Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following relevant factual findings. David B.C. Yeomans, Jr., is now and was at all times material hereto a licensed real estate broker having been issued license number 0163386. During times material, Respondent was the qualifying broker for G & A Realty and Investments, Inc., a corporation licensed as a real estate broker in the State of Florida. 1/ From approximately April 1985 to December 1985, Respondent Yeomans was the president and qualifying broker for G & A. Wilfredo Gonzalez, a licensed real estate salesman and Alberto Aranda were each 50 percent shareholders of G & A. Wilfredo Gonzalez, while licensed as a real estate salesman in the employ of G & A, solicited and obtained a client, Alfredo Susi, who made an offer to purchase a commercial property in Dade County, Florida. In connection with the offer, Alfredo Susi entrusted a $10,000 earnest money deposit with Wilfredo Gonzalez to be held in trust in G & A's escrow account. The seller rejected Susi's offer to purchase whereupon Alfredo Susi made demands upon Gonzalez for return of the earnest money deposit. Wilfredo Gonzalez attempted to return the earnest money deposit entrusted by Susi via check dated November 18, 1985 drawn on G & A's escrow account. Upon presentation of the subject check by Susi, it was returned unpaid due to non-sufficient funds. Alfredo Susi has been unable to obtain a refund of the deposit submitted to Gonzalez. Wilfredo Gonzalez used the deposit presented by Susi and did not apprise Respondent Yeomans of what or how he intended to dispose of Susi's deposit. Alfredo Susi had no dealing with Respondent Yeomans and in fact testified and it is found herein, that Susi's dealings in this transaction, were exclusively with Wilfredo Gonzalez. Tony Figueredo, a former salesman with G & A, is familiar with the brokerage acts and services performed by Respondent Yeomans and Wilfredo Gonzalez. During his employment with G & A, Figueredo had no dealing with Respondent Yeonans and in fact gave all escrow monies to Wilfredo Gonzalez. Carolyn Miller, the president and broker for Rite Way, Realtors, an area brokerage entity, is familiar with the customs and practices in the Dade County area brokerage operations. Ms. Miller considered it a broker's responsibility to supervise all salesman and to review escrow deposits and corresponding accounts approximately bimonthly. Theodore J. Pappas, Board Chairman for Keyes Realtors, a major real estate brokerage entity in Dade County, also considered it the broker's responsibility to place escrow accounts into the care and custody of a secretary and not the salesman. Mr. Pappas considered that in order to insure that funds were not misappropriated, checks and balances and intensive training programs would have to be installed to minimize the risk of misappropriation of escrow deposits. Mr. Pappas conceded however that it was difficult to protect against dishonest salesman. Respondent Yeomans has been a salesman for approximately eleven years and during that time, he has been a broker for ten of those eleven years. During approximately mid 1984, Respondent Yeomans entered into a six (6) month agreement with G & A to be the qualifying broker and to attempt to sell a large tract of land listed by Context Realty in Marion County (Ocala). When Respondent agreed to become the qualifying broker for G & A Respondent was a signator to the escrow account for G & A Realty. Sometime subsequent to Respondent qualifying as broker for G & A, Wilfredo Gonzalez changed the escrow account and Respondent Yeomans was unfamiliar with that fact. Respondent Yeomans first became aware of Susi's complaint during late 1985 or early 1986. Respondent Yeomans was not a signator on the escrow account where Wilfredo Gonzalez placed the escrow deposit entrusted by Alfredo Susi. (Petitioner's Exhibit 9) During approximately November, 1986, Respondent Yeomans made it known to the officers at G & A that he was withdrawing his license from G & A and attempted to get G & A's officers to effect the change. When this did not occur by December, 1986, Respondent Yeomans effectuated the change himself and terminated his affiliation with G & A. During the time when Respondent was the qualifying agent for G & A, there were approximately four employees and little activity to review in the way of overseeing real estate salespersons. During this period, Respondent Yeomans reviewed the escrow account for G & A that he was aware of. During the time that Respondent Yeomans was qualifying broker for G & A, he was primarily involved in the undeveloped acreage owned by Context Realty and other REO listed property of G & A. During the period when Respondent Yeomans was qualifying agent for G & A, Wilfredo Gonzalez spent approximately 95 percent of his time managing rental property that he (Gonzalez) owned.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: That the Administrative Complaint filed herein be DISMISSED. RECOMMENDED this 9th day of June, 1987 in Tallahassee, Leon County, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1987.
The Issue Whether the Respondent is guilty of the violations alleged in the Notice of Cease and Desist Order dated March 13, 1989; and, if so, what penalty should be imposed.
Findings Of Fact At all times material hereto, Respondent, Timothy Gibbons, was an associated person and employed by J.B. Hanauer as a sales representative in institutional sales. Each of the subject transactions at issue in this case constituted a purchase and sale of securities. In the summer of 1988, Mr. Gibbons subscribed the City of Daytona Beach, Florida, as a client. Mr. Mike Robertson, as Deputy Finance Director for the City, was charged with investing the City's funds. The subscription was consummated by a written agreement between the City and J.B. Hanauer establishing a non-discretionary account on behalf of the City. Both Mr. Gibbons and Mr. Robertson were designated in the agreement as authorized representatives of their respective employers for the purpose of conducting transactions between the City and J.B. Hanauer. Mr. Gibbons contacted Mr. Robertson on an almost daily basis with numbers for proposed deals at different market levels. In these conversations, Mr. Robertson would give Mr. Gibbons the authority to enter the market for the City when the market reached certain, agreed market levels. The direction to initiate a trade at a certain previously approved market level was the sole "discretion" granted to Mr. Gibbons. Mr. Robertson retained and required the non-discretionary authority to approve all transactions. Mr. Gibbons did not at any time have the authority to encumber the City's funds without the prior approval of Mr. Robertson. Mr. Robertson further limited Mr. Gibbons by placing a $1,000,000 cap on the amount of the City's funds he would risk per trade. Mr. Robertson told Mr. Gibbons about the $1,000,000 trading practice and each of the approved trades was limited to the $1,000,000 amount. Their first trade was executed on August 25, 1988. Then, on August 31, 1988, without the knowledge or consent of the City, Mr. Gibbons executed several trades in the name of the City. Most of the subject trades were in excess of $1,000,000. In fact, they encumbered increments of $5,000,000 and $6,000,000. When these trades were settled, the City's account owed J.B. Hanauer in excess of $29,000. On September 1, 1988, Mr. Gibbons left the employment of J.B. Hanauer, and subsequently, J.B. Hanauer absorbed the City's loss as a result of the subject trades. By trading without the authorization of his client, the City, the respondent misrepresented his authorization to purchase and sell securities for the City and demonstrated his unworthiness to transact the business of an associated person.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Banking and Finance issue a Final Order: Revoking any and all registrations of Timothy Gibbons under Chapter 517, Florida Statutes; and Assessing against Timothy Gibbons an administrative fine of $5,000. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th of September 1989. JANE C. HAYMAN 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 7th day of September 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 89-2214 Petitioner's proposed findings of fact are addressed as follows: Addressed in paragraph 1. Addressed in paragraphs 2 through 4. Addressed in paragraphs 3, 4 and 5. Addressed in paragraph 4. Addressed in paragraph 5, and subordinate to paragraph 5. Subordinate to paragraphs 4 and 5. COPIES FURNISHED: Eric Mendelshon, Esquire Office of Comptroller 111 Georgia Avenue, Suite 201 West Palm Beach, Florida 33401 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Timothy Gibbons Number 5 Par Drive Maumelle, Arkansas 72118
Findings Of Fact Albert Earl Wise, II, (Al,II) (Case No. 86-2161) began work as a securities salesman in Memphis, Tennessee, approximately November 15, 1982. He was a plumber when an old friend recruited him to be come a salesman with G.I.C. Government Securities, Inc., which was registered with the Department of Banking and Finance, Division of Securities (Department), from June 8, 1982, until October 1, 1985. In February, 1983, Al,II, was transferred to Tampa to work in the branch office being opened there by an office manager named Lonnie Kilpatrick. Kilpatrick had been a government trader with the firm in Memphis. In approximately July, 1984, Al,II, became the Tampa branch manager. As the firm's Florida business expanded, Kilpatrick took over sole ownership and named Al,II, general manager over all the offices in Florida. Al,II, also became vice-president, comptroller and member of the board of directors of G.I.C. Government Securities, Inc. As general manager, Al,II, was responsible for the day-to-day operations of the company. A more accurate description of his duties is that of sales manager as he was primarily responsible for promoting sales and motivating the account executives/sales persons. Al,II's, duties did not include registration of securities, as he possessed no training in that area, nor deciding what products G.I.C.. Government Securities would sell. Notwithstanding having been named comptroller and vice- president, Al,II, was not allowed by Kilpatrick, despite request, to audit or examine the company's books and records. Lonnie Kilpatrick decided what securities the entity would offer, as well as who, if anyone, would have access to the corporate records. Dorothy (also known as D'Oresa) Wise Young (Case No. 86-1848) was employed by G.I.C. Government Securities, Inc., as an associated person from September, 1983, through April, 1985, and as Sarasota branch manager from January through April, 1985. She is Al,II,'s daughter. Albert Earl Wise, III, (Al,III) (Case No. 86-1888) was employed by G.I.C. Government Securities, Inc., as an account executive from February, 1983, through April, 1985, became Boca Raton and Orlando branch manager, and was a member of the board of directors of G.I.C. Government Securities, Inc. Al,III, is Al,II,'s son. Glenn Patrick Young (Case No. 86-1847) was employed by G.I.C. Government Securities, Inc., as an associated person from January through April, 1985. He is Dorothy's husband. David Randall Phillips (Case No. 86-1887) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from August, 1984, to May, 1985. He is a long-time, close friend of Al,III. William Fredrick Mann (Case No. 86-2160) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from February to April, 1985. He is Al,III,'s father-in-law. Al,II, was employed as a general manager of G.I.C. Securities Corporation from at least January 27, 1985 to March 5, 1985 and supervised the sale of securities by unregistered agents of G.I.C. Securities Corporation to following investors located outside the State of Florida: Fred E Martin or Matalie L. Martin $85,000 Post Office Box 449 West Upton, Massachusetts 01587 Gregory E Westerman $50,000 2034 Strathmoor Boulevard Louisville, Kentucky 40205 Karen E Prevett $70,000 72 Old Farm Road Mansfield, Massachusetts 02048 Harvey Notis or Marion Notis $50,000 R. D. 3 Box 1248 Great Harrington, Massachusetts 01230 C. T. George $155,000 Living Revocable Trust Trust Dated 01/31/83 20 Palmer Drive Canton, Massachusetts 02021 Geoffrey P. Pollitt $25,000 313 Simon Willard Road Concord, Massachusetts 01742 Walter Kossman or Virginia Kossman $25,000 1594 S. Circle View Seven Hills, Ohio 44131 Robert Anandale Trustee $30,000 Dated 02/28/84 F.B.O. Robert Allandale c/o Central National Bank 6690 McKenzie Road North Olmstead, Ohio 44070 William P. Giblin $25,000 6433 Beverly Drive Parma Heights, Ohio 44129 Walter Kossman or Virginia Kossman $25,000 1594 South Circle View Seven Hills, Ohio 44131 Dorothy L. Bayman or Dale L. Bayman $85,000 150 Belleair Avenue Dayton, Ohio 45420 Dorothy Wise Young was employed by G.I.C. Securities Corporation as an account executive although not registered with Respondent in any capacity at anytime concerning said employment. Young also sold securities on behalf of G.I.C. Securities Corporation to the following investors despite not being properly registered with Respondent: Albin W. Johnson Box 333 Randolph, Massachusetts 02368 $75,000 T. W. Wenzlick or Viola 421 Jeffrey Drive R. Wenzlick $25,000 New Washington, Ohio 44854 Harvey Notis or Marion Notis $50,000 R. D. 3, Box 142C Great Barrington, Massachusetts 01230 Al,III, was employed by G.I.C. Securities Corporation as an account executive from January to April, 1985, and admitted engaging in the sale of one or more securities while employed by said firm. Al,III, also admitted to not being properly registered in the State of Florida with G.I.C. Securities Corporation. G.I.C. Securities Corporation was denied a license by Order of the Department dated April 16, 1984, in part for material false statements in the application and demonstration of the applicant's unworthiness to transact the business of a broker/dealer. G.I.C. Securities Corporation subsequently filed a petition for formal hearing regarding the Department's denial of registration. On August 30, 1984, G.I.C. Securities Corporation entered into a stipulation, consent agreement and final order with the Department. This written agreement provided that the firm would not apply to the Department for registration under Section 517.12(1), Florida Statutes, for a period of twelve months from August 30, 1984, and that it would fully and faithfully comply with all of the provisions of Chapter 517, Florida Statutes, and the rules of the Department. On the basis of these findings of fact, on April 9, 1985, the Department ordered the firm to cease and desist from violating Chapter 517, Florida Statutes, and more specifically from selling unregistered securities and from selling securities without being lawfully registered to do so. Al,II, also sold unregistered Government National mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Joseph or Bernice Metcalf 4299-14th Street N.E. St. Petersburg, Fl 33703 $25,000 Bruce or Diane J. Fenton 2435 Post Road Sarasota, Fl 33581 $5,000 Betsy O. Lester 1200 Capri Circle S. Apt. 29 Treasure Island, Fl 33706 $10,000 Ernest L. Miller Post Office Box 458 Lake Hamilton, Fl 33851 $7,000 John and Louise Magill 4260 S.E. 20th Place Apt. Cape Coral, Fl 33904 208 $10,000 Mrs. Lina Anker-Simmons Post Office Box 353 Boca Grande, Fl 33921 $10,000 Charles W. Wood or Babetta 211 W. Emily Tampa, Fl 33603 Edmunds $10,000 Margaret McMenamy 1225 N.W. 16th Street Pembroke Pine, Fl 33026 $20,000 Suzanne J. Lewis 4703 Brookwood Drive Tampa, Fl 33629 $10,000 Raymond or Suzanne Lewis 4703 Brookwood Drive Tampa, Fl 33629 $10,000 Deno or Barbara Kazanis 2310 Southern Lights Lutz, Fl 33549 $5,000 William K. Mall, IV 9500 82nd Avenue N. Seminole, Fl 33543 $20,000 Carl E. or Minnie E. Gustafson $10,000 Post Office Box 451 Matlacha, Fl 33909 John A. or Louis Gress $22,000 Post Office Box 1555 Palm Harbor, Fl 33563 Marguerite Gould or Marguerite Robertson $10,000 16183 Dublin Circle Casa Bella Bldg. A-Apt. 103 Ft. Myers, Fl 33908 Robert J. Evans $7,000 Rt. 2, Box 12-B Moore Haven, Fl 33471 Virginia H. or Robert E Bartlett $10,000 4703 Baycrest Drive Tampa, Fl 33615 Robert S. or Helen M. Gerard $5,000 or Frances C. Rafter JT WROS, 4521 W. Rogers Avenue Tampa, Fl 33611 Jacinto R. or Palmira M. Fernandez $10,000 8436 Nebraska Avenue Tampa, Fl 33604 Paul E. or Elizabeth A. Cleveland $10,000 306 Kllburn Road Holiday, Fl 33590 William F. Price $30,000 custodian for Gary Cotton Dan Cook 9105 Tudor Dr #F102 Tampa, Fl 33615 Ruth T. Penner or Laura B. Wood $5,000 1204 W. Risk-Apt. G Plant City, Fl 33566 Edward G. or Eleanor G. Daniels $20,000 4630 B.E. 20th Place Cape Coral, Fl 33904 Frederick S. Crysler $5,000 1200 Johnston Road Unite B-24 Dade City, Fl 33525 Hazel H. Aspinwall or Frederick F. Smith $30,000 69 Arrowhead Drive St. Augustine, Fl 32086 Jay E or Betty A. Yager $20,000 or Martha Dean Post Office Box 465 Astatula, Fl 32705 Katherine B. Wolf $10,000 1850 Palmcrest Lane Clearwater, Fl 33546 Howard J. or Margaret M. Williams $10,000 8290 Oakhurst Road Seminole, Fl 33542 Roy or Dorothy Schreiner $15,000 4112 Robin Way Valrico, Fl 33594 Alfred or Frances Richter $13,000 7248 Antigua Place Sarasota, Fl 33581 Kaye Reid Wainwright $50,000 10671 William Tell Drive Orlando, Fl 32821 Charles A. Kottmeier $25,000 1200 Druid Road S. #7 Clearwater, Fl 33516 Bernie or Sylvia Albert or $10,000 Sharon Terry Albert 10642 Watertown Court Orlando, Fl 32809 Arnold or Gloria Barr $10,000 7503 Willow Court Tampa, Fl 33614 Edward Daniels Development Company $35,000 4630 S.E. 20th Place Cape Coral, Fl 33904 John W. DuBrian $30,900 2912 Tiburon Drive New Port Richey, Fl 33553 Arthur and Ruth P. Hiller $10,000 10702 Westbrook Dr Orlando, Fl 32821 Charles A. Kottmeir $40,000 200 Druid Road S. #7 Clearwater, Fl 33516 Kenneth S. Preston $12,000 11839 U.S. Hwy 41 S. Gibsonton, William E. Fl 33534 Morris $11,000 271-B Deming Avenue North Port, Fl 33596 Walter Leena M. Fennander $7,000 1727 Bayshore Boulevard Dunedin, Fl 33528 Thomas B. or Charlene M. Austin $10,000 309 15th Avenue Indian Rocks Beach, Fl 33535 Katherine Wolf $10,000 1850 Palmcrest Lane Clearwater, Fl 33546 Dorothy Wise Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: George W. Arnold $8,000 618 4th Avenue S. St. Petersburg, Fl 33701 W. R. Bauman or Barbara Nagle $10,000 Post Office Box 16 Yankeetown, Fl 32698 George W. or Marjorie E. Border $10,000 860 N. Lake Avenue Avon Park, Fl 33825 Joan or Jerome Brenan 0005 Granite Lane Orlando, Fl 32821 $10,000 Freida Blockner 14623 Bonaire #607 Delray Beach, Fl 33446 $5,000 John or Elizabeth Grabowski 2308 Castilla Isle Fort Lauderdale, Fl 33301 $10,000 Louis or Mary Hoffman 3512 Spring Valley Drive New Port Richey, Fl 33552 $10,000 Raymond F. Joyce custodian for Salvatore Leone 267 S. Ocean Boulevard #212 C Pompano Beach, Fl 33062 $5,000 John or Caroline Susanec $10,000 215 Stafford Avenue Brooksville, Fl 33512 Stephen Karakay $10,000 Box 3344 Sarasota, Fl 33578 Mrs. Floyd A. Flowers or James A. Monroe $5,000 Route 2, Box 330H Crestview, Fl 32536 Fannie Felicia Caliuzzi $5,000 2742 C. Sherbrook Lane Palm Harbor, Fl 33563 Emma Carolyn Hammond $95,000 130 Devon Drive Clearwater, Fl 33515 A. E. or Joyce LaBeau $12,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 A. E. or Joyce LaBeau $13,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 A. E. or Joyce LaBeau $7,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 Oscar Ritter $5,000 952 N.E. 199th Street #415 N. Miami Beach, Fl 33179 Murial or Sherry Stearns 580 Rio Vista Avenue $9,000 Daytona Beach, Fl 32014 F. William or Frances C. Van 219 87th Street Stone Harbor, N.J. 08247 Ness $6,000 Kaye Reid Wainwright 10671 William Tell Drive Orlando, Fl 32821 $50,000 Adele Althouse 400 Freedom Square U.S.A. Apt. J 619 Seminole, Fl 33542 $5,000 Murial or Sherry Stearns 580 Rio Vista Avenue Daytona Beach, Fl 32014 $10,000 F. William or Frances C. Van 112 S.W. 1st Avenue Seller Apt. Ness $10,000 Delray Beach, Fl 33444 McKinely or Grace Anderson 12408 Oakleaf Avenue Tampa, Fl 33612 $10,000 Mrs. Eileen Coutts 190 S.W. 72nd Terrace Margate, Fl 33068 $18,000 John C. Bertram 1416 Lake Marion Drive Apopka, Fl 32703 $8,000 Luther or Alena D. Ellis Rt. 2, Box 72 Wauchula, Fl 33873 $20,000 F. H. or H. Elizabeth Groezinger $15,000 2308 Crescent Ridge Road Daytona Beach, Fl 32018 Luther or Alena D. Ellis $30,000 Rt. 2, Box 72 Wauchula, Fl 33873 Mrs Isabelia K. Berg $6,000 5421 B Lakefront Blvd. Delray Beach, Fl 33445 Al,III, sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Charles S. Ammerman or Florence F. Ammerman $6,500 710 Lake Hiawassee Orlando, Fl 32811 Eva Wilson $15,000 409 S.E. 2nd Court Deerfield Beach, Fl 33441 Frank or Jean Arnold $18,000 6020 Shakerwood Circle, #G-108 Tamara, Fl 33319 Virginia Cummins or J. H. Cromer $15,000 311 S. Dean Street Westport, Indiana 47283 Morris or Sylvia Erlbaum $10,000 6795 Huntington Lane Bld. #14, Apt. #207 Delray Beach, Fl 33446 Lois G. Crosley $41,000 1626 Silversmith Place Orlando, Fl 32818 Sandy Garrison or Mary M. Boitnott $15,000 3104 Harrison Ave., #C-18 Orlando, Fl 32804 William or Rose Herzog $25,000 Custodian for Ronald Coyne 258-A Hibiscus Drive, M.F.L. Leesburg, Fl 32788 Helen Klein or Shari Weitzner $5,000 3205 Portofina #C-4 Coconut Greek, Fl 33066 Mattye Oliver or Eileen Johnson $3,000 147 W. State Street Kennett Square, PA 19348 Alma Pagliaro or Nancy De Marco $10,000 or Godfrey D. De Marco 9925-B Papaya Tree Trail Boynton Beach, Fl 33436 Gai S. Verner I.T.F. Bill Trilsch $25,000 901 N.W. 31st Avenue Box 13 Pompano Beach, Fl 33069 Harry or Anita Cope $5,000 417 Piedmont I Delray Beach, Fl 33445 Al Rappaport or Ellen Rappaport $15,000 2780 Pine Allen Rd. N. Sunrise, Fl 33329 Godfrey D. De Maro or Nancy De Marco $5,000 9925-B Papaya Tree Trail Boynton Beach, Fl 33436 Morris Erlbaum or Sylvia Erlbaum $10,000 6795 Huntington Lane Delray Beach, Fl 33446 A. Froid or Gertrude Froid $10,000 in trust for Roy Lee Froid 2600 S.W. 18th Terrace Ft. Lauderdale, Fl 33315 Max Pendergrast or Carol Pendergrast $20,000 custodian for Eric & Kurt Pendergrast 1611 S.W. 26th Street Ft. Lauderdale, Fl 33315 Glenn Patrick Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note and GNMA/Mortgage Backed Collateral Note securities, to the following individuals in the following amounts: Wanda G. Baugh $10,500 Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923 Wanda Baugh $5,000 Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923 Norman R. or Margaret 3442 Gerhardt Street A. Keyes $25,000 Sarasota, Fl 33577 Norman R. or Margaret 3442 Gerhardt Street Sarasota, Fl 33577 A. Keyes $25,000 Howard W. or Hazel M. 3300 26th Avenue East Apt. 17-A Bradenton, Fl 33508 Kerr $10,000 David Randall Phillips sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Frank G. and Mildred W. Reynolds $2,500 JTWROS 400 S. Orlando #305 Maitland, Fl 32751 Vivian W. McCann or Marilyn Culpepper $10,000 JTWROS 2211 Beatrice Drive Orlando, Fl 32810 Stanislaw Szamrej or Stanislawa Szamrej $10,000 or Zdzislaw Szamrej JTWROS 2204 Stanley Street Orlando, Fl 32803 Paul Gheorghiu or Martha Gheorghiu $2,500 JTWROS 6565 Carder Drive Orlando, Fl 32818 Marjorie R. Romano or Michael Romano $40,000 11508 Benbow Court Orlando, Fl 32821 William Fredrick Mann sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities to Mark Fulkerson or Bea Kuykendall, 7900 Montezuma Trail, Orlando, Fl, in the amount of $41,000. On April 9, 1985, the Department issued an Administrative Charges and Complaint against G.I.C. Government Securities, Inc., alleging among other things the sale of unregistered securities. On June 27, 1985, the Department entered into a Stipulation and Consent Order whereby G.I.C., its officers and directors and other persons acting in cooperation or concert with them or at their direction were permanently enjoined in part from selling unregistered securities and from obtaining money or property by means of untrue or misleading statements. Despite their positions with Kilpatrick's firms, the petitioners were not told, and did not know, that G.I.C. Securities Corporation was not registered with the Department. Al,III, and Dorothy Wise Young were registered in the states of Ohio (Al,III, only), Delaware and Massachusetts, and Kilpatrick, who had the benefit of legal counsel, had told them that it was legal for them to sell from their Florida offices to customers in those states. Likewise, Kilpatrick and the company's legal counsel, Tony Todd, told Al,II, Al,III, and Dorothy in late 1984 that the Government National Mortgage Association GNMA/U.S. Treasury Trust Notes and GNMA/Mortgage Backed Collateral Notes issued by Southern Bond Clearing were exempt from registration. Following Kilpatrick's instructions, they had their salesmen, including Glenn Patrick Young, Phillips and Mann, sell the securities. Despite their respective positions with G.I.C. Government Securities, Inc., and despite their representation on their U-4 Form applications to be associated persons with the firm that they were familiar with Florida's securities laws, none of the petitioners knew that those securities were unregistered securities for which there was no exemption. In March, 1985, Al,II, was in Memphis interviewing with the securities broker Turner & Sellhorn, Inc., about possible employment. At the time, although earning income well into six figures, Al,II, was dissatisfied with the way Kilpatrick was keeping him in the dark about some aspects of the companies' operations and finances. While in Memphis, Al,II, called in to his Tampa office and was told that the Department was engaged in some kind of audit. After he returned to the office, on April 4, 1985, he confronted Kilpatrick and demanded to know what the audit was about. Kilpatrick told him for the first time that violations had been committed by selling unregistered securities and selling for G.I.C. Securities Corporation, which had not been registered. Although Al,II, and Al,III, technically were members of the board of directors of G.I.C. Government Securities, Inc., there were no meetings of the board during their tenure, and Kilpatrick did not fully disclose the details of the firm's operations and finances to them. The Wises also were not made privy to the operations of related firms, such as Southern Bond Clearing. Dissatisfied with the position in which Kilpatrick had placed him and Al,III, Al,II, decided to resign despite Kilpatrick's offer of concessions and an expenses-paid trip to Europe as enticement to Al,II, stay on with the company. Al,II, resigned the next day, effective April 15, 1985. Al,III, resigned as a director on April 17, 1985. When Al,II, resigned, the other petitioners--family and friends whom Al,II, had brought to the company--began discussing plans to leave. On April 9, 1985, Gerald Lewis, as Comptroller, entered the cease and desist orders enjoining G.I.C. Securities Corporation from selling any securities while still unregistered and enjoining both G.I.C. Government Securities, Inc., and G.I.C. Securities Corporation from sales of unregistered securities. But the orders did not otherwise enjoin G.I.C. Government Securities, Inc., from conducting business. When Dorothy Wise Young inquired of a Department employee, the violations were characterized as "technical." The petitioners then decided that, to be able to have uninterrupted income, the others would stay at the company until Al,II, secured employment at Turner & Sellhorn and could hire the others on at Turner & Sellhorn. But on April 30, 1985, Kilpatrick required all employees to sign a new employment contract which provided, among other things, for 90 days notice before an employee could terminate employment. At that point, the petitioners still at the company (i.e., all but Al,II) refused to sign the new contract and resigned from employment. Up to the departure of the petitioners from Kilpatrick's companies, none of them had any reason to think that securities they sold would not be delivered in due course of time to the customers who purchased them. Securities always had been delivered properly during the term of their employment with the companies. The petitioners, like the Department's employees, were not privy to the companies' finances and had no reason to believe the companies would not, or would not be able to, deliver securities that had been purchased. It is not a customary practice in the industry for securities salesmen associated with a broker/dealer to remain responsible for insuring delivery of securities after termination of employment with the broker/dealer. To the contrary, it is customary for the salesman to rely on the broker/dealer to follow through on delivery of securities. On or about July 22, 1985, the petitioners' U-4 Form applications to be associated persons with Turner & Sellhorn, Inc., were granted, and they began employment at Turner & Sellhorn. They mailed notices to their former customers to advise the customers of their new place of employment. Later in the summer of 1985, some of the petitioners were told by former customers both that G.I.C. Government Securities, Inc., had begun selling short-term zero coupon repurchase agreements and that some former customers had not yet received possession of securities purchased from some of the petitioners on or before April 30, 1985, an extraordinary delay. After discussing these developments with Mr. Turner, the petitioners concluded that Kilpatrick's companies might be having financial difficulties and that the former customers might be at risk. The petitioners began to try to contact all of their former customers to caution them about the "zero repos" and to be sure they had received possession of their securities. This was not easy since many of the petitioners' former customers already had left for summer residences up north, some without leaving a forwarding address or telephone number. Glenn Patrick Young sent letters to the U.S. Postal Service and paid its service fee to obtain a good address or telephone number at which to contact six of his former customers If former customers the petitioners were able to contact had not yet received their securities, petitioners advised them to contact G.I.C. Government Securities, Inc., immediately and demand satisfaction--either possession of their securities or return of their investment. They further advised the customers that, if the company did not satisfy them within a week to ten days, they should contact the Department. Thanks to petitioners' efforts, several of their former customers recovered either their security or investment. For example, Al,III, was able to contact former customer Bryant on August 20, 1985, on Bryant's return to Florida and was told that Bryant still had not received the GNMA certificate he had bought on March 26, 1985. Following Al,III,'s advice, Bryant got his certificate on September 6, 1985. Glenn Patrick Young was contacted by former customer Bough about a "zero repo." He advised her not to invest and to contact the Department. Young also called former customers Neukom and Horowitz and, by his advice, helped Neukom get her $23,000 investment returned around September 25, 1985, and helped Horowitz get his $66,000 GNMA certificate on September 6, 1985, after a six month delay. David Randall Phillips helped former customers, including Mrs. Moffat, who called Phillips at his home for help in August, 1985, because she still had not received the security she had purchased in April, 1985. Phillips advised Moffat to write a letter to the Department, and she got her security within five days. Unfortunately, not all of petitioners' former customers had gotten satisfaction--either the security they had purchased or the return of their investment--by the time G.I.C. Government Securities, Inc., went bankrupt on or about October 1, 1985. Some, including Lillian Nelson and Raymond Dennis (customers of Phillips), did not listen to petitioners' advice and counsel. One couple, the Bakers of Ft. Myers, were contacted by Glenn Patrick Young but misinformed him that they had received possession of their security when in fact they had not. Others could not be contacted because petitioners were unable to get a good address or telephone number for them during the summer and early autumn, 1985. Dr. Stanley Pollock of 332 Fifth Avenue, Suite 213, McKeesport, Pennsylvania, purchased three GNMA certificates in the amount of $195,131 from Dorothy Wise Young near the end of her employment at G.I.C. Government Securities. Young tried to telephone Pollock but had a bad telephone connection. She tried to leave a message for Pollock to call her if he had not yet received his securities and, when Pollock did not call her, she assumed that he had received them. In fact, Pollock never got the message because of the bad connection. As a result, Dr. Pollock did not receive or obtain registered ownership of the securities which he had purchased. He currently has a claim pending in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates. At the direction of Richard Johnson of Tampa, Richard J. Hansen, IRA Plans Administrator, Retirement Accounts, Inc., Post Office Box 3017, Winter Park, Florida, purchased two GNMA certificates from Al,III, on behalf of Johnson in the amount of $18,470.37. Mr. Johnson did not receive the certificates. He moved to Wisconsin June through October, 1985, and gave Al,III, no forwarding address or telephone number (although Al,III, could have made contact with Mr. Johnson through Mr. Hansen.) James and Katheryn Putnal of Route 1, Box 14, Myakka City, Florida, purchased an $85,000 GNMA certificate from Glenn Patrick Young on April 12, 1985. In addition, M. Reed and Edna M. Veazey of 2141 Third Street East, Bradenton, Florida purchased a $50,000 Federal Home Loan Mortgage Corporation (FHLMC) certificate from him on February 11, 1985. Both couples moved from Florida (the Putnals from May 8 through August, 1985, and the Veazeys until October, 1985), and neither gave Young a forwarding address or telephone number. Young unsuccessfully tried to locate them through the U.S. Postal Service and then gave up. Before they left to go up north, the Putnals did receive Young's announcement that he had left G.I.C. and was starting employment with Turner & Sellhorn. But when they returned they called G.I.C., not Young, to inquire about delivery of their certificate and were told it was coming, give it time. The Veazeys also contacted G.I.C., not Young, after Young switched to Turner & Sellhorn and, in fact, bought two more GNMA certificates from G.I.C. after Young had left (although they still had not received the security they had purchased from Young on or about February 19, 1985.) Both the Putnals and the Veazeys have had to make claims in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates. While employed by G.I.C. Government Securities, William Fredrick Mann sold GNMA certificates to the following individuals in the following amounts: Louis M. Totka or Marguerite A. Totka 117 Pine Circle Drive $25,000 Lake Mary, Fl 32746 Mignon Weinstein or Philip Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 $40,000 Philip Weinstein or Mignon Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 $55,000 Although Mann was able to contact these former customers in late July or in August, 1985, and advise and counsel them how to get satisfaction (i.e., either possession of the securities they had purchased or return of their investments, for some reason the Totkas and the Weinsteins did not get satisfaction before the G.I.C. bankruptcy. Despite their association with Kilpatrick's G.I.C. companies, the petitioners have been able to maintain a good reputation for competence, honesty and trustworthiness in their business dealings. Testimony of this kind came from Mr. Turner and Mr. Sellhorn of Turner & Sellhorn, Inc., and several of petitioners' former customers--four customers of Al,II; one of Dorothy; four of Al,III; three of Glenn Patrick Young; and three of Phillips. More than being responsible for the violations in which they have participated, petitioners have been fellow victims of Kilpatrick's violations. The most serious of the violations--failure to account for and deliver securities-- occurred after the petitioners left G.I.C. and through no doing of their own.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that a final order be entered in these cases granting the applications of all of the petitioners for registration as associated persons with Certified Capital Corporation. RECOMMENDED this 29th day of April, 1987 in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 29th day of April, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-1847, 86-1848, 86-1887, 86-1888, 86-2160 and 86-2161 To comply with Section 120.59(2), Florida Statutes (1985), the following rulings are made on proposed findings of fact. Respondent's proposed findings of fact were organized and filed separately by petitioner. Petitioners' proposed findings of fact were not timely filed and do not require explicit rulings (although they have been considered, as reflected in the Findings Of Fact.) Respondent's Proposed Findings Of Fact As To Glenn Patrick Young (Case No. 86-1847). 1.-5. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To Dorothy Wise Young (Case No. 86-1848). 1.-8. Accepted and incorporated, along with additional findings. 9. Rejected as contrary to facts found that Dr. Pollock had no contact with Young; in part, subordinate; otherwise, accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To David Randall Phillips (Case No. 86-1887). 1.-5. Accepted and incorporated, along with additional findings. 6. Subordinate to facts found. Respondent's Proposed Findings Of Fact As To Albert Earl Wise, III (Case No. 86-1888). 1.-8. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To William Fredrick Mann (Case No. 86-2160). 1.-6. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To Albert Earl Wise (Case No. 86-2161). 1.-7. Accepted and incorporated, along with additional findings. COPIES FURNISHED: Michael J. Echevarria, Esquire ECHEVARRIA & BENCHIMOL, P.A. Suite 3016, First Florida Tower 111 East Madison Street Tampa, Fl 33602 Charles E. Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Fl 32399-0305 Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Fl 32399-0305 Charles Stutts General Counsel Plaza Level The Capitol Tallahassee, Fl 32399-0305 =================================================================
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Columbus Equities International, Inc. (Columbus Equities), was registered as a broker/dealer with petitioner, Department of Banking and Finance, Division of Securities and Investor Protection (Division), having been issued broker/dealer registration number 30936. The business address of the firm was 6321 East Livingston Avenue, Reynoldsburg, Ohio. Respondent, Roger L. Parsons, was registered with the Division as an agent with Columbus Equities. He was also registered with the National Association of Securities Dealers (NASD) as the financial and operations principal, general principal and representative of Columbus Equities. As such, Parsons was responsible for supervising the employees of Columbus Equities. Similarly, under the terms of Rule 3E-600.002(4), Florida Administrative Code, Columbus Equities was also responsible for the acts of its employees. Prior to June 1990, Columbus Equities was known as Parsons Securities, Inc. The business was originally formed in 1978 by Parsons, who is majority stockholder and serves as its president, secretary and director. In June 1990, the firm's name was changed to Columbus Equities International, Inc. In January 1991, Columbus Equities filed for protection under Chapter 7 of the Federal Bankruptcy Law. When the events herein occurred, Vincent C. Lombardi was registered with the NASD as general securities principal, representative and registered options principal of Columbus Equities. Lombardi's business address was 450 Tuscarora Road, Crystal Bay, Nevada, where he managed the Nevada branch office of Columbus Equities. Except for Ohio, Lombardi was not registered to sell securities in any other state, including Florida. In the fall of 1990, a Division financial analyst, Joanne Kraynek, received a letter from the Nevada Securities Commission. Based upon that letter, Kraynek wrote a letter on November 21, 1990, to "Parsons Securities/Columbus Equities International, Inc." regarding that firm's alleged sale of unregistered securities to a Florida resident. The letter requested various items of information. On December 6, 1990, Lombardi replied to Kraynek's letter on behalf of Columbus Equities and enclosed a number of documents in response to her request. Based upon this information and a subsequent investigation by the Division, the following facts were determined. On May 31, 1990, Charles D. Flynn conducted a transaction on behalf of his wife, Susan, for the purchase of 4,933 shares of World Videophone, an unregistered security. On June 22, 1990, Flynn purchased 2,500 shares of White Knight Resources Limited on behalf of his wife. That security was also not registered in the State of Florida. On July 9, 1990, Flynn purchased an additional 2,000 shares of White Knight Resources Limited on behalf of his wife. In each transaction, the trade was executed by Lombardi from the Nevada branch office of Columbus Equities. When the sales occurred, Flynn and his wife resided at 2045 Parkside Circle South, Boca Raton, Florida. In finding that the Flynns were Florida residents at the time of the trades, the undersigned has rejected a contention by Parsons that Flynn purchased the stocks while residing in Canada and thus the transactions were not subject to the Division's jurisdiction. Evidence of these transactions and the Flynns' Florida domicile is confirmed by the deposition testimony of Mr. Flynn, admissions by Lombardi, and copies of the order tickets from the Nevada branch office. The order tickets reflect the code "MM" (market maker), which means that Columbus Equities held the securities in its own inventory and did not have to go to an outside source to obtain the stocks. Thus, Parsons (on behalf of Columbus Equities) should have been familiar with these securities. However, at hearing he acknowledged that he was not. This in itself is an indication that Parsons was not properly supervising his employees. Finally, there was no evidence that the three transactions were exempt within the meaning of Sections 517.051 and 517.061, Florida Statutes, and thus were beyond the Division's jurisdiction. As the principal for Columbus Equities, Parsons was responsible for supervising the activities of both Lombardi and the Nevada branch office. Indeed, section 27, article III of the NASD Rules of Fair Practice requires that a NASD member such as Parsons supervise the activities of all associated persons to insure that those persons are complying with all securities laws and regulations. In order to fulfill this duty, Parsons should have reviewed on a timely basis the monthly statements generated by the Nevada office as well as that office's new account applications. For the reasons stated hereinafter, Parsons' review of Lombardi's activities was neither complete nor timely. The Flynn account was opened by Lombardi in April 1990 and Lombardi was the only employee who dealt with the Flynns. Parsons had no knowledge that the Flynn account had been opened because he did not review new account applications. This failure to review new account applications prevented Parsons from detecting whether Lombardi was selling securities in states such as Florida where he was not registered. Lombardi was required to send Parsons a monthly statement reflecting the activity of the branch office. During his review of the May statement in the second or third week of June 1990, Parsons became aware of the first Flynn transaction. Just prior to that, Parsons had learned that Lombardi had also engaged in another illicit trade. In addition, Parsons subsequently became aware of at least four other transactions (including two more with the Flynns) involving the sale of securities by Lombardi in states where he was not registered. However, except for a verbal warning given to Lombardi to discontinue that type of trade, Parsons took no disciplinary action against Lombardi until September 13, 1990, when Lombardi was terminated as an employee and the Nevada branch office closed. By failing to review the new account applications and to take prompt action against Lombardi after having learned of his indiscretions, Parsons failed to properly supervise his employees. Rule 3E-600.014(6), Florida Administrative Code, requires that each member establish, maintain and enforce written procedures governing the conduct of its employees to ensure compliance with all security laws and regulations. To this end, Parsons developed a policy (compliance) manual which was to serve as a guide in the conduct of all employees of Parsons Securities, Inc. and its successor, Columbus Equities. A copy of this manual should have been given to each employee, including Lombardi, for his or her review. However, Parsons did not know if Lombardi ever received and reviewed the manual. In addition, the manual itself was deficient in that it failed to indicate whether employees were to be given a copy for review, and it contained no provisions for taking disciplinary action against an agent if he violated a manual proscription. By failing to develop and utilize an appropriate manual, respondents violated the above cited rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by petitioner finding respondents guilty of all violations alleged in the administrative complaint, ordering respondents to cease and desist all unlawful activities, and imposing a $5,000 fine, jointly and severally, against them. DONE and ENTERED this 26th day of May, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of May, 1992.
Findings Of Fact At all times relevant hereto, respondent, Pioneer Diversified Investments, Inc.(PDI), was registered as a broker-dealer of securities with petitioner, Department of Banking and Finance, Division of Securities (Division). PDI's registration became effective on June 25, 1985 and it commenced operations on that date at 4651 Sheridan Street, Suite 270, Hollywood, Florida. Respondent, Steven J. Hurtig (Hurtig), was also registered with petitioner as an associated person of PDI. In addition, he is registered as a financial/operations principal, full registration/general securities representative, general securities principal and a municipal securities principal. On June 25, 1986 the firm ceased doing business and is now inactive but both respondents are still registered with the Division. As a condition to licensure, Hurtig agreed to the entry by the Division of a Stipulation and Consent Agreement and Final Order on June 25, 1985 wherein the following pertinent conditions were imposed: Hurtig agrees that on the effective date of the applications as aforesaid, and for sixty (60) days thereafter he shall not have, assume, or perform any management responsibilities for or on behalf of Pioneer Diversified Investments, Inc., and his activities during said period shall be limited to those of a salesman. Hurtig further agrees that Ellen Kracoff shall assume and discharge all management responsibilities for and on behalf of Pioneer during said period. Therefore, under the terms of this order, Hurtig was not allowed to assume any managerial responsibilities with PDI or act in any capacity other than as a salesman during the firm's first sixty days of operation. As a registered broker-dealer, PDI was subject to certain recordkeeping requirements. By rule (3E-600.14, FAC) the Division has established a requirement that registered broker-dealers maintain their books and records in a manner described in Rules G-7 and G-8 adopted by the Municipal Securities Rulemaking Board (MSRB), a national rulemaking authority for municipal security dealers and brokers. Copies of Rules G-7 and G-8 have been received in evidence as petitioner's exhibits 8 and 11, respectively. In addition, Rule 3E-600.14, Florida Administrative Code, imposes certain broad recordkeeping requirements upon dealers. On May 22, 1986, two Division financial specialists, Jerome Jordon and Zayre Espraza, conducted a routine audit of PDI's books and records. Jordon and Espraza had held those positions for approximately two months and their experience was limited to three or four prior audits and attendance at a two- week seminar in Tallahassee. The audit continued on May 23 and 28 and June 2 and 10. When the audit occurred, PDI was in the process of going out of business, and shut its doors about two weeks after the last visit by the auditors. During the course of the audit, Jordon requested various documents from Hurtig. These documents were retrieved by Hurtig, initially reviewed by him, and then given to the auditors for their review, Among other things, Jordon requested a copy of PDI's complaint file, associated person's file, general ledger, cash receipts and disbursement journal, purchase and sales blotter, and records of receipts and deliveries of securities. In response to Jordon's request for a complaint file, Hurtig advised him PDI had received no consumer complaints since the business had opened approximately eleven months earlier. Although Jordon did not see such a file during his audit, the firm did maintain a complaint folder (albeit empty) during that time as required by MSRD Rule G-8(a)(xii). The folder has been received in evidence as respondents' exhibit 2. PDI was required to maintain in its office files a Form U-4 for all associated persons. These records are commonly referred to as "associated person's files". When the audit occurred, Ellen K. Kracoff was an associated person with PDI and her U-4 form should have been maintained in the associated person's file. When Jordan reviewed the file on June 2, he did not see Kracoff's U-4 form. However, on his return visit on June 10, Jordan found the U-4 form in the file. At hearing he acknowledged it was "possible" that he simply overlooked the form during his earlier review. The form has been received in evidence as respondents' exhibit 1. According to MSRB Rule G-8(a)(i), which has been adopted by reference by the agency and a copy thereof received in evidence as petitioner's exhibit 8, a broker-dealer of municipal securities must maintain a "blotter or other records of original entry" containing the following information relative to the trading of municipal securities: ...an itemized daily record of all purchases and sales of municipal securities, all receipts and deliveries of municipal securities (including certificate numbers and, if the securities are in registered form, an indication to such effect), all receipts and disbursement of cash with respect to transactions in municipal securities, all other debits and credits pertaining to transactions in municipal securities, and in the case of municipal securities brokers and municipal securities dealers other than bank dealers, all other cash receipts and disbursements if not contained in the records required by other provision of this rule. The records of original entry shall show the name or other designation of the account for each such transaction effected (whether effected for the account of such municipal securities broker or municipal securities dealer, the account of a customer, or otherwise), the description of the securities, the aggregate par value of the securities, the dollar price or yield and aggregate purchase or sale price of the securities, accrued interest, the trade date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered. With respect to accrued interest and information relating to "when issued" transactions which may not be available at the time a transaction is effected, entries setting forth such information shall be made promptly as such information becomes available. During his office visits, Jordan requested the general ledger of PDI. His purpose was to review all receipts and disbursements of cash. Jordon found no entries in the general ledger pertaining to commissions received by PDI on sales of municipal securities. This had the effect of understanding the net capital computation of the firm, which is a measuring tool for gauging the financial soundness of the firm. 2/ By having no then-current record of commissions received, PDI failed to adhere to the requirement in the foregoing rule that a municipal securities dealer keep an itemized daily record of "all receipts and disbursements of cash with respect to transactions in municipal securities" to the extent the firm engaged in that type of business during the period in question. Another recordkeeping rule [rule 17a-3(a)(1)] promulgated by the Securities and Exchange Commission (SEC) which governs other types of dealer transactions and which was relied upon in the amended administrative complaint was not addressed at final hearing, made an exhibit, or officially noticed. Accordingly, it has been disregarded. Jordon also requested that PDI produce its "purchase and sales blotter" so that he could review a daily record of customer trades. Although PDI had no "blotter", it did have copies of the firm's daily trading report furnished once a month by its clearing broker, Mesirow and Company, which reflected all daily sales during that period (respondents' exhibit 3). In addition, PDI retained copies of tickets reflecting sales of securities as well as confirmations furnished by Mesirow approximately four days after each transaction was executed (respondents' exhibit 4). Since respondents' exhibits 3 and 4 constituted "other records of original entry", PDI was in compliance with MSRB Rule G- 8(a)(i). Moreover, since PDI did not take in any funds, no cash receipts journal relating to municipal securities was maintained. The amended administrative complaint alleges that between July 1, 1985 and August 21, 1985 "Pioneer through Hurtig had engaged in at least ten (10) securities trades involving municipal securities in Hurtig's capacity as a municipal securities principal... in violation of the Stipulation... dated June 25, 1985". Records produced at hearing indicated that Hurtig (identified as salesman 014) executed three purchases of municipal securities for each of two accounts which were maintained by long time family friends (the estate of Harry Bender and his widow, Mina Bender) between June and August, 1985. Hurtig asserted that he was acting as a salesman (and not as a principal) at that time, and did not intend to violate the Stipulation. However, since no other person in the firm except Hurtig was registered as a municipal securities principal, the trades would have to have been executed under his supervision. When the above transactions occurred, PDI had not paid the MSRB an initial $100 fee and $100 annual fee required by MSRB Rules A-12 and A-14, respectively. These fees are required for municipal securities brokers and dealers who conduct any business during the MSRB's fiscal year. Since no fees were paid, PDI was not a member of that organization. Even so, the failure to pay these assessments was an oversight, and there was no intent by PDI or its personnel to circumvent the law. The amended administrative complaint also charges PDI with having failed to conspicuously display its Division broker-dealer license in its office. However, no testimony or documentation was offered to substantiate this charge. There is no evidence that any customer or member of the public was injured economically or otherwise by the actions of PDI and Hurtig.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that PDI and Hurtig be found guilty of the violations set forth in the conclusions of law, and that all other charges be DISMISSED. It is further recommended that their registrations be placed on probation for one year. DONE AND ORDERED this 25th day of February, 1987 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 25th day of February, 1987.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact At all times material hereto, Respondent was licensed by the State of Florida as a real estate broker, having been issued license number 0521991. Respondent's last license issued was as a broker c/o Stellings Realty, Inc., 2368 Saratoga Bay Drive, West Palm Beach, Florida. Beginning on or about March 1, 1998, until August 31, 1998, Respondent had an Exclusive Right of Sale Listing Agreement (Agreement) with Judy Cominse (Seller) for real property, owned by the Seller, located at 4397-B Woodstock Drive, West Palm Beach, Florida. Respondent represented the Seller as a transaction broker and owed her certain duties pursuant thereto. A Brokerage Relationship Disclosure statement was provided to the Seller by Respondent. Another broker, Robert Berman, was the referring agent and was personally known by the Seller. Respondent was of the opinion that Berman was to receive a referral fee of 25 per cent in the event of a sale. The listing was problematic for Respondent. Respondent encountered problems due to restrictions placed on the showing of the property by the Seller and her tenants, who were the Seller's son and daughter-in-law. Respondent contemplated not continuing with the listing. He even mentioned discontinuing the listing with the Seller, but he did not discontinue it. A contract for sale of the Seller's property was entered into by the Seller and Evelyn Swinton (Buyer Swinton). Buyer Swinton signed the contract on June 1, 1998, and the Seller signed it on June 3, 1998. The contract provided, among other things, for an escrow deposit of $1,500 to be held by Sun Title, located in Lake Worth, Florida. The $1,500 was paid and held in escrow by Sun Title. The transaction for the sale of Seller's property failed to close. By a Release and Cancellation of Contract for Sale and Purchase form (Release and Cancellation) dated July 28, 1998,1 both the Seller and Buyer Swinton agreed, among other things, that the $1,500 escrow deposit would be disbursed to the Seller. On July 30, 1998, Sun Title prepared an escrow check in the amount of $1,500, made payable solely to the Seller. The check was forwarded to Respondent sometime after July 30, 1998; the evidence presented was insufficient to show when Sun Title forwarded the check to Respondent.2 On August 6, 1998, Respondent prepared an addendum (Respondent's Addendum) to the Agreement that he had with the Seller. Respondent's Addendum was dated and signed by Respondent on this same date. Respondent's Addendum provided, among other things, the following: This contract [Agreement] will be extended from August 31, 1998 until March 1, 1999; if necessary.3 * * * Stellings Realty, Inc. will receive 7% of the total purchase price. In addition 25% commission of the listing side will be given to Berman Realty as a referral fee. If the Seller should cancel this listing the cancelation fee would be $1000.00. Judy Cominse [Seller] will receive $1500.00 by mail upon acceptance. Paragraph numbered 5 of Respondent's Addendum indicates that, upon the Seller accepting Respondent's Addendum, the Seller will receive $1,500, which was the escrow deposit, by mail. The Seller did not accept Respondent's Addendum although the Seller was of the opinion that the only way for her to obtain the $1,500 was to agree to an addendum to the contract that she had with Respondent. With the assistance of her sister, who was a licensee, licensed by Petitioner,4 the Seller negotiated a change of terms to Respondent's Addendum. The seller prepared and executed an addendum (Seller's Addendum) on August 6, 1998, and forwarded it to Respondent. The Seller's Addendum provided, among other things, the following: This listing agreement [Agreement] will be extended six months (i.e., from August 31, 1998 until February 28, 1999). * * * Stellings Realty, Inc. will receive 7% of the total selling price (if sold at full listing price), otherwise negotiable; however, no lower than 6%. Additionally, $533.75 to the listing agency (Stellings Realty), which amount will not be subject to the referral fee due and payable to Robert A. Berman Real Estate, the referring broker to the listing agency. If the seller should cancel this listing, the cancellation fee would be $788.75 ($250.00 cancellation fee, plus $533.75). Judy Cominse [Seller] will receive $1,500.00 (100% of the escrow deposit relinquished by the buyer [Buyer Swinton]) by mail upon acceptance. Paragraph 5 of Seller's Addendum indicates that, upon Respondent's accepting the Seller's Addendum, the Seller will receive $1,500, which was the escrow deposit, by mail. Respondent executed the Seller's Addendum on August 11, 1998, and faxed it to her on this same date. Respondent accepted the Seller's Addendum on August 11, 1998. Prior to August 11, 1998, Berman had contacted Respondent on behalf of the Seller. Berman was requested by the Seller to make an attempt to obtain the escrow deposit of $1,500 for her. Berman contacted Respondent who indicated to Berman that, as soon as the escrow check was received, he would contact Berman. Sometime after July 30, 1998, Berman contacted Sun Title and was informed that the escrow check had been prepared and forwarded to Respondent. On or about August 11, 1998, Respondent contacted the Seller and informed her that the escrow check had been received by him. On or about August 11, 1998, Respondent also contacted Berman regarding the receipt of the escrow check. At the request of the Seller, Berman went to Respondent's office, obtained the escrow check, and forwarded it to the Seller via express delivery. Based upon the required proof, the evidence fails to demonstrate that Respondent refused to relinquish the $1,500 escrow deposit to the Seller in order to force or pressure the Seller to agree to an addendum to their Agreement. Respondent continued to represent the Seller. The Seller's property was sold on November 3, 1998. Subsequently, Respondent sued the Seller in the County Court of West Palm Beach, Florida for $533.75, based on the Seller's Addendum. The Seller had refused to pay Respondent the $533.75, pursuant to the Seller's Addendum, and Respondent sued the Seller to recoup the monies. On or about January 4, 1999, the court suit was settled. Before the end of 1998, Respondent paid Berman the referral fee.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Real Estate enter a final order and therein dismiss the Administrative Complaint filed against Leon Stellings. DONE AND ENTERED this 31st day of July, 2000, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 2000.
