The Issue Whether Respondent, Gregory Bruce Sample, should be disciplined for alleged statutory and rule violations for his role in several insurance transactions.
Findings Of Fact Count I – Jewel Frisani Jewel Frisani was born December 22, 1932. As of September 23, 2010, Ms. Frisani owned two annuities; one issued by MetLife and the other issued by ING Golden American (ING). Ms. Frisani was withdrawing $500 per month from each annuity for a total of $1,000 per month, or $12,000 per year. Death benefits were provided as a feature of each annuity. On September 23, 2010, Ms. Frisani attended a luncheon seminar hosted by Respondent. While at the seminar, Ms. Frisani completed a questionnaire wherein she provided her name, address, and phone number. The questionnaire directs that individuals completing the same should note thereon “Topics of Most Interest to Me.” The questionnaire lists some 25 topics and Ms. Frisani noted that she was only interested in having Respondent to “[r]eview[] [her] existing annuity(ies).” One of the listed topics is “[e]state [p]lanning.” Ms. Frisani did not indicate on the form that she was interested in discussing with Respondent matters related to planning her estate. Soon after the seminar, Respondent contacted Ms. Frisani and they agreed that they would personally meet on October 5 and October 11, 2010, to discuss matters related to her existing annuities. On October 5, 2010, Ms. Frisani met with Respondent to discuss her MetLife and ING annuities. During the meeting, Ms. Frisani showed Respondent a “Portfolio detail” for her ING annuity and a “snapshot” summary of her MetLife annuity. The “Portfolio detail” showed that as of September 30, 2010, the ING annuity had a market value of $65,604.77. The “snapshot” of Ms. Frisani’s MetLife annuity showed that at the beginning of the year, the opening value of her annuity was $50,638.98 and her closing value as of September 30, 2010, was $46,807.73. Neither the “Portfolio detail” nor the “snapshot” summary listed any charges associated with surrendering either annuity. During the meeting with Respondent on October 5, 2010, Ms. Frisani informed Respondent that her “annuities were going to be [the] inheritance for [her] granddaughter.” This explains why the words “Prisilla Frisani granddaughter” appear in Respondent’s handwriting on the bottom of the “Portfolio detail.” Although Ms. Frisani informed Respondent of her desire to leave an inheritance for her granddaughter, she did not impress upon Respondent that any new product(s) that she might purchase must offer death benefits in an amount not less than what she already had with MetLife and ING. Specifically, as to this issue, Ms. Frisani testified as follows: Q. What investment goals did you share with [Respondent] at that meeting? What did you tell him you wanted out of -- A. I wanted him to see if he could do better than what I was getting from my annuities. Q. Okay. And as you stated earlier, what you did like about your old annuities was that -- what was it that you stated earlier that you liked about your old annuities? A. Oh, that I was getting a thousand a month from my -- from my checking, and then they had death benefits for my granddaughter. Q. Did you also share with Mr. Sample that you wanted to continue those benefits? A. No, I didn’t mention that to him there. Q. You didn’t mention the death benefits? A. The death benefits, no. Q. Did you mention -- so you just mentioned that you wanted -- A. I wanted him to make sure that what he was doing would go in the trust, and that I would continue getting my thousand a month. Q. Okay. A. -- from the annuities -- Q. Okay. A. -- and that I wouldn’t lose no money by switching. Q. Okay. And you say he was aware that both annuities had death benefits? A. Well, I don’t know if he was aware of that or not, but Q. Okay. We didn’t discuss too much about the death benefits. Final Hearing Transcript, pp. 149-151. Respondent credibly testified that had Ms. Frisani explained to him that her objective was to maximize the death benefits payable to her granddaughter, then he would have recommended life insurance as a vehicle for her investments instead of annuities. Ms. Frisani also contends that during her meeting with Respondent on October 5, 2010, he assured her that she would not lose any money by surrendering the ING and MetLife annuities. When Ms. Frisani met with Respondent on October 5, 2010, she informed Respondent she was taking a $500 per month partial withdrawal from her ING annuity as well as a $500 per month partial withdrawal from her MetLife annuity. Ms. Frisani also had $200,000 in the bank, some of which may have been in a money market account. When asked if she shared information with Respondent concerning the $200,000, Ms. Frisani testified that “I might have mentioned it, yeah.” Ms. Frisani's ING annuity was characterized as a qualified retirement account. Due to her age, in order to avoid a tax penalty on this qualified account, Ms. Frisani was required to take a minimum distribution of four percent annually. Ms. Frisani's MetLife annuity was a non-qualified account. Therefore, she did not have to take from it any required minimum distributions (RMD). Respondent suggested to Ms. Frisani that as a means of paying less in taxes and obtaining growth on her investments, without losing any principal in the stock market, she should consider replacing the ING and MetLife variable annuities with National Western fixed annuities, and that for her $12,000 annual withdrawals she should take $3,000 a year in partial withdrawals from the National Western qualified annuity he was offering her and $9,000 a year from her money market account. The $3,000 per year in withdrawals from the qualified National Western annuity would satisfy her RMD without incurring any penalty. Since her money market account was paying very little interest, the $9,000 a year from this account would make up the balance of money she needed for her annual income. The non-qualified National Western annuity could then grow at a higher interest rate than the funds in Ms. Frisani's money market account. In order to assist Ms. Frisani with her efforts to learn more about the National Western annuity, Respondent, during the meeting of October 5, 2010, gave Ms. Frisani a copy of National Western's multi-page brochure. The brochure allowed Ms. Frisani to familiarize herself with the National Western annuity prior to their next meeting on October 11, 2010. On October 11, 2010, Ms. Frisani met with Respondent a second time. During this meeting, Ms. Frisani signed several forms related to the surrender of the ING and MetLife annuities, and the purchase of annuities from National Western. It is undisputed that each form was completed by Respondent and signed by Ms. Frisani. Ms. Frisani testified that she did not bother to read the documents that Respondent gave her to sign.3/ One of the forms signed by Ms. Frisani for each of the National Western annuities is the Annuity Suitability Questionnaire. The questionnaire asks two related questions. The first question asks “[w]ill the proposed annuity replace any product?” and the second asks “[i]f yes, will you pay a penalty or other charge to obtain these funds?” The answer noted on the form to the first question is “yes,” and the answer to the second question is “no.” During the October 11, 2010, meeting with Respondent, Ms. Frisani also signed, for both National Western annuity contracts, a “Disclosure and Comparison of Annuity Contracts” form (Comparison form). This form facilitates the side-by-side comparison of certain features of an existing annuity contract with those of a replacement annuity contract. Near the top of the Comparison form, there is a line where the contract number for the existing annuity is to be placed. On the Comparison form for the MetLife annuity, the contract number “3201353529” appears. This is the correct contract number for the MetLife annuity. On the Comparison form for the ING annuity, the contract number “I038301-0D” appears. This is the correct contract number for the ING annuity. Neither of these contract numbers appears on the “snapshot” or the “Portfolio detail” documents that Ms. Frisani presented to Respondent during their initial meeting on October 5, 2010. Ms. Frisani received quarterly statements from both ING and MetLife for the annuity contracts that she had with these companies. The ING and MetLife quarterly statements for the period ending September 30, 2010, each lists the annuity contract number, the contract date, and other pertinent information. The MetLife quarterly statement indicates that as of September 30, 2010, Ms. Frisani’s MetLife annuity had an account balance of $46,684.92 and a death benefit in the amount of $57,160.41. Ms. Frisani’s ING quarterly annuity statement for the period ending September 30, 2010, shows the following: Guaranteed Minimum Death Benefit $115,859.39 Accumulation Value $ 65,491.51 Surrender Charges $ 1,345.01 Cash Surrender Value $ 64,146.50 When Respondent met with Ms. Frisani on October 11, 2010, the evidence reasonably suggests that Ms. Frisani had her quarterly statements with her and presented the same to Respondent so as to assist him with completing the paperwork related to the surrender of Ms. Frisani’s existing annuities and the purchase of the new annuities from National Western. For Ms. Frisani’s MetLife annuity, Respondent wrote on the Comparison form that this annuity contract was issued in “Yr99.” The MetLife quarterly statement that Ms. Frisani presented to Respondent shows, however, that the actual date of issue for the MetLife annuity was April 22, 2005. The evidence does not sufficiently explain this discrepancy. For the MetLife annuity, Respondent also noted on the Comparison form that this annuity had a nine year surrender charge period and a first year surrender charge rate of nine percent that decreased by one percentage point each year that the annuitant maintained the policy. Although Respondent accurately noted the surrender period and related percentages on the Comparison form, it is not clear from the evidence where Respondent got this information, given that neither the MetLife quarterly statement for the period ending September 30, 2010, nor the “snapshot” make mention of surrender charges or related percentages. Respondent, nevertheless, obviously knew of the surrender period and related charges for Ms. Frisani’s MetLife annuity. The Comparison form also notes that the MetLife annuity provides for a “Waiver of Surrender Charge Benefit or Similar Benefit.” Again, however, there is nothing in the MetLife quarterly statement or “snapshot” that makes mention of the waiver of any surrender or similar charges. During the meeting with Respondent on October 11, 2010, Ms. Frisani also signed, for the MetLife annuity, a form titled “DISCLOSURE OF SURRENDER CHARGES IF EXISTING ANNUITY IS REPLACED OR EXCHANGED.” There is a section of the disclosure form where estimated surrender charges are noted. For this section, Respondent wrote in “0” as the amount of surrender charges associated with replacing the MetLife annuity with an annuity from National Western. Contrary to Respondent’s representations on the form, Ms. Frisani incurred $2,142.50 in surrender charges related to the surrender of the MetLife annuity contract. On October 11, 2010, when Respondent met with Ms. Frisani, he knew, or should have known, based on the information available to him, that Ms. Frisani would incur surrender charges related to the surrender of the MetLife annuity. The totality of the evidence as to this transaction indicates that Respondent willfully misled Ms. Frisani, thus causing her to be misinformed about the charges related to the surrender of her MetLife annuity. Petitioner also alleges that Ms. Frisani suffered financial harm as a result of Respondent deceiving her into believing that she would not incur charges related to the surrender of her ING annuity. According to Petitioner, Ms. Frisani incurred $1,345.01 in surrender charges related to this transaction. The evidence of record is insufficient to support this allegation. The “DISCLOSURE AND COMPARISON OF ANNUITY CONTRACTS” form that Respondent completed for Ms. Frisani’s ING annuity notes that nine years was the surrender charge period for this annuity. If this representation is true, the surrender charge would terminate in November 2009. Petitioner’s Exhibit 37 contains a summary of the terms of Ms. Frisani’s ING annuity and it shows seven years as the surrender charge period for this annuity. Whether it is seven years or nine years, neither of these yearly figures would result in a surrender charge, given that Ms. Frisani had held the ING annuity for nine years and eleven months at the time of actual surrender. To further complicate matters, Ms. Frisani’s ING quarterly statement for the period ending September 30, 2010, shows that if she were to surrender the annuity on September 30, 2010, she would incur $1,345.01 in surrender charges. As previously noted, Ms. Frisani’s ING annuity, as of September 30, 2010, had an accumulated value of $65,491.51. Subtracting the stated surrender charges would result in a cash surrender value of the ING annuity of $64,146.50. When this annuity was actually surrendered on or about October 25, 2010, ING issued a check in the amount of $65,172.33 to National Western for Ms. Frisani’s new annuity. The evidence does not explain with sufficient clarity why there is only a $319.18 difference between the accumulated value as of September 30, 2010, and the actual cash surrender value as of October 25, 2010. Also, on or about October 22, 2010, ING sent Ms. Frisani a “Confirmation Notice” regarding transactions related to her annuity account. The Confirmation Notice provides the name (Jeffrey A. Masters), phone number, and mailing address for Ms. Frisani’s ING financial advisor along with a notice advising that “The ING Variable Annuity Customer Contact Center is available Monday through Thursday 8:30 AM to 6:30 PM Eastern Time and Friday 8:30 AM to 5:30 PM Eastern Time at 1-800-366- 0066.” The Confirmation Notice also states the following: IMPORTANT NOTICE: Please carefully review all of the transactions detailed on this confirmation notice. You must inform us of any errors we may have made with respect to allocations of your investment dollars within30 days from the date of this notice. If you do not respond within 30 days, all allocations listed on this confirmation notice will be deemed final pursuant to your instructions. The Confirmation Notice lists two transactions with an effective date of October 22, 2010. The first transaction shows a “Total Cash Surrender” of $65,172.33, and the second transaction shows a “Total Surrender Charge” of $1,345.01. Independent of what Respondent may have told Ms. Frisani, she was given notice by ING that there was a $1,345.01 charge associated with surrendering her ING annuity and that she had 30 days from the date of the notice to inform ING about any irregularities associated with the transaction. There is no evidence that Ms. Frisani ever contacted ING or Jeffrey A. Masters about the $1,345.01 surrender charge. Also, Ms. Frisani had until November 21, 2010, to inquire about the surrender charges or any other matters, including death benefits, related to the surrender of her ING policy. There is no evidence suggesting that Ms. Frisani availed herself of this option. Petitioner failed to prove that Ms. Frisani suffered, as a consequence of Respondent’s conduct, financial harm in the amount of $1,345.01, as alleged. The Department also alleges that Respondent misrepresented to Ms. Frisani that she would receive a $9,000 bonus following her first year of ownership of the National Western annuities. Respondent denies this allegation. None of the documentary evidence references a $9,000 bonus and the only testimony regarding this alleged bonus is from Ms. Frisani. Ms. Frisani’s testimony, without more, is insufficient to satisfy Petitioner’s burden with respect to this allegation. In its Proposed Recommended Order, Petitioner contends that Respondent “stated on Ms. Frisani’s disclosure and comparison of annuity contracts that she would not incur any administrative fees or margins, but the National Western (annuity number 0101255052) contract clearly states otherwise.” It is correct that the disclosure and comparison form notes that the National Western annuity will have zero “Administrative fees or Margins.” The disclosure and comparison form in evidence does not define what constitutes an administrative fee or margin. Petitioner equates the “charge” that Ms. Frisani paid for the National Western annuity withdrawal benefit rider with an administrative fee, but the record does not support Petitioner’s conclusion. There is no indication that National Western considers the charge for the withdrawal benefit rider as an administrative fee. The National Western documents signed by Ms. Frisani advise that “[t]he Account Value of the policy is reduced each year by the Annual Rider Charge” and “[t]here is a charge for this rider, which is assessed annually.” (emphasis added). In looking at Ms. Frisani’s National Western statement for this annuity for the period November 4, 2010, through September 26, 2011, the only “fee” listed is an “Option A Asset Fee” that shows zero as the percentage associated with it. The annual rider charge is not listed as an “administrative” or any other type of fee. Without more, the undersigned is unable to conclude that the annual rider charge is the equivalent of an “administrative fee” as these terms are used in the disclosure and comparison form signed by Ms. Frisani on October 11, 2010. Respondent explained his rationale for recommending the National Western annuities to Ms. Frisani. He estimated that Ms. Frisani may have made $5,000 with her ING variable annuity in the ten years that she owned it and $5,000 with the MetLife variable annuity in the five years she owned that annuity, so her net return was a half percent and one percent, respectively. On the other hand, the National Western fixed annuities Respondent sold Ms. Frisani had a guaranteed five percent growth so she would be earning ten times the amount she had been making on her ING annuity and five times the amount for her MetLife annuity. The National Western annuities also included a five percent bonus, which approximated $6,000. Respondent summarized his comparison of the National Western annuities he sold Ms. Frisani with the ING and MetLife annuities she previously owned as follows: [S]o she had these old contracts with no safety, that had produced a half percent interest from the get-go for ten years. We moved her to National Western, which is an equity index annuity. The principal is fixed. It had a five percent income rider guarantee, which is what she wanted. And we were able to take the nonqualified account and just let it grow. The other is the qualified contract. She -- she has to take out four percent for her RMD. She's making five, which means she continues to actually make some money. Had she stayed with the variable, she was just depleting it every year by this four percent. So she was losing principal every year, so we stopped that. We stopped that. It's stopped cold. Final Hearing Transcript, pp. 1157-1158. Respondent further explained that Ms. Frisani's National Western annuities are structured so she can withdraw up to ten percent annually from the account, but if she does not take any withdrawals in the first year then she is allowed to take up to twenty percent in the second year, and if she elects not to take any withdrawals in the second year then she may withdraw up to thirty percent for the third year, and so on for the duration of the annuity period. Respondent had an objectively reasonable basis for recommending the National Western annuities to Ms. Frisani. Count II – Fred and Eileen Sarracino Fred Sarracino and Eileen Sarracino are married and reside in Lake Placid, Florida. Mr. Sarracino was born on September 20, 1934, and is a retired automobile mechanic. Mrs. Sarracino was born on February 1, 1935, and is retired from working for an insurance broker in Pennsylvania. In October 1993 Mr. Sarracino paid an initial premium of $2,000 towards the purchase of an Allmerica Financial Life Insurance and Annuity Company variable annuity contract (Commonwealth 46). Over the next 15 years, he added premium payments to Commonwealth 46 so that it had a surrender value of $46,435.53 on June 30, 2008, and an enhanced death benefit of approximately $54,000 on March 31, 2008. In October 1993 Mrs. Sarracino paid an initial premium of $2,000 towards the purchase of a separate Commonwealth variable annuity contract (Commonwealth 45). Over the next 15 years, she added premium payments to Commonwealth 45 so that it had a surrender value of $18,979.81 on June 30, 2008, and an enhanced death benefit of approximately $75,000 on March 31, 2008. In September 1997 Mrs. Sarracino paid an initial premium payment of $94,226.16 toward another Commonwealth variable annuity contract (Commonwealth 03). Over the next 11 years, she added premium payments to Commonwealth 03 so that it had a surrender value of $172,831.01 on June 30, 2008, and an enhanced death benefit of over $237,000 on March 31, 2008. During the initial months of 2008, Mr. and Mrs. Sarracino were losing money on their Commonwealth variable annuities and decided, in mid-2008, to attend a seminar presentation hosted by Respondent at a restaurant in Sebring, Florida. Mr. and Mrs. Sarracino met privately with Respondent on June 30, 2008. Acting on Respondent’s recommendations, Mr. Sarracino surrendered Commonwealth 46 and used the proceeds of $46,435.53 to purchase an Old Mutual Financial Life Insurance Company annuity (Old Mutual 67). Mrs. Sarracino surrendered Commonwealth 45 and applied the proceeds of $18,979.81 to purchase an Old Mutual annuity (Old Mutual 68). Mrs. Sarracino also surrendered Commonwealth 03 and applied the proceeds of $172,402.45 to purchase yet another Old Mutual annuity (Old Mutual 69). In total, Respondent earned $31,428.52 in commission from these transactions. When Respondent took the applications for each of the Old Mutual annuities, he misrepresented the financial profile of the Sarracinos on the annuity suitability forms. Respondent accomplished this in part by having the Sarracinos sign blank suitability forms which Respondent later filled in with false information.4/ Respondent falsely noted on the suitability form that Mrs. Sarracino’s monthly disposable income was $1,600. Mrs. Sarracino credibly testified that her monthly disposable income when she met with Respondent was more in the range of four to five hundred dollars. Respondent also falsely noted on the form that Mrs. Sarracino owned $60,000 worth of certificates of deposit (CDs), variable annuities amounting to $300,000, and had $60,000 in mutual funds. Respondent noted on the suitability form that Mr. Sarracino, like his wife, also had monthly disposable income in the amount of $1,600. This is false. Respondent also falsely noted on the form that Mr. Sarracino owned $60,000 worth of CDs, variable annuities totaling $300,000, and $60,000 in mutual funds. Finally, Respondent falsely stated that Mr. Sarracino owned a life insurance policy with a cash value of $10,000. The unrefuted evidence is that Mr. Sarracino has never owned a life insurance policy of any amount. Respondent willfully misrepresented the financial profile of the Sarracinos so that they could pass Old Mutual’s underwriting standards and he could receive a commission. Count III – Warren and Darlene Morgan Warren and Darlene Morgan are married and live in Port Charlotte, Florida. Mr. Morgan was born on May 24, 1947. Mrs. Morgan was born on April 21, 1948. In 2005, the Morgans decided they should consult a financial advisor closer to their home. In May and June 2005, the Morgans met with Respondent for the purpose of purchasing four Allianz annuities. On May 28, 2005, Mr. Morgan made an initial premium payment of $56,949.16 toward the purchase of the first Allianz annuity contract (Allianz 32). On May 28, 2005, Mr. Morgan made an initial premium payment of $16,701.27 toward the purchase of a second Allianz annuity contract (Allianz 22). On May 28, 2005, Mrs. Morgan purchased the third Allianz annuity contract (Allianz 02). The initial premium payment was $16,701.27. On June 15, 2005, Mrs. Morgan purchased the fourth Allianz annuity contract (Allianz 43). She made three premium payments on this policy between May 28, 2005, and June 15, 2005, totaling $68,040.34. Each of the Allianz annuities Respondent sold the Morgans was intended as a long-term investment as evidenced by the respective annuities’ multi-year surrender charge periods and high surrender charge penalties. After purchasing the Allianz annuities, the Morgans and Respondent met annually to review the Morgans' investments, but until 2010, they decided not to change anything. In early calendar year 2010, Respondent, consistent with the practice of conducting their annual review, called the Morgans and informed them of a new product that might appeal to them. Respondent and the Morgans met on January 7, 2010, and Mrs. Morgan testified that Respondent compared the new product with the Allianz annuities they owned. Mrs. Morgan stated in her testimony that “we asked a lot of questions” during the meeting with Respondent. Mrs. Morgan thoughtfully considered the merits of purchasing the new product and explained that initially she was opposed to replacing their Allianz annuities because she believed the surrender penalty that she and her husband would pay was too steep a price for the exchange. She testified, however, that her husband, Warren, wanted to make the change and so she agreed to do so. On January 7, 2010, when they met with Respondent, Darlene and Warren Morgan were 61 and 62 years of age, respectively, and their investment objective remained focused on growth. During the meeting, Respondent suggested that the Allianz annuities should be replaced with annuities issued by Forethought Life Insurance Company (Forethought) and Old Mutual Financial Life Insurance Company (OM). The Forethought annuities were offering a new feature known as an "income rider" that was not available when the Morgans purchased the Allianz annuities in 2005. Allianz 32 was exchanged for a Forethought annuity contract (Forethought 03). Mr. Morgan incurred a surrender penalty of $6,151.79 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $58,000. Allianz 22 was exchanged for an OM annuity (OM 57). Mr. Morgan incurred a surrender penalty of $4,441.09 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $16,000. Allianz 43 was exchanged for a Forethought annuity (Forethought 92). Mrs. Morgan incurred a surrender penalty of $21,469.82 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $65,000. Allianz 02 was exchanged for an OM annuity (OM 58). Mrs. Morgan incurred a surrender penalty of $4,441.09 for exchanging this Allianz annuity, which at the time of the exchange was valued at approximately $16,000. Combined, the Morgans incurred $36,503.79 in surrender penalties associated with the exchange of their annuities. Respondent’s total commission for these transactions was $16,581.62. The Administrative Complaint alleges that Respondent “hurriedly pushed annuity application and suitability forms in front of Mr. and Mrs. M[organ] and had them sign them without allowing them any time to review them,” and that the “entire meeting on or about January 7, 2010, lasted approximately 20 minutes.” The Administrative Complaint also alleges that consistent with Respondent’s alleged conduct of rushing the Morgans, he had them sign blank forms related to the exchange of the Allianz annuities. According to Mrs. Morgan’s testimony, the meeting with Respondent on January 7, 2010, lasted approximately 45 minutes (more than twice as long as alleged), during which they “asked a lot of questions.” As for the issue of allegedly signing blank forms, Mrs. Morgan testified as follows: Q: Did you sign blank forms or were they partially filled out? A: I don’t know. Because he was at his desk writing very fast. Part of it could have been filled out. Final Hearing Transcript p. 645 Q: All right. But what I’m asking you is: As you sit here today, can you state with certainty that any of the forms that he had you sign were, in fact, blank? A: No, I cannot state with certainty that. Final Hearing Transcript p. 678 The evidence is insufficient to clearly and convincingly establish that the Respondent rushed the Morgans into exchanging their Allianz annuities or that Respondent had them to sign blank documents. Respondent, in filling out the transfer, application, and suitability forms for the purchase of the Forethought and OM annuities, listed therein information regarding the Morgans that was false. Respondent included a false statement that the Morgans had a net worth of $400,000, excluding the value of their home, that the Morgans’ liquid assets totaled $65,000, and that the Morgans owned CDs. Respondent willfully misrepresented the financial profile of the Morgans so that they could pass the Old Mutual and Forethought underwriting standards thereby allowing him to receive a commission. Petitioner, in its Proposed Recommended Order, offers several proposed factual findings that ultimately show, “[b]ased on all of the evidence, [that] there was no objectively reasonable basis to recommend the Morgans’ annuity exchanges. § 627.4554(4)(a), Fla. Stat. (2010).” Section 627.4554, by its express terms, only applies to “Senior consumers” that are “65 years of age or older.” Neither of the Morgans was within this age range when they met with Respondent in 2010 and, therefore, section 627.4554 cannot be relied upon by Petitioner as a basis for imposing disciplinary action against Respondent. Count IV Petitioner withdrew Count IV of its Administrative Complaint. Count V – Joel and Evelyn Langer Petitioner alleges that Respondent told Joel and Evelyn Langer that he was familiar with the “IRS 72t rule,” when in reality he was not, and because of his unfamiliarity with this rule, this meant that Respondent “knew that by selling the Langers’ annuities, they would incur substantial withdrawal penalties [pursuant to] the terms of the[ir] annuity contracts.” The essence of this allegation is that Respondent did something wrong in arranging for the issuance of the OM annuities that adversely affected the Langers’ 72(t) protections with the Internal Revenue Service (IRS) and also caused them to lose money. Joel and Evelyn Langer are married and reside in Port Charlotte, Florida. Mr. Langer was born on September 10, 1948. Mrs. Langer was born on August 31, 1949. During their employment, Mr. and Mrs. Langer put their savings in mutual funds managed by Royal Bank of Canada Wealth Management (RBC). Mr. and Mrs. Langer were forced into early retirement before reaching age 59 1/2. The mutual fund investments then became their only liquid assets and they depended on these funds for income. On February 21, 2008, Mr. and Mrs. Langer, who were 58 and 59 years of age respectively, attended a luncheon seminar Respondent hosted in Port Charlotte, Florida. The Langers were interested in obtaining more information about annuities, because they had their life savings invested in the stock market, which was rapidly declining, and they were looking to move their funds to another investment product. The Langers felt annuities would be “a safer investment.” The Langers met with Respondent and explained that they would need immediate income that would qualify for disbursement under the 72(t) provisions of the federal income tax code. Because the Langers had been forced into early retirement, they had elected to draw on their investments through the 72(t) provisions of the federal income tax code. The 72(t) provisions allow the investor, prior to age 59 1/2, to receive distributions from their retirement investment, in substantially equal periodic payments without paying a penalty for early withdrawal, provided the investor receives the distribution for a period of five years without interruption. Respondent placed all of Mr. and Mrs. Langer’s liquid assets into three Old Mutual annuity contracts, hereinafter “Old Mutual 02,” “Old Mutual 03” and “Old Mutual 04.” On March 7, 2008, Mrs. Langer purchased Old Mutual 02. The initial premium was paid with an RBC check in the amount of $237,563.23, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $26,131.96 for this transaction. On March 7, 2008, Mr. Langer purchased Old Mutual 03. The initial premium was paid with an RBC check in the amount of $393,073.89, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $43,238.13 for this transaction. On March 7, 2008, Mrs. Langer purchased Old Mutual 04. The initial premium was paid with an RBC check in the amount of $72,572.48, made payable to Old Mutual Financial Life. Respondent earned a commission in the amount of $7,982.97 for this transaction. As previously noted, Petitioner alleges that the Langers incurred “substantial withdrawal penalties” as a consequence of Respondent botching the paperwork related to the Langers maintaining the protections afforded by the IRS 72(t) rule. Although the evidence is not at all clear as to the amounts of the alleged penalties, it appears as though the Langers did not actually incur any penalties, as alleged, because OM, on or about April 8, 2008, issued refund checks to Mr. and Mrs. Langer in the amounts of $1,329 and $2,018, respectively. As for the alleged mishandling by Respondent of the Langers’ IRS 72(t) paperwork, Petitioner's expert witness, John Richard Brinkley, testified that he assumed Respondent failed to send the IRS the necessary paperwork to entitle the Langers to the IRS rule 72(t) privileges for the OM annuities sold to them by Respondent. Mr. Brinkley conceded, however, that he never verified whether the necessary forms were or were not delivered, or to whom such fault should be allocated. Similarly, both Mr. and Mrs. Langer conceded during their testimony that they could not say whether it was Respondent's supposed error in qualifying the OM annuities under the IRS rule 72(t) provisions, or whether the supposed error was the fault of OM itself. The unrefuted evidence is that Respondent faxed OM specific instructions to set up the annuities so that the annuities complied with the IRS rule 72(t) provisions and that OM subsequently confirmed, in letters sent to each of the Langers, that the annuities indeed were being set up to conform to the IRS rule 72(t) provisions. While there is evidence that Respondent initially may have completed the incorrect OM form for this transaction, the evidence is inconclusive as to the effect this had on how the OM annuities were originally structured by the company. Additionally, the Department's investigator, Juanita Midgett, wrote to OM inquiring as to whether Respondent bore any responsibility in ensuring that the annuities he sold the Langers did, in fact, conform to the IRS rule 72(t) provisions. OM's letter in response stated that Respondent bore no responsibility for any “premature penalty tax,” and reminded Ms. Midgett that the Langers were required “to consult their personal tax advisor before submitting a request should they elect to take early distributions from their retirement funds.” Petitioner has failed to meet its burden of proof with respect to this issue. The Administrative Complaint also alleges that “[d]ue to [Respondent’s] failure to take into account the L[angers’] necessity for a monthly income, the OM 02 and OM 03 contracts had to be reissued thereby altering the initial premiums” paid by the Langers. The only argument advanced by Petitioner in its Proposed Recommended Order as to this issue is found in paragraph 35 wherein Petitioner simply restates that Respondent “failed to properly account for the Langers’ need for a monthly income and, as a result, the Old Mutual 02 and Old Mutual 03 contracts had to be reissued thereby altering the initial premiums” paid by the Langers. It is unclear from the evidence why the referenced contracts had to be reissued. Petitioner’s allegations imply that the “altering [of] the initial premiums” resulted in the Langers incurring additional expense as a result of the error, but the evidence is inconclusive as to whether the premium amounts increased or decreased. Petitioner failed to meet its burden of proof with respect to this issue. Paragraph 71(c) of the Administrative Complaint alleges that Respondent “never explained to the [Langers] that all three annuities had huge surrender charge rates and periods, starting at 17.5% for the first year of ownership and diminishing thereafter until the penalty percentage reached 4.5% in the fourteenth year of ownership.” Remarkably, Petitioner’s Proposed Recommended Order as to this allegation simply restates, verbatim, the allegation from the Administrative Complaint and only cites to the annuity contracts themselves as record support for the allegation.5/ This allegation is not sufficiently supported by the evidence, given that Mrs. Langer testified that Respondent explained to them, with respect to the issue of surrender charges associated with the annuities, that they “had to remain in [the annuities] for a period of years.” Paragraph 71(d) of the Administrative Complaint alleges that Respondent “knew that the Langers wanted to be done with the risks associated with the stock market and yet [he] pegged all three Old Mutual annuities to S&P 500 indices in determining their income returns.” Once again, Petitioner merely restates in its Proposed Recommended Order the allegation from the Administrative Complaint and only cites to the annuity contracts themselves as record support for the allegation. Nevertheless, Mrs. Langer testified that “at the seminar, [Respondent] went over the benefits [of the] annuities and went into detailed explanations of his annuity plans being tied to the S&P 500, and he did quite a bit of explaining at the seminar.” The Langers knew that the annuity products that Respondent was selling were tied to the S&P 500 well in advance of purchasing the products. The evidence clearly establishes that the Langers knew what Respondent was selling and that they made a conscientious and informed decision when they ultimately decided to purchase the three Old Mutual annuities. Paragraph 71(e) of the Administrative Complaint alleges that Respondent “checked a box on the Old Mutual suitability forms indicating that Mr. and Mrs. Langer declined to answer the questions propounded on the form, which was false.” Respondent explained that he discussed with the Langers the nature of their assets, but because the totality of their assets consisted of the money in their brokerage account, there was no purpose in completing the "Customer Profile" section of the suitability forms, and so he checked the line on the OM forms indicating that the Langers were declining to answer the questions. Mr. Langer testified that they “explained to [Respondent] that [they] had no other assets to consider” besides their mutual funds. Given this, it is inconsequential that Respondent checked the box signifying that the Langers declined to answer the "Customer Profile" questions. Paragraph 71(g) of the Administrative Complaint alleges that Respondent “refused to respond to the Langers’ inquiries once they discovered the financial losses they suffered [due to] his recommendations.” Respondent generally denies this allegation but offers no specific defense in response thereto. Mrs. Langer credibly testified that Respondent “would not return her calls” after she and her husband realized that there was a problem with the application of IRS rule 72(t) to their Old Mutual annuities. The evidence does not quantify the number of calls or the length of the time period during which the Langers made calls to Respondent. Respondent’s failure to return Mrs. Langer’s phone calls is, under the facts present, inconsequential given that the evidence is not clear and convincing regarding any culpability on Respondent’s part with respect to Old Mutual’s processing of the Langer’s IRS rule 72(t) paperwork. Paragraph 71(h) of the Administrative Complaint alleges that Respondent “never explained the ‘free look’ provision of the three Old Mutual contracts.” As to this allegation, Petitioner, in its Proposed Recommended Order, offers as its only proposed finding of fact that Respondent “nullified the free look option by pre-dating the delivery receipt so as to eliminate the Langer’s option to cancel the contracts.” Alleged actions of “pre-dating” a delivery receipt are substantively different from actions related to the alleged “failure to explain” a contractual provision. Respondent had no pre-hearing notice of the allegation that Respondent “pre-dated” the delivery receipt and therefore this allegation, even if true, is irrelevant to the allegation that Respondent never explained the free look provision of the three Old Mutual annuities. Petitioner has failed to satisfy its burden of proof with respect to the allegation that Respondent “never explained the ‘free look’ provision of the three Old Mutual contracts.” Petitioner has failed to prove by clear and convincing evidence any violations by Respondent with respect to his dealings with the Langers. Count VI – Gail Shane On February 16, 2012, Gail Shane, who was 65 years old at the time (born June 17, 1946) and an unmarried woman, attended a luncheon seminar conducted by Respondent in Sebring, Florida. At the luncheon, Respondent shared with Ms. Shane information that convinced her that Respondent could place her in an investment product suitable for her needs. Ms. Shane met with Respondent in his Sebring office on March 6, 2012. During this meeting, Ms. Shane explained to Respondent that she was looking for an investment product where she could simply park $5,000 and let it “grow,” and that she was not looking for the investment product to provide her with income. In other words, Ms. Shane wanted an annuity product that would guarantee growth and not reduce her principal investment amount. Per Respondent’s recommendation, Ms. Shane purchased a $5,000 annuity issued by National Western Insurance Company (National Western). Respondent’s commission for this transaction was $500. During the meeting with Ms. Shane on March 6, 2012, Respondent did not explain to Ms. Shane that the National Western annuity contained a yearly withdrawal benefit rider that cost $40.95 per year. According to the annuity contract, the withdrawal benefit rider “provides guaranteed minimum withdrawal benefits . . . in an amount selected by [Ms. Shane on a] semi-annual, quarterly, or monthly payment” basis. At the time of purchase, Ms. Shane did not bother to read the terms and conditions of the annuity product and her omission, coupled with Respondent’s failure to explain to her the inclusion in the policy of the yearly withdrawal benefit rider, resulted in Ms. Shane not knowing that the annuity contained the rider. It was only after Ms. Shane received a statement from National Western that she realized that her annuity contained a rider that she did not need and that was otherwise inconsistent with her investment goals of “growth without principal reduction.” Ms. Shane, upon learning of the existence of the yearly withdrawal benefit rider, immediately notified National Western and directed the company to remove the rider from her annuity. Per Ms. Shane’s request, National Western removed the rider from her annuity policy. Respondent did not have an objectively reasonable basis for believing that Ms. Shane desired to have the yearly withdrawal benefit rider as part of her annuity contract. Paragraph 79(d) of the Administrative Complaint alleges that Respondent never explained to Ms. Shane that the National Western annuity “had huge surrender charge rates and periods, starting at 15% for the first year of ownership and diminishing thereafter until the penalty percentage reached 2% in the thirteenth year of ownership.” As previously mentioned, Ms. Shane’s investment objectives were such that she wanted to park her $5,000 initial investment and let it grow. It is true that Respondent did not explain the surrender charge rates to Ms. Shane. However, his failure to do so is not of legal significance given her stated investment strategy. Paragraph 79 of the Administrative Complaint also alleges that Respondent had Ms. Shane to sign suitability forms that were in many respects blank and that Respondent “completed the forms outside [Ms. Shane’s] presence . . . [and] failed to provide a copy to Ms. S[hane] for her review so that she could discover the falsehoods that were being forwarded to National Western [for] its underwriter’s review.” Specifically, paragraph 79(e) of the Administrative Complaint alleges that “after obtaining Ms. S[hane]’s signature on the annuity suitability form, [Respondent] completed the form outside her presence and indicated therein that she had a net worth of $1,000,000 knowing that [this representation] was completely, utterly, and absurdly false.” Ms. Shane credibly testified that when she met with Respondent on March 6, 2012, her net worth was somewhere in the neighborhood of $258,000; not anywhere near the $1,000,000 that Respondent noted on the suitability form. Petitioner’s Hearing Exhibit 261, p. 803, is the Accredited Investor Acknowledgment Form (Acknowledgment Form) signed by Ms. Shane on March 6, 2012. The first sentence of the Acknowledgment Form provides that “National Western Life Insurance Company is prohibited by Florida Law from selling the annuity for which you have applied to any senior consumer (a purchaser 65 years of age or older) unless that senior consumer is an “Accredited Investor.” The Acknowledgment Form also states the following: Florida law defines an “Accredited Investor” as any person who comes within any of the following categories at the time of the sale of an annuity to that person: The person’s net worth or joint net worth with his or her spouse, at the time of purchase, exceeds $1 million; or The person had an individual income in excess of $200,000 in each of the 2 most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year. The Acknowledgment Form then requires the proposed annuitant to check the appropriate box, sign, and date the form. Respondent checked the box after Ms. Shane signed the form and noted thereon that Ms. Shane’s net worth “exceeds $1 million.” Paragraph 79, subparts (f), (g) and (h), of the Administrative Complaint allege, collectively, that “after obtaining Ms. S[hane]’s signature on the annuity suitability form, [Respondent] completed the form outside her presence and indicated therein that she had an annual income of $50,000.00, . . . liquid assets amounting to $80,000.00, . . . [and] that she owned her own home and that she owned real estate worth $500,000.00, knowing that such information was false.” Ms. Shane credibly testified that in March 2012, her annual income was “closer to $30,000.00,” her liquid assets were “$8,000.00,” she rented and did not own a home, and that her undeveloped real estate was “worth about $50,000.00.” The Acknowledgement Form makes it abundantly clear that the only way that Respondent could sell the National Western annuity product to Ms. Shane was to qualify her as an “Accredited Investor.” In the absence of Ms. Shane being qualified as such, Respondent would not earn a commission. The evidence clearly and convincingly establishes that Respondent willfully misrepresented Ms. Shane’s annual income, net worth, liquid assets, residential status, and real estate holdings so that he could receive a commission for the sale of the National Western annuity.6/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Insurance Agents and Agency Services, enter a Final Order finding that Respondent violated sections 626.611(5), (7) and (9), 626.9541(1)(e)1., and 627.4554(4)(a), Florida Statutes. It is further recommended that the Department revoke his Florida licenses to act as an insurance agent in this state and impose against him a fine in the amount of $140,000. DONE AND ENTERED this 29th day of October, 2014, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 29th day of October, 2014.
Findings Of Fact Respondent Judy Louise Robinson is currently licensed by the Florida Department of Insurance as a general lines agent, a health agent, and a dental health agent and has been so licensed since November 21, 1984. At all times material, Respondent engaged in the business of insurance as Fleming Island Insurer. At all times material, Respondent maintained two business bank accounts in the name of Fleming Island Insurer: Account No. 1740043215 at Barnett Bank in Orange Park and Account No. 11630004614 at First Union Bank, Park Avenue Office. First Union Bank is currently First Performance Bank. All funds received by Respondent from or on behalf of consumers, representing premiums for insurance policies, were trust funds received in a fiduciary capacity and were to be accounted for and paid over to an insurer, insured, or other persons entitled thereto in the applicable regular course of business. Respondent solicited and procured an application for a workers' compensation insurance policy from Linda Smith on September 13, 1989, to be issued by CIGNA. Respondent quoted Ms. Smith an annual workers' compensation premium of two thousand six hundred four dollars and forty cents ($2,604.40). Linda Smith issued her check payable to Fleming Island Insurer in the amount quoted by Respondent on September 13, 1989, as premium payment for the CIGNA workers' compensation insurance coverage. On September 14, 1989, Respondent endorsed and deposited Linda Smith's $2,604.40 check into Fleming Island Insurer's business bank account No. 1740043215 at Barnett Bank, Orange Park, Florida. On September 17, 1989, Respondent forwarded her check in the amount of two thousand six hundred eighty nine dollars and forty cents ($2,689.40) to NCCI ATLANTIC for issuance of a workers' compensation policy with CIGNA for Linda Smith, Inc. The difference between the amount paid to Respondent by Linda Smith ($2,604.40) and the amount paid by Respondent to CIGNA via NCCI ATLANTIC ($2,689.40) amounts to $85.00 advanced by Respondent because she misquoted the premium amount to Linda Smith. On September 17, 1989, Respondent notified Linda Smith that another $85.00 was due. Linda Smith never paid this amount to Respondent. On September 19, 1989, CIGNA issued a workers' compensation policy for Linda Smith, Inc. Respondent's check was thereafter returned to CIGNA due to insufficient funds. On or about October 20, 1989, CIGNA notified Respondent that her agency check had been returned as unpayable and requested substitute payment within ten days to avoid interruption in Linda Smith, Inc.'s workers' compensation insurance coverage. Respondent asserted that she was injured in an automobile accident on October 1, 1989 and could not work through July of 1990 due to chronic dislocation of her right arm, but she also asserted that she never closed her insurance business and operated it out of her home. Respondent's home is the address at which CIGNA notified her on October 20, 1989 concerning Ms. Smith's policy. Respondent failed to timely submit substitute payment to CIGNA, and as a result, Linda Smith, Inc.'s policy was cancelled January 1, 1990. On January 4, 1990, Linda Smith forwarded her own check in the full amount of $2,689.40 directly to CIGNA and her policy was reinstated. Respondent did not begin to repay Linda Smith the $2,604.40 proceeds of Linda Smith's prior check paid to Respondent until May 1991. At formal hearing, Respondent maintained that she was never notified that Linda Smith paid for the policy a second time. Even if such a protestation were to be believed, it does not excuse Respondent's failure to account to either Linda Smith or CIGNA for the $2,604.40, which Respondent retained. Respondent also testified that Barnett Bank's failure to immediately make available to Respondent the funds from Linda Smith's check, which cleared, resulted in Barnett Bank reporting to CIGNA that there were insufficient funds to cover Respondent's check to CIGNA. From this testimony, it may be inferred that Respondent knew or should have known that she owed someone this money well before May 1991. On November 11, 1989, Lewis T. Morrison paid the Traveler's Insurance Company six thousand forty-three dollars ($6,043.00) as a renewal payment on a workers' compensation policy for Morrison's Concrete Finishers for the policy period December 30, 1988 through December 30, 1989. At the conclusion of the 1988-1989 policy period, Traveler's Insurance Company conducted an audit of Morrison's Concrete Finishers' account. This is a standard auditing and premium adjustment procedure for workers' compensation insurance policies. It is based on the insured's payroll and is common practice in the industry. This audit revealed that Morrison's Concrete Finishers was due a return premium of two thousand one hundred fifty-three dollars and eighty- seven cents ($2,153.87) from the insurer. On March 30, 1990, Traveler's Insurance Company issued its check for $2,153.87 payable to Fleming Island Insurer. This check represented the return premium due Morrison's Concrete Finishers from Traveler's Insurance Company. On April 6, 1990, Respondent endorsed and deposited Traveler's Insurance Company's return premium check into the Fleming Island Insurer's business bank account No. 11630004614 at First Union Bank. The standard industry procedure thereafter would have been for Respondent to pay two thousand two hundred forty-eight dollars ($2,248.00) via a Fleming Island Insurer check to Morrison's Concrete Finishers as a total returned premium payment comprised of $2,153.87 return gross premium from Traveler's Insurance Company and $94.13 representing her own unearned agent's commission. When Respondent did not issue him a check, Lewis T. Morrison sought out Respondent at her home where he requested payment of his full refund. In response, Respondent stated that she would attempt to pay him as soon as she could, that she was having medical and financial problems, and that the delay was a normal business practice. Respondent testified that on or about April 19, 1990, in an attempt to induce Mr. Morrison to renew Morrison's Concrete Finishers' workers' compensation policy through Fleming Island Insurer, she offered him a "credit" of the full $2,248.00 owed him. Pursuant to this offer of credit, Respondent intended to pay Traveler's Insurance Company or another insurance company for Morrison's Concrete Finisher's next year's premium in installments from Fleming Island Insurer's account. This "credit" represented the return premium Respondent had already received from Traveler's Insurance Company on behalf of Morrison's Concrete Finishers for 1988-1989 which she had already deposited into Fleming Island Insurer's business account. Whether or not Mr. Morrison formally declined Respondent's credit proposal is not clear, but it is clear that he did not affirmatively accept the credit proposal and that he declined to re-insure for 1989-1990 through Respondent agent or Traveler's Insurance Company. Respondent still failed to pay the return premium and commission which she legitimately owed to Morrison's Concrete Finishers. On June 28, 1990, the Traveler's Insurance Company issued a check directly to Mr. Morrison for the full amount of $2,248.00. Respondent did not begin repaying Traveler's Insurance Company concerning Mr. Morrison's premium until after intervention by the Petitioner agency. At formal hearing, Respondent offered several reasons for her failure to refund the money legitimately due Mr. Morrison. Her first reason was that the district insurance commissioner's office told her to try to "work it out" using the credit method outlined above and by the time she realized this method was unacceptable to Mr. Morrison, he had already been paid by Traveler's Insurance Company. However, Respondent presented no evidence to substantiate the bold, self-serving assertion that agency personnel encouraged her to proceed as she did. Respondent also testified that she did not know immediately that Traveler's Insurance Company had reimbursed Mr. Morrison directly. However, it is clear she knew of this payment well before she began to pay back Traveler's, and since Mr. Morrison did not reinsure through her or Traveler's she should have immediately known the "credit" arrangement was unacceptable to him. Respondent further testified that she did not want to repay Mr. Morrison until a claim on his policy was resolved. However, there is competent credible record evidence that the Traveler's Insurance Company 1988-1989 workers' compensation policy premium refund was governed solely by an audit based on payroll. Mr. Morrison's policy premium or refund consequently was not governed by "loss experience rating", and the refund of premium would not be affected by a claim, open or closed. Thus, the foregoing reasons given by Respondent for not refunding Mr. Morrison's money are contradictory or not credible on their face. They also are not credible because Respondent admitted to Mr. Morrison in the conversation at her home (see Finding of Fact 24) that she was having trouble paying him because of medical and financial difficulties. Further, they are not credible because Respondent testified credibly at formal hearing that she would have paid Mr. Morrison but for her bank account being wiped out by a fraudulent check given her by an unnamed third party. On August 10, 1992, Respondent was charged by Information with two counts of grand theft. See, Section 812.014(2)(c) F.S. The allegations in the Information charged Respondent with theft of insurance premiums from Linda Smith and Lewis T. Morrison, and arose out of the same facts as found herein. On December 17, 1992, Respondent entered a nolo contendere plea to only the first count of grand theft as to matters involving Linda Smith and the other count was "null prossed." Respondent secured a negotiated sentence on the first count. "Grand theft" is a felony punishable by imprisonment by one year or more. Adjudication was withheld pending satisfactory completion of probation, including community service and payment of restitution and court costs. Respondent has been complying with her probation, including restitution payments.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Insurance enter a final order finding Respondent guilty of violations of Sections 626.561(1), 626.611(7), (9), (10), and (13); 626.621(2) and (6) F.S. under Count I, violations of Sections 626.561(1), 626.611(7), (9), (10), and (13), and 626.621(2) and (6) under Count II, and violations of Sections 626.611(14) and 626.621(8) F.S. under Count III, finding Respondent not guilty of all other charges under each count, and revoking Respondent's several insurance licenses. RECOMMENDED this 23rd day of June, 1993, at Tallahassee, Florida. ELLA JANE P. DAVIS 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 23rd day of June, 1993. APPENDIX TO RECOMMENDED ORDER 92-2060 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: As modified to more correctly reflect the whole of the record evidence and avoid unnecessary, subordinate, or cumulative material, all of Petitioner's proposed findings of fact are accepted. Respondent's PFOF: Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint. Sentence 2 is covered in Findings of Fact 4-18. Sentence 3 is accepted but subordinate and to dispositive. Sentence 4 is apparently Respondent's admission that she owed $2,604.40 to Linda Smith and paid her $500.00 of it. Accepted to that extent but not dispositive in that full payment was not made timely. Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint but not dispositive. Sentence 2 is accepted but immaterial. Sentence 3 is rejected as argument and not dispositive. As stated, the proposal also is not supported by the record. Sentence 4 It is accepted that Mr. Morrison admitted he had a claim. However, the record does not support a finding that he requested Respondent to contact Traveler's Ins. Co. about it. Even if he had, that is subordinate and not dispositive of the ultimate material issues. Sentence 5 is rejected as not supported by the credible record evidence. Covered in Findings of Fact 23-28. Sentence 6 is rejected as not supported by the record and as argument. Sentence 7 Accepted. Sentence 8 Accepted. The "Descriptive Narrative" is accepted through page 4, but not dispositive. Beginning with the words "In summary" on page 5, the remainder of the proposal is not supported by the record in this cause which closed April 16. 1993. COPIES FURNISHED: Daniel T. Gross, Esquire Division of Legal Services Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300 Judy Louise Robinson 4336 Shadowood Lane Orange Park, FL 32073-7726 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
Findings Of Fact Respondent, Frank Alvin Lashman (Lashman), was at all times material hereto a licensed insurance agent in the State of Florida. Lashman is qualified for licensure and/or licensed as an Ordinary Life, including Health Agent, Dental Health Care Service Contract Salesman, and Legal Expense Insurance Agent. At all times material hereto, all funds received by Lashman from consumers or on behalf of consumers representing premiums or monies for insurance policies were trust funds received in a fiduciary capacity. Such funds were to be paid over to the insurer, insured, or other persons entitled thereto, in the regular course of business. On or about July 1, 1985, Lashman, as a general agent for American Integrity Insurance Company (American), solicited Martha Lunsford to purchase a medicare supplement insurance policy. On July 31 1985, Lashman secured an application for the subject insurance policy from Ms. Lunsford, and delivered to her a "certification" document which provided: That, I am a licensed agent of this insurance company and have given a company receipt for an initial premium in the amount of $189.20 which has been paid to me by ( ) check (x) cash ( ) money order. The proof establishes that Lashman did not receive the initial quarterly premium of $189.20 from Ms. Lunsford, or give a company receipt for any monies. Rather, Lashman collected $25.00 on July 3, 1985 with the intention of submitting the application to American once he had collected the entire initial premium. Over the ensuing months Lashman visited Ms. Lunsford on a number of occasions to collect the balance due on the initial premium. While the proof is uncontroverted that the full premium of $189.20 was never paid, there is disagreement as to the total amount Ms. Lunsford paid to Lashman. The premium installments Ms. Lunsford paid to Lashman were in cash. Lashman kept no record of the amount or date of payment, and gave no company receipt for the monies collected. The only evidence of payment Lashman provided to Ms. Lunsford was a brief note on the back of his business cards stating the amount received. The last business card he gave to Ms. Lunsford reflects a payment of $60.00, and a balance due of $9.00. On balance, the proof establishes that Ms. Lunsford paid to Lashman $180.20 toward the initial premium of $189.20. Under the terms of Lashman's general agent's contract with American, he was: . . . authorized to solicit applications for insurance for (American), to forward these applications to (American) for approval or rejection, and to collect only the initial premium payment due on such applications. While American averred that Lashman's contract did not permit him to collect the initial premium payment in installments, there is no such prohibition contained in the agreement or proof that Lashman was otherwise noticed of such a prohibition. Accordingly, there is no proof that Lashman committed any offense by collecting the premium in installments, by failing to remit any monies to American until he was in receipt of the full initial premium, or by failing to submit the application to American until the initial premium was paid in full. Although Lashman is free of wrongdoing in the manner in which he strove to collect the initial premium and his delay in submitting the application to American, the proof does establish that Lashman breached a fiduciary relationship by failing to safeguard and account for the monies collected. On November 22, 1985, Ms. Lunsford filed a criminal complaint against Lashman for his failure to secure the subject insurance policy. Incident to that complaint, Lashman was interviewed by a criminal investigator with the State Attorney's Office and served with a subpoena duces tecum which required the production of: ANY AND ALL RECORDS PERTAINING TO THE INSURANCE POLICY SOLD TO . . . MARTHA D. LUNSFORD ON JULY 3, 1985 BY FRANK LASHMAN, ACTING AS AGENT FOR AMERICAN INTEGRITY INSURANCE COMPANY. During the course of his interview, Lashman told the investigator that he had not procured the policy because the initial premium had not yet been paid in full. Lashman further stated that although he kept no records of the payments made, all funds received from Ms. Lunsford had been deposited in his account with Florida National Bank. As of December 20, 1985, Lashman's account with Florida National Bank carried a balance of $5.81. At hearing Lashman averred that he had erred when he advised the investigator that he had deposited the monies he received from Ms. Lunsford in his account with Florida National Bank. According to Lashman, he put the money, as he collected it, into an envelope, which he kept in the file with Ms. Lunsford's insurance papers. Lashman's explanation for not exhibiting the envelope and money to the investigator when questioned was ". . . he didn't ask me for that." Lashman's explanation is inherently improbable and unworthy of belief. On January 12, 1986, the investigator advised Lashman's attorney that a warrant had been issued for Lashman's arrest on the complaint filed by Ms. Lunsford. On his counsel's advice, Lashman sent Ms. Lunsford a cashier's check in the sum of $149.00, as a refund of premiums paid. Ms. Lunsford did not negotiate the check, nor was it of a sufficient sum to represent a return of all premiums paid by Ms. Lunsford.
The Issue Whether the Respondent's license as a limited surety agent should be suspended, revoked or otherwise disciplined based upon the allegations set forth in the Administrative Complaint.
Findings Of Fact Background At all times material to these proceedings, Respondent Harris was licensed as a limited surety agent and continues to be eligible for licensure and appointment in Florida. On June 2, 1988, Respondent executed a bail bond agreement with Indiana Lumbermen's Mutual Insurance Company (Indiana Lumbermen's) as the insurer of the surety bonds, Underwriters Surety, Inc. (Underwriters) as its agent, and Jim Fowler, Jr. d/b/a Fowler Enterprises (Fowler) as its representative indemnitor and supervising representative. Under the terms of the agreement, Indiana Lumbermen's agreed to act as surety on bail bonds solicited and signed in its name by Respondent Harris. In turn, he agreed to charge, collect and remit all bond premiums through Fowler, who has a separate agreement with Indiana Lumbermen's and Underwriters regarding those duties. Additionally, Respondent agreed to hold Indiana Lumbermen's, Underwriters, and Fowler harmless for all bond forfeitures and court costs expended by any of them for bail bonds issued in Indiana Lumbermen's name by him. Because Fowler was also required to indemnify Indiana Lumbermen's and Underwriters against bond forfeitures and court costs resulting from bonds issued by Respondent Harris, a $10,000 mortgage was placed against Respondent's home as collateral for such losses by Fowler. Indiana Lumbermen's and Underwriters also required Respondent Harris to place two per cent of the face amount of each bond in an indemnity fund. The agreement states that after each indemnification is finally determined and satisfied, the remaining portion of the indemnity fund will be delivered to the Respondent or to Fowler. Fowler and the Respondent agreed that when the indemnity fund built up to $25,000.00 in reserved funds, Fowler would release the mortgage. Respondent could also request that the amount of money he was required to place into the indemnity fund for subsequent bond executions be reduced to one per cent of the face of the bonds. After the bail bond agreement was executed by all parties and the Respondent's wife in June of 1988, the bail bonds service office was opened in Tampa, Hillsborough County, Florida. Bond Forfeitures On December 12, 1988, two final judgments were entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-168638 and No. BB1-168639 due to the failure of Charles Douglas, Jr., to appear to answer criminal charges for which the bonds had been issued. Each bond was in the principal amount of $1,000.00 and was issued by Respondent Harris as Attorney- In-Fact for Indiana Lumbermen's. The sum of the two judgments was $2,000.00 and $169.00 and court costs. Warren H. Dawson, attorney for the Defendant, motioned the court to vacate the judgments on January 24, 1989. Instead vacating the judgments, the court stayed the enforcement of the judgments until April 26, 1989. At the chose of the time period, Charles Douglas, Jr., was not located, ad the bond funds were forfeited to the State of Florida for the use and benefit of Hillsborough County. These funds, totalling 2,000.00, were paid to the Clerk of Court by Harry Hamner Enterprises on May 18, 1989, as agent for Fowler. Court costs of $84.50 were paid by Respondent Harris, and $84.50 in court costs remain outstanding. The funds paid to the Clerk of Court on behalf of Fowler were issued to a low Fowler to comply with the bail bond agreement as super representative. Respondent Harris is still obligated to indemnify Fowler for the payment. On December 3, 1990, a remittance of $1,000.00 was given to Fowler because Defendant had been located. As this hearing took place only three days later, it is unknown if a check for the other S1,000.00 was forthcoming to Fowler. If the failure to remit the owner $1,000.00 was an oversight, it could be easily corrected by the Clerk of Court as the location of the Defendant would allow we return of these funds as well. On June 4, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-200214 due to the failure of Ivan R. Jacob to appear in court to answer the criminal charges for which the bond had been issued. The bond was in the principal amount of $1,000.00 and was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The judgment was for $1,000.00 and $84.50 in court costs. Warren H. Dawson, attorney for the Defendant, motioned the court to vacate and set aside the judgment and costs on July 12, 1989. The motion was granted on August 24, 1989, except that the payment of $84.50 in court costs was still required. The outstanding court costs of $84.50 were paid by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's on August 28, 1989. Respondent Harris has not indemnified Indiana Lumbermen's for those funds expended to pay the court costs as required by the bail bond agreement. He is still obligated to do so. On June 14, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-197205 due to the failure of William A. Evans to appear to answer criminal charges for which the bond had been issued. The principal amount of the bond was $500.00. It was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The sum of the judgment was $500.00 with court costs of $84.50. The judgment and court costs were satisfied by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's on August 28, 1939. Respondent Harris has not indemnified Indiana Lumbermen's for the funds expended, as required by the bail bond agreement. On June 21, 1989, a final judgment was entered in Hillsborough County which required the forfeiture of Surety Bond Power No. BB1-197204 due to the failure of Williams A. Evans, Jr., to answer criminal charges for which the bond had been issued. The principal amount of the bond was $500.00, and it was issued by Respondent Harris as Attorney-In-Fact for Indiana Lumbermen's. The sum of the judgment was $500.00 plus court costs of $84.50. On August 28, 1989, the judgment and court costs were satisfied by Rubin C. Bazarte, Bail Bonds, on behalf of Indiana Lumbermen's. Respondent Harris has not indemnified Indiana Lumbermen's for the funds expended, as required by the bail bond agreement. Respondent has not received funds to pay for the bond forfeitures from any source. Bond Net Premiums As part of his duties regarding the issuance of bonds for Indiana Lumbermen's, Respondent was required to regularly report the execution of bail bonds to Fowler and Underwriters. The net premiums were to be paid to either of these agents for Indiana Lumbermen's. According to the business records maintained by Fowler, the Respondent failed to remit the required net premiums owed with reports numbered 35, 36, 37 and 38. The amount of money owed for these premiums is $2,370.00. For April 7, 1989, Rosettia Jacobs paid Respondent $1,000.00 to obtain two bonds for the pretrial release of her son, Andre Hudson. Two bonds, with a face value of $5,000.00 each were executed by Respondent that day. The net premiums for two bonds with a face value of $10,000.00 were listed on bail bond execution report number 36, but the net premium was never paid to Fowler or Underwriters from the cash received from Rosettia Jacobs for that purpose. In July 1989, Melvin Rolfe met with Respondent's son, who represented he could accept funds on behalf of his father for the bail bond business. Melvin Rolfe gave Respondent's son $250.00 for a bail bond in order to obtain the pretrial release of his brother, Joseph Rolfe. Of these funds, $100.00 was for payment of the gross premium and $150.00 was collateral. The bond for $1,000.00 was executed by Respondent on August 1, 1989. The collateral given to Respondent's son was not noted on bail bond execution report number 35. The net premium for the $1,000.00 bond for Joseph Rolfe was not sent to Fowler or Underwriters from the cash delivered by Melvin Rolfe for that purpose. On August 1, 1989, Melvin Hamilton gave the Respondent $250.00 for two bonds in order to obtain the pretrial release of his brother, Mark Hamilton. One bond premium was $100.00 and the other bond premium was $50.00. The additional $100.00 was collateral. Bonds with the total face value of $1,250.00 were executed by Respondent on August 1, 1989. The collateral was not noted on the bail bond execution report number 35, and the net premiums were not sent to Fowler or Underwriters from the funds delivered by Melvin Hamilton for that purpose. On August 4, 1989, Charles Rodriguez paid $350.00 for bond premiums to Respondent in order to obtain the pretrial release of his wife, Tina Dunn. The total gross premium amount was $450.00. Respondent extended credit to Charles Rodriguez and issued three bonds with the total face value of $4,500.00 on August 4, 1989. Although the bonds were issued and noted on bail bond execution report 35, the net premiums were not sent to Fowler or Underwriters from the funds delivered by Charles Rodriguez for that purpose. On September 13, 1989, Fowler, as supervising representative for Indiana Lumbermen's and Underwriters, sent a formal demand to Respondent for the $2,370.00 due for premiums not included with reports numbered 35-38. Respondent has failed to pay any of the funds actually received for those premiums to Fowler, Underwriters, or Lumbermen's. Mitigation Respondent has made some attempts to locate defendants whose bonds have been forfeited to the state. Respondent extended credit to some people seeking bail bonds so he never collected some of the money owed to Indiana Lumbermen's for premiums.
Recommendation Based upon the foregoing, which demonstrates that Respondent misappropriated net bond premiums owed the insurer on four occasions between April and early August 1989, it is RECOMMENDED: The limited surety license of Rudolph Harris, Respondent, be suspended for one year, pursuant to Section 648.49(1), Florida Statutes [1987]. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of February 1991. VERONICA E. DONNELLY 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 February, 1991. APPENDIX TO RECOMMENDED ORDER CASE NO. 90-4689 Petitioner's proposed finding of fact are addressed as follows: Accepted. See HO #1. Accepted. See HO #1. Rejected. Contrary to fact. See #18-#23. Also, irrelevant as to charging document which claimed Respondent misappropriated bond forfeiture funds. Rejected. Irrelevant as to charging document which claim Respondent misappropriated forfeiture funds. See HO $14-#17. Rejected. Contrary to fact. See HO #8-#13. Accepted. See HO #35. COPIES FURNISHED: Gordon T. Nicol, Esquire Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Rudolph Harris 812 E. Henderson Avenue Tampa, FL 33602 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue Whether Respondent's license as a life insurance agent and life and health insurance agent and his eligibility for licensure in the state of Florida should be revoked, suspended or otherwise disciplined.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: At all times material to this proceeding, the Respondent was licensed as a life insurance agent and a life and health insurance agent, carrying Agent Number 262984024, and is currently eligible for licensure. On or about June 11, 1991 Lena B. Pinkerman, an 85 year old widow, residing in Bradenton, Florida, was insured under the provisions of a National Western Life Insurance Company (National Western) Single Premium Endowment Policy Number 0100510100. Policy Number 0100510100 was owned by Arthur Pinkerman, Lena Pinkerman's deceased husband. Lena Pinkerman owned other National Western insurance policies. These policies had been sold to Lena Pinkerman, and apparently also to her husband, by the Respondent. The Respondent's agency with National Western terminated on March 10, 1991. On or before June 11, 1991 Lena Pinkerman requested the Respondent to effectuate the change of beneficiaries on one or more of the policies with National Western. On June 11, 1991 Respondent contacted National Western by telephone requesting the necessary forms for such change. The record of the telephone call to National Western by Respondent kept by National Western indicates that the Respondent requested forms for change of beneficiary and ownership to be sent to Respondent or the insured (Lena Pinkerman). By letter dated June 19, 1991, addressed to Lena B. Pinkerman at Respondent's address, 410 15th Street West, Bradenton, Florida 34205, National Western advised that only policy number 0100510100 would need an ownership and beneficiary change effectuated since it was the only policy owned by Arthur Pinkerman, Lena Pinkerman's deceased husband. The balance of the policies were owned by Lena Pinkerman. On June 24, 1991 Lena Pinkerman signed a letter that the Respondent had printed in ink for Lena Pinkerman's signature advising National Western that she desired to "cash-in" one of her policies to pay off some debts and to send the money to her temporary address, 410 15th St. W., Bradenton, FL 34205. Along with Lena Pinkerman's letter of June 24, 1991, referred to in the above Finding of Fact, National Western received a completed copy of its Policyowner's Change Request and Endorsement of Policy form signed by Lena B. Pinkerman, as the insured, requesting a change in ownership from Arthur Pinkerman to Lena B. Pinkerman. Also along with the June 24, 1991 letter National Western received a completed copy of its Surrender Request signed by Lena B. Pinkerman, as owner, requesting full cash surrender and advising National Western to mail the check to, Lena B. Pinkerman, 410 15th St. W., Bradenton, FL. 34205. Since Lena B. Pinkerman was "cashing-in" the National Western policy, there was no need to change the beneficiary. However, a change in ownership was required and was the reason for submitting the form. Policy Number 010510100 was originally purchased for a single premium payment of $100,000.00 and had a surrender value of $129,525.94 representing an increase in value of $29.525.94. There was testimony that the increase in value would be subject to the federal income tax since the gain had been paid, as well as testimony that since the increase in value was reinvested in a like annuity that it would not be subject to federal income tax at this time. None of this testimony rises to the level of being competent evidence upon which one could rely. Therefore, there is insufficient evidence to determine whether the gain is taxable or not taxable. A check made payable to Lena B. Pinkerman dated July 5, 1991 drawn on National Western in the amount of $125,727.55, the cash surrender value ($129,525.94) minus the amount withheld by National Western for taxes ($3,798.39), was received by the Respondent at the address given in the Surrender Request. The check referred to in the above Finding of Fact was endorsed by Lena B. Pinkerman and below her signature the Respondent wrote "For Deposit only to National Benefit Life". The check was deposited by Benefit Life on July 10, 1991. The Respondent had no control over the account into which the funds were deposited. By application dated July 8, 1991, signed by David R. Thomas as Annuitant and signed by Lena B. Pinkerman, as Owner, with Respondent signing as Agent, a Flexible Premium Deferred Annuity policy number 821962 in the amount of $125,727.55 was issued to Lena B. Pinkerman, as owner, with David R. Thomas, as the Annuitant by Benefit Life. The cash surrender check referred to in the above Finding of Fact deposited to the account of Benefit Life was used to pay the single premium of $125,727.55. The Respondent received $6,286.38 from Benefit Life as a commission on the sale of the policy. The commission paid by Benefit Life to the Respondent did not reduce the amount of the annuity policy issued to Lena B. Pinkerman by Benefit Life. On July 22, 1991, the Respondent prepared a letter printed in ink addressed to National Western requesting that National Western send the taxes withheld on the surrender of policy number 0100510100 to Lena Pinkerman at 410 15th St. W., Bradenton, FL 34205. This letter was signed by Lena Pinkerman. On July 30, 1991 National Western caused to be issued in the name of Lena B. Pinkerman a check in the amount of $3,7978.39 which represented the amount of taxes withheld earlier by National Western for taxes. This check was endorsed by Lena B. Pinkerman, with "For Deposit Only To Financial Benefit" written by the Respondent beneath the signature of Lena Pinkerman. This check was deposited in the Benefit Life account on September 9, 1991. There was no evidence that Respondent caused the delay in this check being deposited by Benefit Life. The amount of this policy was added to the original premium for the annuity policy. Question 7 on the Benefit Life application is addressed to the proposed annuitant and owner asks "Is this annuity applied for to replace any existing insurance or annuity policy?". Both David R. Thomas, the proposed annuitant and Lena B. Pinkerman, the owner, answered "no" to Question 7 and represented their answer to be true and correct to the best of their knowledge and belief by affixing their signatures to the application. The question asked of the agent on the Benefit application is "Do you have knowledge or reason to believe that the annuity applied for by this application will replace or change any insurance or annuity currently in force on the life of the proposed Annuitant?". Respondent answered "No". There was no evidence of any insurance or annuity currently in force on the life of David R. Thomas, the proposed Annuitant, which was being replaced by this annuity policy. There is competent substantial evidence to establish facts to show that Lena B. Pinkerman had knowledge of, and gave informed consent to, all of the Respondent's actions which resulted in Lena B. Pinkerman surrendering annuity policy number 0100510100 issued by National Western and using the funds received to purchase the Flexible Premium Deferred Annuity issued by Benefit Life, including but not limited to, submitting the Policyowner's Change Request And Endorsement of Policy, the Request for Surrender, the letters prepared for Lena Pinkerman's signature by the Respondent including the request to send monies withheld for taxes, the endorsement of all checks and the deposit of those checks with Benefit Life and the application to Benefit Life for the Flexible Premium Deferred Annuity, notwithstanding the testimony of Lena B. Pinkerman and David Thomas to the contrary. There is no evidence that Lena B. Pinkerman suffered any financial loss as a result of Respondent's action. In fact, there was unrebutted testimony that Benefit Life was a more stable company than National Western and the Benefit Life policy would in the long run yield more return for the policyholder than would the National Western policy. When Lena B. Pinkerman made a demand on the Respondent for the return of National Western annuity policy number 0100510100 or the funds received therefrom, the Respondent attempted to work out an arrangement with Benefit Life for the return of the commission which was a condition for the return of the premium payment. Benefit Life would not accept any thing other than full return of the commission before the return of the premium payment. At the time, Respondent was not financially able to return the full commission. There was no duty upon Benefit Life to return the premium or for the Respondent to return the commission since at the time of the demand the ten-day (look-see) waiting period had expired. Additionally, there was sufficient information on the policy and other documents to alert Pinkerman as to who to contact regarding this policy. The main concern of Lena B. Pinkerman was that the gain received on the surrender of National Western policy number 0100510100 would be subject to federal income tax. Although there was evidence to show that Lena Pinkerman did make a trip out of state for a period of time during June or July, 1991, there was insufficient evidence to establish the exact period of time she was out of state.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that the Department enter a Final Order dismissing the Administrative Complaint against the Respondent. DONE AND ENTERED this 21st day of December, 1992, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 21st day of December, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-3634 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all proposed findings of fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner The following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the finding(s) of fact which so adopts the preceding proposed finding(s) of fact: 1(1); 2(2,3); 3(4); 4(5); 5(6); 8,(10); 12(12,13); 13(14,15) and 16(20). Proposed findings of fact 6 adopted in substance as modified in finding of fact 7 with the exception that the act was not with knowledge and consent of Pinkerman which is rejected as not being supported by competent substantial evidence in the record. Proposed finding of fact 7 is accepted in substance as modified in finding of fact 9 with the exception that the amount would be taxable which is rejected as not being supported buy competent substantial evidence in the record. Proposed finding of fact 9 is rejected as not being supported by competent substantial evidence in the record. Proposed finding of fact 10 is adopted in substance as modified in finding of fact 12 with the exception that the act was without the knowledge and consent of Pinkerman which is rejected as not being supported by competent substantial evidence in the record. Proposed finding of fact 11 is rejected as not being supported by competent substantial evidence in the record. The first two sentences of proposed finding of fact 14 is rejected as not being supported by competent substantial evidence in the record, not withstanding Pinkerman's testimony. The third sentence is adopted in substance as modified in finding of fact 15. Proposed finding of fact 15 is rejected as not being supported by competent substantive evidence in the record. 8. Proposed finding of fact 17 is not material or relevant to the conclusion reached in the Recommended Order. Also it is unnecessary. Rulings on Proposed Findings of Fact Submitted by the Respondent The Respondent's proposed findings of fact are set out in eleven numbered paragraphs which addresses each paragraph of the Administrative Complaint and mixes argument, discussion and proposed findings of fact. However, the findings of fact that can be "ferreted out" are adopted in substance as modified in findings of fact 1 through 21. COPIES FURNISHED: Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300 James A. Bossart, Esquire Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Richard Lee Buckle, Esquire 442 Old Main Street Bradenton, Florida 34205
The Issue Whether the proposed rules, 60Z-1.026 and 60Z-2.017, Florida Administrative Code, published in the Florida Administrative Weekly on March 7, 2003 (Volume 29, No. 10, at pages 979-80), constitute an invalid exercise of delegated legislative authority.
Findings Of Fact Petitioner, Florida League of Cities, Inc. (“League”), is a not-for-profit Florida corporation located at 301 South Bronough Street, Suite 300, Tallahassee, Florida 32301. The League is a wholly owned instrumentality of its 405 member cities. The League’s purpose is to work for the general improvement of municipal government and its effective administration in this state, and to represent its members before the legislative, executive and judicial branches of Florida’s state government on issues pertaining to the welfare of its members. The League’s members include 175 cities with pension plans for firefighters established pursuant to Chapter 175; and 184 cities with pension plans for police officers established pursuant to Chapter 185. Petitioner Casselberry maintains a local law pension plan for its firefighters and police officers pursuant to Chapters 175 and 185. Casselberry’s pension plan was in effect on October 1, 1998. Casselberry’s pension plan meets all the minimum benefit requirements of Chapters 175 and 185. Casselberry’s police/fire pension plan provides benefits in addition to or greater than the pension benefits it provides to general employees that cost as much or more than the total amount of premium taxes received by the City of Casselberry. Petitioner Deerfield Beach maintains a local law pension plan for its police officers pursuant to Chapter 185, Florida Statutes. Deerfield Beach’s pension plan meets all the minimum benefit requirements of Chapter 185. Further, Deerfield Beach’s police pension plan provides benefits in addition to or greater than the pension benefits it provides to general employees that cost as much or more than the total amount of premium taxes received by the City of Deerfield Beach. Petitioner Greenacres maintains a local law pension plan for its firefighters and police officers pursuant to Chapters 175 and 185, Florida Statutes. Greenacres’ pension plan meets all the minimum benefit requirements of Chapters 175 and 185. Greenacres’ police/fire pension plan provides benefits in addition to or greater than the pension benefits it provides to general employees that cost as much or more than the total amount of premium taxes received by the City of Greenacres. Petitioner Kissimmee maintains a local law pension plan for its firefighters pursuant to Chapter 175. Kissimmee’s firefighter pension plan meets all the minimum benefit requirements of Chapter 175. Kissimmee’s firefighter pension plan provides benefits in addition to or greater than the pension benefits it provides to general employees that cost as much or more than the total amount of premium taxes received by the City of Kissimmee. Petitioner New Port Richey maintains a local law pension plan for its firefighters pursuant to Chapter 175. New Port Richey’s firefighter pension plan meets all the minimum benefit requirements of Chapter 175, and provides benefits in addition to or greater than the pension benefits it provides to general employees. These benefits cost as much or more than the total amount of premium taxes received by the City of New Port Richey. Chapters 175 and 185, govern the establishment and operation of defined benefit retirement plans for municipal police officers and firefighters employed by cities and special districts. These Chapters also contain a revenue sharing program that allows participating cities and districts to receive a portion of the state excise tax on property and casualty insurance premiums collected on policies covering property within each jurisdiction. In order to qualify for the annual distribution of premium tax revenues provided by Chapters 175 and 185, the local government pension plan must comply with the applicable provisions of those statutes. Sections 175.351(1) and 185.35(1), respectively, of those Chapters were amended in 1999 by Chapter 99-1, Laws of Florida. The two Sections are virtually identical and can be treated interchangeably for the purposes of this proceeding. Section 175.351(1), in pertinent part, reads as follows: PREMIUM TAX INCOME.--If a municipality has a pension plan for firefighters, or a pension plan for firefighters and police officers, where included, which in the opinion of the division meets the minimum benefits and minimum standards set forth in this chapter, the board of trustees of the pension plan, as approved by a majority of firefighters of the municipality, may: Place the income from the premium tax in Section 175.101 in such pension plan for the sole and exclusive use of its firefighters, or for firefighters and police officers, where included, where it shall become an integral part of that pension plan and shall be used to pay extra benefits to the firefighters included in that pension plan; or Place the income from the premium tax in Section 175.101 in a separate supplemental plan to pay extra benefits to firefighters, or to firefighters and police officers where included, participating in such separate supplemental plan. The premium tax provided by this Chapter shall in all cases be used in its entirety to provide extra benefits to firefighters, or to firefighters and police officers, where included. However, local law plans in effect on October 1, 1998, shall be required to comply with the minimum benefit provisions of this chapter only to the extent that additional premium tax revenues become available to incrementally fund the cost of such compliance as provided in Section 175.162(2)(a). When a plan is in compliance with such minimum benefit provisions, as subsequent additional premium tax revenues become available, they shall be used to provide extra benefits. For the purpose of this chapter, ‘additional premium tax revenues’ means revenues received by a municipality or special fire control district pursuant to Section 175.121 that exceed that amount received for calendar year 1997 and the term ‘extra benefits’ means benefits in addition to or greater than those provided to general employees of the municipality. Local law plans created by special act before May 23, 1939, shall be deemed to comply with this chapter. (Underscored language was enacted by Chapter 99-1, Laws of Florida.) The above-quoted underscored language of Sections 175.351 and 185.35 became effective March 12, 1999. The Division of Retirement advised all cities and districts that they could use additional premium tax revenues received in excess of the amount received for 1997 solely to pay for new extra benefits adopted after March 12, 1999. The additional premium tax revenues could not be used to pay for extra benefits adopted before March 12, 1999. Consequently, responsibility for the cost to local governments for extra benefits adopted prior to March 12, 1999, is not defrayed by additional premium tax benefits and must be absorbed by the particular local government. As established by testimony of Respondent's Actuary, Charles Slavin, along with Article X, Section 14 of the Florida Constitution and Part VII, Chapter 112, governmental pension plans must be funded on a “sound actuarial basis.” A plan is actuarially funded when funded by contributions which, when expressed as a percent of active member payrolls or a fixed dollar amount, will remain approximately level from year to year and will not have to be increased in the future, in the absence of benefit improvements. Actuarial funding is based on reasonable assumptions, predictable events and variables so that all the funds necessary to pay employees' future benefits are accumulated by the expected date of benefit payments. A pension plan is funded on a sound actuarial basis when a funding program has been established which, with the payment of level contributions and investment returns over the lifetime of the participants, will fund the difference between the value of expected promised benefits and the available assets. Although pension benefits increase in future years from increased salaries and other facts, pension plans are usually funded on a constant level percentage of payroll. Such funding pays the normal fiscal cost and amortizes unfunded liabilities as required by Chapter 112, Part VII. Payroll growth helps pay for increases in the cost of benefits because employee contributions, based on a level percentage of payroll produce increased funding. Liability increases are offset by payroll growth. Extra benefits for firefighters and police officers in excess of those provided general employees, that were enacted by local governments, prior to or after March 12, 1999, were required by law to be funded on a sound actuarial basis. Premium tax revenues to the local governments are not within the control of those local governments since the amount of tax levied is set by the legislature through statutory enactment. Accordingly, inclusion of future revenues in future years from the premium tax is not a proper actuarial assumption in the funding of extra benefits. Some local governments, despite this categorization of the premium tax revenue, enacted special benefits in reliance upon possible future increases in revenues from the tax to fund special benefits. All local government Petitioners in the present proceeding meet the minimum benefit requirements of Sections 175.162 and 185.16. The cost of extra benefits enacted by Petitioners prior to the effective date of Chapter 99-1 (March 12, 1999), generally exceeded the amount of the premium tax received by Petitioners. Respondent's requirement that Petitioners set aside additional premium tax revenues to fund solely future benefit increases prevented the reduction of future funds for future benefits. Respondent's proposed rules, 60Z-1.026 and 60Z-2.017, are identical with exception that one is applicable to Sections 175.351(1) and 185.35(1), respectively, and read as follows: Use of premium tax revenues: For pension plans that were in effect on October 1, 1998, that have not met the minimum benefit requirements described in Section 185.16, benefits shall be increased incrementally as additional premium tax revenues become available. For pension plans that were in effect on October 1, 1998, that provide benefits that meet or exceed the minimum benefits described in Section 185.16, increases in premium tax revenues over the amount collected for calendar year 1997, must be used in their entirety to provide extra benefits in addition to those benefits provided prior to the effective date of Chapter 99-1, Laws of Florida. For plans that were not in existence on October 1, 1998, premium tax revenues must be used in their entirety to provide extra benefits. Respondent interprets "additional premium benefits" as defined in Sections 175.351 and 185.35 to mean premium tax benefits greater than those received in 1997 and distributed to cities in 1998, prior to enactment of Chapter 99-1. "Extra benefits" means benefits greater than those afforded general employees and in addition to or greater than those benefits enacted prior to the effective date of Chapter 99-1. These definitions presume that amendments in Chapter 99-1 are to be applied prospectively, or after the effective date of that legislative enactment. Extra benefits enacted prior to that date must be funded from premium tax dollars received prior to that date. No evidence was presented by Petitioners of legislative intent that "additional premium tax revenues" should or could be used to fund existing extra benefits enacted prior to Chapter 99-1.
The Issue This is a license discipline case in which the Respondent has been charged by Administrative Complaint with violations of several provisions of Chapter 648, Florida Statutes. All of the violations charged relate to allegations that the Respondent failed to return certain personal property received by the Respondent as collateral security on a surety bond.
Findings Of Fact Facts admitted by all parties The Respondent, Sergio Roque, Jr., is currently licensed in this state as a limited surety agent. At all times relevant to the dates and occurrences referred to in the Administrative Complaint in this matter, the Respondent was licensed in this state as a limited surety agency. On or about July 19, 1990, Respondent, while acting in his capacity as a limited surety agent, did, as agent for Amwest Surety Insurance Company, post a $100,000 general surety appearance bond, power number X00-0-00000331, to obtain the release of defendant Domingo Arrechea from the Dade County Jail. In conjunction with the posting of the aforementioned surety bond, Respondent did on or about July 19, 1990, receive $10,000, which represented the premium payment for said surety bond. Respondent did in conjunction with the posting of said bond receive from indemnitor Lorraine DeVico a diamond engagement ring, a Rolex watch, and the title to a 1979 Mercedes automobile (ID#11602412149348) as partial collateral security for the aforementioned surety bond. On or about April 3, 1991, Respondent did cause to be surrendered back into custody the defendant Domingo Arrechea, thus terminating all liability for said surety bond. Respondent has failed to return to indemnitor Lorraine DeVico the collateral security described above; namely, the diamond engagement ring, the Rolex watch, and the title to the 1979 Mercedes automobile. Additional facts proved at hearing In addition to the collateral described above, the Respondent also received as collateral from the defendant Arrechea, and from the defendant's wife, a conditional mortgage on a condominium. In addition to the collateral described above, the Respondent also received as collateral from "Mike Farina" a conditional mortgage on real estate owned by Mike Farina. Mike Farina was a friend of the defendant Arrechea. "Mike Farina" later turned out to be a fictitious name. Lorraine DeVico was a very close friend of the defendant Arrechea. The Rolex watch Ms. DeVico put up as part of the collateral for Arrechea's bond was a watch that had been given to her by her father. Shortly after Ms. DeVico put the watch up for collateral, her father began to inquire as to the whereabouts of the watch. Because she felt that her father would disapprove of what she had done, and because her father was the source of most of her wealth, Ms. DeVico told several lies to her father about the whereabouts of the watch. As a result of continuing inquiries by her father, Ms. DeVico wanted her watch back and no longer wanted to be responsible under the indemnity agreement she had signed. Towards the beginning of February 1991, Ms. DeVico began to call the Respondent to advise that she was frightened that the defendant Arrechea was considering jumping bond. The Respondent received numerous calls from Ms. DeVico requesting return of her collateral and requesting to be off the indemnity agreement. Consequently, the Respondent hired MV Investigations on February 16, 1991, to locate the defendant Arrechea. On March 27, 1991, Ms. DeVico advised the Respondent that the defendant Arrechea was not answering his digital pager and that his telephone had been disconnected. She advised the Respondent that she sent her employee to look for Arrechea but could not find him. She asked the Respondent to pick up the defendant Arrechea and get her off the bond, agreeing to pay all the expenses. On April 1, 1991, Ms. DeVico again asked the Respondent to pick up the defendant Arrechea and again agreed that she would pay the costs associated with the pick-up. On April 3, 1991, the investigators hired by the Respondent located and picked up defendant Arrechea and surrendered him back to the Dade County Jail. The Respondent returned the collateral deposited by Mr. Farina and by the defendant Arrechea and his wife. After having the defendant Arrechea picked up and surrendered, the Respondent called Ms. DeVico to give her the information and advise her of the pick-up costs. Ms. DeVico verbally refused to pay any pick-up costs. On April 14, 1991, the Respondent sent by certified mail to Ms. DeVico a notice under Section 648.442, Florida Statutes, notifying her that he would be selling her collateral in ten days against his pick-up expenses. The Respondent sold the Rolex watch and diamond ring pledged as collateral by Ms. DeVico after expiration of the ten days. The indemnity agreement signed by Ms. DeVico in conjunction with applying for bail for the defendant Arrechea included the following language: 2. The indemnitor(s) will at all times indemnify and keep indemnified the Company and save harmless the Company from and against any and all claims, demands, liabilities, costs, charges, legal fees, disbursements and expenses of every kind and nature, which the Company shall at any time sustain or incur, and as well from all orders, decrees, judgments and adjudications against the Company by reason or in consequence of having executed such bond or undertaking in behalf of and/or at the instance of the indemnitor(s) (or any of them) and will pay over, reimburse and make good to the Company, its successors and assigns, all sums and amounts of money required to meet every claim, demand, liability, costs, expense, suit, order, decree, payment and/or adjudication against the Company by reason of the execution of such bond or undertaking and any other bonds or undertakings executed in behalf of and/or at the instance of the Indemnitor(s) and before the Company shall be required to pay thereunder. The liability for legal fees and disbursements includes all legal fees and disbursements that the Company may pay or incur in any legal proceedings, including proceedings in which the Company may assert or defend its right to collect or to charge for any legal fees and/or disbursements incurred in earlier proceedings. * * * 7. The Indemnitor(s) agree(s) that the Company may at any time take such steps as it may deem necessary to obtain its release from any and all liability under any of said bonds or undertakings, and it shall not be necessary for the Company to give the Indemnitor(s) notice of any fact or information coming to the Company's notice or knowledge concerning or affecting its rights or liability under any such bond or undertaking, notice of all such being hereby expressly waived; and that the Company may secure and further indemnify itself against loss, damages and/or expenses in connection with any such bond or undertaking in any manner it may think proper including surrender of the defendant (either before or after forfeiture and/or payment) if the Company shall deem the same advisable; and all expenses which the Company may sustain or incur or be put to in obtaining such release or in further securing itself against loss, shall be borne and paid by the Indemnitor(s). In conjunction with applying for bail for the defendant Arrechea, Ms. DeVico also signed a Bail Bond Information Sheet which advised her in bold print that: When all agreements have been fulfilled and bond is discharged, in writing or by the court, and without loss expense on the bond, your full collateral will be returned to you.
Recommendation On the basis of all of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a Final Order in this case to the following effect: Concluding that the Respondent is guilty of the violations charged in the Administrative Complaint, and Imposing an administrative penalty consisting of an administrative fine in the amount of $1,000.00 and a suspension of the Respondent's license for a period of 90 days. DONE AND ENTERED this 12th day of May 1993, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of May 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-4378 The following are my specific rulings on all of the proposed findings of fact submitted by all of the parties. Proposed findings submitted by Petitioner: Paragraphs 1 through 6: Accepted. Paragraph 7: Rejected for two reasons; first, the proposed finding is irrelevant because it is not alleged in the Administrative Complaint, and, second, the proposed finding was not proved by clear and convincing evidence. Proposed findings submitted by Respondent: Paragraphs 1 through 4: Accepted. Paragraph 5: First sentence accepted. Remainder of this paragraph rejected as subordinate and unnecessary details. Paragraphs 6 through 13: Accepted in substance with some details clarified. Paragraph 14: First sentence accepted. Remainder rejected as subordinate and unnecessary details. Paragraph 15: Rejected as constituting procedural details or conclusions of law, rather than proposed findings of fact. Paragraph 16: Rejected as constituting statement of position or legal argument, rather than proposed finding of fact. Paragraph 17: First sentence accepted. The remainder of this paragraph is rejected as constituting conclusions of law or legal argument, rather than proposed findings of fact. Paragraph 18: Rejected as constituting a conclusion of law, rather than a proposed finding of fact. Paragraphs 19 and 20: Accepted COPIES FURNISHED: David D. Hershel, Esquire Department of Insurance Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Martin L. Roth, Esquire Haber & Roth 1370 Northwest 16th Street Miami, Florida 33125 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill, General Counsel Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Respondent, Bobbie Lynn Teddlie, Jr., should be disciplined on charges that he violated various provisions of the Insurance Code in connection with the replacement of an 82-year-old's retirement investments with an annuity.
Findings Of Fact Respondent, Bobbie Lynn Teddlie, Jr., is a Florida- licensed life insurance agent, life and health insurance agent, health insurance agent, and life and health variable annuity contracts salesman. He is not licensed to sell or broker securities. There was no evidence that Respondent previously was subject to license discipline. In May 1998, while he was employed with Senior Estate Services, Respondent visited Genevieve Rathje, an 82-year-old widow and retiree, for purposes of delivering a revocable living trust prepared at her request, having it executed, and listing Rathje's assets that would be subject to the trust. Rathje's 40- year-old son, Larry, one of two beneficiaries under her estate planning arrangements, was at her home when the documents were delivered. After delivery and execution of the trust, Rathje's assets were discussed; they included an Edward Jones securities account, a COVA Financial Life Insurance Company (COVA) annuity, and a SunTrust account. Rathje mentioned that she was not happy about the market risk and fluctuations in the value of the Edward Jones account. Her son concurred. They showed Respondent some recent Edward Jones statements showing the fluctuations and some negative returns. In discussing their concerns, Respondent compared the Edward Jones account to the COVA annuity, with its guaranteed rates of return. Ultimately, Rathje and her son both stated that they preferred the annuity investment. (According to Rathje's deposition testimony, she also had been advised by an estate planning attorney to replace her Edward Jones account, which would be subject to probate on her death, with an annuity.) Respondent then presented an American Investors Life Insurance (American Investors) annuity offered by Senior Estate Services. Rathje and her son decided to liquidate and replace her investments, less approximately $30,000 for capital gains taxes and purchase of a new condominium, with an American Investors annuity. There was no evidence that Respondent misrepresented the American Investors annuity to Rathje or her son; to the contrary, there was convincing evidence that there were no misrepresentations. Nor was there any convincing evidence that Respondent made any misrepresentations to induce Rathje to liquidate her investments to purchase the American Investors annuity. To facilitate the transaction, Respondent arranged to have Rathje's Edward Jones account liquidated through Financial West Group (Financial West), a California securities broker associated with Senior Estate Services. There was no convincing evidence that Respondent made these arrangements against the wishes of Rathje and her son, or without their knowledge and approval. There was no evidence that either Rathje or her son had any complaint about the use of Financial West. Respondent also had Respondent cash in the COVA annuity, less surrender charges. The proceeds, less approximately $30,000 for capital gains taxes and the new condominium, were used to purchase an American Investors annuity. Less than 30 days later, Senior Estate Services went out of business, and Respondent obtained employment with Professional Insurance Systems. Respondent decided to replace the American Investors annuity because his commission was being held, and Respondent did not think it ever was going to be paid to him. In his new employment, Respondent was able to offer Rathje a United Life and Annuity Insurance Company (United Life) annuity, which was superior to the American Investors annuity in several respects. Since the 30-day "free look" period on the American Investors annuity had not yet expired, it was possible to replace it with a United Life annuity without any penalty or surrender charge. Respondent returned to Rathje's home with a more experienced Professional Insurance Systems agent named Phil Mednick to offer the United Life annuity and compare it to the American Investors annuity. Rathje's son was there to participate in his mother's decision, since he was a beneficiary. Respondent's presentation persuaded Rathje and her son that the United Life annuity was superior to the American Investors annuity. Arrangements were made to rescind the American Investors annuity for a full refund and replace it with a United Life annuity. (Respondent's commission on the sale of the American Investors annuity was reversed, so Respondent received no additional compensation by replacing the American Investors annuity with the United Life annuity. To the contrary, he had to split the commission on the United Life annuity with Mednick-- $4,500 each.) At Rathje's request, it was arranged for United Life to pay her monthly interest checks in the amount of $200 (according to Respondent) prior to the "Annuity Commencement Date" (July 28, 2008). There was no evidence that Respondent made any misrepresentations in comparing the two annuities. Two weeks later, Respondent and Mednick returned to Rathje's home to deliver the United Life annuity. Rathje's son, Larry, was there again. During this visit, Rathje expressed dissatisfaction with her IRA account at SunTrust. Respondent and Mednick told them about a Life USA Fixed Index Annuity. Rathje and her son agreed that it was better than the SunTrust account, and arrangements were made to liquidate the SunTrust account and replace it with a Life USA Fixed Index Annuity. Since the IRA was being rolled over, there were no tax consequences. It is not clear from the evidence how or why the complaint against Respondent was filed. Neither Rathje's son, Larry, nor anyone from the Department of Insurance testified. Rathje's deposition testimony was unclear. Apparently, when she was having her income tax return prepared in 1999, she "got a little alarmed" when her "tax man" told her she had no money "in there" (presumably the Edward Jones account). This apparently led to a Department of Insurance inquiry into Respondent's role in these transactions and eventually to a complaint being filed by Rathje. Yet in her deposition, Rathje testified: "I didn't say [Respondent] did anything wrong. I'm not sure if he did." Asked in her deposition what she thought the problem was, Rathje answered: "I don't know. Why ask me?" Rathje also became upset when she requested $2,300 (presumably from United Life) to put new hurricane shutters on her house and, according to Rathje's deposition testimony, was told: "You're already getting $400 a month." (This statement does not make sense and never was explained by the evidence.) Apparently, one basis for the charges against Respondent was that Rathje was not made to understand that the United Life annuity was subject to its own terms regarding withdrawal of funds before the "Annuity Commencement Date," and related surrender charges. But the greater weight of the evidence was that Respondent explained all of this to both Rathje and her son. In addition, it was clearly explained in the annuity documents themselves. It was not proven that Respondent misled Rathje and her son with respect to withdrawal of funds and surrender charges under the United Life annuity. The other basis for the charges against Respondent was the Department's assertion that the liquidation of the Edward Jones account and COVA annuity and their replacement with the United Life annuity patently was to Rathje's financial detriment. (Respondent presented some evidence that the United Life annuity was better than the American Investors annuity, but the Department presented no evidence of the specifics of the American Investors annuity.) According to the March 1998 Edward Jones account statement, Rathje had assets with a total value of $171,329.56. Included in the account were several stock and bond mutual funds, taxable and non-taxable bonds, and a GNMA mortgage-backed security fund. Also reflected on the Edward Jones statement as being held outside Edward Jones was the COVA annuity. These assets are detailed in Findings 11 through 16. The Income Fund of America, Inc. and the Putnam Growth and Income Fund were funds consisting of a mix of stocks and bonds. The Income Fund of America, Inc. had a value of $17,132.97, an unrealized capital gain of $1,323.09, and an estimated annual yield of 4.26%. The Putnam Growth and Income Fund had a value of $15,055.70, an unrealized capital gain of $2,528.96, and an estimated annual yield of 1.59%. The Putnam High Yield Advantage Fund was a taxable bond fund with a current value of $25,928.17, an unrealized capital loss of $1,071.83, and an estimated annual yield of 9.4%. The Putnam Tax-Free Income Trust High Yield Fund was a non-taxable bond fund with a value of $28,131.57, an unrealized capital gain of $818.31, and an estimated annual tax-free yield of 4.88%. As a Class B fund, Rathje could have been assessed a sales charge on the sale of shares of this fund. There were two Van Kampen American Capital Municipal Income Funds. Both were tax-free municipal bond funds. One was a Class A fund, which charges an up-front load on the purchase of shares but no sales charge on the sale of shares; the other was a Class B, which did not charge an up-front load on the purchase of shares but imposed a charge on their sales. The Class A fund had a value of $7,314.69, and an estimated annual tax-free yield of 5.38%. The Class B fund had a value of $15,544.23 and an estimated annual tax-free yield of 4.65%. The unrealized gain or loss of the Van Kampen funds was stated as "not available," probably because the cost bases of the funds were not known. There was a municipal bond issued by the Metropolitan Sewer District of Walworth County, Wisconsin, which had current (maturity) value of $15,000, an unrealized gain of $708.75, and a tax-free yield of 6.3%. There also was a taxable corporate bond issued by the Philadelphia Electric Company with a current (maturity) value of $26,000, an unrealized capital loss of $1,007.50, and an estimated yield of 7.125%. The GNMA fund paid interest of 9.5%. It had a principal value of $1,000 but a current value of $990. The COVA annuity was a five-year fixed annuity in the amount of $10,000 with a current value of $17,814.28. It was issued on May 25, 1990, and was renewed five years later for a second five-year term. As of March 1998, it was paying 6% interest, tax-deferred; this appears to have been the interest rate for the five-year renewal period. The COVA annuity was subject to a 6% surrender charge and an interest (or market) adjustment. At the time the COVA annuity was liquidated, there was a net surrender charge of $780, after credit was given for a positive $202.08 interest adjustment. The United Life annuity ultimately purchased by Rathje also paid 6% interest, tax-deferred, but paid a 1% bonus in addition the first year. On the $120,000 annuity purchased by Rathje, the bonus was worth a total of $1,200. After the first year, interest was subject to adjustment annually but was guaranteed not to fall below 4%. Surrender charges were 10% in the first year, decreasing 1% each year until the eighth year, to 3%, where it would remain until eliminated in year 11. Contrary to the Department’s argument, it was not patently against Rathje’s financial interest to liquidate the Edward Jones investments and replace them with cash (for capital gains taxes and a new condominium) and the United Life annuity. While some of the Edward Jones investments were performing well (and arguably better than the United Life annuity) at the time, it is not clear that all of them were performing that well, and all of them were subject to market fluctuations. Two of the investments were showing unrealized capital losses in March 1998. (Even the individual bonds were subject to the market on a sale before their maturity; the return of the principal only was guaranteed if held until maturity.) It was not patently unreasonable for Rathje to resort to an annuity to reduce her exposure to losses if the market went down. It certainly was not so obvious that the transaction was contrary to Rathje’s financial interests that Respondent, who was not an expert in securities investing, should have refused to participate. Less easily explained was the decision to liquidate the COVA annuity, at a loss of $780 in net surrender charges (after credit for the interest adjustment.) Even taking into account the United Life annuity’s one-time 1% bonus, this only resulted in $174 on the $17,418.77 net surrender value of the COVA annuity on August 5, 1998, for a net loss of approximately $606 on the exchange. It would be five years before the surrender charge on the United Life annuity fell to the 6% surrender charge on the COVA annuity; by that time, the COVA renewable term would have expired, and the value of the COVA annuity could have been reinvested at no surrender charge. There was no basis in the evidence to predict the interest adjustment on the COVA annuity if liquidated later but before expiration of the renewal period. The only apparent financial reason to prefer the exchange of annuities would have been the potential for the United Life annuity to pay more than 6% (on the assumption that the COVA annuity was locked-in at 6% until expiration of the renewal period.) But there also was the potential for the United Life annuity’s interest to decrease to the guaranteed floor of 4%, and preference for such market sensitivity would have run counter to Rathje’s primary stated objective of eliminating market fluctuations. The only other logical reason for Rathje to liquidate the COVA annuity and replace it with United Life would have been to reduce the number of her investments to just one. Respondent testified that Rathje and her son indeed expressed such a desire. Although Respondent omitted this claim in his written statement to the Department (Petitioner's Exhibit 2), there was no evidence to the contrary. In the absence of any coherent complaint by Rathje or her son, Respondent's testimony is accepted as a valid explanation for Respondent's participation in the liquidation of the COVA annuity, even at a net cost of $606. As a result, not only was the evidence insufficient to prove intent to defraud or misrepresent, it also was insufficient to prove negligent analysis of the transaction and improper advice to Rathje. A fortiori, the evidence was insufficient to prove lack of fitness, incompetence or untrustworthiness.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order finding Respondent, Bobbie Lynn Teddlie, Jr., not guilty of the charges alleged in the Administrative Complaint. DONE AND ENTERED this 25th day of May, 2000, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of May, 2000. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Stacey L. Turmel, Esquire 412 East Madison Street, Suite 803 Tampa, Florida 33602 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 2 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
The Issue Whether the Petitioner, Edward J. Miller, is entitled to be licensed as a resident life and variable annuity insurance agent.
Findings Of Fact The Petitioner, Edward J. Miller, is employed at Washington Mutual Bank. His supervisor is Tracy Tarach. It was Ms. Tarach's desire that Mr. Miller become licensed as a resident life and variable annuity insurance agent. To that end, she and Mr. Miller filed the necessary papers with Washington Mutual Bank to approve the application process as well as the course to become licensed. The process of having the bank issue the check to cover the licensing procedure was timely. Additionally, the Petitioner could only be scheduled for the licensure class and completion of the licensing process when the bank took favorable action on the request. Accordingly, for this Petitioner the licensing process was dragged out over the course of several months. In January 2003 the Petitioner completed the state application for licensure but did not transmit it to the state. He submitted the request to the bank for course approval and planned to submit the paperwork when it was successfully completed. At that time, the Petitioner did not have any criminal charges pending against him and the answers noted on the application were all correct and truthful. In February 2003 the Petitioner was stopped for DUI. The next workday the Petitioner went to his supervisor and fully disclosed the arrest as well as the charge. The Petitioner made no effort to hide the arrest from his employer and the employer considers the Petitioner a valuable employee, despite the incident. In March 2003 the Petitioner was formally charged with DUI, a misdemeanor. Meanwhile, the bank approved the Petitioner's request to take the course for licensure. The forty-hour course in another work location required the Petitioner to travel to the school site and reside in a hotel for a week while the course work was completed. Obviously the Petitioner's supervisor was willing to invest the costs of licensure school and accommodations for the Petitioner with full knowledge of the Petitioner's pending criminal matter. After successfully completing the licensure course in April 2003 the Petitioner submitted the license application to the state. He failed to double-check the forms. He failed to correct an answer that was now incorrect. That is, he failed to fully disclose the arrest. Subsequently, the criminal case went to hearing, and the Petitioner entered a plea and was placed on probation. The resolution of the DUI charges was completed after the application was submitted. Section 3 of the license application asks several screening questions of applicants for licensure. Applicants are required to answer "yes" or "no", depending on the information sought. In this case, it is undisputed that the Petitioner failed to correct his answers to the questions posed in Section 3. More specifically, the Petitioner failed to truthfully disclose that he had been arrested for DUI. This failure was an oversight on the Petitioner's part, and not intended to deceive the Department. The answers should have been corrected when the Petitioner amended the application form to include the information regarding his completion of the Gold Coast School of Insurance class on April 11, 2003. He did not do so. When the Department reviewed the Petitioner's application and discovered the false answer, it took action to deny the licensure request. That denial was entered on January 22, 2004. A notice of the denial was provided to the Petitioner and he timely challenged the proposed action. On October 31, 2003, the Petitioner completed all of the terms of his court-ordered probation and the entire DUI incident was put to rest.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a Final Order granting the Petitioner's application for licensure. DONE AND ENTERED this 30th day of July, 2004, in Tallahassee, Leon County, Florida. S ___________________________________ J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2004. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Dana M. Wiehle, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399 Edward J. Miller 6205 Northwest West Deville Circle Port St. Lucie, Florida 34986
