Findings Of Fact The facts in this case are clear and uncontroverted. On or about February 5, 1975, Martin E. Kulok terminated his employment as a mortgage solicitor with ABC Investment Corporation. ABC Investment Corporation wrote and advised the Division of Finance on February 10, 1975, that Kulok had left his employ. On February 5, 1975, Kulok applied for licensure as a mortgage solicitor with Financial Resources Corporation On February 12, 1975, the Division of Finance cancelled Kulok's registration as a mortgage solicitor with ABC. On February 20, 1975, the Division of Finance issued Kulok's license as a mortgage solicitor with Financial Resources Corporation. On February 13, 1975, while unlicensed, Kulok sold what purports to be a first mortgage to Lincoln H. Evans in behalf of Financial Resources Corporation. Kulok has applied for licensure as a mortgage solicitor with Joseph Maddlone, and said application is at issue because the Division of Finance asserts that Kulok's sale to Evans while he was unlicensed between February 12 and February 20 "demonstrates deficiencies in qualities of experience, integrity, and competency" which are essential to the issuance of a mortgage solicitor's license. It is clear that in issuing licenses, the Division of Finance issues licenses to the broker, in this case Financial Resources, and that nothing is forwarded to the mortgage solicitor. Kulok was physically located in Miami, Florida and his broker's office was located in Fort Lauderdale, Florida. Kulok stated that he called his broker frequently to determine what the status of his license was. On February 13, 1975, some eight days after completing his application, his broker advised him that he could go out and sell. On February 13, 1975, Kulok's application was received by the Division of Finance. The apparent basis for requiring issuance of licenses to brokers and requiring brokers to delicense solicitors is that they are more responsible than solicitors. See Subsection 498.04(9)(10), F.S. It appears that in the instant case Financial Resources Corporation was not as responsible as many people, including Mr. Kulok and the Division, thought it was. Fortunately, the issue presented here is not Mr. Kulok's status when his application for licensure had been received but had not been granted by the Division. Under the procedures adopted by the Division of Finance the solicitor is dependent upon the good faith representations of his broker, to whom the Division also looks for control. By inquiring of and being told by his broker that he was able to sell, Kulok did what he could do to determine his status. Certainly he could have done more, but he had no basis to mistrust his broker. Under the facts presented here, there is no evidence that Kulok lacks the "experience, integrity, and competency" to be licensed as a mortgage solicitor, and that is the issue.
Recommendation Based upon the foregoing conclusions of law and findings of fact, the Hearing Officer recommends that Kulok's license be granted. DONE and ORDERED this 6th day of April, 1976. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: James M. Barclay, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Martin B. Kulok 150 S.E. 25th Road, No. 14F Miami, Florida 33129 ================================================================= AGENCY FINAL ORDER =================================================================
Findings Of Fact At all times pertinent to the issues herein the Respondent, Linda H. Abraham, was licensed by the State of Florida as a real estate broker under license number 0323486. During the months of February and March 1983 Martha L. Tew owned a parcel of waterfront property located in Panama City Beach which was identified as being for sale by a sign on the property reflecting her husband's real estate company. Her husband was Ronald Eugene Tew and Mrs. Tew also held a salesman's license. Mr. Tew was contacted by Gregory A. Peaden, a contractor and developer in the Panama City Beach area on several occasions prior to March 1983 with offers to purchase the Tew property. The contacts with Mr. Peaden subsequently culminated in a contract dated March 8, 1983, between Greg Peaden, Inc., and the Tews in the amount of, initially, $180,000.00. During the negotiations for the property, Mr. Peaden had introduced the Respondent to the Tews as his broker. When, at the time of Use contract, Mr. Peaden advised the Tews he wanted Respondent to get a commission for the sale, Mr. Tew refused to pay any commission indicating that Respondent had performed no service for him; that he, Tew, was a broker himself; and that he had no intention of paying any commission to the Respondent or to anyone, for that matter. After some further negotiation, a second contract was prepared and agreed upon wherein the contract price was raised to $189,000.00 and the Respondent's commission was to be paid with the additional money from Mr. Peaden. The contract in question executed by the parties on March 8, 1983, reflected that the sum of $5,000.00 deposit was paid to Linda Abraham, Inc., by check. Mr. Tew contends that at this point he was led to believe that Respondent had the $5,000.00 check and, he contends, he would not have signed the contract if he had known that the check had not been delivered and placed in Respondent's escrow account. The actual signing of the contract took place in Respondent's office, a mobile home which she shared with Mr. Peaden's business. This trailer home was described as having Mr. Peaden's office on one end, and Respondent's on the other, with the living-kitchen area in the middle used as a reception area for both businesses. Mr. Peaden contends that once the contract was signed by the Tews, he gave a check drawn on one of his business accounts, that of Peaden and Guerino, a property management company he owned, to his secretary, Judy White, to deposit in Respondent's escrow account and thereafter promptly forgot about the matter until the date scheduled for closing, two months in the future. Ms. white, on the other hand, contends that Mr. Peaden at no time gave her a check for $5,000.00 to deposit to Respondent's escrow account. It is her contention that when she received the contract after it was signed, she, on her own, inserted the receipt portion on the bottom of the second page and signed as having received it merely to complete the contract. At the time, she contends, she did not know if the deposit was received from Peaden or not. She has never signed a contract like this before without a deposit and cannot give any other reason why she did it on this occasion. She is certain, however, that at no time did Mr. Peaden ever give her a $5,000.00 check or tell her to draw one for his signature on March 8, 1983, or, for that matter, at any time thereafter. What is more, neither Mr. Peaden nor the Respondent, at any time after the signing of the contract and prior to her departure under less than friendly circumstances approximately a week or so later, ever asked her whether she had made the escrow deposit or discussed it with her at all. Ms. white contends that she left Mr. Peaden's employ because he expected her to perform certain functions she was unwilling to do. When she left his employ, she did not feel there was any unfinished business that needed her immediate attention. To the best of her recollection, there were no sales contracts or deposits left in or on her desk - only bills. According to Respondent, the $5,000.00 deposit by Mr. Peaden was to stay in her escrow account. She understood Mr. Peaden was going to arrange with the bank to borrow the entire cash payment called for under the contract, including the deposit, and when that was done, it was her intention to give him back his $5,000.00 check. Under these circumstances, the amount in escrow would never be paid to the sellers but would be returned to Mr. Peaden and the Tews would receive the entire cash amount called for by the contract from the proceeds of the bank loan. Respondent also indicated that this procedure had been followed at least once, in a prior transaction. Under the circumstances, it is clear that no deposit was ever received from Mr. Peaden nor was it placed in Respondent's escrow account. Therefore, the contract, dated on March 8, 1983, was false in that it represented a $5,000.00 deposit had been received. The check for $5,000.00 dated March 8, 1983, payable to Linda Abraham, Inc. and drawn by Mr. Peaden on the Peaden and Guerino account with the stub admitted to show the date of issuance, does not establish that it was written on March 8, 1983, as contended. This check, number 1349, comes after two other checks, 1347 and 1348, which bear dates of April 4 and September 7, 1983 respectively. Mr. Peaden's explanation that the checks were drafted out of sequence is non-persuasive. Of greater probative value is the fact that neither Mr. Peaden nor Respondent bothered to review their bank statements on a regular basis. The check in question was drawn on an account not related to the construction and development business of Greg Peaden, Inc. Further, examination of Respondent's escrow account reflects that there were approximately eleven transactions over a three year period even though, according to her, she handled numerous other closings as well as this. Her explanation is that in most cases the attorney handling the closing served as escrow agent even though she was the sales broker. Her explanation is not credible. This appears to be a classic situation of movement of accounts to satisfy a particular end. The contract called for closing of the sale to be held on or before May 8, 1983, in the office of Panama Title Company. May 8, 1983, fell on a Sunday. As a result, the closing would not have been held that day, but it was not held the following day, Monday, May 9, 1983 either. Mr. Peaden admits that he had not checked with Panama Title prior to May 9 to see if everything was prepared for the closing. Instead, he contacted the title company for the first time at approximately noon on May 9. Apparently he received disquieting information because he thereafter called his attorney, Mr. Hutto, and asked him to check with the title company to see if and when the closing would be held. Mr. Hutto's inquiry reflected that the title insurance binder was ready but the closing statement and the package were not because the title company required a copy of the contract. At this point Mr. Peaden immediately had a copy of the contract delivered to the title company but later that day was advised that the closing still could not be held because of the failure to provide a survey. Mr. Hutto indicates that the reason given was that the release clauses called for in the contract required the survey to be furnished though he did not necessarily agree with that. In any event, closing was not held on May 9. At this time both Mr. Peaden and Respondent allegedly became concerned about the $5,000.00 deposit. Admittedly, neither had concerned themselves with it from the time of the signing of the contract. At this point, Mr. Peaden indicates that he examined his bank records which failed to show the deposit being made and his subsequent search of Ms. White's desk finally revealed the check, undeposited, still there. On May 11, 1983, a $5,000.00 deposit was made to the account on which the deposit check was drawn and on the same day, May 11, 1983 check number 1349, in the amount of $5,000.00 was presented against the account. When on May 10, 1983, Mr. Peaden and Respondent went to Mr. Hutto's office the primary reason for the visit was because Mr. Peaden had heard that the Tews were planning to sell the property in question to someone else at a price much higher than that agreed upon for the sale to Peaden. At this point Mr. Hutto indicated that if Peaden so desired, Hutto could "fix up the contract to jam up the works" until he could do something about it. His examination of the contract revealed that it was not recorded or acknowledged and under the laws of Florida, acknowledgment is required in order for a contract to be recorded. Hutto asked the Respondent if she had seen the parties sign the contract and when she said that she had, he had his secretary prepare a jurat. Unfortunately, his secretary prepared an affidavit type notary jurat rather than an acknowledgment and Hutto quickly admits that he did not look at it when it was given back to him. He says that if he had, he would have had it changed but in any event, without looking at what was given him, he gave it to the Respondent with the implication, at least, that she should notarize it and have the contract recorded. According to Hutto, Peaden, and the Respondent, the sole purpose for notarization and recordation was to preserve the status quo to protect Mr. Peaden's interest in the property so that the matter could be adjudicated in a lawsuit which was soon to be filed. Respondent contends she never intended any misconduct throughout this transaction nor did she do any of the things alleged in the Administrative Complaint. She contends she never saw the check which Mr. Peaden allegedly gave to his secretary for deposit to her escrow account. She merely assumed that it was given and never checked to insure that it had been placed in her account. She does not know why Mr. Peaden did not give her the check. When she took the contract to the Tews, she was operating under the assumption that the check had been received but did not verify this to insure that it had. She contends that since she represented the buyer, her duties were limited to insuring that he performed and this made it simple. She did not check on him because she had had so much experience with him, him being by far her largest account, if he said something, she believed him and when the contract was executed, she merely instructed the secretary, Judy White, to make the file and did not check on it again. As to the recordation and the notarization after the fact, she acted upon the advice of counsel, she states, and did what was suggested to her by Mr. Hutto. It should be noted, however, that Mr. Hutto did not represent her but instead represented Mr. Peaden and while because of her long-standing relationship with him and Mr. Hutto, she may have felt safe in relying on his advice, the fact remains that Hutto was not her attorney.
Recommendation On the basis of the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Respondent's license as a registered real estate broker in Florida be suspended for six months and that she pay an administrative fine of $2,000.00. RECOMMENDED this 6th day of June, 1985, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 1985. COPIES FURNISHED: Arthur Shell, Esquire Department of Professional Regulation Division of Real Estate 400 W. Robinson Street Orlando, Florida 32801 John D. O'Brien, Esquire P. O. Box 1218 Panama City, Florida 32402 Harold Huff Executive Director Division of Real Estate P. O. Box 1900 Orlando, Florida Fred Roche Secretary Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301 Salvatore A. Carpino General Counsel Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301
Findings Of Fact The Petitioner, Lawrence A. Grolemund, has been in the securities business for over 21 years. Except for two complaints--one in 1986 and a second 1988--he has not been the subject of complaint or investigation by the National Association of Securties Dealers (NASD) or any state. He earned a reputation as a successful securities dealer and, as his career progressed, as manager of securities dealership branch offices. As branch manager, one of Grolemund's primary responsibilities was to insure that his office functioned in compliance with applicable state and federal law, and the rules of the NASD. Due to the reputation Grolemund had earned, the Chairman of the Board of Prudential Bache Securities, Inc., personally recruited Grolemund as a branch manager. After a training period, Grolemund assumed duties at the company's New Orleans office in August, 1982. He did not become a registered options principal for the New Orleans office until December, 1982. For several years before Grolemund's arrival, the company's New Orleans office had been a "problem office." A disproportionate share of securities violations occurred in that office, and management had difficulty controlling the associated persons in the office to achieve compliance. Several branch managers who preceded Grolemund had been disciplined by the NASD for inadequate supervision of the office. Grolemund knew some of the problems--he was hired to try to correct them--but he did not know the extent of the problems he would face when he took over. On August 25, 1986, the District 5 Business Conduct Committee filed a complaint against Howard Hampton, E.F Hutton & Company, Inc., Prudential-Bache Securities, Inc., Grolemund and others. The gist of the complaint is that Hampton committed various violations of the Securities and Exchange Act, SEC rules and NASD rules while an associated person with E.F. Hutton and with Prudential-Bache. Hampton was with E.F. Hutton from February, 1981, through August, 1982, and was with Prudential-Bache in the New Orleans office from August, 1982, through February, 1984. The violations involve Hampton's dealings with clients he brought with him from E.F. Hutton to Prudential-Bache. Most of the violations involve the exercise of discretionary power in the accounts of clients without prior written authorization. Some of the alleged incidents occurred while Hampton was at E.F. Hutton. Some occurred while Hampton was at Prudential-Bache but before Grolemund arrived at the New Orleans office. Some occurred after Grolemund arrived but before he became an options principal for the office. In some cases, the information in the file on which Grolemund had to rely was incorrect. Grolemund fired Hampton in December, 1983. (At the time Hampton was fired, no complaints had yet been leveled against Hampton. In fact, all of the clients who ultimately complained against Hampton went with Hampton when he was fired from Prudential-Bache.) Grolemund also fired some other "unsavory" account executives in the New Orleans office. Grolemund was charged, along with other Prudential-Bache options principals, with failure and neglect to establish, maintain, and/or enforce written procedures which would enable Prudential-Bache to exercise reasonable and proper supervision of Hampton and with failure and neglect to supervise Hampton reasonably and properly. Grolemund was represented in the proceedings before the district committee by in-house counsel for Prudential-Bache. Otherwise, Grolemund did not have independent advice of counsel. Prudential-Bache was involved in other proceedings before the SEC which made it in its best interest to resolve the matters arising out of the New Orleans office. For several months, Prudential- Bache tried to convince Grolemund to settle. In addition, Grolemund was concerned whether the District 5 Business Conduct Committee would fairly consider the complaint against him. As part of his successful management of Prudential-Bache's New Orleans office, he competed directly against other securities dealers in the area, some of which were represented on, or had friends who were on, the Committee. When Grolemund came to New Orleans, there were 16 account executives in the office. Under his term of management, after he fired four to five account executives, including Hampton, the New Orleans office grew from 16 to 36 account executives. In addition, Grolemund opened satellite offices in Shreveport and Lafayette, Louisiana. These offices grew in size to 11 and 9 account executives, respectively. Many of the account executives Grolemund added were recruited away from competitors, and he was concerned that there might be hard feelings against him among the members on the Committee. After spending considerable time weighing all factors, Grolemund agreed on or about November 3, 1987, to settle the Hampton matter on terms that included acceptance of a finding that he was guilty of the allegations against him and acceptance of a censure, a 21-day suspension, a requirement that he re- qualify as a registered options principal, and a $7,500 fine. The settlement was reduced to writing in final form on April 25, 1988. As a result of the 21-day suspension, another options principal at Prudential-Bache was required to sign all options agreements during the suspension. Otherwise, Grolemund's job was the same as before the suspension, and Grolemund continued to receive his full normal compensation from Prudential- Bache. Prudential-Bache paid the fine for Grolemund. Re-qualification was a matter of passing a written examination, which did not present a problem for Grolemund. In agreeing to settle, Grolemund misunderstood that the district committee's action would not be the basis of any other proceedings against him. He also misunderstood that the offer of settlement would resolve all pending matters involving the New Orleans office, including the so-called Keel matters. Contrary to Grolemund's understanding, the NASD filed another complaint against Prudential-Bache and Grolemund on May 9, 1988. This complaint, which had been under investigation during the time the Hampton case was proceeding, involved an account executive named Patrick Keel. Like Hampton, Keel was alleged to have exercised discretionary power in the accounts of clients without prior written authorization. He also was alleged to have recommended unsuitable stock and option investments to two clients and to have falsely reported to Prudential-Bache that some of his clients enjoyed profits from the investments he had recommended and made for them, when in fact they had incurred losses. As with the Hampton matter, Grolemund was accused of having failed to establish, maintain, and enforce written supervisory procedures that would have enabled him to exercise proper supervision of Keel and of having failed to properly supervise Keel. The Keel matter went to hearing before the District 5 Business Conduct Committee on August 24-25, 1989. As to what it called Cause One, the Committee found that Keel engaged in unauthorized and unsuitable options transactions in the account of one customer and that Grolemund had failed to supervise Keel properly in connection with the options transactions. Under Cause Two, the Committee found that Keel made unauthorized and unsuitable stock and options transactions in the account of another customer and that Grolemund had ample early warning that Keel was not handling his options accounts properly. The Committee noted that in October, 1984, the customer had lodged complaints regarding Keel's options trading and that Grolemund had daily conversations with a superior concerning problems with Keel's options accounts. The Committee found that, even if Grolemund did not have the benefit of the early warnings of irregularity, his response to the concerns raised by the customer in her December 10, 1984, telephone conversation was inadequate. The Committee found that, given the customer's refusal to sign the activity letter that Grolemund sent her, it was incumbent upon Grolemund to determine whether the customer understood options, whether options transactions were consistent with her financial situation, and whether she had approved the options transactions before their execution. The Committee found that Grolemund did not compile and review the customer's account documentation, which would have revealed that options trading was inconsistent with her objectives and needs and that the customer was only approved for Level II trading although Keel had executed two Level III transactions. Accordingly, the Committee found that Grolemund had violated Article III, Sections 1 and 27 of the Rules of Fair Practice by failing to supervise Keel properly. Under Cause Three, the Committee found that Keel recommended to a customer (the same customer involved in Cause Two) that she commit 25-30% of her net worth to a Hawaiian real estate private placement tax shelter that was not consistent with the customer's needs and objectives. However, the Committee noted that there was conflicting evidence as to whether Grolemund had reviewed the recommendation in light of the customer's personal financial strategy form. Although it was not Grolemund's job at Prudential-Bache to review suitability determinations with respect to private placements, the Committee expressed the view that Grolemund was in the best position to supervise the recommendations of salesmen and that he could not delegate this responsibility to other departments. Accordingly, the Committee found that Grolemund had violated Article III, Sections 1 and 27 of the Rules of Fair Practice under Cause Three. As to Causes Four through Eleven, the Committee dismissed all but two for insufficient evidence. As for the two that were not dismissed, the Committee found that Keel exercised discretion in the accounts of customers without prior written approval and that Grolemund failed to exercise proper supervision over Keel. The Committee reasoned that, by the time at issue, Grolemund had adequate warning of Keel's exercise of discretion without authority and that Grolemund allowed Keel not only to continue options trading but also allowed Keel to continue using special telephone and "bunching" privileges that, in the Committee's view, "greatly facilitated Keel's exercise of discretion." The Committee dismissed Cause Twelve to the extent that it alleged that Grolemund failed to supervise Keel reasonably with respect to the submittal of inaccurate active account information reports by him. The Committee, in its June 21, 1990, decision, censured Grolemund, barred him from associating with any NASD member in any principal capacity and fined him $4,000. Under the bar, Grolemund would not have been permitted to apply for reinstatement for at least ten years. Based on this decision, and the earlier disposition of the 1986 complaint in the Hampton matter, the Department offered to conditionally grant Grolemund's application, prohibiting Grolemund from acting as a principal, supervisor or manager. When Grolemund refused to accept the conditions, the Department denied the application. Grolemund appealed the Committee decision in the Keel matter to the Board of Governors of the NASD. The appeal was heard on October 11-12, 1990. On appeal, the Board reversed the finding that Keel executed out-of-level options transactions. The Board also noted that the record demonstrates a high degree of direct interaction between Grolemund, Keel, Keel's clients, and Prudential-Bache's operations manager and that the firm's records distribution system may have prevented Grolemund from exercising greater supervision over Keel. Because branch managers did not receive copies of customer information relating to limited partnerships, such as the Maui/Waikiki deal, Grolemund had no opportunity to assess the suitability of Keel's customer for the offering, or to compare the documents that Keel had completed in connection with that deal with other account information regarding the customer. The Board also noted that Grolemund engaged in more-than-adequate follow-up with clients following the receipt of complaints and that the customer may have been less than candid regarding her lack of understanding of the investments that Keel recommended for her account. Nonetheless, the Board believed that Grolemund fell short of the standard of reasonable supervision in that it should have been clear to Grolemund that Keel had not been properly trained and lacked a basic understanding of the practices of the securities industry. The well-documented problems that Keel's options trading caused with respect to customers' margins, and Keel's documented confusion of cash and margin accounts, certainly should have put Grolemund on notice that Keel lacked sufficient training to engage in such risky trading strategies as writing options. The Board also thought Grolemund should have inquired why there was no options agreement on file for one customer until after options trading in her account had ceased. The Board concurred with the Committee that Grolemund fell below the standard of reasonable supervision, and thereby violated Article III, Section 1 and 27 of the Rules of Fair Practice. The Board of Governors affirmed the censure and $4,000 fine against Grolemund. However, in light of the various mitigating factors regarding Grolemund's overall conduct, the Board ruled that barring him as a principal was an excessively harsh penalty. Instead, the Board suspended him from acting in any principal capacity for seven days and required him to requalify by examination in all principal capacities. In July, 1985, long before either the Hampton or the Keel complaint was filed, Prudential-Bache promoted Grolemund to the new Tampa office. When Grolemund took over as branch manager, the Tampa office was only nine months old. Grolemund successfully managed the Tampa office until May, 1990, when he applied for registration as an associated person with Advest, Inc. During Grolemund's time as branch manager, the Tampa office grew to 35 account executives. The evidence proved that no violations occurred in the Tampa office during the almost five years that Grolemund was the branch manager there. Since the Hampton and Keel matters, the securities industry has changed remarkably, in part as a result of the October, 1987, stock market crash. Before the crash, options trading generally was viewed as a conservative investment--a way to participate in the market with limited resources and to provide an additional source of income from a conservative investment. The risks of options trading now are widely recognized, and management generally has become sensitive and responsive to those risks. In addition, the data processing and informations systems now in general use in the industry have given management new and effective tools for supervising the activities of account executives. Some of these systems make it impossible for some of the Hampton and Keel violations to occur today. For example, the systems will not process options trades for which there is no record of prior written authorization in the file. For these reasons, it is not likely that activities such as those in which Hampton and Keel were involved in 1981 through 1984 would go undetected today by a manager of Grolemund's caliber or that, detected, they would go unchecked. Advest, Inc., the securities dealer that wants to associate Grolemund to manage its new Clearwater office, is a respectable securities dealer that places reasonably strong emphasis on compliance with the requirements of the various regulatory agencies under which it must operate. It specializes in relatively safe investments, certainly as compared with the activities of the New Orleans office of Prudential-Bache in the early 1980s. Options trading represents only 14 to 15 percent of Advest's total business nationwide. Less than six percent of the business of its new Clearwater office consists of options trading. Advest's compliance department generates a monthly computer report called a "commission versus equity" run which displays the account name and number, the account executive's number, gross commission generated for the month and year, the number of trades for the month and year to date, the amount of cash and securities in the account, and the value of the account in relationship to the trading on a percentage basis. Some variation of the report is provided to the branch managers, to the division managers, and to the branch group manager, with each higher level of management getting more and more information in the report. An options activity report is produced in the Advest compliance department on a daily basis listing all accounts that traded outside their levels, if any, and any accounts that have a trade executed where the appropriate forms are not on file within the allowed period. Advest compliance sends out active account letters to verify customer satisfaction. If the customer does not respond within ten days, a second letter is sent. If the customer does not respond to the second letter within ten days, the account is restricted from further activity. The Advest compliance department reviews all aspects of the branch offices on an annual audit. Compliance then issues a report to the branch manager, the division manager, and the branch group manager. The computer generated commission report would automatically detect a trade executed by a registered representative not assigned to the account for which the trade is completed and would place an asterisk around the account executive number. The manager would then be contacted by the compliance department and asked to explain the discrepancy. In addition to the ordinary compliance procedures in place at Advest, to address the concerns of the Department and other regulatory agencies, Advest proposes several measures to reduce even further the likelihood of violations in the new Clearwater office to which it will assign Grolemund as branch manager. First, it will limit the number of account executives under Grolemund to 15 or less for the first year. Second, it will require another senior registered options principal to supervise the options trading along with Grolemund for the first year. Third, Advest's branch group manager or another Florida branch manager will personally visit Grolemund's office four times during the first year to monitor compliance; during the second year, either he or another Florida branch manager will personally visit Grolemund's office for this purpose at least twice. Fourth, two annual routine compliance monitoring visits will be made, instead of the usual one visit. Finally, the branch group manager personally will review all new account information from Grolemund's office weekly.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Banking and Finance enter a final order granting Grolemund's application for registration as an associated person with Advest, Inc., subject only to the following conditions: First, that Advest limit the number of account executives under Grolemund to 15 or less for the first year; Second, that Advest require another senior registered options principal to supervise the options trading along with Grolemund for the first year. Third, that Advest's branch group manager or another Florida branch manager will personally visit Grolemund's office four times during the first year to monitor compliance and that, during the second year, either he or another Florida branch manager personally visit Grolemund's office for this purpose at least twice. Fourth, that Advest make two annual routine compliance monitoring visits to Grolemund's office, instead of the usual one visit. Finally, that the branch group manager personally review all new account information from Grolemund's office weekly. RECOMMENDED this 21st day of February, 1991, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 February, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-5880 To comply with the requirements of Section 120.59(2), Florida Statutes (1989), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Accepted and incorporated. Rejected in part in that the Department did not consider the order of the Board of Governors of the NASD on appeal from the order of the District 5 Business Conduct Committee on the 1988 "Keel" complaint before giving notice of intent to deny the application. Otherwise, accepted and incorporated. Accepted and incorporated. Rejected in the sense that final action has not yet been taken. As it refers to Department notice of intended action, accepted and incorporated to the extent not subordinate or unnecessary. Accepted and incorporated. Accepted and incorporated to the extent not subordinate or unnecessary. Accepted but subordinate and unnecessary. 8.-10. Accepted but subordinate and unnecessary. Rejected as not proven. Also, subordinate and unnecessary. Accepted but subordinate and unnecessary. First sentence, accepted and incorporated. Second sentence, rejected as not proven exactly when the uniform guidedlines went into effect. Rejected as not proven exactly when the uniform guidedlines went into effect. Accepted and incorporated to the extent not subordinate or unnecessary. 16.-17. Accepted and incorporated to the extent not subordinate or unnecessary. Accepted but subordinate and unnecessary. Accepted but unnecessary. Rejected as not proven that the system was in operation since 1980. 21.-23. Accepted but subordinate and unnecessary. 24. Accepted and incorporated. 25.-28. Accepted and incorporated. 29. Accepted but subordinate and unnecessary. 30.-36. Accepted and incorporated. Rejected as not proven. Accepted but subordinate and unnecessary. Accepted but subordinate to facts contrary to those found and unnecessary. First clause, accepted; second clause, rejected consistent with the NASD orders. Accepted but subordinate to facts contrary to those found and unnecessary. Accepted but subordinate and unnecessary. 43.-46. Accepted and incorporated to the extent not subordinate or unnecessary. Accepted and incorporated in the form of the findings of the Board of Governors of the NASD on appeal from the 1988 "Keel" complaint. Accepted but unnecessary. 49.-50. Accepted and incorporated. 51.-52 Accepted and incorporated to the extent not subordinate or unnecessary. Accepted but subordinate and unnecessary. Accepted and incorporated. Accepted but subordinate and unnecessary. Accepted and incorporated to the extent not subordinate or unnecessary. Accepted and incorporated. Respondent's Proposed Findings of Fact. 1.-2. Accepted and incorporated. Rejected as conclusion of law and unnecessary. Rejected that the orders were entered in 1986 and 1988; otherwise, accepted and incorporated. 5.-7. Rejected as conclusion of law and unnecessary. 8.-12. Accepted and incorporated to the extent not subordinate or unnecessary. Accepted but unnecessary. Accepted that the Committee characterized its decision in those terms by way of explaining why it was just to differentiate between Prudential-Bache and its representatives, including Grolemund, and E.F. Hutton and its representatives. However, in fact, the various dispositions were agreed by the parties. It is unnecessary to include this finding. 15.-18. Accepted and incorporated. 19. Accepted but unnecessary. 20.-21. Accepted and incorporated. 22. Accepted but unnecessary. COPIES FURNISHED: Edward W. Dougherty, Esquire Mang, Rett & Collette, P.A. 660 East Jefferson Street Tallahassee, Florida 32302 Margaret S. Karniewicz, Esquire Assistant General Counsel Department of Banking and Finance Legal Section The Capitol Tallahassee, Florida 32399-0350 Hon. Gerald Lewis Comptroller The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, Esquire General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
The Issue Whether proposed Rule 69O-186.013 is an invalid exercise of legislatively delegated authority as defined in Section 120.52(8), Florida Statutes.
Findings Of Fact Pursuant to Section 20.121(3), Florida Statutes, the Financial Services Commission (the Commission) serves as the agency head for the Office of Insurance Regulation for the purpose of rulemaking. On May 26, 2006, the Office of Insurance Regulation issued a Notice of Development of Rulemaking to amend existing Florida Administrative Code Rule 69O-186.013. A workshop was held pursuant to this notice on June 15, 2006. On August 15, 2006, the Commission approved for publication a notice of proposed rule amendments to Rule 69O- 186.013. A Notice of Proposed Rulemaking was published in the Florida Administrative Weekly on October 6, 2006. A public hearing was held October 31, 2006. On November 22, 2006, a second notice of hearing was published in the "Notices of Meetings, Workshops and Public Hearings" section of the Florida Administrative Weekly, advising of "an additional public hearing on the proposed amendments to Rule 69O-186.013, Title Insurance Statistical Gathering, published on October 6, 2006, in Vol. 32, No. 40, of the F.A.W." A public hearing was conducted as noticed December 5, 2006. Petitioners filed their Petition to Determine Invalidity of Proposed Rule December 21, 2006. On June 7, 2007, the Respondent filed its Motion to Dismiss for Lack of Subject Matter Jurisdiction. Included in its Motion are several statements relevant to the Petitioners' position regarding dismissal of these proceedings: [The December 5, 2006, hearing] of course, was not the "final public hearing," was not noticed as a hearing at which any action would be taken and never intended to be the "final public hearing" as that term is used in Section 120.56(2)(a), Florida Statutes. In fact, the "final public hearing" would have been held before the FSC as the collegial body responsible for rulemaking for the Office. When it is appropriate, the FSC will hold such a "final public hearing" prior to adoption of a proposed rule. As in every other instance in which the FSC intends to adopt a rule, notice will be provided in the Florida Administrative Weekly (sample attached as Exhibit E). In this instance, the final hearing has not yet been held, or even scheduled. * * * 11. Therefore, this case must be dismissed as the Petition to Determine Invalidity of Proposed Rule was untimely filed. The Petitioners may, if they desire, challenge the proposed rule after the final public hearing. Nevertheless, they may not maintain this action at this time. Petitioners have responded to the Motion to Dismiss by consenting to dismissal of these proceedings, "in reliance on representations made by the State of Florida, Financial Services Commission/Office of Insurance Regulation (the Respondent) in paragraphs 5, 6, and 11 of Respondent's Motion to Dismiss for Lack of Subject Matter Jurisdiction (the Motion to Dismiss) filed on June 7, 2007, that no 'final public hearing' within the meaning of Section 120.54 . . . has been held . . . and that no 'final public hearing' shall be held unless Respondent has first provided to Petitioners proper notice and an opportunity to contest the validity of the Proposed Rule." Petitioners assert, however, that the Petition should be dismissed without prejudice, and that should Respondent attempt to promulgate the Proposed Rule without first holding a "final public hearing" with proper notice, they reserve the right to reinstate this proceeding.
Findings Of Fact (Public Portion) Upon consideration of the oral and documentary evidence adduced at the hearing, the following facts are found: On December 8, 1978, the applicants filed their application for a Certificate of Approval of a proposal to purchase or acquire a majority of the outstanding capital stock of the Farmers and Merchants Bank of Trenton, located in Gilchrist County, Florida. The pertinent statutory provision which governs the approval of the acquisition of majority stock or control in an existing bank is as follows: [T]he Department shall issue said certificate of approval only after it has become satisfied that the proposed new owner or owners of the controlling stock or interest are qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner, and that the interests of the stockholders, depositors and creditors of the bank or trust company and the interests of the public generally will not be jeopardized by the proposed change in ownership, interest, and management. F.S. Sec. 659.14(1) With the exception of the application form which has been promulgated as a rule, the Department of Banking and Finance does not have any rules regarding the acquisition of majority control of an existing bank. Mr. Fred Brannen, Jr., Assistant Director of the Division of Banking, testified as to the incipient policy of the Division with regard to applications for majority control. In determining whether the applicant is qualified by character, the Division performs background investigations, checking to see whether there has been any criminal convictions or judgments based on fraud against the applicant, and generally looks to see if the individuals maintain reputations of honesty and integrity, are successful in their own affairs and are therefore entitled to public trust and confidence. In determining whether the applicant is qualified by experience, the Department looks to the biographical information supplied by the applicant. Although it is not necessary that the applicant have direct prior banking experience, the Department looks to see whether the applicant has comparable business experience which would illustrate that the applicant possesses sound business judgment which would facilitate his understanding of banking and banking problems. In determining whether the applicant is qualified by financial responsibility, the Department looks to see whether the applicant has the financial capacity to fund the purchase of the stock without jeopardizing the bank. Specifically, the Department looks at the liquid assets, net worth and income. There are no written standards for determining financial responsibility. Such determinations are made on a case by case basis. In determining whether the interest of the stockholders, creditors, depositors or the public generally is affected, the Department reviews any proposed changes in the policy, management or services of the bank. While recognizing that those stockholders who have agreed to sell their stock have made a business decision and are therefore protected, the Department feels that it has a duty to protect minority shareholders by requiring the proposed purchasers of majority stock to tender an offer to buy all of the stock for the same consideration and terms offered to other shareholders. Purchases for majority stock or control are generally made on a cash basis. While a single application was filed with the Department, the two applicants are both purchasing as individuals, with each applicant contributing equally. There is no written agreement between Mr. Freedle and Mr. Koons with respect to the acquisition of the ownership of the bank. Mr. Freedle received an undergraduate degree from the University of North Carolina in 1963, a law degree from the University of North Carolina in 1965 and a masters degree in tax law from New York University in 1967. He has been a member of the North Carolina Bar since 1965 and was employed as a tax attorney by Coopers and Lybrand from 1967 to 1970. Mr. Freedle is presently a joint owner and president of Janus Corporation and subsidiaries. Janus Corporation has no interests in banks. He is presently serving as chairman of the board, chief executive officer and director of a commercial bank in Corinth, Kentucky, known as the Corinth Deposit Bank of which he owns 46 percent. He is also director and a member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida, and Farmers and Merchants Bank of Trenton, Trenton, Florida. Mr. Freedle formerly served as a director and chief executive officer of Community National Bank of Mt. Gilead, Ohio, and as a director of the Central Bank of South Daytona, Florida. To the best of his knowledge, all information contained in Mr. Freedle's biographical report filed with the Department is true and correct, with the exception that he no longer has an interest in the Community National Bank in Ohio and an agreement presently exists to sell the Central Bank of South Daytona back to the Directors at their cost. Mr. Koons received a B.S. degree in accounting and economics from Pennsylvania State University in 1959 and a degree in corporate finance from the University of Pennsylvania, Wharton School of Finance, in 1964. He was employed by Goldman-Sachs as vice president of corporate finance from 1966 to 1970, and he has worked as an investment analyst for the First Pennsylvania Bank and Trust Company. He is presently a joint owner and executive vice president of Janus Corporation. Mr. Koons presently serves as a director, chairman of the board, and member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida. He owns 46 percent of the Corinth Deposit Bank in Corinth, Kentucky. He serves as a director in the subject Trenton Bank. Mr. Koons formerly served as a director of Community National Bank in Mt. Gilead, Ohio, the Everett Bank in Everett, Pennsylvania, and the Central Bank of South Daytona. To the best of his knowledge, all information contained in Mr. Koons' biographical report is true and correct, with the same exceptions noted above for Mr. Freedle and with the exception that he is now divorced. According to testimony of Mr. Warren Wintaub, a general partner of Coopers and Lybrand who has known the applicants for 13 years and who was qualified as an expert in finance, both applicants have experience in banking and are highly regarded for their expertise in the area of financial affairs. Both are gentlemen of honor and have a high caliber of financial knowledge. Both applicants have taken an active part in the Board of Director meetings of Farmers and Merchants Bank of Trenton and have brought experience and expertise in financial matters to the Board. There have been no complaints by the public about Mr. Freedle or Mr. Koons. The applicants have brought more stability and a wealth of knowledge in financial affairs to the Board of Directors of the Bank of Flagler Beach. The applicants have never been arrested or indicted for a crime; are not under investigation by an agency, police department or other law enforcement agency; have not had a judgment entered against them in a case involving acts of fraud or dishonesty and have no pending litigation against them. The present capital structure of the Farmers and Merchants Bank of Trenton consists of 20,000 outstanding shares of common stock at a par value of $10.00 per share, for a total par value of $200,000.00. In addition, Farmers and Merchants Bank of Trenton has capital surplus in the amount of $550,000.00, and undivided profits in the amount of $195,000.00. Valuation reserves total $65,000.00. There is no preferred stock and there are no capital reserves or capital notes. Thus the total amount of capital is $1,010,000.00. There is no new capital proposed or contemplated at this time if the acquisition is approved. Recent market sales of the stock of Farmers and Merchants Bank of Trenton are not available. No exchange of corporate stock for bank stock has occurred in the past year. The applicants presently do not own any stock in Farmers and Merchants Bank of Trenton and seek to acquire up to 10,000 shares for which no loan or loan commitment has been secured, according to the application. The total shares proposed to be acquired constitute 50 percent or more of the outstanding capital stock of the bank. The applicants will not utilize securities in connection with the proposed acquisition. The proposed sellers of the stock are as follows: Elizabeth S. Hagan 4,481 shares; Carolyn S. Osteen - 200 shares; H.E. Osteen - 2,450 shares; and Helen D. Scott - 2,896 shares. The applicants have agreed to purchase these shares at 130 percent of the book value of the bank as of December 31, 1978. Under the terms of the purchase agreement, 20 percent of the purchase price shall be payable in cash on the date of the sale with four equal annual payments of 20 percent payable on the four succeeding anniversary dates of the initial payment. Two other stockholders have tendered their shares pursuant to the same offer of purchase. These financial arrangements derive a tax benefit to the sellers. The applicants initially offered to purchase all of the outstanding capital stock of Farmers and Merchants Bank of Trenton at 130 percent of the book value of the bank as of December 31, 1978, pursuant to the same terms and conditions offered to the proposed sellers. Subsequently, applicants authorized their counsel to offer to purchase Petitioners' stock at 130 percent of the book value of the bank as of December 31, 1978, payable in cash within six months of obtaining a certificate of approval from the Comptroller. According to the letter from Halley Lewis to L. Peter Johnson, Petitioners authorized their counsel to accept a purchase price of 130 percent of the book value of the bank as of December 31, 1978 plus compensation (dividends and growth), payable in cash within six months after the issuance of a certificate of approval. The latter offer to petitioners has been withdrawn by the applicant. Petitioner Cola H. Lewis, Petitioner Johnny H. Johnson and Petitioner Betty H. Pittman rejected the original offer because it was not a cash offer. They also felt applicants were not financially responsible or of sufficient character because they sought to purchase the stock on an installment basis rather than pay cash. Petitioner Lewis was also concerned that since the applicants do not live in the immediate area of the Trenton Bank, money would be removed from the community. The acquisition of majority control by Freedle and Koons of the Bank of Flagler Beach has not jeopardized the interests of the stockholders, depositors and creditors of said Bank, according to the president of that Bank. Since 1975, when the applicant's purchased their controlling interest, the financial condition of the Corinth Deposit Bank in Kentucky has improved. In accordance with the provisions of Florida Statutes, Sec. 120.57 (1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 19th day of April, 1979, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Comptroller Gerald A. Lewis State of Florida The Capitol Tallahassee, Florida 32301 L. Peter Johnson Post Office Box 59 Jacksonville, Florida 32201 Halley B. Lewis Route 1, Box 337 Bell, Florida 32619 Karlyn Anne Loucks Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING RE: FARMERS AND MERCHANTS BANK OF TRENTON, Application for Authority to purchase or CASE NO. 79-086 Acquire Majority Control by P. Douglas Freedle and Charles R. Koons / FINDINGS OF FACTS, CONCLUSIONS OF LAW AND FINAL ORDER Pursuant to Notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer, with the Division of Administrative Hearings, on March 19, 1979, in Room 106 of the Collins Building, Tallahassee, Florida. The purpose of the hearing was to receive evidence concerning the application of P. Douglas Freedle and Charles R. Koons for a Certificate of Approval to purchase or acquire the majority stock of Farmers and Merchants Bank of Trenton, an existing bank. This Final Order is prepared in two sections, a public section and a confidential section. The confidential section relates to the financial statements of the applicants, and must remain confidential pursuant to Section 658.10, Florida Statutes.
Conclusions When an application for authority to purchase or acquire a majority of the outstanding capital stock of, or controlling interest in any state bank or trust company is filed, it is the applicant's responsibility to prove that the statutory and regulatory factors warranting the grant of authority are met. It is the Department's duty to consider and review the application and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified but is instead conditioned by consideration of the following factors: That the proposed new owner or owners of the controlling stock or interest are qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner (Section 659.14(1), Florida Statutes). That the interests of the stockholders, depositors and creditors of the bank or trust company will not be jeopardized by the proposed change in ownership, interest and management (Section 659.14(1), Florida Statutes). The interest of the public generally will not be jeopardized by the proposed change in ownership, interest and management (Section 659.14(1), Florida Statutes). That the proposed new owner of the controlling stock or interest is not a bank, trust company or holding company, the operations of which are principally conducted outside of the State of Florida, and that each subscriber is purchasing the stock of the said bank in good faith in his own right and not as attorney or agent for any undisclosed person or entity (Section 659.141(1), Florida Statutes). That the proposed new owner or owners of the controlling stock or interest have agreed to purchase all of the outstanding stock of the bank, upon demand at the option of every stockholder thereto, and to pay for same at the same price or consideration paid for any of the stock purchased in connection with the acquisition of the majority interest (Form DBF-C-11, Florida Administrative Code) If, in the opinion of the Department, any of the five foregoing requirements set forth in paragraph one above have not been met, and cannot be remedied by the Applicants, it cannot approve the application. The Department believes that applicants can, at least under certain circumstances, remedy the factors set forth in requirements B, C, and E above, if they are found to be partially inadequate. For example, if all other statutory and regulatory criteria are met, the proposed new owner or owners may be required to enter into an agreement with the Department restricting certain activities of the bank, for the establishment of an escrow fund, for the filing of a bond, for the amendment of the articles of incorporation of the bank or any other restriction that the Department feels necessary to protect the interest of the shareholders, depositors and creditors of the bank as well as the interest of the public in general. Furthermore, it is the Department's policy to allow the applicants to make certain changes to these factors if all other criteria are met; to do otherwise, would be to subject the Applicants to unnecessary red tape. However, it is the Department's position that there is little, if anything, that the applicant or applicants can do to alter the factors set forth in requirement A and D above, since the applicants CANNOT easily change their character, experience and financial responsibility or their status as a foreign bank, trust company or holding company. It is the opinion and conclusion of the Department that, based upon the record, the Applicant is qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner. Therefore, criterion A above IS met. The Applicants have substantial educational qualifications and business experience, and appear to have reputations of honesty and integrity. Both of the Applicants have prior banking experience and extensive backgrounds in financial matters. Their individual net worths indicate that they have the financial capacity to fund the purchase of the stock. In addition,. the record indicates the Applicants are financially responsible in their personal and business dealings. It is the opinion and conclusion of the Department that, based upon the record, the interest of the stockholders, depositors and creditors of the bank or trust company will not be jeopardized by the proposed change in ownership, interest and management. Therefore, criterion B above IS met. The Department of Banking and Finance must look to the current motive and to the future intentions of the proposed owner or owners in taking control of an existing bank. This situation where a few individuals have control over a large amount of assets that belong to others, requires a severe scrutiny by the Department of the proposed takeover. The record indicates that the Applicants have no immediate plans to change the management or the Board of Directors of the Farmers and Merchants Bank of Trenton. The Applicants are presently serving on its Board of Directors and have taken an active part in its meetings, utilizing their experience and expertise in financial affairs. It is the opinion and conclusion of the Department that, based upon the record, the interest of the public in general will not be jeopardized by the proposed change in ownership, interest and management. Therefore, criterion C above IS met. Banking involves a public trust. Unlike private enterprise establishments generally, banks operate on the public's capital and therefore, the legislature has vested with the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a bank, as opposed to the private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community, and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. The Applicants' experience and expertise in banking and financial affairs indicate that they are qualified to continue the operation of the Farmers and Merchants Bank of Trenton in a reasonably successful manner, and thus ensure that the financial resources of the residents in the community will remain stable and safe. It is the opinion and conclusion of the Department that the control of the Farmers and Merchants Bank of Trenton is not being acquired by a bank, trust company or holding company, the operations of which are principally conducted outside of this State and that each subscriber to purchase stock of the said bank is doing so in good faith in his own right and not as attorney or agent for any undisclosed person or entity. Therefore, criterion D above IS met. Section 659.141(1), Florida Statutes, prohibits any bank, trust company or holding company, whose operations are principally conducted out of state, from acquiring or controlling directly or indirectly, all, or substantially all of the assets of a bank in this State. The record shows that the Applicants are purchasing controlling interests in the Farmers and Merchants Bank of Trenton as individuals, each in his own right, and not as agents or attorneys for an undisclosed person or entity. It is the opinion and conclusion of the Department that the proposed new owner or owners have agreed to purchase all of the outstanding stock of the bank, upon demand, and at the option of every stockholder thereof, and to pay for same at the same price or consideration paid for any of the stock purchased in connection with the acquisition of the majority interest. Therefore, criterion E above IS met. It is the duty of the Department of Banking and Finance to protect the interests of the minority stockholders in a bank takeover since they exercise less control in the operations of the bank and are in a position where their interests might not be as equitably represented. Thus, the Department requires that these minority shareholders have the opportunity to sell their interest at the same price and terms as the sellers of the majority control. The Applicants have made an offer to purchase all of the stock of the bank pursuant to the same terms and conditions offered to the proposed sellers.
The Issue The issue is whether Respondent committed unlawful employment practices contrary to Section 760.10, Florida Statutes (2007),1 by discriminating against Petitioner based on her race or color in its failure to promote her or in its decision to terminate her employment.
Findings Of Fact Wal-Mart is an employer as that term is defined in Subsection 760.02(7), Florida Statutes. Petitioner, an African-American female, was hired by Wal-Mart on or about August 26, 2004. At the time of her dismissal, she worked as a Customer Service Manager ("CSM") on the overnight shift, from 10 p.m. to 7 a.m. As a CSM, Petitioner performed various cashiering and supervisory duties at the front end of the store. These duties included conducting cash transactions and making refunds to customers. Petitioner's employment with Wal-Mart was terminated on November 13, 2007, for a category of offense styled "Gross Misconduct--Integrity Issue" related to fraudulent returns. In plain language, Petitioner was alleged to have stolen money from Wal-Mart by issuing "refunds" to nonexistent customers and pocketing the money from the cash register. Wal-Mart has a "Coaching for Improvement" policy setting forth guidelines for progressive discipline. See endnote 4, supra, for a brief description of the disciplinary progression. While the progressive discipline process is used for minor and/or correctable infractions such as tardiness, "gross misconduct" constitutes a ground for immediate termination. The coaching policy explicitly sets forth "theft," "dishonesty," and "misappropriation of company assets" as examples of gross misconduct. Prior to her termination, Petitioner's most recent three progressive "coachings" related to her habitual poor attendance and punctuality. A verbal coaching for misconduct related to attendance/punctuality was issued on January 5, 2007. A written coaching for misconduct related to attendance/punctuality was issued on February 23, 2007. A "decision day" for misconduct related to attendance/punctuality was issued on August 24, 2007, because Petitioner had accumulated six unauthorized absences since the written coaching in February. All of these coachings pre-dated Petitioner's Complaint by more than 365 days. Petitioner conceded that these coachings were unrelated to the reasons for her dismissal from employment. Apart from her unconvincing testimony about an allegedly malfunctioning store time-clock, Petitioner essentially conceded that she had persistent problems arriving on time for work. Petitioner also conceded that, aside from hearsay and rumor on the floor of the store, she had no personal knowledge of anyone else's coachings and thus had no basis for comparing her disciplinary history to that of any other Wal-Mart employee. Wal-Mart's "Promotion & Demotion Criteria" expressly provide that an employee is not eligible for a promotion to management trainee if he or she has an active written coaching. A written coaching is "active" for a period of one year after its issuance, meaning that Petitioner would not have been eligible for promotion to management trainee until February 24, 2008, had she not been discharged on November 13, 2007. Wal-Mart's "Career Preference" system is a computer program that allows employees to express their interest in promotion to other positions. An employee may log onto the Career Preference system and indicate her interest in a particular job. If an employee has not indicated her interest, she is not considered to have applied for the position and will not be considered for that job opening. A printout of Petitioner's Career Preference history was entered into evidence. It indicates that she never applied for a promotion to department manager. On April 13, 2006, Petitioner attempted to indicate her interest in the management trainee program. However, the Career Preference system will allow only qualified employees to indicate an "interest" and thereby be considered for a job; less-than-qualified employees are shown to have an aspirational "goal" of attaining the position. As of April 13, 2006, Petitioner had at least one active written coaching in her employment file,6 had not completed the prerequisites for the management trainee program, and was therefore ineligible for the position. Thus, the Career Preference system did not list her as having an "interest" in the management trainee position and she was not considered for the job. The evidence indicates that Petitioner was not qualified or eligible for a promotion at any time during the 365-day period preceding the filing of her Complaint. Wal-Mart's asset protection coordinators ("APCs") and Market Asset Protection Managers ("MAPMs") work under an entirely different chain of command than those employees involved in store operations. APCs and MAPMs are not involved in day-to-day decisions regarding employee discipline or promotions. Sandra Raines is the APC for Wal-Mart Store 5326, where Petitioner worked. Her job is to supervise and investigate integrity and facility safety issues, including instances of suspected theft by Wal-Mart employees. Ms. Raines reports directly to Melanie Clemons, the MAPM for 12 stores in Market 481, including Store 5326. Ms. Clemons supervises 12 APCs as to their asset protection duties, which includes allegations of internal theft by Wal-Mart employees. As part of her job, Ms. Raines reviews a weekly refund review report. This report provides information regarding suspicious transactions, such as refunds in excess of $50 for which the customer did not provide a receipt. The report provides information necessary to trace the transaction: the operator number of the cashier, the number of the register on which the transaction occurred, and whether the transaction was hand-keyed. It is usual Wal-Mart refund practice to scan the Universal Product Code ("UPC") bar code from the receipt into the register. A "hand-keyed" transaction is one in which the register operator manually overrides the register's protocol and types the information into the register, rather than scanning in the UPC bar code. Ms. Raines testified that, though there are legitimate reasons for using this procedure, a hand-keyed transaction is one of the "red flags" that cause her to look more deeply into a transaction. In the course of reviewing the November 3, 2007, weekly refund review report, Ms. Raines noticed a sale of $963.92 in merchandise at 3:47 a.m. on October 24, 2007, conducted by Petitioner. She also noticed a refund of $212.92 related to that receipt at 3:29 a.m. on November 2, 2007. The refund was hand-keyed. The large amount of the refund, the odd hour at which it occurred, and the fact that it was hand-keyed, combined to rouse Ms. Raines' curiosity. Ms. Raines reviewed the electronic journal, a record of every transaction that takes place in the store. She was able to obtain the original receipt from the October 24, 2007 purchase and the receipt for the November 2, 2007 refund. The refund receipt indicated that the returned item was a recliner chair. Ms. Raines' suspicions became greater as she wondered who would return a recliner at 3:29 a.m., then further intensified when she noted the original receipt showed that no recliner was purchased. Ms. Raines' preliminary review of the refund report and the receipts led her to believe that Catherine Durso, a white female CSM working the overnight shift, conducted the refund transaction. Ms. Durso's operator number was on the refund receipt. Ms. Raines began reviewing store surveillance footage to find visual evidence that Ms. Durso had committed a fraudulent return. Ms. Raines reviewed the video of the original October 24, 2007, sale and saw no recliner. However, she did observe Petitioner printing an additional copy of the sales receipt approximately 11 minutes after the sale. Ms. Raines next reviewed the video of the November 2, 2007 refund transaction. She saw no recliner chair7 and no customers present at the register at the time of the refund. Instead, Ms. Raines saw Petitioner conducting the refund transaction on Ms. Durso's register at 3:47 a.m. Ms. Durso was not to be seen in the surveillance footage of this transaction. Based on all the evidence before her, Ms. Raines concluded that Petitioner hand-keyed a fraudulent cash refund for $212.92, using the UPC code for a recliner chair and the transaction number from the reprinted receipt she had kept from the October 24, 2007 sale. At this point, Petitioner had recorded a cash refund of $212.92 but had not taken any money from the register. Ms. Raines therefore continued to watch the video to "kind of see what's going to happen next." At 6:03 a.m., Petitioner recorded a "no sale" transaction on the same register she had used for the refund. A "no sale" can only be performed by a CSM or a member of management because it involves opening the register drawer without actually recording a sale. A "no sale" is typically used when the cashier needs to change out larger bills for smaller ones. On this "no sale," Petitioner appeared to be merely sorting money. However, Petitioner recorded a second "no sale" three minutes later, at 6:06 a.m. This time, Petitioner removed money from the large-bill slot of the register and concealed the money in a black jacket draped over her left arm. Petitioner admitted removing the money from the register and placing it under her jacket. She claimed that she did so in order to safely move the money from the front of the store to the accounting office in the back. This claim was not credible. Ms. Raines testified that there is never a situation in which a CSM should hide money under a jacket. Wal-Mart provides blue register bags for transporting money and requires their use, for reasons of safety and employee integrity. Based on her observation of the fraudulent return transaction, and the removal and concealment of money from the register drawer, Ms. Raines concluded that Petitioner was stealing money from Wal-Mart. Ms. Raines continued her investigation, and discovered two additional fraudulent returns performed by Petitioner. Both of these returns were hand-keyed, and both used the receipt from the October 24, 2007 purchase. One refund transaction occurred on October 24, 2007, the same date as the purchase. Petitioner hand-keyed a refund for a recliner chair in the amount of $212.92, the same amount as the November 2, 2007 refund. The second refund occurred on October 26, 2007. Petitioner hand- keyed a $249.09 fraudulent refund for a Barbie Jeep, a battery- operated toy car large enough to hold two young children. No Barbie Jeep was purchased on October 23, 2007. For both of these refunds, Petitioner used the same $963.92 receipt from October 24, 2007, that Ms. Raines observed Petitioner reprinting 11 minutes after the actual purchase. Ms. Raines viewed the store video to confirm that no customers were present when these refunds were conducted. She also confirmed that no recliner or Barbie Jeep entered the store on the dates in question. Finally, Ms. Raines observed that on October 13, 2007, Petitioner's register was $300 short at the end of her shift. The surveillance video for that date showed Petitioner performing nine "no sale" transactions. Under the guise of performing an audit of the cash register, Petitioner was removing money from the drawer. Ms. Raines notified her supervisor, Ms. Clemons, of her observations and her conclusion that Petitioner conducted several fraudulent refunds in order to steal money from Wal- Mart. Ms. Clemons reviewed the evidence gathered by Ms. Raines. She reviewed the store videos to verify that Petitioner conducted three fraudulent refund transactions. At the conclusion of her independent review of the evidence, Ms. Clemons was convinced that Petitioner had stolen money from Wal-Mart. Ms. Raines and Ms. Clemons scheduled an interview with Petitioner on November 13, 2007. At this interview, Ms. Clemons terminated Petitioner's employment with Wal-Mart because of gross misconduct. During the interview, Petitioner admitted that she conducted fraudulent returns. She wrote out a statement in her own words: I had a couple of returns that were not actually returns. They were used for emergency personal purposes due to severe hardship and past-due medical bills. To my recollection, it has only started just recently around October 2007 and only 3x's that I remember. I do apologize for the integrity issue and am willing to pay back the 3 that I know and remember. I felt I was pushed over the edge by personnel and corporate or none of this would have happened. Everyone goes through hardships and I guess it was just my turn and that's how I chose to deal with [sic]. Again, I apologize and am willing to repay Wal-Mart, given the opportunity. At the hearing, Petitioner unconvincingly claimed that she was "coerced" into writing the above statement by a promise that Wal-Mart would not pursue criminal charges for the theft if she made a written confession. She claimed that the statement was not true, but was the result of putting herself "in a theatrical acting mode," imagining what would make someone do the things of which she stood accused. This testimony was not credible. Ms. Raines and Ms. Clemons credibly testified that Petitioner was not coerced into admitting her guilt. Ms. Clemons stated that she offered Petitioner the opportunity to write a statement out of adherence to Wal-Mart procedures. Ms. Clemons did not need the statement. She already had all the evidence she needed and would have fired Petitioner whether or not she wrote the statement. Petitioner admitted that she was discharged solely as a result of the investigation performed by Ms. Raines and Ms. Clemons. Petitioner was criminally prosecuted for the theft. She pled guilty and was convicted of grand theft, was sentenced, and paid restitution to Wal-Mart. Petitioner testified that she does not believe and does not contend in this forum that either Ms. Raines or Ms. Clemons discriminated against her because of her race or color. She testified that the discrimination did not involve Ms. Raines and Ms. Clemons: "I was fired by them, but the case of discrimination goes way before that." Even if the time-barred elements of the Complaints were considered, Petitioner provided no evidence beyond her bare assertions that she suffered from discrimination on account of her race or color. She believed that Ms. Durso received favored treatment, not because she was white and Petitioner was black, but because Ms. Durso had relatives in management and friends in the store. Also, Ms. Durso had computer skills that Petitioner lacked, which at times enabled Ms. Durso to sit at a desk in the back of the store while Petitioner did the heavy lifting in the front. Given Petitioner's obvious lack of candor as to the central issue of her termination, the undersigned is reluctant to base tangential findings on Petitioner's word alone. Even if Petitioner's testimony were credited as to the preferential treatment accorded Ms. Durso, Petitioner alleged no motive related to race or color in any of this treatment. Petitioner offered no record evidence that she was qualified for, applied for, and was denied a promotion. To the contrary, the evidence showed that Petitioner kept herself ineligible for promotion under Wal-Mart rules by having written "coachings" on her record for persistent lateness and unapproved absences from work. Petitioner offered no evidence that a similarly situated employee of another race or color committed a similar theft and was not discharged from employment with Wal-Mart. The greater weight of the evidence establishes that Petitioner was terminated from her position with Wal-Mart due to gross misconduct on the job in form of fraudulent refunds that attempted to cover her theft of money from her employer. The greater weight of the evidence establishes that Wal-Mart has not discriminated against Petitioner based on her race or color.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations issue a final order finding that Wal-Mart Stores East, L.P. did not commit any unlawful employment practices and dismissing the Petition for Relief. DONE AND ENTERED this 6th day of April, 2010, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 6th day of April, 2010.
The Issue The issue to be determined is whether Respondent violated Section 475.25(1)(b), Florida Statutes (2006), as alleged in the Administrative Complaint and if so, what penalties should be imposed?
Findings Of Fact Petitioner is the agency responsible for licensing and regulation of real estate brokers, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. At all times relevant to these proceedings, Respondent Maria V. King, has been a licensed Florida real estate broker, issued license number 662452 in accordance with Chapter 475, Florida Statutes. Her address with the DBPR is 900 Cesery Boulevard, Suite 107, Jacksonville, Florida 32211. Charles Wettstein was the listing broker for the property located at 3216 Randall Street, Jacksonville, Florida 32205 (subject property) for the owner/seller, Abdul R. Elsharif. The subject property was listed on the MLS for $269,900. A representative of Developing Entrusted Capital Counseling, LLC (DECC or buyer), came to the Respondent’s office and indicated that she wanted to purchase the subject property. On or about December 2, 2006, Respondent, on behalf of DECC, forwarded an offer to Wettstein for the property with a purchase price of $410,000. The offer was contingent on the following conditions: (1) buyer to choose closing agent; (2) an appraised value of $410,000; (3) satisfactory WDO and 4 point inspection; (4) assignable contract; and (5) an acceptance of a (legal) addendum between the buyer and seller only. In the cover letter sent by Respondent to Wettstein, Respondent states that there will be an assignment fee comprising the difference between the appraised value and sale price ($410,000 and $269,900). The cover letter also states that the MLS will need to be changed to the contract price of $410,000, which is usually done after an appraisal of the property, and that the appraisal would be paid for by the buyer and done immediately after the contract is signed. Respondent advised the buyer's representative that she was offering much more than the listing price for the property. Respondent testified that the buyer represented to her that the buyer was aware of the listing price, but that she had done her homework and she knew what she was doing in offering the price of $410,000. Respondent also testified that the proposed addendum to the contract and the assignment documents were given to her by the buyer. The buyer represented to Respondent that she had legal counsel who had advised her regarding the assignment and other stipulations in the contract. All documents given to her by the buyer, including the addendum to the contract, were not concealed from the seller and were in fact, submitted with the offer to the listing agent, Wettstein. Respondent was not involved in obtaining a mortgage for the buyer or doing an appraisal of the subject property, and did not intend to perform either function. Respondent did not benefit from this transaction, other than the potential commission based upon a sale price of $410,000, as opposed to the listed price of $269,900. Respondent had concerns about the purchase price but was following the instructions of her buyer. Respondent sent all documents, including the addendum and the assignment documents, to the seller because she was aware that he had an attorney who would be looking at the information sent. Respondent informed the buyer that she would submit all documents to the listing agent and her reasons for doing so. She also informed the buyer that she would only do the contract for the purchase of the subject property. Respondent did not think that the subject property would appraise for $410,000 as required by the conditions of the contract. In other words, Respondent doubted the actual sale would go through. The offer communicated by the Respondent to Wettstein, was presented to the seller and rejected. A mortgage loan was not obtained and an appraisal was not completed on the subject property in connection with the offer by DECC. Any appraisal of the subject property would have been arranged by the lending institution as opposed to Respondent, and would not have been performed by Respondent. Respondent was aware that the MLS for Duval County documents a history of the MLS listing prices. Respondent testified that based on her understanding of Duval County policy, the listing price of the subject property can only be increased if a legal, legitimate appraisal is submitted or seen by MLS. Therefore, if the subject property appraised for $410,000, and the listing price was changed as a result, the MLS would show the property’s previous listing price of $269,900.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That the Florida Real Estate Commission enter a Final Order dismissing the Administrative Complaint in its entirety. DONE AND ENTERED this 24th day of February, 2010, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 24th day of February, 2010. COPIES FURNISHED: Daniel Villazon, Esquire Daniel Villazon, P.A. 1420 Celebration Boulevard, Suite 200 Celebration, Florida 34747 Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Thomas W. O'Bryant, Jr., Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
