printed business cards and ran an ad in the newspaper. The business card contained the names of Respondent Lamb and Respondent Next Step Brokerage, Inc., and contained the words "Licensed Mortgage Broker." One ad which ran one time in The Palm Beach Post contained the names of Respondent Lamb and Next Step Brokerage. Under Respondent Lamb's name appeared the words "a Licensed Mortgage Broker." The Department employee conducting the examination found a second ad in Respondent's files containing the names of Respondent Next Step Brokerage and Respondent Lamb. No evidence was offered that the second ad ever appeared in any publication. No loans were closed through Community Savings. Since any loans would have been SBA loans, no commission would have been due from the borrower. During the time that Respondents were temporarily operating out of Respondent Lamb's home, Respondents did not have a sign or an occupational license posted at the home. During the examination period, Respondents received $1,000 from a Mr. Deckman to cover Respondents' expenses in attempting to find funding for a loan for an adult congregate living facility. No loan was ever made. There was no brokerage agreement signed by Mr. Deckman in Respondents' file. During the examination period, Respondents received a $200 payment from Ted Graham, a friend of Respondent Lamb. Respondents obtained an $8,000 loan for Mr. Graham without expectation of any commission. After the closing Graham appeared at Respondent Lamb's home and gave him a check for $200 made payable to Next Step Brokerage, in appreciation for his assistance. Respondents did not have a brokerage agreement or closing statement regarding this transaction in their file. During the examination period, Respondents also received $2,000 from Pinnacle Financial for introducing Pinnacle to NCNB, thereby introducing two lenders. Pinnacle, a finance company, was seeking a source of funding for mobile home financing. Respondents did not negotiate any specific transactions between Pinnacle or Pinnacle's borrowers and NCNB. Respondent Lamb received a telephone call from a Department employee who had seen the newspaper ad which had the name Next Step Brokerage in it. Although the ad also had Respondent Lamb's name in it with the words "a Licensed Mortgage Broker" under Respondent Lamb's name, Respondent Lamb discontinued the ad in accordance with the instructions of the Department's employee to do so. Next Step's name and its bank account are no longer used, and the corporation has presumably been dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered placing Respondent Lamb on probation for a period of two years and requiring Respondent Lamb to pay a fine in the amount of $1,000 by a date certain. DONE and ENTERED this 17th day of January, 1992, at Tallahassee, Florida. LINDA M. RIGOT 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 17th day of January, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1, 8, 9, 24, 25, 27, and 30 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony. Petitioner's proposed findings of fact numbered 2-4, 6, 12-14, 18, 28, and 29 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 7, 16, 17, 19-23, and 31 have been rejected as being unnecessary for determination of the issues involved herein. Petitioner's proposed findings of fact numbered 10, 11, and 15 have been rejected as not being supported by the weight of the credible evidence in this cause. Petitioner's proposed findings of fact numbered 26, 32, and 33 have been rejected as being irrelevant to the issues involved in this proceeding. Respondents' proposed finding of fact numbered 1 has been rejected as being irrelevant to the issues involved in this proceeding. Respondents' proposed findings of fact numbered 2-13 have been adopted either verbatim or in substance in this Recommended Order. 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 The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Jodi R. Marvet Assistant General Counsel Office of Comptroller 201 West Broward Boulevard Suite 302 Fort Lauderdale, Florida 33301 Richard W. Glenn, Esquire 2001 Palm Beach Lakes Boulevard Suite 200 West Palm Beach, Florida 33409
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: From approximately October of 1989, to February of 1990, Respondents were employed as telephone consultants by United Financial International, Inc. (hereinafter referred to as "UFI"), a Florida-based business owned by Laura Correa and Anita "Ann" Cuevas that offered to provide assistance to consumers seeking various types of loans, including mortgage loans. Respondents were not then, nor have they ever been, licensed by the Department as mortgage brokers in the State of Florida. Furthermore, at no time did UFI have a license or registration issued by the Department to operate as a mortgage broker, mortgage brokerage business, correspondent mortgage lender or mortgage lender, although it did have at least one employee during the period of Respondents' employment, telephone consultant John Archer, who possessed a Department-issued mortgage broker's license. As telephone consultants for UFI, Respondents answered and screened telephone calls placed by potential UFI clients. Among the callers Respondent Cook screened were Dudley Phipps and Arthur McCullough. Among the callers Respondent Jelich screened was Connie Wiscaver. Phipps, McCullough and Wiscaver were all interested in obtaining mortgage loans. While on the telephone with a potential client, Respondents, as a general rule, identified themselves by name, explained to the caller the services offered and fees charged by UFI, and obtained from the caller the following information, which they recorded on a form provided by their employer: the caller's name, address, telephone number, date of birth, social security number, employer, salary, financial standing, and credit history; and the type, amount and purpose of the loan sought by the caller. Respondents also typically asked what the caller hoped for in terms of interest rate, size of monthly payments and loan repayment schedule. In addition, they indicated what items the caller needed to send to UFI to complete the caller's loan application package. The representations that Respondents made during a typical telephone conversation with a potential client seeking a mortgage loan gave the impression that, if the caller submitted a complete loan application package along with the requisite loan application processing fee, and everything "checked out," Respondents would make the arrangements necessary for the caller to obtain the mortgage loan he or she wanted from one of the lenders with whom UFI had an established relationship. UFI management, in writing, instructed all of its telephone consultants, including Respondents, to incorporate the following in their presentation to potential clients and it randomly monitored the consultants' telephone conversations to make sure that these instructions were being followed: We Co-Broker loans. We are not lenders nor do we have a Funding Committee to evaluate the Loan Package after we receive it. It takes twenty one (21) to thirty (35) [sic] business days from the day we receive ALL the information to evaluate the package. We have an application Fee of $399.00. MANDATORY Please use these statements to increase your credibility and assertiveness with potential clients. The maximum life of the loan will be determined by the investor/lender. The interest rates will be fixed and vary between 12-18 percent. The application fee is non-refundable and the assessed fees to your loan are separate from the application fee. There will be a Brokerage fee of 1-5 percent assessed to your loan upon closing. To increase your potential, please make sure when your [sic] finishing with your potential client to ask them [sic] when they [sic] would like to obtain a loan. Also in your closing statements be sure to tell your client to Bill Recipient with our Federal Express/Express Mail Service to Guarantee overnight delivery. Be advised this is for the return of the Application Fee Only! The application istself [sic] is returned at the client's own expense. The client may pay the application fee by personal check; however, as the checks will be out-of-state it will take approximately (21) days for the check to clear which will hold up the clients [sic] processing. Therefore, we recommend a money order to expidite [sic] the process. We do not like to use regular mail for sending the money orders, we rather the client use our courier sevice [sic]. (see above) If you need assistance please do not hesitate to phone us at 1-800-729-5666. We want to help you secure the funds you require as soon as possible. We sincerely thank you for giving us the opportunity to serve you. In most cases, Respondents followed these instructions. As compensation for performing their duties as UFI telephone consultants, Respondents received a percentage (either 20 or 30 percent) of the non-refundable loan application processing fee submitted by each caller whose call they screened. In an effort to encourage a caller to submit the fee, Respondents sometimes told the caller that, based upon the preliminary information provided, the chances of the desired loan being approved "looked good." They never stated, however, that loan approval was "guaranteed."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order finding Respondents guilty of having violated Section 494.093(1), Florida Statutes (1989), as alleged in the Administrative Complaint, and imposing upon each of them an administrative fine of in the amount of $5,000.00 for having engaged in such wrongdoing. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 19th day of August, 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 19th day of August, 1994.
Findings Of Fact Respondent is licensed as a real estate broker and was so licensed at all times relevant hereto. He has taught real estate salesman courses at Hillsborough Junior College for about eight years. In February, 1982, Thomas E. Webb and Johnnie M. Webb, husband and wife, signed an offer to purchase real estate owned by Ruby Carline (Exhibit 1). This document was prepared by Respondent as broker and signed by him as witness and escrow agent. The offer was not accepted by the seller. Respondent had a listing agreement (Exhibit 6) on property owned by Ruby Carline in Seffner, Florida, giving him exclusive right to sell this property until June 12, 1982, at a price of $65,800, with buyer assuming an existing mortgage of $27,000 at ten (10) percent. There was also a second mortgage on the property in the amount of $10,000 at eighteen (18) percent. Shortly after Exhibit 1 was not accepted by Carline, the Webbs' trailer burned and they needed a residence quickly. Respondent inquired of Carline how much she would take to move out of her house and she told him $10,000, but needed $2,000 to actually relocate her furniture. On March 5, 1982, Respondent acknowledged receipt of $2,000 from Webb (Exhibit 7). Shortly thereafter, this money was paid to Carline and she vacated her house. Webb moved in during the latter part of March and commenced paying rent. Following this, Respondent prepared an updated contract for sale and purchase which was signed by Thomas Webb and Ruby Carline in early May (Exhibit 3). This contract provided for a purchase price of $59,900, with 7,000 deposit held in escrow by Respondent, and the balance of the purchase price comprising the existing first mortgage of $27,000 to be assumed by the buyer; a purchase money mortgage in the amount of $15,900 to be obtained; and the second mortgage in the amount of $10,000. Special Clause XII provided: Buyer shall rent property for $560 per month with an option to purchase by June 12, 1982, which shall be extended an additional 90 days at time of purchase. Buyer shall assume first mortgage and pay balance to seller. At the time this contract was executed Webb had paid Respondent $7,000. The additional $5,000 cashier's check was given to Respondent by Webb on April 27, 1982 (Exhibit 7) and Exhibit 3 was thereafter prepared. The $5,000 was not placed in escrow but in Respondent's operating account. By check dated May 1, 1982, Respondent disbursed $2,666 to Carline from the proceeds of this down payment plus some rent moneys collected from Webb and claimed the balance of $3,594 as commission on the sale of the property. Carline testified that she received only $1,000 from Respondent in the form of a check when she moved out of the house. Respondent actually paid her $2,000, of which $1,000 was in cash. In her letter to Respondent dated January 1, 1983 (Exhibit 11), Carline acknowledged the $2,000 as a gratuitous payment to her vacating the property and resettling elsewhere. Webb was expecting fire insurance money on his trailer which was to provide funds necessary to pay off the second mortgage. They expected to get additional financing either from a bank or from the seller, or both. When it became evident Webb was experiencing difficulty obtaining financing, Respondent prepared Exhibit 2, another contract for sale and purchase, executed by seller October 22, 1982, which, in Special Clause XII stated: This is a lease option contract, buyer has 30 days to close on property. Rent shall be $560 per month until property is transferred. Property is being purchased "as is". Commission has been paid by seller. This contract also provided for purchase price of $59,900. Deposit (paid to owner-seller Ruby Carline) of $7,000, buyer to assume existing first mortgage of $27,000, the second mortgage to General Finance Corporation in the amount of $10,000 to be paid off and balance to close of $25,900. Clause III provided that if any part of the purchase price is to be financed by third party loan, the contract is contingent upon the buyer obtaining a firm commitment for said loan within 30 days at a rate not to exceed 18 percent for 15 years in the principal amount of $25,000. At the time this contract was signed, all parties knew the buyer needed additional financing to close. While the Webbs occupied the house, Respondent collected the rent, usually in cash, and remitted same to Carlile in the manner received. By the time the closing date of September 12, 1982, arrived, it became evident Webb was having difficulty obtaining financing and would be unable to close. Webb demanded return of the $7,000 deposit from Respondent and Carline. Carline demanded Respondent pay her all of the moneys received by him from Webb; and Respondent claimed a set-off of fees paid by him for appliance repairs, for the institution of eviction proceedings against Webb and for services in collecting the rent for Carline. Respondent paid Webb some $1,200 and attempted to get Carline to release him from liability for further payment to Carline (Exhibit 15). Carline reported the incident to the Real Estate Commission.
Findings Of Fact Respondent was issued Mortgage Broker License No. 3082 on September 3, 1974 by Petitioner. Respondent conducted certain transactions under its Mortgage Broker License during the period from September, 1973 until April, 1974. Respondent found client investors who had funds which they wished to invest in mortgages which would pay a greater return in interest than the average land mortgage. The transactions involved the purchase of a promissory note from a land development corporation secured by a mortgage deed on land ostensibly owned by the developer, in which the latter reserved the right and was authorized to convey the premises to a purchaser under an installment land contract subject to the lien of the mortgage. The deed further provided that the developer would deliver to a bank as an escrow agent a copy of any such agreement for deed and a quitclaim deed which would be held in escrow unless a default was established under the mortgage deed. What the investor would receive in such cases would be the developer's assignment of an agreement for deed collateralized by the mortgage deed. The issuance of these high interest notes were for the purpose of enabling the development company to make certain improvements on the land which they were obligated to do under sales contracts. In the transactions in question, Respondent dealt through Financial Resources Corporation of Ft. Lauderdale, Florida to which he remitted the investors funds, less an amount retained for fees or commissions. The land developer/borrower would then issue the note and mortgage in the face amount of the total investment made by the investor. The detailed procedure was that when an investor inquired concerning such mortgages, Respondent would determine from Financial Resources Corporation if any were available. It was the practice of Respondent's President then to look at the land development, determine if, in fact, the land was in development and had streets and the like, and to read pertinent documents concerning the development. He would then proceed to accept the full sum of the investment from the investor pursuant to an agreement by which the investor, in consideration of the stated sum, would authorize Respondent to use its best efforts to secure collateralized promissory notes at a minimum percentage of interest on the declining balance with principal and interest payable monthly if held to maturity. Respondent would then deposit the investor's check, usually on the same day as received, and then in several days send a notice to Financial Resources Corporation authorizing it to prepare and execute a self-amortizing monthly principal and interest promissory note with quitclaim deed in the amount of the investment, together with a check representing the proceeds of the Investment less the Respondent's fee or commission, and a sum for intangible tax on the transaction. Financial would thereafter return to Respondent a copy of the note and mortgage in exchange for the funds remitted. The recorded mortgages would be sent to Respondent within a month or so thereafter. Respondent had no agreements in writing with the land developer, nor with Financial Resources Corporation. Respondent claimed that its fees for services were set by Financial Resources Corporation which usually amounted to about 12 percent of the face amount of the investment, but which was sometimes more and frequently less than that authorized under the applicable statutes and regulations. Respondent did not maintain an escrow bank account and all funds received from investors were deposited into the corporate bank account of the firm. Respondent's agreements with investors set no specific term or period of time in which the secured promissory notes were to be obtained although its president would customarily tell investors that it would take some time for the transaction to be consummated, and that they could not expect to receive the recorded mortgages right away (testimony of Mr. Montague, Petitioner's Exhibits 2-10). Respondent discontinued transactions as described above in April, 1974 because he was dissatisfied with the business. He had been informed that certain lands under some of the mortgages had not been sold until after the mortgage had been executed and that this was in violation of State law. In the fall of that year, he received a memorandum from the State Comptroller on the subject of escrow accounts, dated October 11, 1974, which warned mortgage brokers in the state concerning the practice of remitting investors' funds to land developers in anticipation of receiving a recorded mortgage and note (testimony of Mr. Montague, Respondent's Exhibit 9). In 1975,a financial examiner from Petitioner's office was sent to the office of Respondent to examine his books and records. Pursuant to that examination, it was determined that Respondent had committed various violations of Chapter 494, F.S. on certain transactions. The following findings of fact are made with respect to the transactions in question: Allegation: That Respondent took and received deposits of money from Robert E. Creighton, Hazel R. Hardesty, J. Wilfred Caron, Rose A. Hoadley, Margaret A. Gregory and Willard A. Kotthaus, in the regular course of business, and failed to immediately place such said funds in an escrow or trust account as required by Section 494.05(1) , F.S. As heretofore stated, the Respondent did not maintain an escrow trust account with respect to any of the above-stated transactions. The above- mentioned individuals had authorized Respondent to disburse the funds immediately upon receipt (testimony of Mr. Montague, Supplemented by Exhibits 3- 8). Allegation: Respondent failed to maintain adequate records in violation of Section 494.06(3), F.S., in that its files contained no written agreements on transactions with Della W. Shaw, Lantana Sheet Metal and A.C. Inc., and another transaction with Lantana Sheet Metal. The agreement between Della Shaw and Respondent, although not present in Respondent's file at the time of examination of its records by Petitioner's representative, had been executed on October 15, 1975, and presently is contained in the records of the Respondent. It had been taken out temporarily by one of Respondent's associates who also had Della Shaw as a client. Respondent had entered into two transactions with the trustee of the pension fund and profit sharing plan of Lantana Sheet Metal, one for ten thousand dollars from the pension fund and one for three thousand dollars from the profit sharing plan. At the time of these investments there were written contracts which were executed by the parties. The books and records of both the pension fund and the profit sharing fund were maintained at Respondent's office by a firm which administered both plans. The agreements pertaining to the Lantana transactions were requested and withdrawn from Respondent's files by the trustee of the Lantana funds. Consequently, they did not appear in the records of the corporation at the time of examination by Petitioner's representative (Petitioner's Exhibits 2 and 4; Respondent's Exhibit 10). Allegation: Respondent failed on numerous loan purchase agreements to establish the term for which the agreement was to remain in force before the return of the deposit for nonper- formance could be required by the investor, in violation of Chapter 3-3.06, F.A.C. The transactions in question did not involve applications for mortgage loan, but agreements to purchase secured promissory notes. Respondent's clients were investors/purchasers, not borrowers (testimony of Mr. Montague; Petitioner's Exh. 2-10). Allegation: Respondent charged and accepted fees or commissions in excess of the maximum allowable in violation of Section 494.08(4), F.S., and Chapter 3-3.08(3) and (4), F.A.C., on trans- actions involving Rosa Eichelberger, overcharge of $10.90, Lantana Sheet Metal, overcharge of $62.60; Lantana Sheet Metal, overcharge of $10.91; Rose A. Hoadley, overcharge of $9.10; and Margaret A. Gregory, overcharge of $9.10.
