The Issue The issue is whether respondent acted as a mortgage lender within the meaning of Section 494.001(3), Florida Statutes, and thus is subject to Division licensure requirements.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Department of Banking and Finance, Division of Finance (Division), is a state agency charged with the responsibility of administering and enforcing the Florida Mortgage Brokerage and Lending Act which is codified in Chapter 494, Florida Statutes. Among other things, the Division regulates mortgage lenders and requires such persons or entities to secure a license. Respondent, White Pine Resouces, Inc. (WPR), is a Florida corporation formed in March 1986. Its sole shareholder is John R. Grass, a Pensacola attorney. Although the corporation was originally formed for a number of purposes, its primary activity is the real estate investment business. It holds no licenses issued by, or registrations with, the Division. WPR's current business address is 358-C West Nine Mile Road, Pensacola, Florida. WPR's principal source of money is Grass, or his professional association, who loan money to the corporation. In some cases, the money is used to acquire parcels of property for resale, make necessary repairs or improvements, and then provide owner financing to the buyer. In other cases, WPR loans money to persons needing to make improvements to their homes or rental property and takes back a second mortgage from the borrower. These types of transactions, which occurred during the years 1992-95, are found in documents offered in evidence as petitioner's exhibits 1-5. Respondent has also stipulated that several other transactions of this nature occurred during that same period of time. In every case, WPR was investing its own money or that of its principal. In 1992, a Division examiner analyst noted the following listing in the Yellow Pages section of the Pensacola telephone directory under the heading of "Mortgages": White Pine Resources Having Trouble With Financing Residential & Land Fast Service on 1st Mortgages The advertisement also contained respondent's street address and telephone number. In the 1993-94 telephone directory, WPR carried the following advertisement under the "Mortgages" section of the Yellow Pages: White Pine Resources Specialists! Bad Credit - We Can Help Vacant Land Loans In the 1995-96 telephone directory, WPR placed the following advertisement in the "Mortgages" section of the Yellow Pages: White Pines Resources A Private Investor Not a Mortgage Broker Specialists! We Can Help Vacant Land Loans Although the Division first noted one of WPR's Yellow Page advertisements in 1992, for some reason it did not conduct a formal investigation of respondent's activities until February 28, 1994. On that day, an examiner analyst made an unannounced visit to respondent's office for the purpose of inspecting its records to determine if WPR was acting as a mortgage lender. However, WPR's principal, John R. Grass, was not in the office, and the analyst simply left his business card and a message for Grass to contact him. The next morning, Grass telephoned the analyst's supervisor and advised him that since WPR was merely a private investor, and not a mortgage lender, it was not subject to the Division's regulation, and hence it would not provide copies of its records. A subpoena duces tecum was then issued by the Division, records were produced pursuant to the subpoena, and this controversy ensued. The parties agree, however, that this action was not prompted by complaints from consumers or other persons having dealings with WPR. The record indicates that a mortgage lender differs from a private investor in several material respects. An important distinction is that a private investor uses its own funds rather than those of another party. Also, a private investor does not buy or sell paper, does not escrow taxes, does not split or broker commissions, and does not close its own loans. In all of these respects, WPR had the attributes of a private investor. When mortgage brokerage firms are involved in transactions with private investors, they must supply the private investor with certain documents that are not provided to an institutional investor. Among others, they include a disclosure agreement, receipt of recorded instruments, an appraisal or waiver of the same, and title insurance. In addition, Division rules require that a mortgage brokerage firm record its transactions with private investors in a log journal known as DBF-MB-888. The evidence shows that for transactions between WPR and at least two mortgage brokerage firms during the years in question, the two firms recorded those transactions on DBF-MB-888. They also provided WPR with documents typically given to private investors. The Division has adopted Rule 3D-40.290(2), Florida Administrative Code, which provides that a person is deemed to be holding himself out to the public as being in the mortgage lending business if he advertises in a manner "which would lead the reader to believe the person was in the business of buying, making or selling mortgage loans." The rule has not been challenged and, for purposes of resolving this controversy, is presumed to be valid. In view of the representations that WPR provided "Fast Service on 1st Mortgages" and "Vacant Land Loans," it is fair to infer that the Yellow Page advertisements made by WPR would reasonably lead the reader to believe that WPR was in the business of buying, making or selling mortgage loans. Therefore, by virtue of advertising in the Yellow Pages, WPR is deemed to be holding itself out to the public as being in the mortgage lending business. During the years 1993-95, the Division routinely sent WPR questionnaires regarding various WPR transactions with licensed lenders. The transmittal letter accompanying the questionnaire noted that the Division was conducting "a routine examination" of the licensed lender (and not WPR), and WPR's comments would "be of material assistance to (the Division) in determining compliance with the Florida Mortgage Brokerage Act." By way of an estoppel defense, WPR has essentially contended that the questionnaires constituted a representation by the Division that WPR was merely a private lender. It further contends that, to its detriment, it relied upon that representation. But there is nothing in the documents that states that the Division considered WPR to be a private lender. Nor is there any evidence that the Division made any other oral or written representations to WPR that it did not need to secure a license. Finally, assuming arguendo that such a representation occurred, there was no showing that WPR relied to its detriment on such an alleged "misstatement of fact." WPR also raises the defense of laches arguing that it was severely prejudiced by the Division's delay in prosecuting this action. Except for testimony that respondent was forced to secure the services of an attorney to defend against this action, and its principal was required to attend a hearing, there was no showing of prejudice on the part of WPR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order requiring respondent to cease and desist from engaging in the mortgage lending business without a license. DONE AND ENTERED this 17th day of June, 1996, 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 17th day of June, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 95-0290 Petitioner: Because petitioner's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. Respondent: Because respondent's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. COPIES FURNISHED: Honorable Bob Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry L. Hooper, III, Esquire Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Clyde C. Caillouet, Jr., Esquire 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 John T. Reading, Jr., Esquire 358-C West Nine Mile Road Pensacola, Florida 32534-1818
Findings Of Fact The Office of the Comptroller, Department of Banking and Finance, Division of Securities and Investor Protection (Department), is an agency of the State of Florida charged with the responsibility to administer and to enforce the provisions of Chapter 517, Florida Statutes (1987), and administrative rules promulgated thereunder, related to regulating the practice of securities dealers, "associated persons" and investment advisors. It regulates sales and other transactions in securities and investments, as those items are defined in that chapter. The Respondent, David John Kury, has been registered with the Department since 1967 as an associated person under Chapter 517, Florida Statutes. Pursuant to that registration, he is authorized to engage in the offer and sale of securities to clients. Since 1967 he has also been registered with the National Association of Securities Dealers (NASD). Since July 21, 1987, Respondent Kury has been registered with the Department as an associated person of American Capital Equities, Inc. (American), and he has also been registered as an associated person with the following broker/dealers: Associated Planner Securities Corporation (Associated); Prudential Bache Securities, Inc.; and E. F. Hutton. These registrations cover the period of time from April 1978 through May 1987. During all times Respondent Kury has been registered with the Department as an associated person of American, he has been simultaneously registered with the NASD as a "principal" of American. American is a corporation incorporated under the laws of the State of Missouri, which has been lawfully registered with the Department as a broker/dealer since approximately August 1984. American operates a branch office at 116 West Government Street, Pensacola, Florida. This office has been lawfully registered with the Department and in continuous operation since approximately August 21, 1987. Respondent Kury has been the branch manager of the office during all the period of time it has been registered with the Department. Kury has been registered with the Department as a principal of the Kury Investment Advisory Corporation (KIAC), pursuant to Chapter 517, Florida Statutes, since approximately March 2, 1988. That corporation is incorporated under the laws of the State of Florida and has been registered itself with the Department as an investment advisor, pursuant to Chapter 517, since approximately March 2, 1988. The Respondent corporation maintains its principal place of business also at 116 West Government Street, Pensacola, Florida, at which address Respondent Kury maintains the branch office of American. Respondent Kury is and has been at all pertinent times the sole owner, officer, director and chief operating officer of the Respondent corporation. Since March 2, 1988, Respondent David Kury has been registered as an investment advisor himself, with KIAC. He is also registered in approximately 15 other states as an associated person, thereby being authorized to offer and sell securities in those states as well. Kury Financial Planning Group, Inc. (Group) is a corporation organized under the laws of the State of Florida on or about October 23, 1985. It maintains its principal place of business at the above-referenced address as well. Respondent David Kury is the registered agent, sole officer and director of Group. Since approximately 1976, Kury has engaged continuously in the business of financial planning for individuals in the Pensacola area. Pursuant to this business, he has recommended various financial products, including securities and insurance products for individuals' personal portfolios. He has also rendered advice to clients concerning matters that are not involved with securities or insurance, although the bulk of his financial planning advice and experience relates to these two areas. During the twenty or more years he has been licensed as an associated person only one minor complaint has been lodged against Kury by a client. He has never been the subject of a complaint or an investigation by the Securities Exchange Commission, the NASD, the State of Florida or any other state securities regulatory agency. Neither has he been the subject of a complaint or investigation by the Florida Department of Insurance. He is a member of the Institute of Certified Financial Planners, a member of the International Association for Financial Planning and is in the Registry of Financial Planning Practitioners, a very select group comprised of only a very small percentage of the total number of certified financial planners in the United States. The Respondent, Mr. Kury, has been highly successful as an associated person dealing in securities and as a financial planner. In 1983, while employed with E. F. Hutton as a salesperson, selling securities and investments, the Respondent earned commissions in excess of $500,000 for that year and was one of the largest producers for E. F. Hutton in the entire nation for that year. He received commendations directly from the Chairman of the Board of E. F. Hutton and other senior management for his sales efforts and his integrity. His personal share of the commissions earned that year amounted to $330,000. It is obvious that the Respondent has substantial earning power due to his knowledge, experience and other capabilities in the field of securities and investment sales and advice and the field of financial planning. The Department, commencing on or about May 20, 1988, conducted an investigation and examination of the affairs of Kury Investment Advisory Corporation and the branch office of American, of which Respondent David Kury was branch manager, located at 116 West Government Street, Pensacola, Florida. It was thus determined (and established by clear and convincing evidence in this proceeding) that David Kury, as well as Kury Financial Planning Group, Inc. ("Group") sold or offered for sale both personal notes of David Kury, as well as corporate promissory notes of the Group, since approximately 1975. At the present time, there are approximately 50 persons holding 83 notes in amounts ranging from $5,000 to $200,000. These notes have maturities ranging from three months to four years, with investment return rates ranging from 9 percent to 13 percent. Some of the note-holders were told by Respondent Kury that certificates of deposit, by comparison, were then available to the note-holders or investors at rates ranging from two to three percent less than the rates offered by Kury and Group for the subject personal and/or corporate promissory notes. The total principal amount outstanding, represented by the corporate and personal promissory notes at issue, is approximately $2.4 million. The total principal and accrued interest as of June 15, 1988 is approximately $2.8 million. The total principal amount with accrued interest at the maturity of the notes in question would amount to approximately $3.1 million. The 50 note- holders are clients of the Respondent's. The notes were offered to them in the context of being investment alternatives to certificates of deposit and other "passive" investments, with the primary inducement being higher rates of return on the notes. Respondent David Kury and/or the Corporation failed to maintain and preserve an adequate record of purchases and sales of equity securities by maintaining a "purchase and sales blotter," as well as a "securities received and delivered blotter" and failed to maintain a current "trial balance." These items were not maintained in the ordinary course of business by Respondent David Kury and the Corporation. (See Section 517.121, Florida Statutes, and Rule 3E- 600.014, Florida Administrative Code). During approximately the last 13 years, Respondent David Kury has utilized the proceeds of the personal and corporate notes to pay business expenses for himself and the corporations he controls, as well as certain personal expenses, including the financing of his home (at a cost of approximately $1,000,000). The Respondents have sold or offered for sale the notes, both personal and corporate, without having them registered with the Department, which is required if they are deemed securities. The Respondents did not provide the purchasers of these notes a prospectus for purposes of Section 517.07, Florida Statutes. Group has engaged in the offer and sale of these notes to the note- holders or investors without being registered with the Department to engage in such activities, as required by law, if it be deemed that these notes indeed are securities. Respondent David Kury, in his individual capacity, and on behalf of Group, has engaged in the offer or sale of the notes without being registered with the Department to engage in such activities, either in his individual capacity or on behalf of Group, if the notes are deemed securities. Kury and the Corporation engaged in the business of "investment advisor" prior to lawful registration of that corporation with the Department to engage in such activity. Kury and the Corporation have rendered investment advice since at least September 18, 1987, notwithstanding the fact that the Corporation did not obtain lawful registration with the Department to engage in such activities until March 2, 1988. David Kury was the branch office manager for the registered branch office of American. He failed to establish, maintain and preserve certain books and records required by Florida law for registered branch offices of brokerage firms. In particular, he failed to establish and maintain the purchase and sales blotter reflecting all equity securities sold by American through Kury's branch office. Additionally, as branch office manager for a registered branch office of American, he failed to maintain and preserve a "securities received and delivered blotter." The Corporation, and Kury acting on its behalf, has failed to maintain a current trial balance indicating proof of current money balances in the corporate accounts. Respondent Kury, in his individual capacity and on behalf of Group, sold securities and/or investments (the notes) without making disclosures as to certain material facts, which disclosures were necessary in order for the purchasers or investors not to be misled. Statements were made in conjunction with the sales to the investors under circumstances, such that the omitted material facts, which were not disclosed, were necessary in order to prevent these investors or purchasers from being misled. See Section 517.081, Florida Statutes. Specifically, Kury and Group omitted to inform the investors of the following material facts: Information about the risks to the purchasers of the notes, including his and the Group's ability or inability to repay the notes generally and provision for repayment in the event of Kury's death. Information as to the use to be made of the proceeds of the notes, which in fact were used to finance business operating losses, business operating expenses and to repay personal debts of Kury, and to assist in the financing of personal living expenses of Respondent Kury. (d) Information concerning approximately $4,000,000 in liabilities and outstanding indebtedness of Respondent Kury individually and/or the Corporation and/or the Group. The $2.3 million negative net worth of Kury and/or the Corporation and/or the Group. The fact that Kury's previous employment with E. F. Hutton and Company had been terminated in 1984, partially because of his borrowing money from investors, in violation of Hutton's internal policies and NASD rules. In fact, Respondent Kury had borrowed an aggregate sum of approximately $327,172 from approximately 17 different clients by the time of his termination by Hutton. The fact that Kury's previous employment with Associated Planners Securities Corporation had been terminated in 1987 due to his borrowing money from investors in violation of that company's internal policies and NASD rules. The fact that Kury's personal and group life insurance policies were inadequate to pay the total indebtedness represented by the subject notes, in the event of Kury's death. The fact that Kury's representations concerning his abilities to borrow from banks and other financial institutions were predicated in part on inaccurate financial statements which under- estimated liabilities and overstated net worth without including on those statements the aggregate indebtedness represented by the outstanding personal and corporate notes. The fact that he had submitted an inaccurate financial statement to the Florida Comptroller's Office in connection with the charter application of American Bank and Trust Company during the Summer and Fall of 1985 in the process of becoming an organizer and founding director of that bank. The fact that he was using the money generated from the sale of the promissory notes, at least in part, to repay principal and interest payments due on other, earlier promissory notes. The fact that Kury failed to relate to the note-holders and investors how the promised rate of interest on the notes was reasonably related, if at all, to the risk associated with the investment involved and how it might be related to any other factor commonly known to influence interest rates. Witnesses Catone, Engelman and Boyd, testifying as Respondent's witnesses, in part established that the appropriate disclosures referenced above were not made. Additionally, Kury's explanation for submitting the false financial statements to lending institutions and to the Comptroller was to the effect that he did not wish to violate the confidentiality of the note sales transactions with the note-holders or investors. This rationale is illogical and self-serving, however, and is not accepted. Disclosing accurate financial information, required by law, to banks would have only required, at most, that Kury list the aggregate indebtedness he owed, the type of indebtedness owed, as well as information concerning principal balances, interest rates and repayment terms. Such information required on these financial statements would not have involved divulging the note-holders names or any confidential information pertaining to the note-holders, including the amounts of their individual notes. Law Professor Stuart Cohn was accepted as an expert in state and federal securities laws and corporate finance. It has thus been established that Kury and the Group sold approximately $2.4 million worth of personal and corporate promissory notes which are established to be securities and investments, as discussed infra., to at least 50 investors. This constituted, in effect, the borrowing of money from clients or customers, which is a prohibited business practice for a registered "associated person," investment advisor and financial planner. See Rule 3E-600.013(2)(a), Florida Administrative Code, and Article III, Section 2, NASD Rules of Fair Practice. Kury also effected securities transactions with customers which were not recorded on the regular books and records at American Capital Equities, for whom he was functioning and registered as an "associated person." In particular, he engaged in, sales and offers to sell securities in his capacity as an associated person of American, the Corporation and the Group and failed to record those transactions on the books of American. This is a prohibited business practice. See Rule 3E-600.13(2)(c), Florida Administrative Code. He engaged in private securities transactions without notifying his principal, American. See also Article III, Section 40, NASD Rules of Fair Practice. The Respondents' activities, largely ongoing at the time of the investigation, posed an immediate, serious threat to investors or potential investors because the Respondent's activities constituted, at least in part, the operation of a "pyramid" or "ponzi" scheme. This occurs when funds from new investors, in this case the more recent purchasers of the notes, are used to satisfy interest and principal obligations coming due to earlier investors or note purchasers. Therefore, as time progresses, and more of such notes or securities are sold, then more and more investors will be subject to losing their investments and suffer financial hardship. This occurred in the instant situation through the practice engaged in by the Respondent of "note rollovers" or renewals when due without paying principal and interest owed, or all of it, as well as by making new note sales and using the proceeds, or some of them, to pay earlier investors in spite of the above-described adverse consequences. The threat to the public welfare, as described above, is also represented by the fact that Kury and the Group have undergone an obligation to the note purchasers in excess of $2.8 million as of June 15, 1988, with ultimate liability on the notes of more than $3.1 million, at the respective maturity dates, in the aggregate. The $2.4 million to $3.1 million liability to these investors vastly exceeds the assets available to the Respondents to satisfy the note obligations. Kury admitted that the Respondents are insolvent and currently unable to meet the total financial obligations represented by the notes.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that a Final Order be entered by the Department of Banking and Finance finding the, Respondents guilty as charged, and in the above particulars, and that the registrations of the Respondents as associated person and investment advisors be revoked, provided however, that such revocation should be suspended and held in abeyance contingent on the Respondent David John Kury, under the close supervision and direction of the Department, embarking upon a plan whereby, by continued practice under his registrations, he will repay the principal and interest due all the investors involved in this proceeding within a time certain, as directed by the Department. That plan should include creation of an escrow or trust account, managed by an independent escrow agent, such as a bank, into which, pursuant to an approved plan and schedule, a substantial portion of revenues earned by Kury in the practice as an associated person, investment advisor and any other registration pursuant to the regulation of the Department, shall be deposited for the use and benefit of the subject investors. This arrangement should continue until the investors have been fully repaid principal and interest due them. Should the Respondents, David John Kury and Kury Investment Advisory Corporation, refuse to accept such an arrangement or violate its terms and conditions, their registrations should be immediately revoked. DONE and ENTERED this 9th day of January, 1989, in Tallahassee, Florida. P. MICHAEL RUFF 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 9th day of January, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-3419 Petitioner's Proposed Findings of Fact: 1-3. Accepted. 4. Rejected as not constituting a Finding of Fact. 5-19. Accepted. Rejected as subordinate to the Hearing Officer's Findings of Fact on this subject matter and to some extent not supported by the evidence of record. Accepted. Accepted in part but subordinate to the Hearing Officer's Findings of Fact on this subject matter. 23-26. Accepted. Respondent's Proposed Findings of Fact: 1-8. Accepted. 9-14. Constitute statements of issues presented and recitation of evidence presented and are not Proposed Findings of Fact. COPIES FURNISHED: Reginald R. Garcia, Esquire Charles E. Scarlett, Esquire Office of Comptroller The Capitol Tallahassee, Florida 32399-0350 Philip J. Snyderburn, Esquire SNYDERBURN, RISHOI & SWANN Suite 240 280 West Canton Avenue Winter Park, Florida 32789 Donald A. Rett, Esquire MANG, RETT & COLLETTE, P.A. Post Office Box 11127 Tallahassee, Florida, 32302-3127 Honorable Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
The Issue The issue presented is whether Respondent violated Section 475.25(1)(a) and Section 475.25(3), Florida Statutes, as alleged in the administrative complaint.
Findings Of Fact Marvin Cohen is a registered real estate salesman. He was employed from September, 1975 until March, 1976, with Continental Marketing Services. The depositions of Mary Schmucker, Lawrence Hyer, and Eguene Leu were received without objection into the record. These depositions reveal that each of the deponents received a telephone call from a person identifying himself as Marvin Cohen. The caller represented that he was with Continental Marketing Services, a real estate sales organization. The caller sought a listing by the individual deponent's of property owned by them in the State of Florida with Continental Marketing Services. The caller represented that their property would be advertised nationally and overseas and could be sold at an amount greater than they had paid for it. No representations as to ready, willing and able purchasers were made to the deponents, nor was a guarantee of positive sale made. No representations were made by the deponents Hyer and Schmucker that had ever met Marvin Cohen or recognized his voice. Eugene Leu stated specifically that he had never met Cohen. The deponents all eventually listed their property with Continental Marketing Services and paid advance listing fees for between $325 and $350. No evidence was presented that the representations made by the caller were false, that Continental Marketing Services did not perform all services that it contracted to perform for the deponents, or that the Respondent Marvin Cohen had any knowledge of the calls, the representations made therein, or the business practices of Continental Marketing Services.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that no action be taken by the Florida Real Estate Commission against the registration of Marvin Cohen as a real estate salesman. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 16th day of March, 1979. COPIES FURNISHED: Mark A. Grimes Staff Attorney Florida Real Estate Commission Post Office Box 1900 Orlando, Florida 32802 Marvin Cohen 1422 NW 196th Street Miami, Florida 33169 STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 ================================================================= AGENCY FINAL ORDER ================================================================= July 9, 1979 TO: Renata Hendrick, Registration Supervisor FROM: Mark A. Grimes, Staff Attorney RE: PD 3154 - FREC vs. MARVIN COHEN 00158048 DOAH CASE NO. 77-1293 Pursuant to the Commission's Order of May 9, 1979, the Defendant's license is to be suspended for a period of 180 days, effective June 29, 1979. The suspension shall elapse on December 27, 1979. No appeal was taken. Mark A. Grimes Staff Attorney
The Issue Whether petitioner should take disciplinary action against respondent for the reasons alleged in the administrative complaint?
Findings Of Fact Respondent Diane M. Klein, nee Diane Marie Ballantyne, has been licensed by petitioner as a real estate broker at all pertinent times, holding license No. 0314120. Petitioner's Exhibit No. 6. On September 22, 1983, Winfield F. Imel signed a contract for sale and purchase of Arrowhead County Club, which is in Broward County, Florida, on conditions including the following: New financing mortgage: this agreement is contingent upon the buyers being able to obtain a new first mortgage. Buyers agree to immediately apply for said mortgage and to pay mortgage loan costs in obtaining same. Broker to receive written mortgage commitment on or before 20 days after acceptance of contract or contract is null and void. Petitioner's Exhibit No. 1. In this transaction, Ms. Klein represented the owner of the property as a real estate broker. The total purchase price was $1,950,000.00. The seller accepted the offer and executed the contract on September 23, 1982. On September 27, 1982, Mr. Imel signed a check in favor of respondent Klein indicating "ESCROW" and "re golf-COURSE." Petitioner's Exhibit No. 2. He delivered the check to Ms. Klein as earnest money under the contract he had signed on September 22, 1982. Ms. Klein deposited the check to her escrow account, No. 0002502307 at Florida National Bank, on September 28, 1982. Petitioner's Exhibit No. 5. Mr. Imel tried to obtain money, to be secured by a new first mortgage, from more than one lender. He approached "a group in Atlanta, IVA," (T.8), Mr. Frank Porter in Phoenix, and Vicars and Associates in Maryland, as well as local banks, including First Fidelity Mortgage Corporation in Palm Beach. Dexter B. Wakefield of First Fidelity Mortgage Corporation advised Mr. Imel in November of 1982 that First Fidelity's efforts to "broker a loan on his behalf for Arrowhead Country Club" (T. 9) had not succeeded. Petitioner's Exhibit No. 4. Mr. Imel sought money from First Fidelity not only in order to purchase the property, but also for "refurbishing." Petitioned's Exhibit No. 4. Be never succeeded in obtaining financing for the acquisition and wrote respondent to that effect, requesting "a full and immediate refund of my deposit in the amount of $5,000.00," on December 7, 1982. Petitioner's Exhibit No. 3. Respondent expressly declined to refund the deposit and has never paid Mr. Imel any of the money. On October 19, 1982, respondent had written a check for $5,000.00 against her escrow account and in favor of "D.K. Operating Acc't." The check was paid October 20, 1982. Petitioner's Exhibit No. 5. The record does not reveal whether the seller ever asked for or received any money in connection with this transaction. The seller had "agree[d] to pay [respondent] as a fee, the sum of Ninety-Seven thousand and five hundred dollars ($97,500.00) or one-half of the deposits in case same is forfeited by the Buyer Petitioner's Exhibit No. 1.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner suspend respondent's license for ninety (90) days. DONE and ENTERED this 11th day of May, 1984, in Tallahassee, Florida. ROBERT T. BENTON II 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 11th day of May, 1984. COPIES FURNISHED: Fred Langford, Esquire Department of Professional Regulation Florida Real Estate Commission 400 West Robinson Street Orlando, Florida 32801 Diane M. Klein Post Office Box 7193 Ft. Lauderdale, Florida Harold Huff, Executive Director Department of Professional Regulation Florida Real Estate Commission 400 West Robinson Street Orlando, Florida 32801 =================================================================
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends that the Florida Real Estate Commission take no action against the registration of Cindy Realty of Hernando, Inc., and William Colello as real estate brokers. DONE and ORDERED this 30th day of April, 1979, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Fred Langford, Esquire 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Stephen C. Booth, Esquire 1604 U.S. Highway 19, North New Port Richey, Florida 33552
Findings Of Fact Respondent has been employed in the securities industry since approximately 1957. He has worked for a number of broker/dealers over the years and is familiar with the procedures involved in transferring employment from one broker to another. It is the custom in the securities industry that when a securities salesperson changes employment, forms U-4 and U-5 are filed with the National Association of Securities Dealers. As registration is approved by that organization and by the various states involved, the states give that information to the National Association of Securities Dealers, which in turn gives that information to the securities firm which employs the associated person seeking registration, and that brokerage firm in turn notifies the applicant. Respondent began to work at Alison Baer Securities, Inc., in September, 1988, and remained employed there until February, 1989. When he associated himself with Alison Baer, Respondent applied for registration as an associated person with that company. As is the proper procedure, he submitted a U to the National Association of Securities Dealers. While waiting for his registration to be approved, Respondent maintained telephone and personal contact with his own clients. He did not, however, sell or offer to sell securities until after he was sure his registration was approved. Respondent's application for registration as an associated person with Alison Baer Securities, Inc., was approved by the National Association of Securities Dealers and was also approved by the states of New York, Texas, Georgia, Florida, and Oklahoma. In late October of 1988, Jeffrey Britz, the President and Chief Executive Officer of Alison Baer Securities, told Respondent that his registration as an associated person with Alison Baer Securities had been approved by the state of Florida. In fact, Respondent was not registered as an associated person by the state of Florida until December 7, 1988. Respondent did not attempt to directly confirm with the Department of Banking and Finance his registration as an associated person with Alison Baer Securities. Respondent has applied for registration with the Department as an associated person with Shamrock Partners, Ltd. The Department denied that application based solely on the allegations which are the subject matter of this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint, dismissing the Administrative Complaint filed against him in this cause, and granting his application for registration with the Department as an associated person with Shamrock Partners, Ltd. DONE and ENTERED this 14th day of February, 1992, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed finding of fact numbered 27 has been adopted in this Recommended Order. Petitioner's proposed findings of fact numbered 1-5, 11-14, 16-18, 23- 26, 28, 29, and 31-34 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Petitioner's proposed findings of fact numbered 6-10, 15, 19, and 30 have been rejected as being subordinate to the issues involved in this proceeding. Petitioner's proposed findings of fact numbered 20-22 have been rejected as not being supported by any competent evidence. COPIES FURNISHED: Deborah Guller, Esquire Assistant General Counsel Office of the Comptroller Suite 211 111 Georgia Avenue West Palm Beach, Florida 33401 Richard Doggett, Esquire 808 Northeast 3rd Avenue Fort Lauderdale, Florida 33304 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact Petitioner is charged with the responsibility of administering and enforcing the provisions of Chapter 494, Florida Statutes, including the duty to sanction those licensed under the Mortgage Brokerage Act (the Act) for violations of the Act. At all times pertinent to this proceeding, Respondent Joan N. Harnagel (Ms. Harnagel), was a registered mortgage broker in the State of Florida, holding license No. HA 517383319. There was no evidence that Ms. Harnagel's registration has been previously disciplined by Petitioner. Respondent Meridian Mortgage Group, Inc. (Meridian) first became a licensed mortgage broker in the State of Florida in September, 1988, with Respondent Joan N. Harnagel (Ms. Harnagel) serving as its vice-president and principal mortgage broker. Between September, 1988, and August, 1992, Meridian was a mortgage brokerage business in the State of Florida and held license No.HB 880000176-00. Meridian has held no active license as a Florida mortgage broker since August, 1992. There was no evidence that Meridian's registration has been previously disciplined by Petitioner. In September 1988, Meridian bought a Florida mortgage brokerage company named Bay Pointe Mortgage. At the time of this purchase, Ms. Harnagel was the principal mortgage broker and was responsible for the daily operations of Bay Pointe as its general manager. Upon Meridian's purchase of Bay Pointe, Ms. Harnagel served as Meridian's principal mortgage broker in Florida and continued her responsibility for the daily operation of Meridian's activities in Florida. Until July 15, 1989, Ms. Harnagel had no ownership interest in Meridian. The owners of Meridian between September 1988 and July 15, 1989, were Majorie Mohr and Larry Mohr of Carmel, Indiana. On July 15, 1989, Ms. Harnagel assumed ownership of Meridian and continued to serve as its principal mortgage broker and general manager responsible for daily operations. At all times pertinent to this proceeding, Ms. Harnagel was the principal mortgage broker of Meridian and was responsible for its daily operations, which included the hiring and firing of employees, the ordering of appraisals and credit reports for customers, and the preparation of good faith estimates. Petitioner conducted an examination of the Respondents Harnagel and Meridian for the period inclusive of January 1, 1989, through April 30, 1990. As a result of the investigation, Petitioner prepared and forwarded to Respondents a report of its investigation. Subsequently thereto, Petitioner prepared and served on Respondents an "Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights" which is the charging document for this proceeding. 1/ PAR PLUS VIOLATIONS There is a difference between a mortgage broker's origination fee and a lender's discount fee. A mortgage broker's origination fee is a fee charged by the mortgage broker for finding a loan for the applicant. A discount fee is a fee charged by the lender to a borrower for doing the paperwork on a loan and is usually expressed as a percentage of the amount borrowed. A discount may be considered as prepaid interest to the lender to cover the lender's expenses in making the loan. In the typical transaction that does not involve "par plus", the mortgage broker's origination fee is paid to the mortgage broker by the borrower at closing either by separate check or out of the proceeds of the closing. A "par plus" transaction is one in which the mortgage broker's origination fee is paid to the mortgage broker by the lender instead of by the borrower. Petitioner's Exhibit 1 is a composite exhibit and pertains to a transaction involving borrowers Oscar and Arlene Carlsen. Petitioner's Exhibit 2 is a composite exhibit and pertains to a transaction involving borrowers J. Richard and Sara Pooler. The first page of each exhibit is the good faith estimate that was completed by Ms. Harnagel. The good faith estimate is normally given to a borrower when the borrower first comes to the mortgage broker's office and applies for a loan. The purpose of the good faith estimate is to make full disclosure of what fees are going to be charged to the borrower. The second and third pages of Petitioner's Exhibit 1 and Exhibit 2 constitute the Settlement Statements for each transaction and was prepared by the respective closing agents for these transactions. The Settlement Statement should reflect all costs that were paid by the buyer and the seller in the transaction being financed. The Carlsen transaction was a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. The Pooler transaction was also a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. By failing to respond to requests for admissions, Respondents admitted 2/ that in the Carlsen transaction and in the Pooler transaction neither Meridian nor Ms. Harnagel disclosed to the borrowers Meridian's participation in a "par plus" program. Both the Carlsen and the Pooler transactions closed in December 1989. ESCROW FUND VIOLATIONS - RESIDENTIAL 3/ Respondents received the following sums from the following borrowers on the following dates: BORROWER AMOUNT DATE K. Carrol $525.00 06-07-89 R. Williams $400.00 11-28-89 J. Gentile $270.00 06-30-89 C. Saffer $270.00 05-15-89 J. Mark $270.00 02-22-89 G. Norton $275.00 07-14-89 F. Sloss $275.00 03-02-89 W. Nachman $275.00 02-27-89 E. Ward $270.00 04-26-89 H. Rosen $310.00 04-24-89 J. Morris $825.00 06-30-89 S. Lewis $270.00 03-24-89 E. Fuller $485.00 05-01-89 G. Fleming $270.00 03-30-89 J. Bishop $270.00 03-28-89 P. Bifulco $270.00 04-10-89 E. Zulueta $270.00 05-26-89 L. MacCalister $325.00 06-21-89 T. Nangle $275.00 01-26-89 I. Rybicki $270.00 03-31-89 I. Rybicki $275.00 03-07-89 The foregoing sums were received by Respondents from borrowers to pay for credit reports and appraisals. Respondents should have placed these funds in the escrow account Meridian maintained at Sun Bank. Instead of being used for the intended purpose, these funds were placed in Meridian's operating account at Sun Bank and were used to pay Meridian's overhead. At all times pertinent hereto Respondent Harnagel was the principal mortgage broker for Meridian and knew that these sums were not being placed in escrow, knew that the funds should have been placed in escrow, and knew that these funds were not being expended for credit reports and appraisal reports. Ms. Harnagel asserts that the practice of placing these funds in Meridian's operating account was dictated by Meridian's out-of-state owners. Ms. Harnagel knew this practice violated the Mortgage Brokerage Act and asserts that she repeatedly informed the Mohrs of this problem. Notwithstanding her acknowledged violation of the Act, she continued to collect these fees and continued to place these fees in Meridian's operating account. The great majority of these transactions occurred prior to Ms. Harnagel assuming ownership of Meridian on July 15, 1989. As a result of these practices, Meridian became indebted to at least two appraisal companies, Duffy and Associates (Duffy) and Diamond Realty and Appraisal Company (Diamond). Neither appraisal company had been fully repaid as of the time of the formal hearing. Duffy and Associates is owed a total of $4,000 by Respondents for work that was performed on the order of Respondents. At least six of the appraisals for which Duffy has not been paid were ordered after Ms. Harnagel assumed ownership of Meridian. In each of these transactions Respondents collected the amount necessary to pay for the appraisal, but, instead of paying for the appraisals, spent the amounts as part of the operating account on overhead expenses. Ms. Harnagel paid Diamond the sum of $1,500 as partial payment of the accumulated debt to Diamond. At the time of the formal hearing, Respondents owed Diamond the sum of $1,675 plus interest and attorney's fees. THE COMMERCIAL LENDER: VICTORY ENTERPRISES TRUST The proposed lender for each of the four commercial transactions at issue in this proceeding was an entity referred to as "Victory Enterprises Trust". The principals of this trust were Thomas Telford, Harold McDonnard, Harold Meridon, and a man identified as Mr. Carpenter. COMMERCIAL TRANSACTION ONE: GOLDEN HILLS Golden Hills is one of the four commercial projects that was at issue in this proceeding. A group of individuals including Robert Hastings, Doug Ollenberger, and Jeffery Kollenkark formed a partnership to purchase, refurbish, and develop a golf course and its surrounding property known as Golden Hills. This partnership, initially known as EBBCO Partnership and later incorporated under the name of Fore Golf Management, Inc., discussed with Ms. Harnagel the financing that would be required for the project. Ms. Harnagel suggested to this borrower a possible joint venture with a potential lender, the Victory Enterprises Trust, and requested a deposit in the amount of $12,000. Ms. Harnagel did not identify her lender to the borrower. This borrower deposited with Meridian the sum of $12,000 on or about September 28, 1989, with conditions that may be summarized as follows: The money was to be placed in Meridian's escrow account. The money was to be "100 percent refundable" if the joint venture partner did not fund the project or if terms of funding were not acceptable. Signatures from both parties to the joint venture would be required to release the funds from escrow. This money was not to be considered an application fee, but as a deposit for closing costs of the proposed joint venture. Any funds remaining were to be returned to Fore Golf Management, Inc. At no time did the Golden Hills borrowers authorize Ms. Harnagel to remove any of the funds from her trust account. On October 2, 1989, Ms. Harnagel wrote Robert Hastings a letter that included the following: Friday, September 29, 1989, Sun Bank received the Twelve Thousand Dollars ($12,000.00) and deposited in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring FORE GOLF MANAGEMENT, INC. an acceptable commitment. THE MONIES ARE REFUNDABLE if the commitment is not acceptable. (Emphasis in the original) On February 1, 1990, Mr. Hastings wrote Ms. Harnagel a letter that included the following: ... For about five months we have been attempting to put together a deal on Golden Hills. You have had our $12,000.00 since 9/29/89. To date no commitment has been brought to us. We do not mind continuing to try, but we do not wish to continue with this indefinitely. It is our wish that you suggest a time frame within which the project is completed and funded, or unless extended in writing by both parties, all agreements are null and void and all monies are refunded. On March 3, 1991, the Golden Hills borrowers demanded that Respondents return the $12,000 deposit, noting that the Golden Hills property had been sold to another entity approximately six months previously and that no commitment from Respondents or their lender had been forthcoming. Thereafter, the Golden Hills borrowers sent Dr. Kollenkark to Florida from California in an effort to collect the deposit from Respondents. On March 11, 1991, Ms. Harnagel wrote to Dr. Kollenkark a letter that provided, in part, as follows: The Trust does not want to return the monies as they felt they bought a commitment but that you were unable to obtain a viable contract. As I have said to you when we were told in December, 1990 that Golden Hills had definitely been sold. I told you that I would pay the $13,000 and get the money through the legal department. The reference to the Trust in Ms. Harnagel's letter of March 11, 1991, is to the Victory Enterprises Trust. The reference to the sum of $13,000 was an error and should have been $12,000. There was no evidence as to whether the deposit was transferred from Meridian's trust account to the proposed lender as implied by the letter of March 11, 1991. Ms. Harnagel testified that the money was transferred to Meridian's operating account and expended on Meridian's operating expenses. Ms. Harnagel admitted that the sum deposited by the Golden Hills borrowers should be refunded, but that she has been unable to do so. Her position that using the money to fund her operating expenses was authorized by the agreement with the Golden Hills borrowers is rejected as being contrary to the evidence. Although the record establishes that Ms. Harnagel expended considerable time and effort to secure funding for the Golden Hills borrowers, the record is equally clear that she was not entitled to use the deposit to fund her overhead expenses. COMMERCIAL TRANSACTION TWO: GENESIS CORPORATION The second commercial transaction involved the funding of two hotel projects with the Genesis Corporation as Respondents' borrower. By letter dated December 15, 1989, the Genesis Corporation deposited with Meridian the sum of $1,500. Paragraph two of the transmittal letter is as follows: 2. The Funding must be to Genesis Corp. satisfaction. The Application Fee of $1,500. is refundable, if Genesis Corp. is not Completely Satisfied with the Funding. The principals of Genesis Corporation did not provide certain financial statements requested by Respondents. Consequently, Respondents were unable to secure financing for the two hotel projects. After the request for the financial statements was made, Respondents did not hear further from the Genesis Corporation. Respondents expended the deposit made by the Genesis Corporation for its operating expenses. COMMERCIAL TRANSACTION THREE: RIVER RUN The third commercial transaction involved River Run Limited Partnership (River Run), which proposed to develop a golf course in North Carolina. As part of the transaction, Meridian required the borrower to pay an advance fee of $10,000.00 to be placed in Meridian's trust account. This deposit was subject to the following conditions: The deposited fee may be used by the lender (an unidentified trust) or by MERIDIAN MORTGAGE GROUP, INC. in conjunction with the lender to conduct an inspection of the property and for other prudent and reasonable expenses necessary to bring the BORROWER an acceptable loan commitment. For all monies spent a full accounting of such expenses will be made to BORROWER. If no loan commitment is offered within fifteen (15) days of the last signature date of this agreement, the entire application fee will be refunded unless otherwise agreed to by both parties to this agreement. Should an offer be made by the lender that, for any reason, is unacceptable to the BORROWER, the BORROWER shall have the right to reject such an offer and the entire application fee shall be refunded to the BORROWER. In such an event, the BORROWER shall be obligated to notify MERIDIAN MORTGAGE GROUP, INC. within five (5) working days of receipt of such offer that the offer is rejected, otherwise the deposited funds will be forfeited and will become the property of MERIDIAN MORTGAGE GROUP, INC. The foregoing agreement between Meridian and River Run was extended so that Meridian was given until November 15, 1989, to obtain the financing. The $10,000 deposit to Meridian was paid on behalf of River Run by Nate Bowman. No financing for River Run was secured by Respondents. Mr. Bowman demanded a refund of the deposit and subsequently obtained judgment against Respondents for the $10,000 deposit. As of the formal hearing, Respondents had not satisfied the Bowman judgment or otherwise refunded the deposit to River Run. Ms. Harnagel asserted that the following circumstances were the reason that the River Run transaction did not close: The trust that was to be the lender asked for financial statements that were not provided. There was a lawsuit between certain of the partners of River Run. A financial officer would not relinquish certain tax returns for one of the partners of River Run. There was a concern about River Run's ability to repay the money. Ms. Harnagel stated that of the $10,000 that was deposited into Meridian's trust account, she only retained the sum of $3,500 and that the balance went to the lending trust. The $3,500 that was retained by Ms. Harnagel was expended. There was no accounting for these expenditures. Likewise, there was no accounting for the sums paid to the lending trust. COMMERCIAL TRANSACTION FOUR: CHAPEL HILL The fourth commercial transaction involved a group of borrowers represented by Michael Grdina, an attorney in Ohio, who desired to obtain financing for the construction of a series of projects that will be referred to as the Chapel Hill complex. Subsequent to a telephone conversation between Mr. Grdina and Ms. Harnagel, Ms. Harnagel sent a letter dated November 16, 1989. This letter reflected that Respondents represented a Trust and that the Trust was interested in participating in a joint venture with Mr. Grdina's clients. The letter contained certain requirements imposed by the Trust and provided, in part, as follows: A Seventy-Five Hundred ($7,500.00) application fee be placed in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring Chapel Hill Commerce Center an acceptable commitment. If the commitment is not acceptable the monies are refundable. In response to that letter of November 16, 1989, Mr. Grdina wrote Ms. Harnagel a letter on behalf of his clients and enclosed a check for the sum of $7,500. Mr. Grdina's letter became the agreement between the parties as to the status of the $7,500 deposit paid to Respondents by Mr. Grdina. That letter omitted the language in Ms. Harnagel's letter of November 16, 1989, pertaining to the use of the deposit "for prudent business expenses". Mr. Grdina's letter of December 1, 1989, provided, in part, as follows: By wire transfer to Meridian's trust account the entities [Mr. Grdina's clients] have placed with you a Seven Thousand Five Hundred Dollars ($7,500.00) refundable good faith deposit. If an entity accepts a proposal for funding from sources identified by you, and such entity does not close the transaction for reason other than the fault of the lender, the good faith deposit will be forfeited as liquidated damages for expenses and fees incurred in the transaction. The initial agreement between Harnagel and Grdina contemplated that Harnagel's Trust would provide financing for Grdina's clients. By letter dated February 23, 1990, Mr. Grdina accepted the offer that the transaction be modified so that the Trust would secure 100 percent of the loan by a lending institution by depositing with the lending institution certificates of deposit. As additional consideration to the Trust, the Trust would become entitled to 25 percent equity participation in the construction project. The letter of February 23, 1990, did not modify the status of the deposit paid by Mr. Grdina on behalf of his clients. The loan to Mr. Grdina's clients did not close because the lending institution with whom Ms. Harnagel and Victory Trust dealt would not fund the loan. Thereafter, Mr. Grdina demanded return of the $7,500 deposit. As of the date of the formal hearing, that deposit has not been refunded. Although Ms. Harnagel argues that she was entitled to keep the deposit, that argument is without merit since none of the conditions precedent to her entitlement to the deposit occurred. CUSTOMER OVERCHARGE Respondents admitted that two customers were charged brokerage fees, origination fees, and/or discount fees which were greater than those disclosed on the Good Faith Estimates. On the Morris transaction, a fee of $450.80 was estimated, but the fee actually assessed at closing was $2,240, an overcharge of $1,790. On the Rosen transaction a fee of $1,773 was estimated, but the actual fee assessed was $1,871.50, for an overcharge of $98.50. Both overcharges resulted from charges imposed by a lending institution and neither overcharge resulted in inappropriate payments to Respondents. WALL STREET JOURNAL ADVERTISEMENT Respondents placed an advertisement in the Wall Street Journal on February 16, 1990. This advertisement did not contain the address of Meridian as required by law. The deletion of Meridian's address was the fault of the Wall Street Journal. INVESTIGATION OF LENDING SOURCE Ms. Harnagel testified without contradiction that she made efforts to verify the reliability of the Victory Enterprises Trust and its principals. She learned of this potential lender through an advertisement the Trust had placed in the Miami Herald. Neither the Trust or the principals were required to be licensed in Florida. Her efforts included having her attorney and her bank officer make inquiries to verify the reliability of the proposed lender. Petitioner argues that Respondents should have made further inquiry after the loan to the Golden Hills borrowers was not forthcoming from this lender. Petitioner has failed to establish by clear and convincing evidence that Respondents breached any standards imposed upon them to investigate the reliability of lenders so as to prove that Respondents are incompetent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all licenses and registrations issued either to Joan N. Harnagel or Meridian Mortgage Group, Inc., be revoked. It is further recommended that an administrative fine be imposed against Joan N. Harnagel in the amount of $25,000. It is further recommended that a separate administrative fine be imposed against Meridian Mortgage Group, Inc., in the amount of $25,000. DONE AND ENTERED this 22nd day of July, 1993, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 22nd day of July, 1993.
