The Issue At issue in this proceeding is whether Respondent Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, Section of General Regulation has violated Section 120.535 F.S. by adoption of a policy which meets the definition of a "rule" under Section 120.52(16) F.S., without complying with the rulemaking procedures established by Section 120.54 F.S.
Findings Of Fact Petitioner originally applied and was licensed as a yacht and ship salesman in June, 1992. To be a salesman, one must be associated with a licensed broker who prominently displays the salesman's license. On April 15, 1994, Petitioner contacted Respondent agency by telephone to discuss renewal of his salesman's license issued June 3, 1992 and due to expire under its own terms on June 3, 1994. At that time, Kathy Forrester told Petitioner that his file reflected that his license had been "cancelled" effective March 10, 1993 due to a letter received on or about March 1, 1993 from Petitioner's employing broker, Frank Stanzel. Mr. Stanzel's letter showed that he was relocating his business from Miami to Ft. Lauderdale and that he wanted his two salesmen's licenses transferred to the new location. He enclosed with his letter the two salesmen's licenses for agency action, as required by agency rules. Mr. Stanzel further reported that Petitioner had left his employ on October 19, 1992, taking his license with him, so Mr. Stanzel could not return Petitioner's license to the agency. On March 22, 1993, five months after Mr. Stanzel heard the last of Petitioner and approximately three weeks after he notified the agency of Petitioner's leaving his employ, Mr. Stanzel's broker's license expired. Under the terms of the agency rules, Mr. Stanzel was required to apply for a new license. He applied. His broker's license was not renewed retroactively, and his new license became effective August 30, 1993. For approximately five months, from March 22, 1993 to August 30, 1993, Mr. Stanzel was not a licensed Florida broker. Neither Mr. Stanzel nor the Respondent agency notified Petitioner of this fact nor did anyone notify Petitioner at that time that his salesman's license was deemed "cancelled" during the broker's lapse. After finding out for the first time on April 15, 1994 that the agency presumed his salesman's license "cancelled" by Mr. Stanzel's notification that Petitioner had taken his salesman's license and left Mr. Stanzel's employ, Petitioner and his father prevailed upon Mr. Stanzel to execute an affidavit dated May 19, 1994 to the effect that Mr. Stanzel had misunderstood, now believed Petitioner had been diligently working at yacht sales after October 19, 1992, and wanted Petitioner's salesman's license reinstated. The affidavit was submitted to the agency. Although Ms. Forrester had misgivings about the affidavit, the agency reinstated Petitioner's salesman's license effective April 29, 1994, after receiving the affidavit (TR 25-28). The reinstated license still had the original expiration date of June 3, 1994. The agency did not reinstate Petitioner's salesman's license retroactive to October 19, 1992 when Petitioner went into construction work fulltime, to the date of Mr. Stanzel's original broker's license expiration, or to the date of Mr. Stanzel's new broker's license. Petitioner accepted his salesman's license as reinstated. Petitioner did not renew his salesman's license on June 3, 1994, so it expired by its own terms. On July 21, 1994, Petitioner filed an application to be licensed as a yacht and ship broker, together with the required bond, fee, and fingerprints. On August 2, 1994, Peter Butler, Head of the Section of Yacht and Ship Brokers, wrote Petitioner a deficiency notice, explaining that the agency regarded Petitioner's salesman's license "cancelled" during the lapse of his employing broker's license. The agency has no rule which specifically states that when an employing broker's license expires, his salesmen's licenses are automatically cancelled. The language employed in the deficiency notice was, "any salesman licenses held by [the employing broker] were considered cancelled (sic) for that period of time [the period while the employing broker's license was expired/lapsed] because they did not have an actively licensed broker holding their license." [Bracketed material added for clarity.] This language is the focus of this proceeding. The deficiency notice did not refer to the prior "cancellation" of Petitioner's salesman's license based on Mr. Stanzel's March 1, 1993 notice that Petitioner had left his employ effective October 19, 1992. The deficiency notice cited Section 326.004(8) F.S. [1993] which provides: Licensing.- (8) A person may not be licensed as a broker unless he has been a salesman for at least 2 consecutive years, and may not be licensed as a broker after October 1, 1990, unless he has been licensed as a salesman for at least 2 consecutive years. Bob Badger, an agency investigator, submitted a report to Mr. Butler dated September 1, 1994 expressing his opinion that even with Mr. Stanzel's after-the-fact affidavit, Petitioner's salesman's license would have been interrupted by the fact that he had no licensed broker holding his salesman's license during Mr. Stanzel's broker's license lapse of five months. He further concluded that Petitioner's salesman's license was "suspended" for a short period for not renewing his salesman's license bond. After review of the investigation report, on September 19, 1994, the agency issued its Intent to Reject Petitioner's broker's application pursuant to Rule 61B-60.002(6) F.A.C. alluding to the deficiency notice and citing Section 326.004(8) F.S., for Petitioner's failure to complete two consecutive years as a salesman. Section 326.004(14)(a) and (b) F.S. and rules enacted thereunder clearly place on the broker the responsibility of maintaining and displaying the broker's and salesmen's licenses as well as providing for a suspension of a salesman's license when a broker is no longer associated with the selling entity. Typically, salesmen turn in their licenses through the original broker for cancellation by the agency and receive new ones when they move from one broker's oversight to another's. Salesmen who are employed by one broker also switch their salesman's licenses to another active broker whenever the first broker disassociates from a yacht sales company and moves to another company, quits, retires, or lets his broker's license lapse. Due to the common dynamics of the employment situation whereby salesmen are under the active supervision of their employing broker in the company office, they usually know immediately when a broker's license is in jeopardy or the broker is not on the scene and supervising them. This knowledge is facilitated by the statutes and rules requiring that all licenses be prominently displayed in the business location. Anybody can look at anybody else's license on the office wall and tell when it is due to expire. If licensees are in compliance with the statutes and rules, no active salesman has to rely on notification from the agency with regard to the status of his own or his broker's license. In the present case, Petitioner removed himself from all contact with Mr. Stanzel as of October 19, 1992. Therefore, he did not know what was occurring in the office or with any licenses. All agency witnesses testified substantially to the effect that since they have been employed with the agency and so far as they could determine since its inception, agency personnel have relied on Sections 326.002(3), 326.004(8), 326.004(14)(a) and (b) F.S. and Rules 61B-60.005 and 61B-60.008(1)(b) and (c) F.A.C. to preclude licensing someone who has not been actively supervised by a Florida licensed employing broker for two consecutive years. More specifically, agency personnel have always applied Sections 326.004(14)(a) and (b) to place on the broker the responsibility of maintaining and displaying the broker's and salesman's licenses as well as providing for a suspension of the salesman's license when his broker is no longer associated with the sales entity. The agency has always interpreted the word "broker" as used in Chapter 326 F.S. and Chapter 61B-60 F.A.C. to mean "Florida licensed broker." See also, Section 326.002(1) and 326.004(1) F.S. and Rule 61B-60.001(1)(g) F.A.C. These interpretations are in accord with the clear language of the applicable statutes and rules. Petitioner unsuccessfully attempted to show that he had received treatment different than others similarly situated.
The Issue The Petitioner, P & M Transit Company, Inc., d/b/a Jim Walker's Yamaha (hereinafter "Walker") filed an application to relocate its Yamaha dealership. A protest to the application was filed by the Respondent, Suzuki of Hamilton, Inc., d/b/a Daytona Yamaha, U.S.A. (hereinafter "Hamilton"). The basic issue in this case is whether the Walker application should be denied. Underlying issues are (a) whether Section 320.642, Florida Statutes (1987), applies to relocations of existing dealerships and, if so, (b) whether the existing dealers ". . . are providing adequate representation in the community or territory. . . ." (The parties stipulated that there is no issue in this case regarding breach of the dealer agreement by a dealer.) At the hearing, Yamaha Motor Corporation, U.S.A. (hereinafter "Yamaha"), presented the testimony of John Donaldson, an expert in the area of motorcycle dealer network analysis, and offered exhibits 1 through 21, all of which were received into evidence. Hamilton presented the testimony of Alec Mobbs and offered into evidence exhibits A through G. The transcript of the hearing was filed on January 4, 1989, and thereafter Yamaha and Hamilton filed timely proposed recommended orders containing proposed findings of fact and conclusions of law. The parties' proposals have been carefully considered during the formulation of this recommended order. All findings of fact proposed by the parties are specifically addressed in the attached appendix.
Findings Of Fact Based on the evidence received at the hearing, I make the following findings of fact: Petitioner Walker filed an application seeking to relocate its Yamaha motorcycle dealership from 1147 "B" North Dixie Freeway, New Smyrna Beach, Florida 32069, to the location of its Honda-Suzuki Store at 2385 South Ridgewood Avenue, South Daytona, Florida 32019. The new Yamaha location would be approximately nine miles north of the original location and within six miles of Respondent Hamilton's existing dealership. The traffic in the six miles between the proposed new Walker location and the existing Hamilton location is much more dense than the traffic in the nine miles south of the proposed location. The population of Volusia County is separated from the surrounding counties on the north and south, such as to constitute it as a separate community or territory. For purposes of the applicable statutory provisions, the geographic boundaries of the subject "territory or community" are the same as the geographic boundaries of Volusia County. The proposed relocation of Walker is from one point in a territory or community in which he is presently located to another point in that same territory or community. The motorcycle industry is in a decline. Florida currently ranks eighth in the nation in motorcycle sales, which is down from its previous ranking of sixth. Hamilton, the protesting dealer, has owned and operated a successful Yamaha dealership at 324 Eleventh Street, Holly Hill, Florida 32017, since 1983. The dealership is well marked and easily accessible. Although the majority of Hamilton's sales are made to customers who live within five miles of the dealership location, Hamilton considers its market area to be Volusia County. Eleven motorcycle dealerships are currently located in the county. Volusia County's population in 1982-83 was 281,512. In 1987-88 the total was 337,909, for a growth rate of 20 percent. This growth rate is significantly less than Florida as a whole. The typical motorcycle purchaser is aged eighteen to thirty-four. The population of eighteen to thirty-four year olds in Volusia County grew only 16 percent between 1982 and 1988, and, as a percentage of the total population, that age group declined from 25 percent to 24 percent. Hamilton has actively cultivated all of Volusia County as a sales market area since 1983. It spends an average of $17,500 a year advertising on the radio, in newspapers, yellow pages, and participating in various exhibits and mall shows. Hamilton's efforts have been successful. The dealership was a financial disaster when purchased by Hamilton in 1983. But after its first year of operation the dealership showed a profit. The dealership continues to show a profit in the face of a declining industry and a declining market population. Hamilton has over $100,000 invested in his business. Hamilton's store consists of 10,000 square feet in which only Yamaha products are marketed. This is approximately 4,000 square feet larger than the average store. The dealer employs two sales people and three mechanics. Walker has 10,000 square feet for two brands, Honda and Suzuki. If the relocation is permitted, three brands would be housed in the same amount of space Hamilton has for Yamaha alone. Since 1983, Hamilton has probably accounted for the majority of Yamaha sales in Volusia County. In 1983 it sold 163. In 1984 it sold 207. In 1985 it sold 186. In 1986 it sold 139 and in 1987 it sold 122. By the beginning of December 1988, with ten more selling days remaining it had already sold the same as last year's total. Eighty-four percent of all of Hamilton's sales during the last five years were made to customers who lived within a five mile radius of the dealership. In the last two years, 86 percent of total sales were made in the same area. If another dealer were permitted to locate within that radius, the number of sales that Hamilton could reasonably expect to make would probably significantly decrease. Walker's proposed relocation is in the center of the southern half of the majority of Hamilton's sales. Hamilton is an award winning dealer. Yamaha introduced its pacesetter awards program in 1985. There are separate awards for service, parts and accessories, and sales. A dealer receiving all three awards in the same year is named a pacesetter. In 1985, Hamilton won the pacesetter award. In 1986, 1987, and 1988 it won the parts and accessories, and service awards. Hamilton won the service award in spite of intense competition from 20 motorcycle businesses in the Volusia County area. Yamaha has requested Hamilton to perform service warranty work on machines sold by Walker. Hamilton is 17 points above national average in customer service, and at 155 percent of the target sales figures for parts and accessories. Hamilton was chosen by Yamaha as one of only ten dealers in the United States to test market a line of Yamaha clothing. Yamaha attempts to measure the adequacy of sales performance by determining market penetration. Market penetration is determined by adding the total number of motorcycle registrations to the total number of scooter registrations and dividing that total into the total number of Yamaha motorcycle registrations plus the total registrations of Yamaha scooters. All terrain vehicles, ATVs, and motorcross (off road competition dirt) bikes are not included in Yamaha's computation because they are not registered with Florida's Department of Highway Safety and Motor Vehicles. The registration data that Yamaha relies on is compiled by the R.L. Polk Company. Polk purchases the data with which to compile the reports from various state motor vehicle agencies. Polk's reports are based only on vehicle registrations. Therefore the data is not an accurate reflection of sales performance in Florida because ATVs and motorcross bikes are not registered with the State. In addition, registrations reflect only where the motorcycle purchaser lives, not where the unit was purchased. In other words, if a person who lives in Orlando bought a Yamaha in Daytona, that motorcycle registration would show up in a Polk report as an Orlando registration. It is difficult, if not impossible, to accurately evaluate a dealer's sales performance, or representation of its manufacturer, using the Polk data. It is unreasonable to judge Hamilton's representation of Yamaha on a formula based solely on motorcycles and scooters because unregistered vehicles are a large part of Hamilton's sales. Use of registration data also sometimes yields absurd results. For example, Yamaha based their market share of Volusia County for 1985 on 181 vehicles. Hamilton alone sole 186 units that year. Yamaha dealers have had difficulty ordering and maintaining a sufficient supply of machines to sell. Yamaha allocates a certain number of units to each dealer. The allocations are small and made up of mixtures of units that are difficult to sell. On occasion Yamaha has not been able to fill even an allocated order. The manufacturer has also instituted package sales which place small single line dealers such as Hamilton at a distinct disadvantage in the market area. Because of this packaging system, Hamilton was unable to sell any competition machines, a segment of its beach market, in 1988. Overall, there are fewer Yamaha machines available for dealers to buy and retail. The evidence suggests that Florida's "Space Coast" does not purchase motorcycles at a rate commensurate with the rest of the state. In 1985, 1986, and 1987, the only years for which comparable data was introduced, the counties surrounding Volusia (Flagler, Seminole, St. Johns, Orange, Lake, and Putnam) had market percentages below the Florida and national average. Nevertheless, the Florida Yamaha average for 1987 (21.11 percent) was almost achieved in the zip code area in which Hamilton is located. In that area, Yamaha achieved 20.58 percent by registering 14 scooters and motorcycles out of 68 total. Yamaha has never expressed any dissatisfaction with Hamilton's sales performance or representation of the manufacturer. Hamilton was never told to make any changes in its business and never had any indication that it was providing less than adequate sales representation.
Recommendation For all of the foregoing reasons, it is recommended that the Department of Highway Safety and Motor Vehicles enter a final order in this case denying the application of P & M Transit Company, Inc. d/b/a Jim Walker's Yamaha, to relocate its dealership premises. DONE and ENTERED this 6th day of April 1989, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of April 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-3519 The following are my specific rulings on all proposed findings of fact submitted by the parties. Findings proposed by Petitioner, Hamilton: Paragraphs 1 through 10: Accepted. Paragraph 11: Accepted in substance. Paragraphs 12 through 16: Accepted. Paragraph 17: Rejected as constituting primarily argument rather than proposed findings of fact. Paragraphs 18 and 19: Rejected as admittedly inaccurate. Paragraph 20: Rejected as constituting inferences which are not warranted by the evidence; there is insufficient evidence in the record upon which to base the proposed opinion. Paragraphs 22 through 24: Accepted. Findings proposed by Respondent, Yamaha: Paragraphs 1 through 4: Accepted. Paragraphs 5 and 6: Rejected as constituting a discussion of statutory interpretation rather than proposed findings of fact. Paragraph 7: Accepted in substance. Paragraph 8: First sentence accepted. The remainder is rejected as subordinate and unnecessary details. Paragraph 9: Rejected as subordinate and unnecessary details. Paragraphs 10 and 11: Rejected in part as subordinate and unnecessary details and in part as constituting inferences not warranted by the evidence. Paragraphs 12 and 13: Rejected as subordinate and unnecessary details. Paragraph 14: Accepted in substance. Paragraphs 15 and 16: Accepted in substance. Paragraph 17 and 18: Rejected as subordinate and unnecessary details. Paragraphs 19 through 23. Rejected as based on inferences not warranted by the evidence; the Polk data standing alone is simply not a persuasive basis upon which to reach conclusions regarding the scope of the area within which the existing dealers enjoy a "geographic advantage." Paragraph 24: First four lines rejected as based on inferences not warranted by the evidence. Last three lines accepted in substance. Paragraphs 25 and 26: Rejected as contrary to the greater weight of the evidence and as not supported by persuasive competent substantial evidence. Paragraph 27: Rejected as constituting a statement of legal principles rather than proposed findings of fact. Paragraph 28: Rejected as constituting inferences not warranted by the evidence and not supported by competent substantial evidence. Paragraph 29: Rejected as subordinate and unnecessary details; also irrelevant. Paragraph 30: Rejected as constituting inferences not warranted by the evidence. Further, the reasonableness of the proposed standard, without more, is questionable in view of the fact that by simple logic half of the dealers nationwide are performing below the national average. Paragraph 31: Accepted in substance. Paragraph 32: First sentence rejected for same reason as rejection of Paragraph 30. Remainder rejected because the Polk data is not a persuasive basis upon which to draw conclusions regarding market penetration. Paragraphs 33 through 38: Rejected because the Polk data is not a persuasive basis upon which to draw conclusions regarding market penetration. Paragraph 39: First sentence is rejected as irrelevant. Last sentence is rejected as constituting an inference not warranted by the evidence and not supported by competent substantial evidence. Paragraph 40: First sentence is rejected as constituting a legal conclusion not warranted by the evidence. Last sentence rejected as redundant. Paragraph 41: Rejected as constituting argument rather than findings of fact. Paragraphs 42 through 48: Rejected as irrelevant. Paragraphs 49 and 50: Rejected as subordinate and unnecessary details. Paragraph 51: Rejected as constituting subordinate, unnecessary, and irrelevant details. Paragraph 52: Rejected as subordinate, unnecessary, and irrelevant details that are closer to argument than to proposed findings of fact. Paragraphs 53 through 56: Rejected as constituting argument about the evidence rather than proposed findings of fact. COPIES FURNISHED: Dean Bunch, Esquire Rumberger, Kirk, Caldwell, Cabaniss, Burke & Wechsler 101 North Monroe Street Suite 900 Tallahassee, Florida 32301 Linda McMullen, Esquire McFarlain, Sternstein, Wiley & Cassedy 600 First Florida Bank Bldg. Tallahassee, Florida 32301 Michael J. Alderman, Esquire Office of General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 Enoch J. Whitney, Esquire General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 Charles J. Brantley, Director Division of Motor Vehicles Room B-439, Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 =================================================================
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, I hereby make the following Findings of Fact: The Respondent, Holiday Interval Ownership, Inc., is the developer and seller of Ocean 80 Resort, a condominium and time-share plan. Ocean 80 Resort is located in the Florida Keys on U.S. Highway 1, mile marker 80, Islamorada, Florida. Mr. and Mrs. William Seibert II received an advertisement concerning Ocean 80 Resort which promised prospective buyers a free trip to Mexico simply for visiting the condominium and listening to a sales presentation. On May 28, 1983, Mr. and Mrs. Seibert went to Islamorada and visited Ocean 80 Resort. The Seiberts were given a sales presentation by Bonnie Seide, a sales agent for Respondent. Ocean 80 Resort consists of 79 separate units located in one building. There are 8 different types of units, ranging from the Mako units which are efficiencies consisting of approximately 520 square feet, to the Tarpon units which are 2 bedroom, 2 bath units consisting of approximately 1,056 square feet. The Seiberts first listened to a description of the program and facilities of Ocean 80 Resort and then were taken by Bonnie Seide to see a model on the fourth floor. The Seiberts told Ms. Seide that they were only interested in the large Marlin units, which are 2 bedroom, 2 bath units consisting of approximately 944 square feet. The Seiberts were taken to Model Unit 404, a Marlin unit located on the fourth floor. Ms. Seide told the Seiberts that there was a similar unit available on the third floor below. The exact words used by Ms. Seide to describe the third floor unit were not established by the witnesses at the hearing with any degree of persuasiveness. Neither party presented the testimony of Ms. Seide. The Seiberts believed that the "similiar" third floor unit would be located directly beneath the model unit with an identical view of the pool as was enjoyed by the model unit. The model unit was situated in the middle of the corridor, with its balcony directly overlooking the pool. The Seiberts and Ms. Seide went down to the third floor, but were unable to walk down the hall and visit the unit that the Seiberts were to purchase because of construction. The Seiberts and Ms. Seide looked down the corridor towards the unit. There were no numbers on the doors at that time. Even though they were unable to inspect the unit, the Seiberts decided that they would purchase it anyway. The Seiberts then went to the sales office where they entered into a purchase agreement with Respondent for Unit 300, week 52 in Ocean 80 Resort. Although the Seiberts believed that their unit would be located directly beneath the model unit which they were shown, they were apparently unconcerned that the model unit's number was 404 and their unit was numbered 300. The purchase agreement provided that the price of the unit would be $9,270 and that the Seiberts would be entitled to occupancy of the unit during the appropriate week of 1983. The purchase agreement specifically advised the Seiberts of their right to cancel the contract without penalty or obligation within 10 days from the date of signing the agreement. The purchase agreement contained an exclusionary clause in bold print which stated as follows: Oral representations cannot be relied upon as correctly stating the representa- tions of the developer. The developer makes no representations other than those contained in this contract, the offering statement and the condominium documents. Upon entering into the purchase agreement on May 28, 1983, the Seiberts received several condominium documents, including a prospectus text, declaration of condominium, articles of incorporation and a floor plan. Because 1983 was a leap year, week 52 entitled the Seiberts to two weeks occupancy. The Seiberts decided that they would rent out one of the weeks and "spacebank" the other with Resort Condominiums International, Inc., (RCI). RCI is an organization which trades and transfers time share units. The Seiberts were interested in exchanging their unit week for a unit week in another facility in Paris. The Seiberts submitted a form to Ocean 80 Resort indicating that they desired that one of their weeks in 1983 be placed in a rental pool. At some point, the Seiberts were advised by Ocean 80 Resort that their unit would not be ready for occupancy in 1983. Nevertheless, the Respondent mailed the Seiberts a check for $371.02 reflecting a rental fee for the unit. In January of 1984, the Seiberts were advised by RCI that their request to "spacebank" and exchange their unit was denied because the unit was not yet ready for occupancy. A few weeks later, Ocean 80 Resort spacebanked a substitute unit with RCI on the Seiberts' behalf. Because their unit was not completed and ready for occupancy in 1983 and because their initial request to space-bank with RCI had been denied, the Seiberts became increasingly irritated and dissatisfied with Ocean 80 Resort. On March 17, 1984, the Seiberts went to Ocean 80 Resort and visited their unit for the first time. Much to their dismay, the Seiberts discovered, apparently for the first time, that unit 300 was not in the middle of the corridor, directly opposite the pool. Unit 300 afforded a view of the pool, but the unit was located at the end of the corridor directly opposite the roof of a common area. The pool was visible from unit 300 when looking at an angle from the balcony. Although some attempts were made by Ocean 80 Resort to resolve the matter by substituting a different unit, the Seiberts decided that they wanted nothing further to do with Ocean 80 Resort and desired a cancellation of the agreement. The Seiberts have never used their unit at Ocean 80 Resort. Stan Zabetakis received an advertisement for Ocean 80 Resort Condominium in 1983 and went to a sales presentation primarily because he was interested in receiving a promised free trip to Mexico. After listening to the sales presentation, Mr. Zabetakis purchased unit #202, week 2 for a total cost of $5400. On December 29, 1984, Mr. Zabetakis visited Ocean 80 Resort to "take a look around" and spoke with a sales representative. After this discussion Mr. Zabetakis decided to enter into a purchase agreement with Respondent whereby he would trade his current unit in on a larger, more expensive unit. The purchase agreement, signed by both parties on December 29, 1984, reflects that Zabetakis purchased unit 414, week 5 at a total purchase price of $8,500. Zabetakis was credited with $5,400 as equity in his previous unit (202) and the balance of $3,100 was financed with Respondent at 14 percent interest for 5 years, with monthly payments of $72.14. The Purchase Agreement specifically provided that the buyer had the right to cancel the contract without any penalty or obligation within 10 days from the date the contract was signed and executed. On January 6, 1985, Mr. Zabetakis wrote Respondent a letter indicating his desire to cancel the purchase agreement for unit 414, week 5. The Respondent received Mr. Zabetakis' letter of cancellation on January 8, 1985. Initially, Respondent refused to honor Mr. Zabetakis' cancellation and claimed that the letter was not received within the statutory 10 day period. On August 17, 1985, the Respondent changed its position and wrote Zabetakis a letter acknowledging the timely receipt of his letter of cancellation and enclosing a Quit-claim Deed for unit 414, week 5, which Zabetakis was asked to sign and return. However, by this time, Respondent had resold Mr. Zabetakis' original unit week. Further complicating Mr. Zabetakis' dilemma, by the time Respondent agreed to cancel the purchase agreement, the Respondent had sold the note and mortgage to a third-party financial institution. Mr. Zabetakis made his first payment of $72.14 in March 1985 and has made a timely payment of $72.14 each month, up to the date of the final hearing. Because Mr. Zabetakis' original unit and his mortgage note had been sold, he was leery of signing the Quit-claim Deed and did not return it to Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that a final order be entered: Assessing a civil penalty of $5,000 against Respondent; and Requiring that Respondent honor the right of Mr. Zabetakis to cancel his contract and receive an appropriate refund. DONE and ORDERED this 31st day of March, 1987 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1765 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in Findings of Fact 1 and 2. Addressed in Conclusions of Law section. Partially adopted in Findings of Fact 3, 4, 5, 6, 7, 8 and 9. Sentence 4 is rejected as misleading and contrary to the weight of the credible evidence presented. The credible evidence did not establish that Ms. Seide stated that the similar unit would be located directly below the unit which the Seiberts were shown. Sentence 1 is rejected as contrary to the weight of the credible evidence. Sentences 2 and 3 are rejected as misleading but addressed in Findings of Fact 9 and 10. Sentences 4 and 5 are adopted in substance in Finding of Fact 10 and 11. Sentences 1 and 2 are adopted in substance in Finding of Fact 17. Sentences 3 and 4 are rejected as misleading but addressed in Finding of Fact 18. Sentence 1 is rejected as misleading but addressed in Finding of Fact Sentences 2 and 3 are adopted in substance in Finding of Fact 19. Adopted in Finding of Fact 22. Adopted in Findings of Fact 24, 25, 26 and 27. Rejected as subordinate and/or unnecessary. COPIES FURNISHED: Thomas Presnell, Jr., Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007 John A. Ritter, Esquire 9040 Sunset Drive - Suite 20 Miami, Florida 33173 James Kearney Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000 Thomas A. Bell, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000 Richard Coats Director Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000
The Issue Whether petitioner's application for registration as a real estate salesman, pursuant to Chapter 475, Florida Statutes, should be approved.
Findings Of Fact Petitioner field applications for registration as a real estate salesman with respondent on October 10, 1977. Question 16 of the application reads as follows: 16. Have you, in this state, operated, attempted to operate, or held yourself out as being entitled to operate, as a real estate salesman or broker, within one year next prior to the filing of this application without then being the holder of a valid current registration certificate authorizing you to do so? The petitioner answered "no" to Question 16. On December 8, 1977, respondent Florida Real Estate Commission issued an order denying the application based on its determination that the applicant had operated, attempted to operate or held himself out as a real estate broker or salesman within the one year period prior to filing his application. Petitioner thereafter requested a hearing in the matter. (Exhibit 1) Petitioner is the president of Marketing Institute Corporation of the Americas, Ltd. of San Jose, Costa Rica. (MICA) The firm operates as a real estate sales organization under the laws of Costa Rica, and is owned by Insco S.A., a Costa Rican holding company. (Testmony of McIntire, Figueredo) In 1975, petitioner became associated with William W. Landa, president of Costa del Sol, a condominium project in Miami, Florida. His function was to produce sales of condominium units as a result of sales efforts in Latin America. Part of the informal arrangement was the petitioner occupied a rental villa at the condominium project. His success in producing sales was limited and, as a result, the association was terminated sometime in 1976. In a letter to Lands, dated January 21, 1977, petitioner sought an accounting of expenses incurred in the operation and stated that he had produced three purchasers for which commissions were payable at the rate of "10% for foreign sales and 5% on domestic sales." Although no explanation of the terms "foreign sales" and "domestic sales" was presented, Landa testified at the hearing that petitioner did not sell in Florida for Costa del Sol. (Testimony of Landa, Figueredo, Exhibits 2-3) On December 1. 1976, the receiver in bankruptcy of the estates of Grandlich Development Corporation and Fisher Development Corporation, Fred Stanton Smith, president of the Keyes Company, Miami, Florida, Wrote petitioner and offered to pay his firm a 10% commission on "all sales closed by you of all Commodore Club Condominiums sold to your prospects." The commission was to be payable to MICA through its agent in the United States, Transcontinental Properties, Inc. of Miami, Florida, a corporate broker, The Commodore Club is a condominium project located at Key Biscayn, Florida. Hemisphere Equity Investors, Inc. was the registered broker for the sales of the condominiums and kept sales agents on the premises. Smith instructed Hemisphere to cooperate with foreign brokers in the sales of the properties. Petitioner proceeded under this arrangement to obtain and refer prospective foreign purchasers to Transcontinental who arranged to show the condominium units to the clients and consummate any resulting sales. Although petitioner had desk space in the Transcontinental office from September, 1976, to August, 1977, he was not supposed to show properties to clients or be involve in any real estate sales functions. In September, 1976, the president of Transcontinental placed a telephone call to respondent's legal office at Winter Park, Florida and ascertained that commissions could be paid to a foreign broker. However, he was informed by the Commission representative that it was a "gray" area and, although the foreign representative could serve as an interpreter for foreign clients during transactions in the United States, he could not perform any of the sales functions himself in Florida. Sales were made in this manner and commission checks were paid to petitioner's firm during the period January - September, 1977. (Testimony of Smith, McIntire, Figueredo, Exhibits 4, 5, 12, 13, 15) On July 1, 1976, Alexander Sandru purchased a condominium at the Commordore Club through the Keyes Company as broker. He was a friend of petitioner's from Caracas, Venezuela, and the latter had recommended his purchase of the condominium. However, petitioner was not in the United States at the time Sandru viewed the property and purchased it. Petitioner claimed a commission on the sale and it was paid to his firm through Transcontinental's predecessor company. A dispute arose over the payment of the commission because a saleswoman of Hemisphere Equity Investors, Inc. had shown the property to Sandru and assumed that she would earn the commission on any resulting sale. (Testimony of Lundberg, Nelson, Murragy, Exhibits 8-11) On several occasions in 1976 and 1977, petitioner accompanied Latin American individuals to the Commodore Club where a representative of Hemisphere showed them various condominium units. During this time, petitioner would inquire concerning maintenance charges and the like and transmit such information to the individuals in Spanish. Several of these persons were connected with petitioner's foreign firm and were not prospective purchasers. (Testimony of Lundberg, Figueredo, Exhibit 7) On January 30, 1977, Insco S.A. entered into a purchase agreement for a Commodore Club condominium unit. Petitioner signed the agreement on behalf of his firm MICA as broker for the transaction. However, the deal was never consummated. (Testimony of Figeredo, Exhibit 14)
Recommendation That Petitioner's application for registration as a real estate salesman under Chapter 475, Florida Statutes, be denied. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 22nd day of March, 1978. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: John Huskins, Esquire Florida Real Estate Commission 400 West Robinson Avenue Orlando, Florida 32801 Richard J. Mandell, Esquire 748 Seybold Building Miami, Florida 33132
Findings Of Fact Ben L. Musick is a registered real estate broker, t/a Ben Musick holding License No. 0062987. In September or October of 1975, Ben Musick was contacted by Barbara Hawkins who requested Musick to represent her in the sale of her home located at 3802 East Esther Street, Orlando, Florida. At that time, Hawkins advised Musick that she had had a recurrence of cancer, was behind on the second mortgage to her house, and desired to sell her home. Musick advised Hawkins that he could assist her in selling the home but that if he undertook to list the house in a direct capacity, that by virtue of his membership in the Orlando/Winter Park Multiple Listing Service that he would have to charge her seven percent commission on the sale. Hawkins advised Musick that she did not desire to have the house so listed and did not desire to place a sign on the property. Hawkins was desirous of paying off the money owned on the house, and obtaining as much money as possible on the sale. Musick was unable to give her an approximation of the money she could hope to realize on the sale of the home because Hawkins was unable to tell him the amount she was in arrears on the second mortgage. Musick undertook to represent Hawkins and advised her that he would check into the status of the second mortgage and would contact her. Upon checking with the second mortgagor and with the courthouse, Musick determined that there was a lien against the property for a deficiency judgment from a small loan company. He also determined the amount of money which she was in arrears on the second mortgage. With this information, Musick met with Hawkins on the 12th or 13th of October, 1975 and discussed with Hawkins the fact that the judgment lien of the small loan company would have to be satisfied together with the amounts due and owing on the second mortgage. A firm purchase price was not reached, but it was their understanding that he would attempt to get the very best price for the home and bring any offers to her and see if she would approve. Musick, having been limited in the manner in which he could advertise Hawkins' property, contacted several friends of his wife and as a result of these contacts showed the home to two couples during the months of October and November. Mrs. Hawkins entered the hospital at the Naval Station in Orlando around November 10, 1975. After her initial examination, it was determined that she would have to be evacuated by air to a cancer treatment center and arrangements were made to do this. She was to be transferred on November 20 or 21, 1975. Ben Musick had shown the Hawkins' home to Bobby and Jerry Hill who on November 19 communicated their decision to Musick that they would offer to pay all outstanding obligations on the Hawkins' home and assume the first mortgage on the home. By this time it had come to light that there was due and owing four months payments on the first mortgage and that both mortgage companies were considering foreclosure. Ben Musick communicated the offer made by the Hills to Hawkins on November 19, 1975 by telephone speaking with her at the Naval Hospital. Based upon her acceptance of the offer and having been advised by Hawkins that her husband was present, Musick prepared the contract for sale based upon the estimates of the cost which the Hills would have to pay and the amount of the first mortgage which they would have to assume. Then Musick presented the contract for purchase and sale and the deed to the property to Barbara Hawkins and her husband at the Naval Hospital on November 20. At that time Musick advised Hawkins that upon signing the contract and deed that the property would be effectively transferred although there would be a formal closing at which he would appear and represent her. Hawkins concurred in this and signed the contract for sale and the deed conveying the property from herself and her husband to Bobby and Jerry Hill. She was told prior to signing that she would receive no cash proceeds from the sale pursuant to the offer of the Hills to pay all debts owing on the home and assume the first mortgage. On November 21, 1975, Barbara Hawkins was transferred from the Naval Hospital in Orlando to Keesler Air Force Base Hospital in Biloxi, Mississippi. The Hills had determined to obtain title insurance on the subject property; and, therefore, Musick turned to Lawyers Title Insurance Company to handle the closing in this transaction because they offered to do so for free thereby saving the Hills money in closing the sale of the property. The final closing statement for the sale of the property was prepared by Jody Sellers of Lawyers Title Insurance Company. She prepared the closing statement based upon information obtained by her from the mortgage companies involved. The information provided her was slightly different from the information provided to Ben Musick and the estimates which he had been required to make regarding the cost of title insurance and other closing costs as stated in the contract for sale. However, the offer was premised upon a payment of debts and assumption of mortgage with the understanding that Hawkins would receive no cash proceeds. Because of the difference in Sellers and Musick's figures there was a slight difference ($250) between the purchase price figures arrived at by Sellers and that arrived at by Musick as expressed in the contract for sale. On November 28, 1975, Ben Musick called Barbara Hawkins at the Air Force Hospital at Keesler Air Force Base, Biloxi, Mississippi, where he advised her that the closing had been approved and was imminent and that she would receive $55 cash from the proceeds of the sale. He further advised her that he would be at the closing and represent her picking up her papers and check. She acknowledged his representation of her at the closing. At closing Jody Sellers requested that Ben Musick execute an affidavit stating that the subject property was free and clear of any mechanics liens, which Ben Musick signed as follows: "Ben Musick, Realtor for Barbara M. Hawkins" Ben Musick signed the closing statement indicating the receipt of $55.31 in behalf of Barbara M. Hawkins in the same manner. Upon her return from Biloxi, Mississippi, around December 10, 1975, Ben Musick delivered the closing papers and the check for $55.31 to Barbara Hawkins.
Recommendation The Hearing Officer, based upon the foregoing findings of fact and conclusions of law, recommends that the Florida Real Estate Commission take no action against the license of Bennett L. Musick, t/a Ben Musick, as a registered real estate broker. DONE and ORDERED this 28th day of December, 1976, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Randy J. Schwartz, Esquire Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Thomas F. Lang, Esquire Post Office Box 633 Orlando, Florida 32802 Charles T. Wells, Esquire Post Office Box 3109 Orlando, Florida 32802
The Issue Whether the Department of Insurance (hereinafter referred to as the "Department") should remove Respondent from the office of President of Perry & Company, a premium finance company authorized to do business in Florida, pursuant to Section 624.310, Florida Statutes, for the reasons set forth in the Administrative Complaint?
Findings Of Fact Based upon the evidence adduced at hearing, the factual stipulations into which the parties have entered, and the record as a whole, the following Findings of Fact are made: Respondent's Early Employment After graduating from Miami Dade Community College with an A.A. degree in computer science, Respondent was employed as a teller, and then as the head teller, at Pan American Bank in Miami, Florida. He remained in the employ of Pan American Bank for approximately six months. Respondent then went to work for Brickell Bank, another bank located in the Miami area. He started as a new accounts representative, but ultimately became the bank's "in-house computer person" and worked on various computer- related projects for the bank. Respondent was employed by Brickell Bank for a period of two to three years. Respondent left Brickell Bank to become the Vice President of Computer Operations at General Bank. At the time, First Miami Insurance Company (hereinafter referred to as "First Miami"), as well as its immediate parent corporation, General Trust Mortgage Corporation, were wholly owned subsidiaries of General Bank. First Miami was a Florida domestic property and casualty insurer, specializing in the issuance of "non-standard" automobile insurance policies. It was initially licensed by the Department in 1988. The majority shareholders of General Bank were Pedro Ramon Lopez and his wife, Teresa Saldise, who, at all times material to the instant case were practicing attorneys licensed to practice law in the State of Florida. Lopez was General Bank's Chairman of the Board. Saldise was its Vice Chairman of the Board. In late 1988 or early 1989, Respondent, who at the time had no previous experience working in the insurance industry, was assigned by General Bank the task of better automating and otherwise improving the efficiency of First Miami's operations. First Miami was having problems with its telephone and computer systems which, combined with other operational deficiencies, were resulting in delays in policy issuance and claims payments. The Department had received complaints from consumers regarding these delays, which it was investigating. During the investigation, Respondent met with a Department official and explained to him First Miami's computer operations. In the middle of 1989, Respondent became a full-time employee of First Miami. He was given the same title that he had had with General Bank, Vice President of Computer Operations. As Vice President of Computer Operations, Respondent initially reported to Frank Santanaria, who at the time was First Miami's Chief Financial Officer. Subsequently, when he assumed greater responsibility for the operations of the company, he reported to Diana Madero, First Miami's then Executive Vice President. The "Spin Off" of First Miami In August or September of 1989, General Bank decided to "spin off" both First Miami and General Trust Mortgage Corporation and make them independent of the General Bank corporate structure. The "spin off" was intended to satisfy the concerns of federal banking regulators. At the time of the "spin off," Respondent was actively involved in the day-to-day operations of First Miami. Although he did not participate in the decision to "spin off" First Miami, nor was he involved in taking any of the steps necessary to effectuate the "spin off," he was aware, before the "spin off" occurred, that the "spin off" decision had been made and was in the process of being implemented. The Post-"Spin Off" First Miami Following the "spin off," Lopez transferred his ownership interest in First Miami to Saldise. From the date of this transfer until First Miami's liquidation, Saldise was the principal shareholder and President of First Miami and, as such, the person in effective control of the company. She exercised such control through a holding company, First Miami Holding Company, in which she had a 75 percent ownership interest. Respondent was either an officer or director, or both, of First Miami Holding Company from May 23, 1990, until the administrative dissolution of the company on October 9, 1992. Although Lopez was neither a shareholder, officer nor director of First Miami following the transfer, he served as a consultant to the company and, along with his wife, made strategic decisions about the company's direction, its business activities, and its investments. In making these decisions, Saldise and Lopez occasionally sought the legal advice of other attorneys, including Stephen Rubin, with whom they dealt directly. Rubin is a member of The Florida Bar 4/ who has been practicing law since 1969, following his graduation from Columbia University Law School. 5/ He is primarily a litigator who specializes in complex corporate, commercial and regulatory matters, however, he also does general transaction work. Respondent replaced Diana Madero as First Miami's Executive Vice President, in charge of the company's day-to-day operations, sometime around the time of the "spin off" 6/ and he remained in that position until the Department's takeover of the company in June of 1992, receiving a salary of approximately $75,000.00 a year. As Executive Vice President, Respondent reported to Saldise and Lopez. For a period of time following the "spin off" Respondent also held the office of Treasurer. From at least February of 1990, until the Department's takeover of First Miami, Respondent was on its Board of Directors. As of December 31, 1991, the other members of the Board were as follows: Saldise; Raimundo Aleman, the Vice President of Accounting and Treasurer, who was responsible, throughout the period that Respondent was Executive Vice President, for the preparation of all of company's financial statements and reports; Orlando Roberto Soto, the Secretary; and Juan Saldise. November, 1989 Petition for Order to Show Cause Following the "spin off," First Miami acquired approximately $5,000,000.00 of General Bank stock. In November of 1989, federal banking regulators placed General Bank into conservatorship and seized its assets. Such action rendered worthless the General Bank stock held by First Miami. Following the takeover, an article appearing in a Miami newspaper quoted the Department's General Counsel as having said that First Miami was insolvent and that its majority shareholder, Saldise, and her husband, Lopez, had "walked off" with the $5,000,000.00 that First Miami had paid for the General Bank stock that was now worthless. Shortly thereafter, the Department filed in Leon County Circuit Court a Petition for Order to Show Cause against First Miami alleging that there was reason to believe that the company was insolvent. First Miami's business declined after the publication of the newspaper article and the filing of the Petition for Order to Show Cause. Independent insurance agents and premium finance companies were reluctant to continue their dealings with the company. Representatives of two large premium finance companies that had done a considerable amount of First Miami business, Perry & Company and Equivest Premium Finance, visited with Respondent and others at First Miami's offices to inquire about First Miami's solvency. During the pendency of the Petition for Order to Show Cause, the Department, with the assistance of auditors employed by Coopers & Lybrand, conducted an investigation of First Miami. The investigation was headed by Curt O'Shields. During his investigation, O'Shields had discussions with Respondent regarding First Miami's capital and surplus position as of September 30, 1989. Following the investigation, in a February 7, 1990, memorandum to the Department's General Counsel, O'Shields recommended that the Department "settle with [First Miami] and drop the rehabilitation proceedings." O'Shields noted in his memorandum that "[o]perationally, the Company has greatly improved" and "[f]inancially, [it] ha[s] provided evidence to support admitting certain assets sufficient to make the Company solvent." O'Shields' recommendation was followed. On or about February 13, 1990, the Department and First Miami entered into a stipulation which provided as follows: THIS STIPULATION is by and between the State of Florida, Department of Insurance and Treasurer and First Miami Insurance Company. For and in consideration of the mutual promises and covenants set forth hereinbelow, the parties stipulate and agree as follows: The parties stipulate and agree to entry of an Order of Dismissal of Civil Action 89-4343 pending in the Circuit Court of the Second Judicial Circuit In and For Leon County, Florida, and further agree immediately upon the execution of this Stipulation to enter into the Stipulation for Dismissal attached hereto as Exhibit A. First Miami agrees that it will not carry as an admitted asset any stock it may own in General Bank. The parties stipulate and agree that because Forum Reinsurance Company Limited at this time is not an approved reinsurer for purposes of its 1989 annual statement First Miami may not carry as an admissible asset the amount of reinsurance ceded in excess of the amount of First Miami's trust; provided, however, that the Department agrees to promptly review an application for approval of Forum Reinsurance Company Limited as an approved reinsurer, or a request for approval of Forum Reinsurance Company Limited as a SNAR, in good faith and on the same basis as it would review an application from any other insurer. 7/ First Miami for purposes of its 1989 annual statement shall carry its wholly-owned subsidiary, PRLS, Inc. 8/ as an admitted asset at a value of $650,000.00; provided however, that said valuation is contingent on First Miami's obtaining a fully executed contract for sale of said subsid- iary by June 30, 1990. If First Miami does not obtain an executed contract for sale of said sub- sidiary by June 30, 1990, on its June 30, 1990 financial statement and thereafter it shall not carry PRLS, Inc. as an admitted asset. Respondent, approved, but did not execute, the stipulation. The Stipulation for Dismissal, attached to the stipulation as Exhibit A, provided that the parties had "resolved all matters relevant that gave cause to the filing of the PETITION FOR ORDER TO SHOW CAUSE" and that "THEREFORE, the parties agree[d] to entry of an Order by the Court dismissing this action." Such an order was entered on February 13, 1990. Carrera Insurance Underwriters and the "No Down Payment" Program After the entry of the Order of Dismissal, First Miami engaged in a campaign to repair its relationships with independent insurance agents and premium finance companies. It also formed, in June of 1990, a subsidiary, Carrera Insurance Underwriters (hereinafter referred to as "Carrera"), so as to reduce its reliance upon business generated by independent insurance agents. Saldise, Lopez, Madero, Soto and Respondent were the initial members of Carrera's Board of Directors. To attract business, Carrera, at the suggestion of Lopez, instituted a "no down payment" program. Based on the legal research he had done, Lopez concluded that the "no down payment" program was not unlawful. Other insurance companies, independent agents, and agent associations, such as the Latin-American Agents Association and the Specialty Agents Association, complained to the Department about the program. After having received these complaints, the Department contacted First Miami and a meeting between representatives of First Miami and the Department was arranged. The meeting was held in Tallahassee. Among First Miami's representatives at the meeting were Saldise, Lopez and Respondent. The primary spokesperson at the meeting for First Miami was Lopez. Respondent's role at the meeting was to address computer-related issues. Neither at the meeting, nor at any other time, did the Department advise First Miami that it had concerns regarding the legality of the "no down payment" program. The Forum and Munauto Reinsurance Agreements First Miami's reinsurance agreement with Forum Reinsurance Company Limited (hereinafter referred to as "Forum"), which was referred to in the February 13, 1990, stipulation between First Miami and the Department, had been entered into on November 27, 1989. The reinsurance agreement with Forum was negotiated, on First Miami's behalf, by Erin Doherty of Saturn Intermediaries. She received input regarding the preferences of First Miami primarily from Saldise, Lopez and Madero. Respondent assisted in the negotiations by providing computer-generated reports and data. Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez. In conjunction with this reinsurance agreement, a Trust Agreement was entered into by Forum (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). Under the Trust Agreement, First Miami, rather than Forum, had the authority to direct and control the investment of trust fund assets. This was an unusual arrangement inasmuch as it is generally the reinsurer which exercises such direction and control. First Miami directed that the assets of the Forum reinsurance trust fund be invested in insurance premium finance contracts of South Florida Premium Finance Company. South Florida Premium Finance Company was a "captive" premium finance company. It financed only premiums due on policies issued by First Miami. First Miami owned 9.09 percent of the shares of South Florida Premium Finance Company. General Trust Mortgage Corporation owned the remaining shares. Respondent was an officer and director of South Florida Premium Finance Company from February 21, 1990, until October 9, 1992, the date of the administrative dissolution of the corporation. From August 1, 1989, until June 5, 1992, Respondent was either an officer or director, or both, of General Trust Mortgage Corporation. First Miami sought the Department's approval of its reinsurance arrangement with Forum. By letter dated February 26, 1990, which read as follows, the Department granted the requested approval: This is pursuant to your request for the Department to approve Forum Reinsurance Co., Ltd. of Bermuda ("Forum Re") as a "Satisfactory Non-Approved Reinsurer" for purposes of taking credit in First Miami Insurance Company's ("First Miami") accounting and financial statements for calendar year ended December 31, 1989. Your request is hereby granted under Sec. 624.610(2)(b)1, F.S., with the condition that the reinsurance contract entered into by First Miami and Forum Re shall be commuted on or before December 31, 1990 and replaced with another reinsur- ance contract satisfactory to the department. 9/ Forum commuted its reinsurance agreement with First Miami in July or August of 1990. 10/ Forum notified Doherty of its action. Doherty then contacted First Miami and discussed the matter with Respondent. Respondent asked Doherty to find an admitted reinsurer for First Miami that would be agreeable to allowing First Miami to exercise control over the investment of reinsurance trust fund assets. Doherty unsuccessfully attempted to locate such a reinsurer for First Miami. On October 11, 1990, First Miami entered into a written reinsurance agreement with Munauto, S.A., a non-admitted Spanish reinsurer, which covered both current and prior business and was particularly advantageous to First Miami. In conjunction therewith, a Trust Agreement which permitted First Miami to direct and control the investment of trust fund assets was entered into by Munauto (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). 11/ The reinsurance agreement contained an addendum which was signed by Respondent in his capacity as First Miami's Executive Vice President. The Munauto reinsurance and trust agreements were drafted by First Miami's retained attorney, Stephen Rubin. Saldise and Lopez had negotiated these agreements on behalf of First Miami. They first met with Munauto representatives in Spain approximately two to three months before the written agreements were executed. Following this initial meeting, Munauto's Chairman of the Board and its President visited First Miami's offices in Miami where they continued their discussions with Saldise and Lopez. During their visit, they also met with Respondent, who provided them with information regarding First Miami's operations and introduced them to the department heads. Doherty was not in any way involved in the negotiations that culminated in the execution of these agreements. In fact, she was not even aware of the existence of the agreements. As requested by Respondent, Doherty continued her efforts to obtain a suitable reinsurer for First Miami even after these agreements had been executed. Respondent had made such a request at the direction of Saldise, who wanted to explore other reinsurance options. On its Quarterly Statement for the quarter ending September 30, 1990, which was signed by Respondent and filed with Department on November 15, 1990, First Miami provided the Department with the following advisement: Forum has cancelled the Reinsurance Agreement. Munauto S.A. has replaced Forum Reinsurance Co. (P's FOF 46, 1st and 2nd sent) The Munauto reinsurance and trust agreements, however, were never submitted to the Department for approval. Investment in Premium Finance Contracts First Miami was advised by its retained attorney, Stephen Rubin, that it was legally permissible for it invest in the premium finance contract accounts receivable of South Florida Premium Finance Company. Rubin further informed First Miami that it was his legal opinion that First Miami's ownership of these premium finance contract accounts receivable constituted an admitted asset of First Miami under the Insurance Code. He explained that, in his view, First Miami's "participations" in these accounts receivable, based upon promissory notes, were tantamount to "securities," within the meaning of Section 625.012, Florida Statutes. Respondent was among those at First Miami with whom Rubin discussed this matter, and he relied upon Rubin's legal advice. The $1,000,000.00 Dividend On January 29, 1991, at a meeting of the Board of Directors of South Florida Premium Finance Company, the Board declared a "cash dividend of $1,000,000 to the shareholders of record as of December 1, 1990:" First Miami, which held 9.09 percent of the shares; and General Trust Mortgage Corporation, which held 90.91 percent of the shares. Saldise and Respondent were among the Board members present at the meeting. After the meeting, South Florida Premium Finance Company issued the following checks to First Miami and General Trust Mortgage Corporation on the dates and in the amounts indicated: check number 003541, dated May 10, 1991, to First Miami in the amount of $61,325.80; check number 003542, dated May 10, 1991, to General Trust Mortgage Corporation in the amount of $613,325.51; check number 003543, dated April 26, 1991, to First Miami in the amount of $37,387.32; check number 003545, dated April 26, 1991, to General Trust Mortgage Corporation in the amount of $373,914.31. 12/ All four of these checks were signed by Respondent and Aleman for South Florida Premium Finance Company. They all cleared the bank on May 13, 1991. The Immediate Final Order On or about March 1, 1991, the Department received First Miami's Annual Statement for the year ending December 31, 1990. The Department reviewed the statement to ascertain, applying the principles of "statutory accounting" (which differ from generally accepted accounting principles or "GAAP accounting"), First Miami's current ability to meet its obligations. 13/ The review caused the Department to be concerned that First Miami was not currently able to meet its obligations. On March 12, 1991, the Department sent First Miami a letter in which it stated the following: A review of First Miami Insurance Company's Annual Statement indicates that real estate (page 2, line 4.1) was listed at appraised market value, instead of cost, less depreciation. Premium and Agents' balances and installments booked but deferred and not yet due were $6,732,243 at December 31, 1990. Please explain the justification for the admission of this asset. Further, please indicate, how much and when the unearned premium was set up for this asset. Page 72, Schedule P-part 2b, line 12 shows a redun[dan]cy figure of (833), please explain this. The above referenced filing inconsistencies reported in the 1990 Annual Statement should be revised and reported properly in the amended 1990 Annual Statement to be filed with the Department within fifteen (15) days from the date of your receipt of this letter. In addition to the above reporting inconsistencies, the Department has conducted a Diversification analysis of First Miami Insurance Company's Annual Statement, which indicates that the company is not diversified by approximately $4,192,253. With respect to the improper diversification, please submit a business plan to the Department within thirty (30) days from the date of your receipt of this letter, indicating the company's plan of action to correct this concern. Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Two days later, on March 14, 1991, the Department wrote to Respondent advising him that it was "imperative that [he] submit to this Department upon receipt of this letter, Premium Volume Written, Policyholders Surplus, Earned Premiums, and Losses Incurred for the months of January and February, 1991." Respondent responded immediately. In his cover letter to the Department, he stated the following: As per your request, I am attaching a copy of our total page of premiums written for January. The net premium written is $1,110,697.20, our Data processing Department is producing the end of month February reports and should be available by 3:00 p.m. on March 15, 1991. In order to determine our net surplus of January and February Mr. Raimundo Aleman, Vice President of Accounting, is presently working on producing these numbers. Please forgive us for not having these numbers available, but as you know we have spent January and February preparing the end of year blanket. Mr. Aleman will have a full set of Financial Statements for January ready for you by March 22nd. We believe that the February Financial Statement will be completed by the second or third week of April. Should you need further assistance in this matter, please do not hesitate to contact me. In a follow-up letter dated March 27, 1991, Respondent informed the Department of the following: As per your request, please be advised the accounting department has been able to finish the Financial Statement for January 1991. Our net surplus is $3,535,987.00. We are continuing to close February 1991 and as soon as the numbers become available we will forward them to you. Should you need further information regarding the aforementioned, please do not hesitate to call me. By letter dated April 9, 1991, the Department requested the following of Respondent: Pursuant to our conversation on April 1, 1991 concerning issues that are important to the Department of Insurance please confirm in writing. First Miami Insurance Company will not take credit for reinsurance because the reinsurer is an unauthorized Alien carrier, non-approved by the Department. First Miami Insurance Company, Mrs Teresa Saldise, nor her husband, Mr. Pedro Ramon Lopez, have any investments in banks in the United States or abroad. With regards to the 1990 Annual Statement, premiums, Agents Balances and installments booked but deferred and not yet due were $6,732,243, please provide documents substantiating unearned premiums excluding net of reinsurance. In addition, how much of that balance is over ninety days old? The Statement of Actuarial Opinion was not submitted with the Annual Statement, please remit within five (5) days from receipt of this letter. The company's short term assets less short term liabilities indicates a liquidity deficiency of $4,504,955. What is the company doing to improve this deficiency? Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Respondent wrote to the Department on April 15, 1991. In his letter, he stated the following: In response to your letter dated March 12th, 1991, in reference to our Annual Statement, please be advised of the following: Premiums and Agents balances and installments booked but deferred, and not yet due were $6,732,243 at December 31, 1990. This amount reflects premium finance contracts that have been purchased from South Florida Premium Finance. The total of this amount is all outstanding monthly payments from insureds. The amount is backed by unearned premiums in the amount of $11,627,613.73. The net of that amount is also reflected on page 3, number 9. Unearned premiums Part 2A, Column 5, Item 34. Page 72 Schedule P, Part 2B line 12 shows a negative figure of $833. Please see attached. I don't believe that an amended Annual Statement is necessary due to the fact that the above two numbers in my opinion are shown correctly. Should you have any further questions about them let me know. In reference to the Diversification analysis of the First Miami Insurance Company 1990 Annual Statement, I am not sure what statute you are basing yourself on to determine whether there is a diversification problem nor how you arrive at the $4,192,253.00 figure. Can you please refer me to a particular statute or explain the manner you calculate the diversification analysis. If this amount reflects the amount invested in premiums, I believe it is a fully admitted asset according to statute 625.012(3). "Premium notes policy, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest hereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy." Should you have any further questions regarding the above, please do not hesitate to call me. On Friday, May 10, 1991, the Department issued an Immediate Final Order (hereinafter referred to as the "IFO") in which it directed that First Miami "CEASE AND DESIST instanter from writing any new, reinsurance and/or renewal business effective 5:00 P.M. Friday, May 10, 1991," inasmuch as grounds "exist[ed] for the immediate suspension or revocation of FIRST MIAMI'S certificate of authority." The IFO alleged that FIRST MIAMI in the conduct of business under its certificate of authority Is in unsound financial condition. (Section 624.418(1)(a), Florida Statutes) Is using methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or the public. (Section 624.418(1)(b), Florida Statutes) No longer meets the requirements for the authority originally granted. (624.418(1)(d), Florida Statutes) Has violated any lawful order or rule of the department or any provision of this code. (Section 624.418(2)(a), Florida Statutes) Is impaired or insolvent. (Section 624.418(3)(a), Florida Statutes Has failed to have and keep to the extent of an amount equal to its entire reserve and the minimum capital and surplus required to be maintained. (Section 625.305(1), Florida Statutes Has entered into and ceded reinsurance to non-approved reinsurers. (Section 624.610(2)(b), Florida Statutes) Has excess investments in subsidiaries and affiliates. (Section 625.325(2), Florida Statutes) With respect to the issue of reinsurance, the IFO further, more specifically, alleged the following: FIRST MIAMI took a credit for reinsurance in Forum Reinsurance Company, Ltd., a non-approved reinsurer, in the amount of $3,479,939.00, which contract, pursuant to agreement with the DEPART- MENT, was to be replaced with another reinsurance contract satisfactory to the DEPARTMENT by December 31, 1990. In addition, FIRST MIAMI'S 1990 Annual Statement reflects a credit for reinsurance in Munauto Reinsurance, S.A., a non-approved reinsurer, in the amount of $6,358,231.00. The reinsurance contract was entered into in 1990 by FIRST MIAMI with a non-approved reinsurer and has not been approved by the Department in violation of Section 624.610, Florida Statutes. Since neither of these companies are approved by the Department, the Department cannot determine if either can satisfactorily pay current or future claims of the insureds in this state. With respect to the "Premium and Agents' balances and installments booked but deferred and not yet due" referred to in the Department's March 12, 1991, letter to First Miami, the IFO alleged the following: The balance of $6,732,243.00 due from FIRST MIAMI'S subsidiary and premium finance company, South Florida Premium Finance Company, consisting of FIRST MIAMI'S premiums, agents balances and installments shown on the books but deferred and not yet due was 201 percent of policyholders surplus. Such amounts should have been submitted to FIRST MIAMI at the time premiums were financed. As reflected on the 1990 Annual Statement, the amount represents a loan back to South Florida Premium Finance Company and as such, is a receivable from an affiliate which exceeds the allowable statutory limitation by $5,837,107.00 in violation of Section 625.325(2), Florida Statutes. In addition, such amount is not shown as a loan on the 1990 Annual Statement for South Florida Premium Finance Company. Pursuant to section 625.012, Florida Statutes, only those investments and loans held in accordance with the Florida Insurance Code may be considered in determination of financial condition. Therefore the $5.8 million cannot be considered an asset of the company. According to the IFO, although "FIRST MIAMI'S policyholders surplus as indicated on its 1990 annual statement was $3,347,596[, w]ith the adjustments of assets and liabilities required in order to comply with applicable statutes, FIRST MIAMI'S surplus [was] really a negative $7,498,838.00" and therefore it was "in violation of section 624.408, Florida Statutes which require[d] surplus of $1,370,321.00 and [was] impaired or insolvent." The IFO did not specifically address First Miami's "no down payment" program. First Miami received the IFO the afternoon of May 10, 1991, and immediately contacted its attorneys in Tallahassee for legal advice. Respondent was involved in discussions with First Miami's attorneys concerning the IFO. First Miami's Tallahassee attorneys sought and obtained, on Monday, May 13, 1991, an order from a Leon County Circuit Court judge enjoining the Department from enforcing the IFO. Doherty was among the witnesses who gave testimony at the injunction hearing for First Miami. She testified that an admitted carrier, namely U.S. Capital Insurance Company (hereinafter referred to as "U.S. Capital"), was ready, willing and able to enter into a reinsurance agreement with First Miami. Doherty had begun negotiating with U.S. Capital, on behalf of First Miami, in 1990. In addition to enjoining the enforcement of the IFO, the judge ordered First Miami to take the following action: Within twenty-four (24) hours of the time this Order is entered, [First Miami] shall provide to the [Department] an English Language version of any and all reinsurance Treaties or Agreements to which First Miami is currently a party, unless such English version treaties have been previously provided to [the Department]. No later than 5:00 p.m. on May 24, 1991, [First Miami] shall provide to the [Department] proof of existing reinsurance, if not already provided. No later than 4:00 p.m. on May 21, 1991, [First Miami] shall deposit the aggregate amount of One Million ($1,000,000.00) Dollars of its funds into the registry of the court or with the Division of Collateral Securities of the Office of the Treasurer as additional security for the issuance of this Order. No later than 5:00 p.m. on May 24, 1991, First Miami Insurance Company, shall receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars and in exchange therefor shall give to the contributor a surplus note in the form and on the terms customarily approved by the Department of Insurance, and the value of the contributed asset shall not be available for the purpose of writing insurance. [First Miami] shall file, in a timely manner, as required by law, any and all statutorily required, quarterly financial statements, and provide a copy of same immediately to the [Department]. After obtaining the injunction, First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover by the Department in June of 1992. The One Million Dollar Security Deposit On May 14, 1991, Respondent and Aleman, in their capacities as officers of General Trust Mortgage Corporation, gave Sun Bank of Miami written "authorization to debit General Trust Mortgage Corporation master Account #0189000017703 the amount of $1,000,000 and issue a cashier[']s check payable to Teresa Saldise." On or about May 15, 1991, Saldise deposited the check in her money market account at Commercial Trust Bank in Hialeah. On or about May 22, 1991, Saldise withdrew from this account $1,000,000.00, with which she purchased a $1,000,000.00 cashier's check made payable to the Leon County Clerk of the Court. The cashier's check was thereafter deposited with the Leon County Clerk of the Court on First Miami's behalf to comply with the judge's order enjoining the IFO. On May 21, 1991, First Miami executed a note promising to repay the $1,000,000.00 to Saldise and General Trust Mortgage Corporation at an interest rate of 12 percent per year. The note provided that the "principal [was] payable on demand." This note was secured by a mortgage on First Miami's home office property, Units A and D-1 of the Brickell Bay Club Condominium, as well as parking spaces 181 through 381 at the condominium complex. This property was valued at $2.7 million on First Miami's 1990 Annual Statement. In addition, First Miami agreed to pay $25,000.00 in loan points, $10,000.00 in attorney's fees and $63,024.36 for 12 months of "condominium association assessments." Respondent, along with Soto, signed the note and mortgage for First Miami. The documents were duly recorded and a UCC-1 form was filed. In order to facilitate First Miami's compliance with the judge's order, the Department approved the arrangements First Miami had made to obtain the $1,000,000.00 First Miami was required to deposit "as additional security for the issuance of this Order." Subsequently, on January 19, 1992, Saldise and General Trust Mortgage Corporation made a demand for full payment of the loan. First Miami then sought an extension of the repayment period. Saldise and General Trust Mortgage Corporation agreed to an extension of 60 days. In return for the extension, Saldise and General Trust Mortgage Corporation were given additional collateral for their $1,000,000.00 loan, in the form of four mortgage notes having a total value of $1,473,750.00. Respondent and Soto signed, on behalf of First Miami, the paperwork necessary to effectuate this mortgage note extension agreement. Before Respondent did so, though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan. Rubin told Respondent during their discussion regarding the matter that the additional collateral would still be considered assets of First Miami even after the agreement was executed. In its Quarterly Statement as of March 31, 1992, that it submitted to the Department, First Miami disclosed the following regarding the mortgage note extension agreement: The Company notes that certain promissory notes owned by the Company in the original principal amount of $1.47 million have been pledged as additional security for the note issued by the Company on May 21, 1991. The Company's note is also secured by the previously-disclosed mortgage on the Company's headquarters office. The "Company's headquarters office" was listed on the statement as a $2,700,000.00 asset of First Miami, as it had been on all previous quarterly and annual statements submitted to the Department since 1989 Annual Statement. The Saga Bay Property With respect to the requirement contained in the judge's order enjoining the IFO that First Miami "receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars," Saldise and/or Lopez contributed to First Miami 13 real estate parcels located in the Saga Bay development in Dade County, Florida. In exchange therefor, First Miami gave a surplus note, which the Department approved. Post-IFO Reinsurance On May 15 and 16, 1991, Jim Smith, a Reinsurance Financial Specialist with the Department, visited the offices of First Miami. The purpose of his visit was to analyze and review First Miami's reinsurance program. Smith issued a written report detailing his findings on May 20, 1991. In the "Summary" section of his report, Smith stated the following: Based on the information available, the current reinsurance program is highly suspect. I believe there is a possibility that First Miami is re- insuring itself or at a minimum only obtaining limited financial reinsurance. The use of the trust agreement would normally provide some assurance as to the availability of funds. However, the purchase of premium finance contracts from South Florida Premium Finance Company circumvents this normal protection feature. First Miami has purchased over 6 million [dollars] of these contracts since March 20, 1991. 14/ The lack of correspondence between First Miami and Silver Breeze, Ltd. 15/ and/or Munauto S.A. is also of concern. I find it unconscionable that a company would accept a potential $20 million liability without having some preliminary written negotiations or correspondence. Another concern is that Munauto S.A. accepted the previous reinsurer's contract without modifying the terms to protect its interest. 16/ Such action is not characteristic of an arm's length transaction in the reinsurance industry. Also atypical is the wire transfer of funds through General Trust Mortgage, an affiliate, to the intermediary and reinsurer. Smith went on to further state the following: I have reviewed the accounting entries in regard to the Munauto reinsurance treaty and they appear to be normal and booked correctly. I also reviewed debits and credits to the re- insurance trust account at Sun Bank. These entries appeared normal except for use of these trust funds to purchase or invest in South Florida Premium Finance contracts. The terms of the temporary restraining order (TRO) require First Miami Insurance Company to replace the current reinsurer with an approved reinsurer acceptable to the Department. I highly agree with this provision. I would suggest that First Miami has no effective reinsurance lacking supportive evidence to the contrary. Therefore, it is imperative they replace the current re- insurance with an approved reinsurance treaty which actually transfers the underwriting risk. At the request of First Miami, following the issuance of the IFO, Doherty, on First Miami's behalf, while still negotiating with U.S. Capital, commenced negotiations with another potential reinsurer, Dai Ichi Kyoto. In July of 1991, Doherty met with representatives of Dai Ichi Kyoto in London. Respondent was present at the meeting. The negotiations culminated in a signed, conditional reinsurance agreement. Respondent signed the agreement on behalf of First Miami. Under his signature he placed the following handwritten notation, which he initialed: "Subject to approval of the Florida Department of Insurance." The agreement never received the approval of the Department. In early August of 1991, First Miami entered into a series of reinsurance agreements with Warwick Re Insurance and Reinsurance Company, LTD (hereinafter referred to as "Warwick Re"). The agreements were drafted by Rubin, First Miami's retained attorney. In drafting the agreements, he utilized the Munauto reinsurance documents, making revisions where appropriate. Warwick Re was incorporated on August 7, 1991, in Anguilla. The subscribers, each with 250 shares, were General Trust Mortgage Corporation and Procesys, Inc. Respondent signed the necessary documents on behalf of General Trust Mortgage Corporation. Lopez signed on behalf of Procesys, Inc. Prior thereto, on July 31, 1991, in anticipation of its incorporation, Warwick Re had applied for registration as an insurer in Anguilla. Respondent was listed as a director of Warwick Re on the registration form and he signed the form in various places in his capacity as a director. The following day, August 1, 1991, the Boards of Directors of General Trust Mortgage Corporation and Procesys, Inc. each resolved to make a capital investment in Warwick Re in the amount of $100,000.00. Each resolution was signed by Respondent in his capacity as a director. According to a financial statement prepared by Mario Toca, a certified public accountant, as of September 30, 1991, Warwick Re had $20,988,714.00 worth of assets. On August 8, 1991, Bob King of U.S. Capital sent a memorandum to Respondent requesting a decision regarding the offer U.S. Capital had made to First Miami regarding reinsurance. That same day, Respondent sent King a letter in which he stated the following: In reference to the reinsurance treaty between U.S. Capital and First Miami Insurance Company, I would like to advise you that we are negotiating with the Helm Bank the possibility of them pur- chasing the Premium Finance Contracts from us, in consideration of our banking relationship. This means that we would establish a Trust for the outstanding reserves of your portion of the Quota Share. The Trust will invest in A plus Securities only. Should you have any questions, do not hesitate to contact me. On August 22, 1991, King sent Doherty a letter informing her of the following: As a result of First Miami's inability to conclude our proposed transaction, please be advised that we withdraw any and all offers as presented or amended. Unfortunately, we find ourselves unable to proceed with an organ- ization which cannot make a determination as to its objectives and method of transacting business. Respondent was furnished a copy of the letter by King. After receiving King's letter, Doherty faxed a copy of the letter to Lamont Wynn of the Department at Wynn's request. Whereas the Department was swiftly advised of the breakdown in negotiations between U.S. Capital and First Miami, it was not until January 27 1992, that the Department first learned of the reinsurance agreements between First Miami and Warwick Re. On that date, representatives of the Department, including Lisette Lozano, went to the offices of First Miami to review First Miami's books and records. While on the premises, Lozano spoke with Respondent, who, throughout the period he was the Executive Vice President of First Miami, served as First Miami's primary spokesperson in its dealings with the Department. Before speaking with Lozano, Respondent had received instructions from Saldise and First Miami's attorneys that he was to discuss with Department representatives only those matters relating directly to First Miami. Not deviating from these instructions, Respondent told Lozano that Warwick Re was "now the reinsurer of First Miami." Respondent volunteered that Warwick Re was an Anguilla company that owned more than 90 percent of South Florida Premium Finance Company. Lozano, who was not at all familiar with Warwick Re, asked Respondent the names of the officers and directors of the company. Following the instructions he had been given, Respondent told Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami. That same day, January 27, 1992, South Florida Premium Finance Company and General Trust Mortgage Corporation issued checks in the amounts of $200,000.00 and $703,549.16, respectively, payable to Warwick Re. Both checks were signed by Respondent. The next day the checks were deposited in Warwick Re's newly opened account at Sun Bank. The Department ultimately determined that the reinsurance agreements between First Miami and Warwick Re were not "appropriate reinsurance transactions," although it had no proof that Warwick Re was insolvent. Infusion of Additional Capital into First Miami In or about late 1991, Saldise and Lopez made Respondent aware of their plans to formally contribute additional assets to First Miami in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency. Among these assets were ownership interests in the following corporations: Warwick Properties, Inc.; Investors Arts and Antiques, Inc.; Community Broadcasters, Inc.; and Procesys, Inc. Respondent questioned Lopez as to whether the assets which were to be contributed to First Miami would be considered admitted assets under the Florida Insurance Code. Lopez told Respondent that he had researched the matter and come to the legal conclusion that they would be admissible, at least for a three year period. Furthermore, he showed Respondent a draft of a legal memorandum he was preparing which addressed the subject. Respondent subsequently reviewed a second legal memorandum, prepared by another attorney, Marc Cooper, which discussed the admissibility of these assets. Respondent was further advised that although no written contracts effectuating the contemplated transfer of assets had yet been executed, oral agreements to do so did exist. Saldise felt uncomfortable infusing these additional assets into First Miami without written agreements making it clear that it was her intention that the transfer of these assets would be effective only if the Department deemed them to be admitted assets. Rubin, First Miami's retained attorney, drafted these written agreements and related board resolutions. Although it was originally contemplated that these written agreements would be prepared and signed before the end of 1991, they were not ready for execution until March of the following year. 17/ Saldise instructed Respondent to sign the agreements on behalf of each of the parties. Respondent felt ill at ease doing so and asked Saldise whether it was appropriate for him to sign on behalf of more than one party. Saldise assured him that it was inasmuch as he was an officer of each of the parties on behalf of whom he would be signing. Respondent also sought Rubin's legal advice on the matter. Rubin told Respondent that there was no reason, from a legal standpoint, why he could not follow Saldise's instructions regarding execution of the written agreements. Respondent also asked Rubin if the agreements actually accomplished what Saldise and Lopez had intended: to give legal title of these assets to First Miami. Rubin responded in the affirmative to this inquiry, although he further advised Respondent, as he had Saldise, who nonetheless decided to proceed with the transfer of assets, that if a conservatorship or liquidation proceeding were initiated by the Department all of First Miami's assets would be frozen and unavailable to Saldise personally. 18/ Another matter about which Respondent was concerned was the effective date of the agreements, which the agreements indicated was December 31, 1991. He therefore raised the subject with Rubin. Rubin advised Respondent that there was "no problem" with the December 31, 1991, effective date since the written agreements, although they would be signed after that date, merely memorialized what had already been orally agreed upon by the parties prior to December 31, 1991. Relying on the advice he had been given, Respondent, in late March of 1992, executed the written agreements as he had been instructed, thereby formally effectuating the contribution of assets to First Miami, but only after one of the agreements, which had originally reflected a December 31, 1991, date of execution, had been modified, at his insistence, to accurately reflect the date he actually signed the agreement. Payment of Attorney's Fees First Miami authorized payment of past and future attorney's fees incurred by Saldise and Lopez in defending themselves in a federal court proceeding involving General Bank. In this federal court proceeding, which was initiated after the "spin off" of First Miami, the federal government was attempting to freeze the personal assets of Saldise and Lopez. These personal assets included many, if not all, of the assets that Saldise and Lopez planned to contribute, and that later actually were contributed, to First Miami. If these assets planned for contribution were frozen, they would be unavailable to First Miami. Accordingly, First Miami felt that it was appropriate to expend funds, in the form of payment of Saldise's and Lopez's attorney's fees, in an effort to prevent this from happening. Notice to the Department of the Capital Infusion First Miami notified the Department of the capital contributions made to the company by including in the 1991 Annual Statement it submitted to the Department the following footnote, footnote 18, which was drafted by Rubin and reviewed by Respondent: PURSUANT to contracts entered between Liborio Financial Group 19/ and First Miami Insurance Company, Liborio has agreed to contribute its ownership of four subsidiary corporations, including assets owned by these subsidiaries, to First Miami subject to the satisfaction by First Miami of the condition precedent with respect to two of the subsidiaries that the State of Florida Department of Insurance finds that all assets held by First Miami qualify as admitted assets, and that First Miami is in compliance with capital and surplus requirements. This footnote was included in the 1991 Annual Statement at the specific direction of Saldise and Lopez. Respondent had disagreed with Saldise's and Lopez's method of disclosure and had suggested that instead they meet with Department representatives prior to the filing of the 1991 Annual Statement to disclose the information contained in footnote 18. Saldise and Lopez, however, vetoed Respondent's suggestion. The Contributed Assets Warwick Properties, Inc. Warwick Properties, Inc., (hereinafter referred to as "WP") was incorporated on July 31, 1991. Respondent was one of the incorporators. From the date of its incorporation until its administrative dissolution on October 9, 1992, Respondent was an officer, director or both of the corporation. According to a financial statement prepared by CPA Toca, as of December 31, 1991, WP had total assets of $4,500,660.00 and total liabilities, excluding stockholders' equity of $1,176,638.00. Among its assets was an apartment complex known as the Marianna apartments. In October of 1989, these apartments were appraised by Philip Spool, ASA, who estimated their market value at $2,100,000.00. The apartments were valued at $2,300,000.00 in an appraisal conducted in June of the following year by Appraisal and Real Estate Economics Associates, Inc. The written appraisal report was issued on July 9, 1990. This appraisal was referred to in Note 6 of Toca's financial statement, which read as follows: As stated in Note 1, property is recorded at historical cost in accordance with generally accepted accounting principles. However, the estimated current value of land and building based on an independent appraisal performed on July 9, 1990 amounted to $2,300,000. Another asset held by WP was a third mortgage on Saldise's personal residence. In an appraisal conducted in August of 1988, by Appraisal and Real Estate Economics Associates, Inc. the residence was valued at $3,275,000.00 using a "cost approach" and $3,250,000.00 using a "sales comparison approach." Investors Arts and Antiques, Inc. Investors Arts and Antiques, Inc., owned works of art and antiques. These items had been appraised and assigned valuations. Investors Arts and Antiques, Inc., also owned 52.5 percent of Community Broadcasters, Inc. The other shareholders were Maria Elena Prio and Carrie Meek. Community Broadcasters, Inc., held a Federal Communications Commission license to operate a radio station in the Miami area and had obtained certain programing rights as a result of having entered into an agreement with Business Radio Network, Inc. Respondent was at no time an officer or director of either Investors Arts and Antiques, Inc., or Community Broadcasters, Inc. According to a financial statement prepared by CPA Toca, as of March 23, 1992, Investors Arts and Antiques, Inc., had total assets of $2,487,700.00, with donated capital amounting to $2,487,200.00. These donations of capital had been made by Saldise and Lopez. Procesys, Inc. According to a financial statement prepared by CPA Toca, as of December 31, 1991, Procesys, Inc., had total assets and liabilities of $75,065.00. In a note to his statement, Toca made the following comment: In accordance to the Statements of Accounting Standards (SFAS Nos. 2 and 86), the costs incurred internally in creating computer software are charged to expense until the completion of a working model. Thereafter, all costs are capitalized and amortized based on current and future revenues. Accordingly, subject to future revenues, the "Company's" management, estimates that the products developed have a market value of $3,000,000. Procesys, Inc. owned the ATRACK computer software system, which was designed for use by companies providing automobile insurance. First Miami used the ATRACK system pursuant to a licensing agreement it entered into with Procesys, Inc., which agreement the Department had approved. Although it was used extensively by First Miami to deal with day-to- day operational matters, the system did not have an accounting function and therefore was not used by First Miami for that purpose. Lopez helped to develop the ATRACK system when he was involved in another insurance company, International Bankers Insurance Company, prior to his involvement in First Miami. Respondent refined and modified the system to meet the particular needs of First Miami. In February of 1992, pursuant to Lopez's request, Respondent asked Alberto Alphonso, the owner of Microcare Service Corporation (hereinafter referred to as "Microcare"), the vendor which provided First Miami with computer-related goods and services, to appraise the value of the ATRACK system. 20/ Alphonso was a friend of Respondent's whom Respondent had known since his community college days. Alphonso's corporation, Microcare, had previously been owned by Respondent under the name Computer Technology Systems, Inc. Upon the transfer of his ownership interest to Alphonso, Respondent resigned his position as an officer/director of the corporation and has not held any similar position since his resignation. He did do some "moonlighting" work through Microcare, and his wife, Dania Campos, continued to work as a secretary for the corporation for a short period of time after the transfer. Otherwise, however, neither he nor his wife have had any involvement in the affairs of Microcare, nor have they received any dividends or corporate disbursements from the corporation. Alphonso agreed to do the appraisal. On or about February 17, 1992, he submitted his written report to Lopez. Alphonso stated in the report that in his "opinion, based upon potential revenues of this product, that obtaining exclusive marketing and copy rights would have a fair market value of $3,087,500." In early April of 1992, Respondent approached the owner of Nationwide Computer Systems, Inc., Mike Burns, an MIT graduate with an extensive computer background, requesting that he provide another opinion concerning the fair market value of the ATRACK system. Respondent explained to Burns that he was "in a rush to get the appraisal." Respondent did not specifically state why he needed the appraisal, but Burns was left with the impression that it was "just required to fill some requirement to have three appraisals." Respondent advised Burns of the appraisal Alphonso had done and showed Burns Alphonso's report. In doing so, Respondent commented that he was "comfortable with the appraisal." Burns was at first reluctant to undertake the task because he thought that someone else might be better qualified to do so. He felt more confident about his qualifications after learning of Alphonso's appraisal because he considered himself at least as qualified as Alphonso, with whom he was familiar, to do such an appraisal. He therefore ultimately agreed to accept the assignment. On or about April 13, 1992, Burns submitted his written report to Respondent. In the concluding paragraph of his report, Burns stated the following: It is my opinion that the ATRACK software uses the most modern tools and operating platform and the skills of programmers and designers are above- average, and that its modular design will give it an advantage in opening new markets. For this reason I have evaluated the software at $2.90 million in its current form. I am assuming that programmers associated with the software will bring their expertise and experience with the software. If a new programming staff is required, there will be substantial up-front learning curve costs. My estimate is based upon the information I could gather in a limited time-frame. The staff of First Miami Insurance was open to all my requests and no attempt was made to keep me from any data I required. Some supporting material is included. Valuation of First Miami's Home Office In January of 1989, First Miami's home office property was appraised by Appraisal and Real Estate Economics Associates, Inc., and given a market value of $1,600,000.00. Thereafter, the property was extensively renovated. Following the completion of these extensive renovations, a second appraisal of the property was done by Fred Carach. In his report, Carach opined that, as of October 29, 1989, the property had a market value of $2,700,000.00 In the IFO proceeding, the Department did not raise as an issue the value of the home office property. At no time did the Department voice any concerns regarding the appraisers that conducted these two appraisals for First Miami of its home office property. While they may not have shared their thoughts on the matter with First Miami representatives, Department officials did question whether First Miami was overstating the true value of its home office property. They therefore retained Charles Failla to provide them with an appraisal of the property. In his written report, Failla opined that, as of March 13, 1992, the date of the report, the property had a market value of $800,000.00. Valuation of South Florida Premium Finance Company Onyx Financial Group, Inc., (hereinafter referred to as "Onyx") is a company located in Miami, Florida, which South Florida Premium Finance Company retained to provide an appraisal of its market value in anticipation of making a public offering. (The public offering, however, was never made.) On or about December 11, 1991, Onyx provided such an appraisal. Onyx sent the appraisal to Respondent. First Miami used the appraisal to prepare financial statements that were later submitted to the Department. First Miami's Handling of Claims As noted above, at the time that Respondent was initially assigned to work for First Miami, the company was experiencing difficulty in timely paying claims and, as a result, was the subject of numerous consumer complaints made to the Department. In response to concerns expressed by the Department about these complaints, First Miami made improvements to its telephone and computer systems and hired additional claims adjustors as well as a new claims manager. It also, in large measure through the efforts of Respondent, developed and implemented a specific procedure to track and quickly respond to these complaints. Immediately after First Miami took these measures, there were fewer reported delays. As of May 13, 1991, the date the IFO was enjoined, the Department was satisfied with the remedial steps taken by First Miami and had "concluded that the consumer complaint problem [was] not related to any solvency problems." Statistics maintained by the Department's Division of Insurance Consumer Services, however, reveal that, for the entire calendar year of 1991 and for the first two months of 1992, the Department received a relatively large number of consumer complaints about First Miami, most of which related to alleged delays in paying claims. The numbers, by line of insurance, were as follows: 1991 Jan/Feb 1992 "P/P Auto No-Fault" 64 26 "Other P/P Auto Liab" 376 71 "P/P Auto Phys Damage" 317 86 The numbers for Allstate and State Farm Insurance Companies, which held much larger shares of the respective markets than did First Miami, in comparison, were as follows: Allstate 1991 Jan/Feb 1992 "P/P Auto No-Fault" 118 28 "Other P/P Auto Liab" 398 23 "P/P Auto Phys Damage" State Farm 154 19 1991 Jan/Feb 1992 "P/P Auto No-Fault" 133 23 "Other P/P Auto Liab" 267 42 "P/P Auto Phys Damage" 187 27 According to these statistics, however, First Miami did not have the highest "Complaint Index" (which is arrived at by dividing the insurer's 1991 complaint share by its 1990 market share) for all of the lines of insurance covered. As evidenced by the Department's statistics, "non-standard" insurers, like First Miami, tend to have a higher "Complaint Index" than other insurers. Following the hiring of its new claims manager, First Miami developed a written claims handling procedure, which provided, in part, as follows: Step 1. New claims are received via telephone, mailed or faxed to First Miami Insurance Company by the insured, claimant, attorneys or agent. Customer Service completes the automobile loss notice (ACCORD FORM), and verifies coverage. Step 2. Accord forms are given to the Data Entry Department to complete a new loss report form. Step 3. Claims manager or assistan[t] manager reviews accord form, assigns preliminary reserves and assigns claims to adjuster. The choice of adjuster to handle the claim will depend on the type and severity of the claim. The most qualified adjusters will handle the most serious claims. The initial reserves are as follows when the amount of loss cannot be reasonably estimated. PD, COLL 800 to 1,100 COMP 500 to 800 PIP 2,000 Ded 400 PIP full 1,000 BI-UM 1,000 Step 4. Data Entry Clerk sets up new loss [reserve] based on preliminary reviews. The adjuster must review the accuracy of the reserve or the files which are processed on diary. Adjustment, both upward and downward, must be made on all coverage where appropriate. The police report is requested and appraisal assignment is made. The file is returned to the cabinet to await 15 day diary cycle. File will be reviewed Bi-monthly by adjuster and manager/supervisor. SETTLEMENT OF CLAIM: The adjuster can settle claims up to $3,000. Anything over $3,000 requires the signature of the claims committee which meets once a week. After claim has been settled, the unit supervisor reviews claims file to verify coverage and liability. RELEASE OF PAYMENT: Proper release forms must be received before final payment/check is issued. Unit supervisor is allowed to release payments up to $2,000. If payment is from $2,000 to $3,000, it must be released by either the claims manager or his assistant. If over $3,000, payment must be released by Alex J. Campos, EVP. 21/ After payment is released, and outstanding reserves are closed out on the "Reserve History Sheet[,]" [t]his claims report is printed out on the "Daily Close Report" which indicates that the remaining reserves have been eliminated. . . . In addition, First Miami's adjusters were given written instructions they were expected to follow. Through these written instructions, the adjusters were advised of, among other things, the following: All of the adjuster's claims handling activities, should be directed towards achieving the major claims handling goals which are: Provide the best possible customer service. Comply with the insurance policy/contract and the law. Minimize our losses and expenses. In handling a claim, the adjuster not only deals with facts and figures, but also with people. Therefore, the adjuster is responsible for helping to build friendly and satisfactory relations with the insured-claimant and the public. The adjuster may be the only contact the insured-claimant has with the insurer, other than the sales agent. A person who receives prompt attention and fair treatment will want to continue his or her relationship with us. An insurer with a reputation for fast, fair claims service is likely to attract new policyholders. One of our primary goals is to comply with the insurance contract/policy[, a]s we have both a moral and legal obligation to assure the insured receives the protection purchased. This also includes complying with any applicable law. The adjuster is responsible for seeing that moral, legal, and contractual obligations are fulfilled. While we as an insurer are committed to fulfilling all our obligations, we are also committed to controlling and reducing our losses/expenses. This can be achieved by limiting our claims payments to only those legitimately established by contract and law. Thus, again, the adjuster is responsible for prompt and efficient processing of claims and claims data. As this last paragraph may suggest, First Miami, at the insistence of Saldise and Lopez, had a very "conservative" claims payment philosophy: to pay claims only after they had been thoroughly investigated and determined to be valid. Conducting such investigations necessarily delayed the processing of claims. 22/ The use of a claims committee to review claims was an essential component of First Miami's "conservative" approach to the payment of claims. First Miami's claims committee consisted of a core of three individuals: an attorney retained as a consultant by First Miami; the claims manager; and the assistant claims manager. The attorney on the claims committee was Carlos Lidsky. Lidsky has practiced personal injury and insurance law in the State of Florida for approximately the past 20 years. From time to time, Lidsky and his two colleagues on the claims committee would invite additional individuals, including Respondent, to sit on the committee for particular meetings and join in the discussions and deliberations. On those occasions that he sat on the claims committee and, as a member thereof, withheld approval of questionable claims, he reasonably believed that the committee's actions were in the best interest of First Miami's shareholders and policyholders. Assisting the claims committee in evaluating claims involving medical issues was a nurse and a physician that First Miami had hired for that purpose in an effort to combat fraudulent claims. The physician was a respected orthopedic specialist, who also was a minor shareholder of General Trust Mortgage Corporation, First Miami's parent corporation. Where the claims committee was presented with objective evidence of bodily injury, it invariably approved payment up to the policy limits. In those personal injury protection cases where there was no such evidence, however, the committee withheld its approval and contested the claim. In a significant number of personal injury protection cases, Lidsky advised First Miami to invoke the arbitration clause of the policy and First Miami followed his advice. This often led to a compromise and settlement of the claim. Where First Miami was presented with a subrogation claim and there was an indication that there may have been some comparative negligence, the matter was investigated before any payment was made. Lidsky had standing instructions to, on behalf of First Miami, negotiate in good faith all disputed subrogation claims, (including not only those filed against First Miami but those filed by First Miami as well) and enter into, what are referred to in the industry, as "bulk settlement" agreements. At one point in time during the latter stages of First Miami's existence, the aggregate amount of pending subrogation claims made against it by State Farm Insurance Company and Allstate Insurance Company and separate claims being handled by Bell Adjusting Company was $1,200,000.00. None of these claims were ever paid. 23/ First Miami, however, through Lidsky, who acted at the specific direction of Saldise and Lopez, did enter into "bulk settlement" negotiations with State Farm Insurance Company (whose pending subrogation claims against First Miami at the time amounted to approximately $492,000.00) in an effort to resolve these pending claims, as well as those unpaid subrogation claims First Miami had made against State Farm. 24/ These negotiations were not fruitful. They terminated without any agreement being reached. Lidsky believed that State Farm had not negotiated in good faith and so informed Respondent, who had not participated in the negotiations. Unable to reach a settlement with First Miami, State Farm resorted to litigation, suing the alleged tortfeasors. Other claims-related lawsuits were filed against First Miami policyholders. On occasion, First Miami was also sued. In some of these cases, the plaintiffs prevailed. Lidsky and First Miami's Claims Department were responsible for seeing to it that First Miami policyholders who were the subject of a lawsuit received the legal representation First Miami was obligated to provide. Respondent was not made aware of any case where First Miami refused to provide such representation. First Miami's Loss Reserves In his capacity as Executive Vice President of First Miami, Respondent did not himself establish the levels of the company's reserves. First Miami maintained two types of reserves: an individual case reserve regarding specific claims, and an IBNR ("Incurred But Not Reported") reserve. First Miami's Claims Department established claims reserves for individual cases. Two actuaries, one employed by First Miami, Jeff Cohn, and the other an independent contractor, James Stergiou, reviewed and certified the actuarial soundness of First Miami's IBNR reserve. Stergiou provided Respondent with written statements certifying the adequacy of First Miami's IBNR reserve for the years 1990 and 1991. In its communications with First Miami, the Department never raised any questions regarding Stergiou's qualifications to provide such certifications, and Respondent had no reason to believe that Stergiou was not so qualified. First Miami's Lawsuit Believing that the Department and Insurance Commissioner, in concert with the Latin-American Agents Association and the Specialty Agents Association, had acted in violation of civil rights and antitrust laws in its dealings with First Miami, Saldise and Lopez decided in December of 1991, or January of 1992, that First Miami should file a lawsuit against these parties to seek redress. Two attorneys, Sonny Meyers and Stephen Rubin, were retained to represent First Miami in connection with such contemplated legal action. Saldise requested Respondent, in preparation for a meeting with Meyers and Rubin, to review various matters pertinent to the lawsuit, including the chronology of events concerning the "no down payment" program about which the Latin-American Agents Association and the Specialty Agents Association had complained to the Department. The meeting was held on February 4, 1992. A court reporter was present at the meeting. Following the meeting, a transcript of the meeting was prepared. 25/ The lawsuit was ultimately filed in federal court in Miami. Disposition of Carrera Thereafter, as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the "no down payment" program that had generated so much controversy. Carrera was initially sold to Victor Madero, Diana Madero's husband, for between $900,000.00 and $1,000,000.00. At the time of the sale, Diana Madero had an insurance agency of her own and was not in any way connected with First Miami. The sale was negotiated by Lopez on behalf of First Miami. After Mr. Madero had made three or four payments, he decided that he did not want to remain in the insurance business. He made no further payments and First Miami "took back" Carrera from him. Thereafter, First Miami sold Carrera to Lewis Sands for approximately the same price Madero had paid. Payments were to be made over a 12 year period and interest was charged. Sands made payments of approximately $66,000.00 before defaulting. As a result of the default, First Miami again took possession of Carrera. It subsequently sold Carrera to Frank Davila for approximately the same price Madero and Sands had paid. Payments were to be made for a period of less than 12 years and interest was charged. Following the sale to Davila, which, like the sale to Sands, was negotiated by Respondent 26/ and another First Miami Vice President, Sergio Fonte, First Miami had no ownership interest or involvement in the operation of Carrera. Carrera was administratively dissolved on August 13, 1993. Financial Statements Raimundo Aleman, First Miami's Chief Financial Officer, reported to Respondent during the time Respondent was the company's Executive Vice President. As noted above, Aleman was responsible for formulating and placing the entries on the Quarterly and Annual Statements First Miami submitted to the Department. He was designated on the statements as First Miami's "contact person." As a general rule, before the statements were sent to the Department, Respondent reviewed Aleman's work product to determine if there were any obvious omissions or mistakes. With respect to the Quarterly Statement as of March 31, 1992, however, Respondent only reviewed the footnotes. All of First Miami's Quarterly and Annual Statements contained a sworn attestation, signed by certain of its officers, certifying that the information contained therein was complete and accurate "according to the best of their information, knowledge and belief." Respondent signed this attestation as Treasurer on the 1989 Annual Statement, the Quarterly Statement as of March 31, 1990, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990. He signed none of the other financial statements that First Miami submitted to the Department, with the exception of the Quarterly Statement as of September 30, 1991, which he executed on behalf of Saldise. These other financial statements that First Miami submitted to the Department, but which Respondent did not sign, were: the 1990 Annual Statement; the Quarterly Statement as of March 31, 1991; the Quarterly Statement as of June 30, 1991; the 1991 Annual Statement; and the Quarterly Statement as of March 31, 1992. Respondent was listed as a Vice President and Director on these statements, all of which were signed by Aleman in his capacity as Treasurer. Respondent was not aware, nor did he have any compelling reason to believe, that any of the financial statements that First Miami submitted to the Department during the time he was its Executive Vice President contained misleading or inaccurate information concerning First Miami's financial condition or any other matter of significance to the Department. There was no intent on Respondent's part to deceive the Department. In discharging his duties as First Miami's Executive Vice President, including those duties related to the preparation and filing of the financial statements the company submitted to the Department, Respondent reasonably relied upon the advice and opinions of attorneys, accountants, appraisers, actuaries and other professionals concerning matters which, by all appearances, were within the scope of these professionals' expertise. For instance, he reasonably relied upon the professional opinions that had been rendered regarding the admissibility and valuation First Miami's assets and the adequacy of the company's loss reserves. His views concerning the financial condition and solvency of First Miami, understandably, were shaped by these opinions. The On-site Review and Respondent's Deposition After First Miami filed its 1991 Annual Statement on or about March 15, 1992, the Department conducted an on-site review at First Miami's offices. Respondent served as First Miami's primary spokesperson during the review, answering questions posed by the Department's representatives concerning, among other things, the 1991 Annual Statement that First Miami had filed. In doing so, Respondent expressed the view that the transactions reflected in footnote 18 were "bona fide . . . with economic substance behind them" and that First Miami was not insolvent, which is what he reasonably believed. Subsequently, various First Miami officials were subpoenaed and deposed by the Department. Respondent was among those deposed. First Miami had designated Respondent as its representative for purposes of responding to a subpoena with which it had been served by the Department. Although Aleman was more knowledgeable than Respondent about the financial affairs of First Miami and the contents of its 1991 Annual Statement, he was not so designated because of his difficulty in orally communicating in the English language. Aleman, though, did retrieve documents for Respondent's use at the deposition. Prior to the deposition, Respondent consulted with Lopez and First Miami's attorneys with respect to the company's position concerning the admissibility of assets. During his deposition, in responding to questions, Respondent relied upon the documents he had been given by Aleman, as well as the notes he had taken during his pre-deposition meeting with Lopez and the other attorneys. Conservatorship and Liquidation of First Miami On or about May 14, 1992, First Miami filed its Quarterly Statement as of March 31, 1992, with the Department. Certain assets which appeared on the 1991 Annual Statement were not included in this Quarterly Statement. Saldise had directed Aleman to delete these assets in response to the concerns the Department had expressed regarding their inclusion in the 1991 Annual Statement. After the filing of this Quarterly Statement, the Department instituted conservatorship and liquidation proceedings in Leon County Circuit Court and, in conjunction therewith, sent personnel to First Miami's offices. During the conservatorship, which commenced on May 29, 1992, Respondent, who had been cooperative in his prior dealings with the Department, remained on the payroll of the company. He prepared computer programs to assist in the calculation of commission payments. In addition, he provided to Department personnel on the premises valuable information concerning the operations of First Miami, including its computer system. An unopposed order liquidating First Miami and appointing the Department Receiver was entered on June 5, 1992. Among the findings set forth in the order was that First Miami was "insolvent as defined in section 631.011(11), Florida Statutes (1991)." Among the directives set forth in the order was the following: All affiliated companies including, but not limited to General Trust Mortgage Corporation, Liborio Financial Group, Inc., First Miami Holding Corporation, South Florida Premium Finance Company, Procesys, Inc., Investors Arts & Antiques, Warwick Properties Inc., Carrera Insurance Underwriters, Inc., Camino Insurance Underwriters, Inc., and Warwick Re are hereby directed to make their books and records available to the Receiver . . . . The order further provided that "[a]ll officers, directors, agents and employees and all other persons representing [First Miami] or currently employed by [First Miami] in connection with the conduct of its business are discharged forthwith." The Department determined that, at the time of liquidation, First Miami had admitted assets totalling $4,203,356.00, which fell into the following categories: Mortgage loans on real estate: First liens $1,465,889.00 Real estate: Properties occupied by $800,000.00 27/ the company Cash on hand and on deposit: Cash on deposit $1,247,553.00 Short term investments $594,672.00 28/ Electronic data processing equipment $95,242.00 On its last financial statement, the Quarterly Statement as of March 31, 1992, First Miami had listed a total of $27,340,837.00 of admitted assets. The difference between the Department's June 5, 1992, total and First Miami's March 23, 1992, total was, in large measure, the product of the Department's disagreement with First Miami and with the professionals upon which First Miami relied 29/ as to the admissibility and valuation of certain of First Miami's assets. Post-Liquidation Activities Following the entry of the order of liquidation, Respondent was retained for a period of two or three weeks to continue to assist the Department/Receiver, as well as the Florida Insurance Guaranty Association, which had taken over the responsibility of processing and paying claims made against First Miami. No other First Miami officer or director was similarly retained. 30/ Saldise and Lopez left Miami for Madrid, Spain, a day or two after the entry of the liquidation order. First Miami had almost 600 claims-related cases in litigation at the time of liquidation. Lidsky's office handed the files in these cases over to the Florida Insurance Guaranty Association at the Department's request. As of January 31, 1994, for both loss claims and expenses, the Florida Insurance Guaranty Association had paid $12,397,234.35 on behalf of First Miami. As of March 7, 1994, it had reserved $1,638,369.14 to pay additional loss claims on First Miami's behalf. Respondent's Present Employment Situation Respondent is currently the President (but not a director) of Perry & Company, a premium finance company authorized by the Department to do business in the State of Florida. Perry & Company's Chairman of the Board is Richard Perry. Perry has known Respondent for approximately four or five years. He first became acquainted with Respondent when Respondent was employed by First Miami. At the time, Perry & Company was one of the companies that financed premium payments on insurance policies issued by First Miami. Perry was very much impressed with the operational efficiency of First Miami. On behalf of Perry & Company, he extended Respondent an offer of employment, at a higher salary than Respondent was receiving from First Miami. Respondent declined this initial offer of employment. Perry renewed the offer after he learned that First Miami had been liquidated and placed in receivership. Before he did so, though, he asked Harry Landrum, a Tallahassee consultant and lobbyist, to check with his sources at the Department to find out if, given Respondent's previous association with First Miami, Perry & Company's relationship with the Department would suffer if the company hired Respondent. Landrum reported back to Perry that his sources had only kind words to say about Respondent. Having received this favorable report about Respondent, Perry felt comfortable renewing his offer of employment to Respondent. This time Respondent accepted Perry's offer. Respondent began his employment with Perry & Company in July of !992, when he assumed the position of Executive Vice President. His primary responsibility as Executive Vice President was in the area of data processing. In December of 1992, Respondent became Perry & Company's President, the position he holds today. As President of Perry & Company, Respondent is responsible for virtually all of the company's day-to-day operations. To date, he has successfully discharged these duties. During his affiliation with Perry & Company, Respondent has not engaged in any conduct that has jeopardized the financial soundness of the company. He has not caused, nor is it likely, based upon his past performance with Perry & Company and as Executive Vice President of First Miami, that he will cause, Perry & Company or those with whom the company does business to suffer any unwarranted loss or damage.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 1994.
The Issue The issue in the case is whether the allegations of the Administrative Complaint are correct and, if so, what penalty should be imposed.
Findings Of Fact At all times material to this case, Frederick L. Roberts (Respondent) was a licensed Florida mortgage broker, holding license number MB 316324569. In November 1993, a friend of the Respondent, Alan Petzold, introduced Tami Aaronson to him. Ms. Aaronson owned property in Maryland and was interested in securing a mortgage on the Maryland property to provide funding for a Florida home for herself and her son, Jarrett. According to Ms. Aaronson, Mr. Petzold is the father of a minor son, Jarrett Aaronson. The Respondent believed that such was the case at the time he met the family. The Respondent met several times with Ms. Aaronson. The Respondent gave a “Flagship Mortgage Company” business car to Ms. Aaronson. The business card had the Respondent’s name printed on it. The Respondent had been briefly employed by Flagship Mortgage Company, but apparently was not so employed at the time he met Ms. Aaronson. Frederick L. Roberts (Respondent) received check number 0170, dated November 22, 1993, from Tami Aaronson as “Custodian for Jarrett Aaronson” in the amount of three thousand dollars. The notation on the check states that it is for “refinancing.” Ms. Aaronson believed the check was payment for services the Respondent would render in obtaining refinancing of the Maryland property. There was no written agreement between the Respondent and Ms. Aaronson, or between the Respondent and Mr. Petzold. The Respondent completed no written documentation related to the Aaronson transaction. The Respondent did not place the Aaronson deposit into a segregated escrow account. The Respondent did not record the Aaronson deposit into an escrow transaction journal. During the period he held the Aaronson funds, the Respondent worked on unrelated business, and traveled to China for about thirty days. The Respondent performed no work on behalf of Ms. Aaronson, Mr. Petzold, or Jarrett Aaronson. There is no evidence that the Respondent intended to perform any work on behalf of Aaronson/Petzold. The Respondent asserted that he asked for a three thousand dollar “deposit” as a means of discouraging the couple from asking for his assistance. The assertion is not credible. The Respondent asserts that the three thousand dollars he received from Ms. Aaronson was a deposit against travel expenses he would incur during his examination of the property in Maryland. The assertion is not supported by credible evidence. In the spring of 1994, the Respondent received a telephone call from Ms. Aaronson. The Respondent asserts that he believed Ms. Aaronson to have called him from a mental hospital. For whatever reason, at that time he determined that he no longer wanted to be involved in the Aaronson/Petzold situation. Shortly after receiving the Aaronson phone call in spring 1994, the Respondent also received a call from a Department of Banking and Finance investigator, apparently looking into a complaint received from Ms. Aaronson. The Respondent thereafter contacted Mr. Petzold and made arrangements to return the funds to him. According to a notarized statement dated May 9, 1994, the Respondent returned the three thousand dollars to Jarrett R. Aaronson and Alan C. Petzold. The Respondent testified that the money had been returned on May 8, 1994 to Mr. Petzold. The Respondent offered into evidence a document dated May 8, 1994, purporting to be a receipt received from Mr. Petzold for return of the funds. The signature is not notarized. The Respondent did not return the Aaronson deposit to Tami Aaronson. There is no evidence that Ms. Aaronson authorized the return of the three thousand dollars to Mr. Petzold. There is no evidence that Ms. Aaronson authorized the return of funds to Jarrett. Ms. Aaronson has not received any part of the three thousand dollars allegedly refunded. There is no evidence that the funds have been redeposited into the minor child’s custodial account. The Respondent asserts that he was not acting as a mortgage broker and was merely investigating the property to determine whether the Aaronson property could be used as a source of funds for the purchase of Florida property. The Respondent asserts that had a refinancing situation arisen, he would have referred Ms. Aaronson to another licensed person who would assist in the actual refinancing. The assertion is not supported by credible evidence. The Respondent asserts that in the spring of 1994 he had reason to believe that Ms. Aaronson had been hospitalized in a mental facility, and therefore he returned the funds to Mr. Petzold. The rationale for the failure to return the funds to the appropriate party is not persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order suspending the mortgage broker license held by Frederick L. Roberts until the following conditions are met: Payment to Tami Aaronson of $3,000 plus appropriate interest calculated from November 22, 1993. Payment of an administrative fine in the amount of $5,000. After compliance with the above conditions, the license suspension shall be lifted, and a two-year probationary period shall begin RECOMMENDED this 22nd day of October, 1997, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of October, 1997. COPIES FURNISHED: Clyde C. Caillouet, Esquire Department of Banking and Finance 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 Michael W. Carlson, Esquire Carlton Fields Ward Emmanuel Smith & Cutler, P.A. 215 South Monroe Street, Suite 500 Tallahassee, Florida 32301 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Hon. Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
The Issue Whether Respondent's license should be revoked as set forth in the Notice of Intent to Revoke License.
Findings Of Fact The Petitioner is the state agency charged with the responsibility of regulating yacht salesmen and brokers. Such authority includes the discipline of yacht salesman as set forth in Chapter 326, Florida Statutes. At all times material to the allegations of this case, Respondent has been licensed as a yacht salesman in the State of Florida. Respondent first applied for licensure in June of 1994. This license request was granted and Respondent was issued a license for the two-year period 1994-1996. In June of 1996, Respondent applied to renew the license. This license request was also granted and Respondent was issued a yacht salesman's license for the period 1996-1998. On or about April 28, 1997, Respondent was convicted of conspiracy to commit wire fraud, a federal violation, and a felony. As a result, Respondent was sentenced and incarcerated. In July of 1998, Respondent applied to the Department to renew the yacht salesman's license. Based upon the information submitted to Petitioner at the time he sought renewal, the Department had no direct information of the felony conviction. In telephone conversations with the Department staff, Respondent did not disclose he had been incarcerated, was living in a halfway house as part of his sentence, and was a convicted felon. In August of 1998, a third party advised the Department that Respondent had the felony conviction. Thereafter, upon such notice, Petitioner took action to seek revocation of Respondent's license. The license renewal for 1998 filed by Respondent was executed on July 7, 1998. Technically, his license expired on June 14, 1998, but he was afforded a grace period within which to process the renewal. To this end the Department attempted to accommodate the renewal applicant. On the license renewal card Respondent submitted conflicting answers. To question (3) which read: Have you been convicted of a crime, found guilty, or entered a plea of nolo contendere, since initial licensure? Respondent answered "Y." To question (4) which read: Has any judgment or decree of a court been entered against you or is there now pending any case in this or any other state, in which you were charged with any fraudulent or dishonest dealing? Respondent answered "N." An undated letter from Respondent accompanied the renewal card which referred to a prior correspondence with the Department of June 6, 1996, as the explanation for question (4). As to question (3), the letter stated: "a conviction was made on 4/28/98 in the U.S. District Court Southern Florida." Respondent's answer to question (4) was false. Moreover, the manner in which Respondent answered the two questions did not disclose that Respondent had been convicted of a felony or conspiracy to commit wire fraud. More telling of Respondent's attempt to mislead the Department, however, is his failure to disclose any of the foregoing circumstances during telephone conversations with staff seeking to assist him to renew the license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation enter a final order revoking Respondent's license. DONE AND ENTERED this 29th day of June, 1999, in Tallahassee, Leon County, Florida. J. D. PARRISH 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 29th day of June, 1999. COPIES FURNISHED: Philip Nowick, Director Florida Land Sales, Condos, Mobile Homes Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399 Scott K. Edmonds, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 Tracy J. Sumner, Esquire Tracy J. Sumner, P.A. 1330 Thomasville Road Tallahassee, Florida 32303
