Findings Of Fact Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact. The Petitioner, Christopher James Arenal, filed a Form U-4 application seeking registration as an associated person with Rocky Mountain Securities & Investments, Inc., located at 1600 Stout Street, Suite 920, Denver, Colorado 80202. Said application was received by the Respondent on April 24, 1986. By letter dated June 17, 1986, the Respondent advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. (At the hearing the Respondent stipulated that the allegations of the top paragraph on the second page of the denial letter of June 17, 1986, should be deleted.) Thereafter, the Petitioner filed a timely request for hearing. Except for the reasons stated in the Respondent's denial letter dated June 17, 1986, the Petitioner is otherwise eligible for the registration he seeks. On October 26, 1982, the State of Tennessee issued a Complaint and Notice in the matter of First Colorado Investments and Securities, Inc., Mr. Arenal, and others, alleging the sale of securities while not being properly registered. On February 7, 1983, Mr. Arenal entered into a Findings and Consent Order which found that Mr. Arenal and others had engaged in securities transactions involving Tennessee residents at a time when Mr. Arenal and others were not registered in the State of Tennessee. Mr. Arenal and others were ordered to cease and desist from acting as agents in the State of Tennessee without being lawfully registered to do so. The transactions in question took place during 1981. The evidence does not show how many of those transactions involved Mr. Arenal. On April 28, 1983, the State of Wisconsin entered into a Stipulation and Consent Order of Prohibition with Mr. Arenal in which Mr. Arenal agreed to the entry of an Order of Prohibition. On June 2, 1983, a Consent Order of Prohibition was entered into in which Mr. Arenal was prohibited from transacting business as a securities agent in Wisconsin without lawful registration in that state. That order had as its genesis the fact that during 1981 Mr. Arenal had engaged in nine securities transactions for a Wisconsin resident who had previously been a client of Mr. Arenal when the client resided in New York. On January 11, 1984, the State of Iowa issued a Summary Order Denying Application For Securities Agent License on an application filed by Mr. Arenal. The findings of fact in that order included findings that Mr. Arenal had "engaged in securities transactions on behalf of an Iowa resident in March, 1981, while unlicensed as a securities agent," and, with regard to an affidavit filed with the Iowa Division of Securities, that "Mr. Arenal's filed and notarized statement is a false statement." Since the issuance of the January 11, 1984, order, the State of-Iowa has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. On November 5, 1984, the State of Utah entered an Order Summarily Denying Application For Registration as an Agent on an application filed by Mr. Arenal. The denial was based on Mr. Arenal's prior disciplinary history. Since the issuance of the November 5, 1984, order, the State of Utah has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. The State of Oregon, by letter dated November 1, 1985, denied Mr. Arenal's application for registration in that state. The Oregon denial letter does not set forth a factual basis for the denial. On September 6, 1984, the State of Nebraska issued an Order Denying Agent Registration on an application filed by Mr. Arenal. The denial was based on his prior disciplinary history. Mr. Arenal was again denied registration in the State of Nebraska on February 20, 1986. During 1985, the staff of the Respondent's Division of Securities was almost tripled in size. Shortly after the increase in staff size, a Task Force recommended that the Division of Securities devote more time and energy to the review of applicants with disciplinary history in order to more carefully screen such applicants. As a result of the increase in staff size and the increased emphasis on review of applicants with disciplinary history, the Respondent is now rejecting applications that previously might have gotten through a cursory review. All of the adverse actions taken against Mr. Arenal by the states of Tennessee and Wisconsin were based on events that occurred in 1981, at one firm, First Colorado Investments and Securities, Inc. Mr. Arenal's supervisors at that firm advised him that it was permissible for him to sell certain securities in states where he was not registered. Since those improper sales in 1981, Mr. Arenal has not engaged in any subsequent transactions in states where he was not registered. During his approximately eleven years of professional experience in the securities field, there have never been any client complaints against Mr. Arenal. Mr. Arenal has been previously registered as an associated person in the State of Florida. He was last registered in Florida from approximately February of 1985 until December of 1985. His prior registrations were processed prior to the changes in policy and procedure described in paragraph B, above.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order granting Mr. Arenal's application for registration as an associated person. DONE AND ENTERED this 9th day of June, 1987, at Tallahassee, 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 9th day of June, 1987. COPIES FURNISHED: H. Richard Bisbee, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Mr. Christopher James Arenal 1600 Stout Street Suite 920 Denver, Colorado 80202 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
The Issue Should Petitioner's application for registration as an associated person be approved?
Findings Of Fact From April, 1985 to August 1986, Petitioner was employed as a registered associated person of Dean Witter Reynolds in Tallahassee, Florida. The Reebok Trade On March 11, 1986, Petitioner was instructed by one of his customers to sell 200 shares of stock in Reebok International, Ltd. (Reebok). By mistake, Petitioner executed an order to sell 500 shares of Reebok on behalf of the client. On March 17, 1986, the client came to Petitioner's office and while reviewing the client's account, Petitioner discovered the error he had made on March 11, 1986. Petitioner told his supervisor, Mr. Brock, of the mistake. The supervisor told Petitioner that he should "bust" the trade. This meant reversing the transaction and purchasing 300 shares of Reebok. It is Dean Witter's policy that whenever an error is discovered, it should be covered immediately. Petitioner, however, did not cover the error. From March 11, 1986 to March 17, 1986, the price of Reebok stock had increased. Petitioner decided to wait and see if the price would come down. Sometime after March 17, 1986, Mr. Brock left the firm and a new supervisor, Mr. Cavelle, took his place. On April 30, 1986, Mr. Cavelle noticed the Reebok error in the error account and executed an order to cover the error by purchasing 300 shares of Reebok stock. From March 11, 1986 to April 30, 1986, the price of Reebok stock increased substantially, and the error in the Reebok trade resulted in a loss of $9,225.00 to Petitioner's client. The client was reimbursed by Dean Witter. Petitioner received a written reprimand from Dean Witter and agreed to pay Dean Witter the amount of the loss. While Petitioner remained employed with Dean Witter, $400.00 were deducted from his monthly pay check to pay off the loss. After Petitioner was fired from Dean Witter in early August, 1986, he has only been able to make sporadic payments, totalling approximately $600.00 to $700.00. The Corpen One Transactions Sometime in May, 1986, while Petitioner was still employed at Dean Witter, Petitioner and John Collins formed Corpen One, Inc. (Corpen). The corporation was formed to run a hot dog vending cart operation in Tallahassee, Florida. John Collins was named president and Petitioner was the secretary and treasurer responsible for handling the corporation's finances. In order to raise capital for the corporation, Petitioner found three other persons willing to invest in the corporation. Curtis Davis, J.B. Durham and Jeff Burkett each invested approximately $4,000.00, in return for part ownership of the corporation. With the unused cash which the corporation had, Petitioner opened a bank account with Barnett Bank. From May 15, 1986, to July 17, 1986, Petitioner, without the knowledge of other stockholders, wrote checks to himself from the corporate bank account totalling $3,500.00. The dates and amounts of each check were: May 15, $800; May 19, $1,200; May 27, $800; June 26, $100; July 17, $600. These amounts were used by Petitioner for personal expenses. He treated them as loans from the corporation. Eventually, he repaid the loans with interest equal to what would have been earned had the money been invested in a Dean Witter money market account. Sometime in early July, 1986, Petitioner determined that it would be a good idea to open up a Dean Witter money market account for the funds which the corporation had in the bank account. On July 9, 1986, Petitioner, in his capacity as a Dean Witter employee, assigned a Dean Witter new account number, number 531015757, to the corporation. He did this by personally writing the name Corpen One, Inc. in the Dean Witter "New Account Number Assignment" log. This procedure was contrary to Dean Witter's policy which required that the new accounts clerk assign the new account number. In the clerk's absence, a person other than a broker or salesperson should assign the number. When Petitioner returned to his desk to complete the paperwork necessary to open a new account, he discovered that he needed to have a Federal Tax Identification Number for Corpen in order to open the account. Since Corpen did not yet have such a number, Petitioner never opened the account. During the period of time he borrowed money from the corporation, Petitioner filled out Dean Witter receipts which showed Dean Witter as having received $3,300 from Corpen to be invested in a money market account. The dates and amounts of the receipts were: May 15, $800; May 19, $1,200; May 27, $800; July 17, $500. The receipts were filled out completely and included the account number which Petitioner had assigned to Corpen One for the account which was never opened. Sometime in July or early August, 1986, Mr. Durham and other shareholders of Corpen became concerned with the operation of the corporation. Sales were not as high as expected and the corporation was not doing well. Also, Petitioner wanted to be relieved of his duties, because the time needed to run Corpen was interfering with his duties at Dean Witter. The more Mr. Durham checked into the operation of the corporation, he became convinced that improprieties were taking place. After several meetings took place, Petitioner handed over to Mr. Durham the corporate records in his position. These records included the cancelled checks Petitioner had written to himself and the Dean Witter receipts. When Mr. Durham saw the Dean Witter receipts, he asked Petitioner about them. When he did not receive a satisfactory answer, he took the receipts to Dean Witter and met with Mr. Cavelle, the branch manager. Mr. Cavelle tried to look the account up on his computer and discovered there was no account. He then checked the new account log book and discovered that Petitioner had personally assigned the account number. When Mr. Cavelle asked Petitioner to explain what had happened, he received what he considered a "hazy" explanation, and fired Mr. Hicks. Mr. Cavelle's main concern was that the receipts made Dean Witter potentially liable for the amounts shown in each receipt. After being fired, Petitioner was unemployed for four to five months. From February, 1987 to May 1988, Petitioner worked for Corporate Risk Management, a company managing self-insurance funds for employees. Petitioner is now the manager of the Melting Pot restaurant in Panama City Beach, Florida. For 1987, Petitioner earned approximately $13,000. His current salary is $1,200 per month.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a Final Order denying Petitioner's application for registration as an associated person. DONE and ORDERED this 19th day of January, 1989, in Tallahasee, Florida. JOSE A. DIEZ-ARGUELLES 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 19th day of January, 1989. APPENDIX The parties submitted proposed findings of fact which are addressed below. Paragraph numbers in the Recommended Order are referred to as "RO ." Petitioner's Proposed Findings of Fact Proposed Finding Ruling and RO Paragraph of Fact Number Second sentence accepted. Rest of paragraph is rejected as irrelevant or argument. Rejected as irrelevant. First three sentences rejected as argument. Fourth and fifth sentences accepted. Supported by the evidence but unnecessary to the decision reached. The implication in the first sentence that the delay was someone else's fault or that the stock market is to blame is rejected. Petitioner has only himself to blame for the delay. Third sentence is rejected as argument. Fourth sentence accepted. Last three unnumbered paragraphs are argument Respondent's Proposed Findings of Fact Proposed Finding Ruling and RO Paragraph of Fact Number Not a finding of fact. Accepted. See Background section of RO. 3.-4. Not a finding of fact. See Background section of this RO. Accepted. See Background. Not a finding of fact. See Background. Accepted RO1. Accepted RO12. Rejected as recitation of testimony. Also, as to the first sentence, Mr. Durham's testimony on direct was weakened by the cross- examination where his memory of events was tested. As to the second, third and fourth sentences, Mr. Hicks executed the receipts, and borrowed money from Corpen One. However, the evidence fails to establish that Mr. Hicks "converted" to his own use money which was to be invested in the money market account. Rejected as recitation of testimony. But see RO18. Accepted. RO20, 21. Rejected as not supported by the evidence. Rejected as recitation of testimony. Rejected as recitation of testimony except fourth and ninth sentences. ,16.,17. Rejected as not a finding of fact. Rejected as irrelevant. Accepted. RO2.-4. Rejected as recitation of testimony. But see RO6. ,22. Rejected as recitation of testimony. But see RO5.-10. 23. Rejected not as a finding of fact. 24.-28. Rejected as recitation of testimony. COPIES FURNISHED: John D. Hicks 3918-A Raven Street Panama City, Florida 32312 Reginald R. Garcia, Esquire Assistant General Counsel Department of Banking and Finance The Capitol, Suite 1302 Tallahassee, Florida 32399-1302 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 =================================================================
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 Petitioner, Thomas Patrick Boggs, resides in Ft. Lauderdale, Florida, and is employed with MCG Portfolio Management Corporation. On March 9, 1987, the Petitioner submitted an application for registration as an associated person with MCG Portfolio Management Corporation pursuant to the "Florida Securities and Investor Protection Act," Chapter 517, Florida Statutes. By letter dated April 9, 1987, the Respondent, Department of Banking and Finance, Division of Securities and Investor Protection, denied the Petitioner's application based on the incidents discussed in paragraphs three (3) to nine (9) below. Petitioner was arrested on August 8, 1975, in the State of Virginia for the alleged offense of passing a bad check to a service station. The charges were dropped when the Petitioner made payment on the check. In a letter dated July 24, 1978, the New York Stock Exchange ("NYSE") admonished Petitioner for failing to disclose his 1975 arrest for petty larceny on a Form U-4 (Uniform Application for Securities and Commodities Industry Representative and/or Agent). The NYSE took note of Petitioner's "explanation that [he] failed to report the offense because [he] considered the problem minor and that the charge against [him] was subsequently dropped." The letter to Petitioner went on to state that "[t]he Exchange hereby admonishes you for your conduct and cautions you that any future misconduct may result in formal disciplinary action. " In a letter dated March 20, 1981, the NYSE admonished Petitioner for failing to respond correctly to a question on a Form U-4 dated May 7, 1980. Question 50(a) of the Form U-4 read as follows: "In your previous business connections or employment, have you ever been . . . a subject of a major complaint or legal proceeding?" The Petitioner responded "no" to question 50(a), although he had been named as a party defendant in a lawsuit commenced in March 1980 by a customer of Drexel, Burnham, Lambert Incorporated where he was employed as a registered representative from January to May 1980. In a letter dated March 20, 1981, the NYSE took consideration of Petitioner's "explanation that [he] interpreted Question 50(a) as referring to [his] business connections and employment prior to entering the securities business, and that [he] had disclosed the litigation to Dean Witter personnel during [his] initial interview for employment." The NYSE's letter to Petitioner went on to state that "the Exchange hereby admonishes you for your conduct and cautions you that any misconduct on your part in the future will very likely lead the Exchange to take formal disciplinary action against you." On September 25, 1985, a suit was filed against Petitioner in the United States District Court for the Northern District of Georgia. The suit, Bernard, et al v. First Continental Resources, Inc.; T. Patrick Boggs (Petitioner); David Meeks; and First Continental Drilling Associates, a Nevada Limited Partnership (Civil Action No. 85-182), alleged fraud, breach of contract, breach of fiduciary duty, and negligence in connection with the sale of securities. First Continental Resources, Inc., was the corporation general partner of First Continental Drilling Associates. Petitioner was the individual general partner for First Continental Drilling Associates and President/Chief Operating Officer and Director of First Continental Resources, Inc. Petitioner was a controlling person of First Continental Resources, Inc., and First Continental Drilling Associates as that term is used in Section 15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934. The plaintiffs in the lawsuit sought compensatory damages of approximately $800,000, treble damages, and punitive damages of $20 million. The Petitioner and the other defendants failed to defend the suit and the Court entered an Order of Default against Petitioner on March 31, 1986. On May 31, 1986, the defendants obtained a judgment against Petitioner and all defendants for approximately $2.3 million. The Petitioner testified that he had a meritorious defense to the Bernard lawsuit but failed to present it because of lack of funds for legal representation. The Petitioner testified that he was in fact a victim of fraud along with the plaintiffs, perpetrated by some of the co-defendants in the lawsuit. George Bloukos, Executive Vice President of MCG Portfolio Management Corporation, has known the Petitioner since March of 1987 when Petitioner first sought employment with his company. Since that time, the Petitioner has been employed with MCG in a clerical-like capacity, pending resolution of his registration application. Bloukos has worked in the securities and investments profession for approximately thirty (30) years. Based on Bloukos' observation of Petitioner, the Petitioner has shown himself to be a person of good character, good business ethics and a conscientious worker. Bloukos believes that Petitioner is a trustworthy individual who would be an asset to his company and to the securities and investments profession.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Petitioner's application for registration as an associated person be DENIED. DONE and ORDERED this 7th day of October, 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 7th day of October, 1987. COPIES FURNISHED: Charles E. Scarlett, Esq. Office of the Comptroller Suite 1302, The Capitol Charles L. Stutts, Esq. General Counsel Department of Banking & Tallahassee, FL 32399 Finance Plaza Level, The Capitol Tallahassee, FL 32399-0350 Thomas P. Boggs c/o George Bloukos MCG Portfolio Management Corp. 5301 North Federal Highway Suite 170 Boca Raton, FL 33431 Hon. Gerald Lewis Comptroller Department of Banking & Finance The Capitol Tallahassee, FL 32399-0350
Findings Of Fact Petitioner is the state agency responsible for regulating insurance and insurance related activities in Florida. Petitioner is the agency responsible for regulating any licensed or unlicensed person engaged in activities prohibited under Chapter 626, Florida Statutes. 1/ Respondent is licensed as an independent adjuster. Respondent's license number is 289505173. Gilmore Wimberly & Associates, Inc. (GWA) is a Florida corporation engaged in the business of insurance adjusting. GWA's principal place of business is 1033 Oak Street, Jacksonville, Florida 32204. All billing for independent adjusting services is processed in the Jacksonville office. However, GWA maintains branch offices to adjust claims throughout the state. One of the branch offices is located at 251 Maitland Avenue, Suite 110, Altamonte Springs, Florida 32701 (the "Altamonte office"). In March and April, 1994, Respondent was employed by GWA as an independent adjuster in charge of operating the Altamonte office. Respondent supervised one secretary and an appraiser. Respondent issued five unauthorized invoices to GWA clients in the aggregate amount of $2,329.92. Respondent altered the address on the face of the invoices so that payment would be made to the Altamonte office rather than the home office in Jacksonville (the "altered invoices"). 2/ Respondent received payment for the altered invoices on drafts or checks ("checks") from insurance companies that employed GWA to provide adjusting services. Each check was made payable to GWA. Respondent endorsed the checks on behalf of GWA. Respondent had no authority to endorse the checks. Respondent endorsed the checks to himself. Respondent then deposited the checks to his personal bank account. 3/
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of the charges in the Administrative Complaint and revoking Respondent's license. RECOMMENDED this 29th day of September, 1995, in Tallahassee, Florida. DANIEL MANRY 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 29th day of September, 1995.
The Issue The central issue in this case is whether Petitioners' applications for registration should be approved or denied.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: On January 26, 1988, KC Securities, Inc. (KC) filed an application for broker-dealer registration. Ted Casey Kata was identified as the president and principal owner of KC. Question 7E. of the application asked: Has any self-regulatory organization or commodities exchange ever: * * * (2) found the applicant or a control affiliate to have been involved in a violation of its rules? The answer KC gave to question 7E.(2) was "yes". Question 7G. of the KC application asked: Is the applicant or a control affiliate now the subject of any proceeding that could result in a "yes" answer to parts A-F of this item? The answer KC gave to question 7G. was "yes." The "control affiliates" whose conduct caused KC to answer in the affirmative to the questions noted above are Ted C. Kata and Mary S. Kata. KC has not previously been registered as a broker-dealer. Petitioner, Mary S. Kata, filed an application for securities industry registration and requested registration as a general securities principal, financial and operations principal, and municipal securities principal. According to the application, Mary S. Kata has been unemployed since October, 1985. Previously, Mary S. Kata was the financial principal for TK Securities. Prior to working for TK, Mrs. Kata worked for Cooper Investments, Inc. and Southeast Securities of Florida, Inc. Mrs. Kata later amended her request to seek registration as an associate with KC. Petitioner, Ted C. Kata, filed an application requesting registration as a general securities principal and a municipal securities principal. According to the application, Ted C. Kata has been unemployed since October, 1985. Previously, Mr. Kata had owned and been the principal for TK Securities, he had managed Cooper Investments, Inc., and had owned and managed Southeast Securities of Florida, Inc. The National Association of Securities Dealers, Inc. (NASD) is a self- regulatory organization comprised of securities dealers of which Ted C. Kata and Mary S. Kata were members. Ted C. Kata, entered the securities business as a registered associate in 1965. In 1973, he purchased a general securities business known as First Broward Securities, Inc. Later, Mr. Kata changed the name of First Broward to Southeast Securities of Florida, Inc. (Southeast). On March 3, 1976, Ted C. Kata, as registered principal of Southeast, and Southeast were censured and fined by NASD based upon a violation of Article III, Sections 1 and 32 of the NASD Rules of Fair Practice. This violation was based upon Southeast's failure to obtain and maintain a blanket fidelity bond as prescribed by NASD requirements. The amount of the fine assessed against Mr. Kata was $400 plus costs in the amount of $20. Mr. Kata considered this a minor infraction but took steps to correct the situation and did obtain the required bond. On November 17, 1978, the NASD filed a complaint against Southeast and Ted C. Kata, the registered principal. This complaint alleged Southeast and Kata had violated several provisions of Article III of the Rules of Fair Practice which were set forth in six separate causes. After hearing on the issues, NASD entered findings which determined Kata had operated in a deceptive manner, had presented a false accounting of the firm's income and capital, and had taken excessive mark-ups. As a result, Mr. Kata was censured and fined $500 and was required to pay costs totaling $1,636. Mr. Kata paid this fine but felt that the investigators had not understood the true facts of the case. On October 9, 1986, the NASD filed a complaint against TK Securities, In., Ted C. Kata and Ruth Elaine Berry. Mr. Kata was charged as the sole general securities principal for TK. This complaint alleged violations related to a failure to maintain sufficient net capital, failure to make and keep current records, and failure to file a correct FOCUS report. In accepting an offer of settlement, the NASD censured Mr. Kata and fined him in the amount of $1000. Again, Mr. Kata paid the fine as required. In the latter part of 1985, James Stibal sued Ted C. Kata and alleged, among other complaints, that Mr. Kata had represented the Stibals in their stock transactions and that Mr. Kata had made numerous false or misleading statements to induce the Stibals to invest. According to Mr. Kata this case was settled when he agreed to pay approximately $22,000 to the Stibals. On December 14, 1987, the Securities and EXCHANGE Commission (SEC) took action against Mary S. Kata. The SEC had charged that Mrs. Kata had willfully aided and abetted violations of the Securities EXCHANGE Act by failing to make and keep current books and records for a company for which she served as the financial principal. The settlement, offered by Mrs. Kata and accepted by the SEC, suspended Mrs. Kata for a period of six months from association in a proprietary or supervisory capacity with any broker, dealer, municipal securities dealer, investment company or investment advisor. It should be noted that the acts complained of against Mrs. Kata in the SEC action and the acts complained of by the NASD against Mr. Kata and Berry resulted from errors allegedly committed at TK. According to Mr. and Mrs. Kata, TK was sold two months prior to the incidents which gave rise to these complaints. The Katas maintained that the acts complained of occurred while Mrs. Berry was operating TK. However, the record is clear that Mr. Kata remained as the principal for TK and Mrs. Kata remained as the financial principal for TK during all periods in question. In fact, the Katas remained employed at TK despite the change in ownership. Further, Mr. Kata continued to advise Mrs. Berry and the staff from time to time on matters regarding the business. Approximately two months after the sale of TK, the company went into liquidation by the Securities and Investor Protection Corporation (SIPC). During the liquidation period, Mrs. Kata assisted the trustee to locate and process records. Leonard Simons has known Ted C. Kata since 1968. Mr. Kata handled Mr. Simons' investment account for a number of years. Mr. Simons found that his sales and purchases were promptly confirmed, that he was always paid correctly, and that Mr. Kata's brokerage rates were competitive. If given the opportunity, Mr. Simons would trade with Mr. Kata again. Mr. Simons was unaware of the NASD actions against Mr. Kata. George Brown has known Ted C. Kata since 1964. Mr. Brown and Mr. Kata studied to become NASD members at the same time, and Mr. Brown subsequently worked both with and for Mr. Kata. Mr. Brown stated that Mr. Kata has always confirmed trades accurately and promptly, has always been fair and considerate, and brought to the attention of salesmen in his employ the applicable rules and regulations. Mr. Brown intends to register with Mr. Kata again if the applicant is approved and considers Mr. Kata worthy to be in the securities business. Christopher Constable has known Ted C. Kata since 1972. Mr. Constable worked for Mr. Kata as an associate of all of the brokerage firms for which Kata served as principal for the period 1973-1985. Mr. Kata required that Mr. Constable and the other sales associates review all new rules and regulations. Mr. Constable knows of no complaints from customers while he was associated with Mr. Kata. Mr. Constable believes Mrs. Kata to be an excellent bookkeeper and believes both Katas to be worthy to engage in the securities business. Mr. Constable was not aware of the NASD actions against Mr. Kata. Don Saxon is the director of the Division of Securities and Investor Protection. According to Mr. Saxon, the NASD actions against Mr. Kata are the type which would result in revocation of registration since the violations were related to failures in books and records keeping, illegal markups, and since the Katas were principals of the company which went into SIPC liquidation.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Banking and Finance, Division of Securities and Investor Protection, Office of the Comptroller enter a final order denying the registration applications of the Petitioners. DONE and RECOMMENDED this 22nd day of December, 1988, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 22nd day of December, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2493 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY PETITIONERS: Paragraphs 1 through 9 are accepted. With regard to paragraph 10, the first sentence is accepted. The remainder of paragraph 10 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. No conclusion is reached as to whether Mrs. Berry exercised control over TK after the sale since the Katas remained as principals with the company. With regard to paragraph 11, that TK went into liquidation approximately two months after the sale is accepted. All other conclusions reached in paragraph 11 are rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. Paragraphs 12 and 13 are accepted. Paragraph 14 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. The evidence established that at all periods in question, before the sale of TK and until its liquidation, that Mrs. Kata was the financial principal for the company. Paragraph 15 is accepted. Paragraph 16 is accepted. The first two sentences of paragraph 17 are accepted. The third sentence is rejected as contrary to the weight of the evidence. Mr. Kata remained as principal for TK after its sale, he continued to work there, and he advised staff regarding business matters. Whether he or Mrs. Berry exercised final control over the business is immaterial since Mr. Kata was the sole registered principal. There is no conclusion that the shortcomings were committed after the sale. Paragraphs 18-20 are accented. Paragraphs 21-22 are rejected as hearsay or not supported by the record. Paragraphs 23 and 24 are accepted. Paragraphs 25 and 26 are rejected as a recitation of testimony not findings of fact. Mr. Kata may not have agreed with the ultimate findings reached by the NASD; however, the censure was issued as found in the findings of fact. With regard to paragraph 27, see the findings of fact, otherwise rejected as contrary to the weight of the evidence. Paragraphs 28-33 are accepted but are irrelevant or immaterial to the conclusions reached herein. Paragraph 34 is accepted to the extent that it describes the NASD action taken against Kata. Those portions of the paragraph which suggest Kata did not have control over the company after its sale are rejected as contrary to the weight of the evidence, irrelevant or immaterial. Kata remained as principal for the company after the sale and continued to advise the staff. That he might have allowed the new owner to exercise poor judgment does not excuse Kata of all liability. Paragraph 35 is rejected as contrary to the weight of the evidence, irrelevant or immaterial. Paragraph 36 is accepted only to the extent that it describes the penalty Kata agreed to accept. The action was resolved without hearing. Paragraph 37 is rejected as immaterial and irrelevant. The first sentence of paragraph 38 is accepted. The second sentence is rejected since the record is clear that the total of the fines and costs associated with the NASD actions exceeded the amount of the fines alone, consequently, it would be erroneous to consider only the fine portion. To his credit, Mr. Kata paid all amounts owed by him for the various violations. Paragraph 39 is accepted only to the extent that it finds that TK went into liquidation two months after the sale. The rest of the paragraph is rejected as speculation, unsupported by the record, or contrary to the weight of credible evidence presented. Paragraph 40 is accepted. Paragraph 41 is accepted but is irrelevant and immaterial to the conclusions reached herein. Mr. Kata's self-serving testimony both as to the denials of all wrongdoing and the reasons for either agreeing to pay fines or settlements has not been credited. Paragraph 42 is accepted. Paragraph 43 is accepted. Paragraphs 44 and 45 are rejected as self-serving comment, Mr. Kata's testimony having not been credited. Paragraph 46 is accepted but is irrelevant to the conclusions reached herein. Paragraph 47 is accepted to the extent it relates charges against Mrs. Kata; however, it should be noted that Mrs. Kata was the financial principal for her husband during the periods in which he was censured for problems relating to bookkeeping. Paragraph 48 is accepted but is irrelevant and immaterial to the conclusions reached herein; Mrs. Kata's self-serving comments have not been credited. Paragraph 49 is accepted. Paragraph 50 is accepted. Paragraph 51 is accepted. Paragraph 52 is rejected; Mrs. Kata remained as financial principal for the company after its sale. Whether she should have discovered the errors or whether she could have discovered the errors is immaterial. The sale does not excuse the responsibility for the errors of the company. Thus, paragraph 52 is immaterial, irrelevant or contrary to the weight of credible evidence submitted. Paragraph 53 is rejected as speculation but in any event, if true, would be irrelevant or immaterial to the conclusions reached. Paragraph 54 is accepted but, again, is irrelevant or immaterial to the conclusions reached. Paragraph 55 is rejected; see comment to p. 53. Paragraph 56 is rejected as contrary to the weight of the evidence; Mrs. Kata remained as a principal throughout all periods. Paragraphs 57-68 are accepted. Paragraph 69 is accepted to the extent that it expresses one witness' perception. However, that witness' testimony conflicted with another's and was given little weight in light of the self-interest and long-term friendship involved. Paragraphs 70-80 are accepted. Paragraph 81 is rejected as argumentative, irrelevant or immaterial to the issues in this case. Paragraph 82 is rejected as contrary to the record. Paragraph 83, the first sentence is accepted. The remainder of paragraph 83 is rejected as contrary to the record. Paragraphs 84-86 are rejected as contrary to the record. Paragraph 87 is rejected as argumentative, irrelevant or immaterial. Paragraph 88 is rejected as argumentative, irrelevant or immaterial. Paragraph 89 is rejected as contrary to the record in its entirety. Paragraph 90 is rejected as argumentative. Paragraph 91 is rejected as a recitation of testimony, argument, or irrelevant. Paragraphs 92-93 are rejected as argument, irrelevant, or immaterial. Whether the Division may properly rely on a rule which establishes prima facie evidence of unworthiness for registration has not been challenged. Such a challenge would have been pursuant to Section 120.56, Florida Statutes. These Petitioners have challenged the denial of their registration pursuant to 120.57, Florida Statutes, and the rule by which they are governed is presumed valid for purposes of this review. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: 1. Paragraphs 1-26 are accepted. COPIES FURNISHED: Thomas N. Holloway 2101 W. Commercial Boulevard Suite 5300 Fort Lauderdale, Florida 33306 Charles E. Scarlett Assistant General Counsel Office of the Comptroller Department of Banking and Finance Legal Section, The Capitol Tallahassee, Florida 32399 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue The issues to be determined are whether Respondent violated sections 475.25(1)(e), 475.42(1)(b), and 475.42(1)(d), Florida Statutes (2011), and Florida Administrative Code Rule 61J2- 14.009, as alleged in the Administrative Complaint, and, if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency charged with the licensing and regulation of the real estate industry in the state of Florida, pursuant to section 20.165 and chapters 455 and 475, Florida Statutes. At all times material to this proceeding, Respondent was a licensed real estate sales associate having been issued license number 3101946. During the time relevant to this case, Respondent was a sales associate affiliated with Bahia Real Estate ("Bahia"), a brokerage company owned by Raul and Ricardo Aleman, with offices located in Miami, Orlando, and Tampa, Florida. Respondent was employed in Bahia's Miami location. In 2010, Respondent acted as a sales associate on behalf of Michael Perricone for a real estate transaction involving the purchase of a condominium in the Blue Lagoon Towers ("Blue Lagoon") in Miami which was purchased as an investment. Mr. Perricone's sister, Francesca Palmeri, and her husband, Santo Palmeri, were present at the closing where they met Respondent for the first and only time. During the closing, which lasted approximately one hour, the Palmeris indicated to Respondent that they would be interested in making a similar purchase of investment property if another comparable condominium unit became available at Blue Lagoon. The Palmeris had no further interaction with Respondent until he contacted them at their home in Pueblo, Colorado, in 2011 to advise them of the availability of a condominium for sale at Blue Lagoon. On or about October 6, 2011, Respondent faxed a partially completed Bahia form "'AS IS' Residential Contract for Sale and Purchase" to Mrs. Palmeri for the Palmeris to use in making an offer on a condominium unit located at 5077 Northwest Seventh Street, Miami, Florida. Prior to forwarding the document to Mrs. Palmeri, Respondent wrote on the form the property description, the escrow agent name and address, the initial escrow deposit amount and additional deposit, the time for acceptance, the closing date, and listed himself as the "Cooperating Sales Associate" with "Bahia Realty Group, LLC." The Palmeris decided to offer a $125,000.00 purchase price. Respondent directed Mrs. Palmeri to complete the contract and provide a ten percent escrow deposit. Mrs. Palmeri entered a purchase price of $125,000.00, initialed each page, and signed the form as "Buyer." Respondent provided Mrs. Palmeri with instructions on how to wire the funds for the escrow deposit. On October 7, 2011, Mr. Palmeri wired $12,000.00 to J.P. Morgan Chase, which was then deposited in an account for Bonaventure Enterprises, LLC ("Bonaventure").1/ The Palmeris had no knowledge of Bonaventure, but, based upon the representations of Respondent, they understood the money they were asked to wire to the J.P. Morgan Chase account of Bonaventure was an escrow deposit for the property they intended to purchase at Blue Lagoon. The Palmeris had no discussion with Respondent regarding the reason for sending the escrow deposit to Bonaventure. They assumed that Bonaventure was somehow related to the seller or its title company. The condominium unit in question was bank owned; however, the Palmeris were not informed of this. No evidence was presented that Respondent had an ownership interest in Bonaventure. However, Bonaventure is owned by Respondent's brother and sister-in-law. At all times material hereto, Respondent was the managing member of Bonaventure. Bonaventure is not a licensed real estate broker. Bahia does not maintain an escrow account, and its sales associates are authorized to use title companies of their choice for receipt of escrow deposits. Respondent was aware that he was unable to accept the escrow deposit of the Palmeris in his own name, because, as a licensed real estate sales associate, he is prohibited from receiving the money associated with a real estate transaction in the name of anyone other than his broker or employer. In fact, Respondent was disciplined in 2010 for a similar violation.2/ Respondent claims that the Palmeris entrusted him with their $12,000.00 to hold for possible investments, not necessarily related to real estate transaction, and he was doing it as a favor for them as "friends." Respondent contradicted himself by stating his intention in directing the Palmeris to deposit their money into the Bonaventure account was to help them have cash on hand in Florida in order to meet the Blue Lagoon condominium seller's requirements to make the escrow deposit with the seller's title company within 24 hours after an offer was accepted. The Palmeris had no knowledge of the seller's unique restrictions on the escrow money. Further, Respondent's asserted motive in requesting the $12,000.00 to have cash on hand in Florida is undermined by the fact that, if the Palmeris could wire $12,000.00 to Bonaventure's bank account, they could also wire the funds directly to a title company chosen by the selling bank after acceptance of their offer. Shortly after returning the contract to Respondent and sending the escrow deposit, Mrs. Palmeri discussed increasing the purchase price by $1,000.00 for a total of $126,000.00. Based upon the language of the proposed contract, the Palmeris expected a response to their offer within 24 hours. Immediately thereafter, Respondent told the Palmeris that they were "in negotiations." However, almost a month passed before they heard from Respondent regarding the status of the purchase of the condominium. On or about November 4, 2011, Respondent contacted Mrs. Palmeri and stated that he had "good news." He indicated that the seller would be willing to sell the property for a price of $129,500.00. According to Respondent, the seller requested documentation from the Palmeris' bank indicating their ability to pay. Mrs. Palmeri indicated that this was not an acceptable counter-offer. Respondent suggested that he could negotiate a sales price of $129,000.00, but he needed the Palmeris to send an additional $9,000.00 to put into escrow. Mrs. Palmeri told Respondent that she was no longer interested in the property because their maximum offer was $126,000.00. During the same conversation, Mrs. Palmeri asked for the return of her deposit. Respondent expressed agitation that she was retreating from the possible purchase because he had done "so much work." Respondent clearly anticipated he would receive a commission if the deal was consummated. The Palmeris did not get an immediate return of their escrow deposit. Mrs. Palmeri called Respondent repeatedly and received no answer. She also sent an e-mail to J.P. Morgan Chase trying to find out the status of the deposit and received no reply. Mrs. Palmeri again attempted to contact Respondent on November 18, 2011, and left him a message that he needed to call her regarding the deposit. After receiving no response, she contacted Bahia and spoke with Ricardo Aleman. Mrs. Palmeri explained to Aleman that she had signed a real estate contract with Respondent on October 6, 2011. She no longer wanted to pursue this real estate transaction and wanted the escrow deposit returned. Aleman was unaware that Respondent was negotiating a real estate transaction for the Palmeris or had accepted their deposit money. Aleman contacted Respondent who confirmed by email that the Palmeris were no longer interested in purchasing the condominium at Blue Lagoon. Respondent wrote, "After a month of hard work . . . the client decided to drop. It was a little bit problematic. I lost time and money because the offer was already accepted and she had no reason to negotiate." Respondent assured Aleman he would return the deposit to the Palmeris. In accordance with Bahia's policies and procedures, its sales associates are required to complete a deposit form at the time of receipt of funds for escrow. No such receipt was received by Bahia from Respondent with regard to the transaction involving the Palmeris. However, it was not unusual for Bahia not to receive information regarding real estate transactions conducted by their sales associates until the time of closing. After discussing the matter with Aleman, Respondent advised the Palmeris that he could return their money within ten days. Respondent advised Mrs. Palmeri that he would send her two checks for the total amount--one check which she could cash immediately and a second check which would be postdated. In order to get a return of their deposit, Mrs. Palmeri agreed. On or about November 28, 2011, the Palmeris received two checks, each in the amount of $6,000.00, including one postdated for December 16, 2011. These checks were written on the account of Bonaventure and signed by Respondent.
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 imposing on Alfonso Miranda an administrative fine in the amount of $6,000.00 and suspending the real estate sales associate license of Alfonso Miranda for a period of two years. DONE AND ENTERED this 2nd day of April, 2014, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2014.
Findings Of Fact At times pertinent hereto, Respondents were the holders of Florida real estate licenses. During all times material hereto, Respondent, Robert F. Nagel was licensed and operating as a real estate broker. Additionally, Respondent Nagel was the qualifying broker for Bluff's Realty, Inc. During times material, Respondents had an open listing agreement with Angelo Traina to sell his property at 401 Ocean Bluffs Boulevard, 305, in Jupiter, Florida. On or about December 7, 1986, Respondents prepared a purchase-sales contract signed by Carl and Lila Holback, as purchasers and Angelo Traina, as seller, for the purchase of the above referred property for the price of $98,450.00. The sales contract called for a $1,000.00 deposit to be held in escrow by Respondents. An additional $8,000.00 was to be deposited in escrow with the Respondents upon acceptance by the Seller. The contract signed by the Holbacks and Traina's contained a failure of performance provision. The failure of performance provision was contained in paragraph S of the contract and provided essentially that if the buyer failed to perform as required per the terms of the contract, the deposit could be retained by the seller as liquidated damages, or seller, at seller's option, could proceed at law or in equity to enforce the seller's legal rights under the contract. On the following day, December 8, 1986, the Holbacks informed the Respondents that they were no longer desirous of purchasing the Traina property. The Holbacks requested that the $1,000.00 deposit instead be transferred from the Traina/Holback transaction to a new contract to purchase a different condominium unit. This was done on December 8, 1986, as directed by the Holbacks without the knowledge and consent of Angelo Traina. The Holbacks considered that they had been pressured by Mr. Traina into executing the purchase agreement and that after reflection on the "duress" exerted by Mr. Traina, the Holbacks considered that they had a 72 hour period in which they could withdraw from the transaction. They therefore advised Respondents that they were no longer desirous of purchasing the Traina property. The Holbacks closed on a different property on January 12, 1987. Subsequent to December 8, 1986, but prior to January 13, 1987, Respondents offered to pay Mr. Traina $500.00 in return for a release from any potential liability under the contract. This offer was rejected by Mr. Traina. Thereafter, on or about January 13, 1987, Mr. Traina retained counsel who demanded a payment of $10,000.00 from Respondents for alleged damages for breach of a fiduciary duty. The Respondents refused to pay $10,000.00 to or on behalf of Angelo Traina based on the listing agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Petitioner enter a Final Order imposing an administrative fine against Respondents for Two Thousand Dollars (2,000.00) payable within thirty (30) days of entry of Petitioner's Final Order. RECOMMENDED this 25th day of August, 1988, in Tallahassee, Florida. JAMES E. BRADWELL 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 August, 1988. COPIES FURNISHED: John L. Bryan, Jr., Esquire Scott, Royce, Harris, Bryan & Hyland, P.A. 450 Royal Palm Way Post Office Box 2664 Palm Beach, Florida 33480 Steven W. Johnson, Esquire Department of Professional Regulation- Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Bruce D. Lamb General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Laurence A. Gonzalez, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Darlene F. Keller Executive Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
The Issue The issues are whether Respondents K. D. Trinh Investments, Inc., Strong Financial Services, Inc., and Loren Reynolds sold unregistered securities in Florida, in violation of Sections 517.07 and 517.12, Florida Statutes, and engaged in fraudulent transactions with concealment and falsification of facts, in violation of Section 517.301(1)(a), Florida Statutes. If so, an additional issue is what penalty should be imposed.
Findings Of Fact Respondent K. D. Trinh Investments, Inc. (Trinh) has never been registered with the Division of Securities and Investor Protection (Division) as a dealer or investment advisor and its securities have never been registered with the Division pursuant to Chapter 517, Florida Statutes. Neither Respondent Strong Financial Services, Inc. (Strong) nor Respondent Loren Reynolds (Reynolds) has ever been registered with the Division as a dealer or investment advisor. Respondent Alexander Legault (Legault) was the president and general manager of Trinh at all material times. On March 14, 1986, a grand jury in the Eastern District of Louisiana, United States District Court, returned an indictment against Legault for wire fraud, mail fraud, and conspiracy to commit wire and mail fraud. The indictment alleges that Legault attempted to defraud several institutions in connection with a food brokerage scheme. The investments in the present case also involve food brokerage operations, according to the information supplied potential investors. In March 1994, Charles Mortimer of Lake Mary, Florida, attended a seminar in Leesburg, Florida, devoted to three investment opportunities. Mr. Mortimer learned of the seminar through mail flyers or newspaper announcements. Mr. Mortimer expressed interest at the seminar in a cremation society and the Trinh notes. Reynolds appeared at the seminar and presented these investment opportunities. The next month, Mr. Mortimer met Reynolds in Lady Lake, Florida, and Reynolds sold Mr. Mortimer one of the Trinh notes. Mr. Mortimer thereafter purchased through Reynolds several more notes for a total investment of $55,000. At no time prior to making these investments did Reynolds disclose to Mr. Mortimer that Legault was under indictment in New Orleans for criminal fraud and was avoiding prosecution in Canada. Mr. Mortimer would not have invested in the Trinh notes had he known this material fact. However, the record does not indicate whether Reynolds knew that Legault was under indictment or had escaped to Canada. Nor does the record reveal sufficient background information to support the finding that Reynolds reasonably should have known this fact. Mr. Mortimer received a total of $600 on this investment. He has lost the remaining $54,400. Earl Wilson learned of Trinh through Reynolds, who was Mr. Wilson’s tax advisor in 1994 and had been since 1986. Reynolds recommended that Mr. Wilson and his wife should invest a recent inheritance in Trinh notes. Between his initial investment in 1994 and his final investment on April 25, 1995, Mr. Wilson and his wife invested a little over $200,000 in Trinh notes. They lost the entire investment. William Dinges first learned of Trinh at a seminar that he attended in 1993. He purchased a $140,000 note in 1995. He lost his entire investment.
Recommendation It is RECOMMENDED that the Department of Banking and Finance enter a final order ordering Respondents K. D. Trinh Investments, Inc. and Loren Reynolds to cease and desist from any further violations of Chapter 517 and dismissing the amended administrative complaint against Respondent Strong Financial Services, Inc. ENTERED in Tallahassee, Florida, on June 4, 1997. ROBERT E. MEALE 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 on June 4, 1997. COPIES FURNISHED: Susan Steinberg Sandler Assistant General Counsel Office of Comptroller West Central Florida Regional Office 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 K. D. Trinh Investments, Inc. 1194 Hanna Street East Windsor, Ontario Canada N8X2P4 Loren Reynolds Strong Financial Services, Inc. 241 B Ridgewood Avenue Holly Hill, Florida 32117 Harry Hooper General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0500
Findings Of Fact On November 20, 1985, petitioners, Richard Schulze and Constable Atlantic, Inc., made application with respondent, Department of Banking and Finance, Division of Securities (Divi- sion), for licensure as a principal and broker-dealer, respec- tively. In response to a Division request, petitioners submitted amended applications containing additional information on January 31, 1986. After conducting an investigation of petitioners' backgrounds, the agency issued a proposed final order on February 18, 1986, denying the application on the grounds (a) Schulze had violated the federal Commodity Exchange Act and had been the subject of a final administrative order in the State of Minnesota involving a violation of that state's security laws, and (b) an officer or director of Constable Atlantic, Inc. (Schulze) had been guilty of an act which would be cause for denying or revoking the registration of an individual dealer. The agency action prompted the instant proceeding. Schulze is president of Wyndwood Merchantile Corporation (Wyndwood) and various affiliated organizations. Wyndwood is involved in the sale of precious metals and is currently doing business in the State of Florida and other states. Constable Atlantic, Inc. is a Delaware corporation authorized to do business in the State of Florida. Schulze is Constable's president, his wife Theodora treasurer, and his son Otto secretary. The three are also the directors and shareholders of the corporation. Constable is now registered as a broker and dealer with the federal Securities and Exchange Commission. Just recently, Schulze was licensed as an associated person and a commodity pool operator by the National Futures Association, which is the licensing arm of the Commodities Futures Trading Commission (CFTC), a federal agency in Washington, D.C. Schulze has been involved in selling securities for the last six or seven years. At one time he was also a principal with Atlantic Futures, Inc. (AFI), which was then licensed as a commodity pool operator and trading advisor with the CFTC. AFI and Schulze were both under the regulatory jurisdiction of that agency. On October 2, 1984 the CFTC issued a complaint and notice of hearing alleging that AFI and Schulze had violated various provisions of the federal Commodity Exchange Act and CFTC regulations. More specifically, it alleged that: ...AFI and Schulze, aided and abetted by each other,...cheated and defrauded or attempted to cheat and defraud AFI's pool participants in violation of Section 46(A) of the Commodity Exchange Act, as amended...; that AFI, aided and abetted by Schulze, violated Section 40(1) of the Act and Sections 4.41(a) and 166.3 of the Commission's regulations; and that AFI violated Sections 4.21(a) and 4.21(a)(3) of the Commission's regulations. Thereafter, Schulze and AFI submitted an offer of settlement to the CFTC which was accepted and formalized in a consent decree entered by the CFTC on April 23, 1985. The consent decree made no adjudication of law or fact, or an adjudication on the merits of the case. Rather, it was entered solely for the purposes of accepting the offer of settlement and terminating the proceeding. Under the terms of that decree, which has been received in evidence as respondent's exhibit 2, Schulze and Atlantic paid a $100,000 fine and agreed to cease and desist from any violations. In addition, AFI agreed to a suspension of its registrations for six months and to never apply for any other registrations with the CFTC. Finally, for purposes of the settlement only, the CFTC found Schulze had violated certain portions of the Act and regulations and noted that "these findings may be used only in any other proceedings brought by the Commission." Schulze later made application with the CFTC for licensure as a dealer, and this application was approved on September 11, 1986. On or about July 26, 1984 the State of Minnesota issued an ex parte cease and desist order against Wyndwood, Schulze and others requiring them to stop selling securities in that state without being registered. The order, which has been received in evidence as respondent's exhibit 1, required Schulze to request a hearing within a prescribed time, or the order would become final. Schulze did not timely request a hearing. However, after the prescribed time to request a hearing had expired, he filed a request with the State Commissioner and the order of July 26 was subsequently vacated on September 18, 1986. The outcome of the proceeding is not known. Constable Atlantic, Inc. is a member firm of the National Association of Security Dealers (NASD) and is registered as a broker and dealer with the Securities and Exchange Commission (SEC). In obtaining their registrations, Constable and Schulze furnished the SEC and NASD the same information that was submitted to respondent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications of Constable Atlantic, Inc. and Richard Schulze for registration as a broker- dealer and principal, respectively, be APPROVED. DONE and ORDERED this 26th day of November, 1986, in Tallahassee, 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 26th day of November, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1065 Petitioners: 1. Covered in finding of fact 4. 2. Covered in finding of fact 4. 3. Covered in finding of fact 4. 4. Covered in finding of fact 3. 5. Covered in finding of fact 3. 6. Covered in finding of fact 3. 7. Covered in finding of fact 3. 8. Covered in finding of fact 3. 9. Covered in finding of fact 3. Covered in finding of fact 3. Covered in finding of fact 2. Covered in finding of fact 2. Rejected as being irrelevant. Covered in finding of fact 5. Respondent: Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 4. Covered in finding of fact 4. Covered in finding of fact 3. Rejected as being irrelevant. Rejected as being irrelevant. COPIES FURNISHED: Edward Brodsky, Esquire Sarah S. Gold, Esquire SPENGLER, CARSON, OUBAR, BRODSKY and FRISCHLING 280 Park Avenue New York, New York 10017 Calianne P. Lantz, Esquire Office of the Comptroller 401 Northwest 2nd Avenue Suite 870 Miami, Florida 33128 Honorable Gerald Lewis, Comptroller The Capitol Tallahassee, Florida 32301-8054 Charles E. Scarlett, Esquire Room 1302, The Capitol Tallahassee, Florida 32301-8054
