The Issue The issues in this case are whether Respondent violated sections 626.611(7), 626.611(9), 626.611(16), 626.621(2), 626.621(6), 626.9541(1)(e)1., 626.9927(1), 626.99275(1)(b), and 626.99277(6), Florida Statutes (2003),1/ and, if so, what discipline should be imposed.
Findings Of Fact At all times material to the Administrative Complaint, Mr. McCloskey was licensed in Florida as an insurance agent. He currently is licensed as a life and variable annuity agent and health agent, life and variable annuity insurance agent, life insurance agent, life and health insurance agent, non-resident life and health and variable annuity agent, non-resident life insurance agent, and a general lines insurance agent. He has been working in the insurance business for approximately 24 years. No prior disciplinary actions have been taken against Mr. McCloskey. In the latter part of 2003, a representative from Mutual Benefits Corporation (Mutual Benefits) visited Mr. McCloskey to discuss the offering of Mutual Benefits' viatical settlement products to Mr. McCloskey's clients. A viatical settlement (viatical) is the purchase of an interest in the death benefits of a life insurance policy for an economic benefit. Mr. McCloskey was not familiar with viaticals. He checked on Mutual Benefits by researching Mutual Benefits on the internet. He called the Department's predecessor, the Department of Insurance, and also looked on the Department of Insurance's website. When he contacted the Department of Insurance, he was advised that viaticals were regulated by the Department of Insurance. Everything that he learned led him to believe that Mutual Benefits was a legitimate business. Mr. McCloskey also called the office of Mutual Benefits and talked to representatives who seemed to be familiar with insurance products and who answered questions that he had concerning Mutual Benefits. After researching Mutual Benefits, Mr. McCloskey decided to offer viaticals from Mutual Benefits to his customers. On October 9, 2003, Mr. McCloskey entered into a Sales Representative Agreement with Mutual Benefits. The agreement contained the following provision: Representative [Mr. McCloskey] hereby warrants to MBC that he/she has obtained and holds valid and current securities and/or insurance licenses that are required by the law of a prospective purchaser's and Representative's respective state of residence, if any, to market, solicit, offer, or sell viatical or life settlements to that prospective purchaser. Mr. McCloskey understood that he would be selling the viaticals pursuant to his life insurance license. Mr. McCloskey understood that there were many other insurance agents in Florida who were selling Mutual Benefits' viatical products. When Mr. McCloskey sold a viatical from Mutual Benefits, he received a commission. The total percentage of his income derived from the sale of viaticals was approximately five percent of his total business income. The viatical settlement purchase agreement forms at issue in this case had been approved for use by the Department of Insurance on February 5, 2002. The viatical settlement purchase agreements provided: This Agreement covers the purchase of an interest in the death benefit of a life insurance policy or policies insuring the life of persons who are either terminally ill or have an estimated life expectancy of 72 months or less. * * * WHEREAS, both parties understand and agree that neither Mutual Benefits Corp., nor any representative of Mutual Benefits Corp., is in any way acting as an insurance agent, broker, dealer, or representative, or a securities broker, dealer or representative, and the parties further agree that this transaction does not constitute the offer for sale or the sale of a security. * * * The only benefit the Purchaser will receive pursuant to this Agreement will be payment of the agreed portion of the death benefit upon maturity of the life insurance policy(ies). Policies are priced at a discount of the death benefit which depends on the projected life expectancy of each insured. Mutual Benefits Corp. makes no representation or warranty as to the specific date when a policy will mature. The return realized by the Purchaser does not represent an annual return. An annual return cannot be determined until the policy(ies) in which the Purchaser obtains an interest matures. * * * Purchaser hereby represents and warrants that he/she is sophisticated in financial matters and/or has access to professional services, has adequate means for providing for current financial needs and possible personal contingencies, and also acknowledges that once the policy closes the funds committed are not liquid and the funds are not available until the policy matures. Purchaser hereby also acknowledges that the life expectancy(ies) provided by the reviewing physicians are only estimates. Mutual Benefits Corp. does not make any warranties regarding the accuracy of these estimates. Purchaser further acknowledges that the policy may mature before or after the projected life expectancy. Purchaser also represents that he/she is able to bear the risk of the purchase of a policy(ies) for an indeterminate period and will only commit himself/herself to a purchase which bears a reasonable relationship to his/her net worth. * * * This agreement is voidable by the Purchaser at any time within three (3) days after the disclosures mandated by Florida Statute § 626.99236 are received by the Purchaser. * * * Pursuant to the terms of the Viatical Settlement Purchase Agreement, Mutual Benefits Corp. will escrow with a trustee funds for future premium payments for a minimum of the projected life expectancy of the insured, or longer at the company's discretion, and has agreed that the interest on those funds and any unused premiums may be retained as a reserve for payment on those policies where the insured outlives his/her projected life expectancy. Additionally, Viatical Services, Inc., a company the Purchaser may select to perform post closing services, has agreed to establish a premium reserve account to pay unpaid premiums for those policies that exceed their projected life expectancy if the above referenced trustee premiums are ever exhausted. Viatical Services, Inc.'s agreement to pay any unpaid premiums is limited to the exhaustion of the funds in its premium reserve account. In the event the trustee and Viatical Services Inc.'s respective premium reserve accounts are exhausted, the Purchaser may be responsible for a payment of his/her pro rata share of any unpaid premium. In the event the Purchaser is required to pay premiums, such payments will reduce the fixed returns referenced above. * * * The purchase of the death benefit of one or more life insurance policies should be not be considered a liquid purchase. While every attempt is made to determine the insured's life expectancy at the time of purchase, it is impossible to predict the exact time of the insured's demise. As a result, the Purchaser's funds will not be available until after the death of the insured. It is entirely possible that the insured could outlive his/her life expectancy, which would delay payment of the death benefits under the Viatical Settlement Purchase Agreement. Mutual Benefits estimated the life expectancies of the insureds and determined which policies would meet the estimated life expectancies chosen by the purchasers. The choice of which policies would be purchased would be done after the closing of the purchase agreement between the purchaser and Mutual Benefits. Mutual Benefits would provide the medical records of the insureds to the purchasers after the execution of the purchase agreement. In some instances, the purchasers would not be purchasing a full interest in the insurance benefits, but would be one among others who were purchasing interests in a specific insurance policy. Mutual Benefits would determine the amount that needed to be escrowed for the payment of future premiums, and the escrow agent would disburse the funds for the premiums as they came due. The viaticals offered by Mutual Benefits were investment contracts that were required to be registered in accordance with chapter 517. At the time that Mr. McCloskey offered the viaticals to his clients, he did not understand that the viaticals could be considered as securities which had to be registered. Neither Mutual Benefits nor Mr. McCloskey was registered with the Office of Financial Regulation (OFR) of the Financial Services Commission at the time the viaticals at issue were sold. In December 2003, George Bode, who was retired and approximately 74 years old, saw a newspaper advertisement placed by Mr. McCloskey concerning various types of investments. Mr. Bode contacted Mr. McCloskey and made an appointment to meet with Mr. McCloskey at his office in Melbourne, Florida, to discuss potential investments for Mr. Bode. One of the types of investments that was discussed was viaticals. Mr. McCloskey never represented that viaticals were securities and made no guarantees concerning the outcome of the purchase of viaticals. Mr. Bode understood that there was some risk involved in the purchase of the viaticals and that the insured might not die within the estimated life expectancy. Mr. Bode was also aware that he might have to pay additional funds for premiums depending on the longevity of the insured. On December 9, 2003, Mr. Bode entered into a Viatical Settlement Purchase Agreement with Mutual Benefits. The purchase price was $10,000.00. The estimated life expectancy of the insured was 36 months. The rate of return if the insured died within the 36 months was 42 percent. The insured did not expire within the estimated 36 months, and Mr. Bode was required to pay for additional premiums for the viaticated insurance policy after the expiration of the 36 months. Sometime in November 2003, Alan Clemente (Mr. Clemente) saw an advertisement placed in a newspaper by Mr. McCloskey. The advertisement was for annuities. Mr. Clemente went to Mr. McCloskey's office to discuss possible investments. Mr. Clemente told Mr. McCloskey that he had lost $100,000.00 with a financial planner and was looking for a safe investment. Mr. McCloskey talked with Mr. Clemente about several types of products that his agency offered, including annuities, certificates of deposit, and viaticals. Mr. Clemente was not interested in certificates of deposits, but was very interested in annuities, such as Mr. McCloskey had advertised in the newspaper. Mr. Clemente was also interested in viaticals, and Mr. McCloskey made a presentation to Mr. Clemente concerning viaticals. Mr. Clemente did not make a purchase at the first meeting with Mr. McCloskey. A few weeks after his initial visit with Mr. McCloskey, Mr. Clemente came to Mr. McCloskey's office and purchased an annuity for $50,000.00. The annuity policy was delivered to Mr. Clemente on December 5, 2003, at Mr. McCloskey's office. When Mr. Clemente came to pick up his annuity policy, he again discussed viaticals with Mr. McCloskey. Mr. Clemente understood that a viatical was the purchase of an insurance policy of someone who was terminally ill and when the person died that he would get his money back plus a return on the investment depending on when the person died. He wanted to invest in a viatical for which the insured's life expectancy was estimated at three years, which would result in a 42 percent return on his money. He also understood that he would be responsible for the payment of the premiums on the policy until the insured died. Mr. McCloskey went over the Viatical Settlement Purchase Agreement with Mr. Clemente. He told Mr. Clemente that he thought it was a good investment. Mr. McCloskey never guaranteed that Mr. Clemente would get a 42 percent return on his money. Mr. McCloskey told Mr. Clemente that "in the last ten years that no one [had] lost any money in the contracts, principal and interest, and no one [had] to pay premiums." Mr. Clemente entered into a Viatical Settlement Purchase Agreement with Mutual Benefits on December 5, 2003. The purchase price was $20,539.00 for two policies for insureds whose life expectancies were estimated to be three years. The return listed in the policy was 42 percent. This return was conditioned on the insureds dying within the three-year period. Mr. Clement initialed each page of the agreement and signed the agreement. Additionally, Mr. Clemente executed a Purchaser Suitability Questionnaire which stated: I have carefully examined my financial resources, investment objectives, and tolerances for risk. After conducting this examination and reviewing the terms of the Viatical Settlement Purchase Agreement, I have determined that this purchase is appropriate for me. I sufficiently understand the risk factors and objectives associated with this investment, either independently or as explained to me by one or more professional financial advisors not affiliated with or in any way compensated by Mutual Benefits Corporation or its representatives. I have adequate means of providing for my current financial needs and personal contingencies, have no need for liquidity of this investment, and I am able to bear the financial risk of a purchase of life insurance policy death benefits for an indefinite period of time. In the early part of 2004, Carol Mauter (Ms. Mauter) came to Mr. McCloskey's office seeking some information about products that would generate an income for her mother, Julia Teny (Ms. Teny). Mr. McCloskey discussed various products with Ms. Mauter, including single premium immediate annuities and viatical settlements. A few days after Ms. Mauter's initial visit, she returned to Mr. McCloskey's office with Ms. Teny, who was approximately 87 years old. On March 3, 2004, Ms. Teny purchased a single premium immediate annuity for $30,000.00. This annuity was purchased to provide an income stream for Ms. Teny for five years. Mr. McCloskey discussed the purchase of a viatical settlement for an insured whose life expectancy was 48 months. It was decided that the purchase of the viatical would suit Ms. Teny's needs since it was estimated that the return on the viatical purchase would occur shortly before the annuity ended, and the proceeds from the viatical could be used to purchase another single premium immediate annuity to continue a stream of income for Ms. Teny. Mr. McCloskey gave Ms. Mauter and Ms. Teny a brochure from Mutual Benefits concerning viaticals. He did not guarantee a return on the purchase of the viatical nor did he guarantee that Ms. Teny would never have to pay any premiums on the policy. He did tell Ms. Mauter and Ms. Teny that as of the date of their visit to his office persons purchasing viatical settlements from Mutual Benefits had not lost any principal or interest or paid any premiums. There was no evidence presented to show that this statement was not true or that Mr. McCloskey knew that the statement was not true at the time the statement was made. On March 8, 2004, Ms. Teny executed a Viatical Settlement Purchase agreement with Mutual Benefits for policies on insureds whose life expectancies were estimated to be 48 months. The purchase price was $70,000.00. Ms. Teny initialed each page of the purchase agreement, but she relied on the judgment of her daughter concerning the understanding of the terms of the purchase agreement. On May 3, 2004, the Securities and Exchange Commission (SEC) filed in the United District Court of the Southern District of Florida an Ex Parte Motion for Temporary Restraining Order and Other Relief and Entry of Preliminary Injunction against Mutual Benefits and others, claiming Mutual Benefits was defrauding investors by offering unregistered securities in the form of investment interests in viatical settlement contracts. The motion for a temporary restraining order was granted. On February 14, 2005, the court entered an Order Granting Motion for Preliminary Injunction, finding that there was sufficient evidence of fraud committed by Mutual Benefits, specifically that the announced life expectancies of the insureds were a product of fraud. The court enjoined Mutual Benefits from further violations of the anti-fraud and registration provisions of the Federal Securities Laws in connection with the offering of viatical settlement products. SEC v. Mutual Benefits, Corp., No. 04-60573-CIV-Moreno (S.D. Fla. February 14, 2005)(order granting preliminary injunction). On May 4, 2005, the court entered an Order Appointing Receiver for Mutual Benefits. SEC v. Mutual Benefits, No. 04-60573-CIV-Moreno (S.D. Fla. May 4, 2005)(order appointing receiver). Mr. Clemente received notice about a year and a half after he entered into the viatical settlement agreement with Mutual Benefits that Mutual Benefits had been placed in receivership. He was instructed by the receiver that premiums were due on the insurance policies that were covered by Mr. Clemente's viatical settlement agreement and that in order to preserve his investment, Mr. Clemente would be required to pay the premiums on the policies. Due to the high cost of the premiums, Mr. Clemente elected to forfeit three of the policies covered by his viatical settlement agreement. Mr. Clemente is currently paying the premiums on one policy. To date, the receivership had paid Mr. Clemente approximately $5,000.00 out of his original purchase price. Sometime after Ms. Teny purchased her viatical, she began receiving letters requesting her to pay the policy premiums on the policies covered by her viatical settlement agreement. Ms. Teny did not know who sent the requests, but given the timing of the appointment of the receiver, it can be inferred that the receiver was requesting the payments. Ms. Teny initially paid the premiums, but as the amounts of the premiums increased to as much as over $10,000.00 in 2008, Ms. Teny allowed the policies to lapse and lost her entire investment of $70,000.00. Mr. Bode was also requested to make premium payments on the policies covered by his viatical settlement agreement. Mr. Bode made some payments, but stopped making payments and forfeited his purchase price of $10,000.00.
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 finding that Mr. McCloskey did not violate sections 626.611(7), 626.611(9), 626.621(2), 626.621(6), 626.9541(1)(e)1., 626.9927(1), 626.99275(1)(b), and 626.99277(6); finding that Mr. McCloskey violated section 626.611(16); and suspending his license for two months for each of the three violations for a total of six months. DONE AND ENTERED this 18th day of April, 2012, in Tallahassee, Leon County, Florida. S SUSAN BELYEU KIRKLAND 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 18th day of April, 2012.
The Issue The issues in this case are whether Respondents, Donald J. Denton and Strategic Strategies, Inc. (hereinafter "Respondents," "Denton," or "Strategic Strategies"), are guilty of selling or offering for sale securities in Florida that were not registered pursuant to Chapter 517, Florida Statutes, in violation of Section 517.07(1), Florida Statutes; whether Respondents are guilty of acting as unregistered dealers, associated persons, or issuers by having sold or offered for sale any securities from this state, in violation of Section 517.12(1), Florida Statutes; and, if so, what penalties are appropriate and should be imposed. All references to Florida Statutes are for the years 1998 and 1999.
Findings Of Fact Based upon the observation of the witnesses and their demeanor while testifying, the documentary evidence received in evidence, and the entire record complied herein, the following relevant and material facts are found: The Department is the agency charged with the enforcement and administration of the provisions of Chapter 517, Florida Statutes, the "Securities and Investors Protection Act," and the rules promulgated there under (hereinafter the "Securities Act"). As authorized by the Securities Act, the Department conducted an investigation of the activities of Respondents. At no time pertinent, material, and relevant hereto were Respondents, Denton or Strategic Strategies, licensed or registered by the Department pursuant to the provisions of the Securities Act in any capacity. Specifically, Respondents were not licensed or registered in Florida as a broker/dealer, registered representative, or investment advisor. At all times pertinent, material, and relevant hereto, Denton, whose address is 139 East Park Drive, Celebration, Florida 34747-5052, was licensed as a Health Agent under license No. AO666272 issued by the Florida Department of Insurance. At all times pertinent, material and relevant hereto, Strategic Strategies was an Ohio corporation, now dissolved, whose company business address was Post Office Box 341470, Columbus, Ohio 43234. Strategic Strategies was served the Administrative Complaint via its agent in Ohio. The Department was advised by Strategic Strategies' agent that the company would not further respond to the charges. From November 1, 1998, through July 21, 1999, Denton, in Florida as an agent, offered and sold to investors, investment contracts purportedly being interests in viaticated life insurance policies known as settlement agreements with titles such as, "Viatical Insurance Benefits Participation Agreement." The interests in viaticated life insurance policies were represented to be provided by Accelerated Benefits Services (hereinafter ABS). Denton engaged in sales with four Florida investors in four transactions through Strategic Strategies during the period of March 15, 1999, through July 27, 1999. Denton engaged in 26 sales with 26 Florida investors in 26 transactions. On or about January 21, 1999, Dr. Kerry L. Neal, a Florida investor, paid $50,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with a participation of $25,000 in two viaticated insurance settlement agreements as a 14.2 percent fractional interest in the insurance policies' face value. A monthly income program was offered in the participation disclosure materials provided to Dr. Neal by Denton. Dr. Neal was promised a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator (the person insured by the insurance policy) did not die during the 36-month period and the policies had not matured. Of his $50,000 investment, Dr. Neal has only received approximately $8,000 as disbursements from the ABS bankruptcy trustee resulting in Dr. Neal having suffered a present financial loss of $42,000. On or about January 3, 1999, Dr. Theodore F. Hoff, a Florida investor, paid $200,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in eight viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided Dr. Hoff together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $200,000 investment, Dr. Hoff has only received a total of approximately 15 percent in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Hoff of approximately $170,000. On or about March 23, 1999, Dr. Paul Richard Williamson, a Florida investor, paid $50,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided to Dr. Williamson together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $50,000 investment, Dr. Williamson has only received $8,253.68 in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Williamson of approximately $41,746.32. On or about January 4, 1999, Dr. Samuel Preston Martin, a Florida investor, paid $100,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided to Dr. Martin together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $100,000 investment, Dr. Martin has only received $16,000 in disbursements from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Martin of approximately $84,000. On or about November 10, 1999, Dr. Gilbert Principe, a Florida investor, paid $125,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided Dr. Principe together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices have not matured. Of his $125,000 investment, Dr. Principe has only received approximately $20,000 (16 percent) in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Principe of $105,000. The above investors, Drs. Neal, Hoff, Williamson, Martin and Principe, were clients of Denton who held himself out as a financial advisor. By special and private invitations from Denton, they were invited twice yearly to attend investment seminars conducted by Denton. Denton directly or indirectly represented that the viatical investment would make money for the above named investors; he represented to each investor that the return could be 9.86 percent per year for three (3) years paid monthly as a income program. The above-named investors lost their money as victims of a Ponzi scheme run by principals of ABS involving the sale of viatical agreements in Florida. Ray Levy was the owner of ABS, a viatical settlement brokerage company that raised funds for the purchase of viatical settlements. Jeffery Pains, Esquire, was the escrow agent for ABS. Levy, Paine and others were convicted in federal court of fraud since approximately 90 percent of the $208 million obtained from thousands of investors solicited nationwide was used for the purchase of real estate and items for personal use.1 ABS offered and sold its viaticals to thousands of investors in Florida and in other states. There were approximately a total of 7,000 ABS transactions. The Department filed charges against ABS and Ray Levy that resulted in a Final Order adopting a stipulated settlement. ABS and Ray Levy agreed to comply with Florida law, stop offering the income program, return $900,000 to certain investors, and pay $60,000 to the Department for costs. Other agents (insurance, financial advisors, etc.) that sold the interests in the ABS viaticals have been charged with violations of the Securities Act by the Department, resulting in cease and desist orders being issued and fines being imposed. Denton offered the following defenses to his conduct: sales were exempt securities; sales were insurance policies; investors were wealthy and experienced; his reliance upon ABS's printed literature absolved him from personal liability; and the Department had an obligation to communicate to him personally any knowledge of problems with business practices of ABS, all of which are without merit. The undisputed evidence of record, clearly and convincingly supports that: First, Respondent, Denton, while not registered in the securities business, intentionally or knowingly, solicited and sold unregistered securities; and second, Respondent, Strategic Strategies, had four sales and Denton has 26 sales.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department of Banking and Finance enter its final order finding Respondents guilty of violations of Sections 517.07(1) and 517.12(1), Florida Statutes; it is further RECOMMENDED that The Department of Banking and Finance order Respondent to cease and desist from engaging in any transaction constituting the sale of securities in Florida; it is further RECOMMENDED that The Department of Banking and Finance order Respondent, Strategic Strategies, Inc., be fined in the amount of $40,000; and, it is finally RECOMMENDED that The Department of Banking and Finance order Respondent, Donald J. Denton, be fined in the amount of $260,000. DONE AND ENTERED this 20th day of November, 2002, in Tallahassee, Leon County, Florida. FRED L. BUCKINE 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 20th day of November, 2002.
Findings Of Fact By Stipulated Settlement and Mutual Release executed December 22, 1988, (Ex. 1) signed by Mike Gresham, Director, Division of Administration, Department of Insurance and John Machules, the parties agreed to settle all issues and conclude the litigation and all claims in this case. The Deputy Commissioner approved the agreement on December 28, 1988, making it final with respect to both parties. In consideration of the Department agreeing to pay Machules the salary he would have earned plus compensation for the leave he would have earned between February 1, 1935 and December 31, 1988, in the gross amount of $76,713.33, Machules agreed to: Waive any and all present or future claims against the Department concerning the abandonment action; Waive the right to hearing in this matter and to dismiss with prejudice the case currently pending before the Division of Administrative Hearings; Voluntarily tender his resignation from employment with the Department effective at 5:00 p.m. on December 31, 1988; and Release the Department from all acts or omissions alleged or which could have been alleged in this cause of action or any derivative or collateral action at law or in equity. On December 22, 1988, Machules tendered his resignation effective 5:00 pm. December 31, 1988, (Ex. 1). On December 22, 1988, Machules, in consideration of the sum of $76,71.33 minus standard deductions (Ex. 1) executed a RELEASE releasing the Department from all claims arising from the termination of his employment with the Department. By letter dated December 9, 1988, (Ex. 2) Machules was advised by the Department that all details of the settlement had to be accepted and approved prior to the end of December 1988, that the Department could not credit him with an additional year of credible service (to qualify Machules for retirement) and if this was a condition he insisted upon, the case would proceed to hearing. By letter dated January 4, 1989, (Ex. 3) from the Department to Petitioner's then acting attorney, Machules was advised that the Comptroller's office needed a new W-4 form from Machules and affidavit of his earnings during the period the Department had agreed to pay him. By letter dated February 1, 1989, (Ex. 4) from the Department to Petitioner's attorney, Machules was advised of an IRS levy on Machules' salary and requested documentation that the delinquent taxes had been paid. By letter dated February 27, 1989, (Ex. 4) from the Department to Petitioner's attorney, the attorney was advised that Machules had telephoned the Department lawyer regarding the IRS lien and that he had advised Machules that his attorney should make the contact and further advised Machules that the information on this lien could be obtained from the Comptroller's office. The attorney was also advised that Machules had requested subpoenas for the earlier scheduled March 1, 1989, hearing. By letter dated March 17, 1989, (Ex. 5) the Comptroller's office advised the Department that all issues in the Machules' back pay award had been resolved except for Machules' interim earnings during the back pay period. By letter dated March 21, 1989, (Ex. 6) the Department forwarded a copy of the Comptroller's letter (Ex. 5) to Machules' attorney requesting income tax returns for the years 1986, 1987 and 1988 or W-2 forms for those years, either of which would be acceptable to the Comptroller. By letter dated March 31, 1989, (Ex. 8) the Department forwarded to Machules' attorney a copy of a letter and affidavits received by the Comptroller's office from Machules and advised the attorney that more specific information was required by the Comptroller before Machules' claim could be paid. By letter dated April 3, 1989, (Ex. 9) Machules wrote to Respondent's attorney acknowledging receipt of a copy of Exhibit 8 and stating, among other things, that since he had not received the $76,000.00 by December 31, 1988, "The tentative settlement agreement was NULL and VOID." However, he included a list of one place "employed from 1971 to present" and part-time employment at other places in 1987 and 1988. No specific earnings were provided. By letter dated April 12, 1989, (Ex. 10) the Department replied to Exhibit 9 emphasizing to Machules that it was the Comptroller that needed to be satisfied about Machules' interim earnings before it could pay his claim and he would not be paid until he satisfied the Comptroller on this point. By letter dated April 13, 1989, (Ex. 11) Machules forwarded to the Department copies of 1099-MISC and W-2's for 1987 and 1988. Receipt of this letter which provided the information previously requested was acknowledged by Respondent on April 18, 1989 (Ex. 12). By letter dated April 20, 1989, (Ex. 13) the Department forwarded to Machules' attorney a warrant dated 4/19/89 in the amount of $50,572.33 payable to John J. Machules with a Retroactive Payment Schedule showing a deduction for interim earnings, withholding tax and social security tax. By separate letter dated April 20, 1989, (Ex. 14) the Department advised Machules that the check settling his claim for back pay had been forwarded to Machules' attorney. By letter dated May 11, 1989, (Ex. 15) to Machules' attorney, the Department inquired if Machules had received payment so this case could be closed. By letter dated May 9, 1989, (Ex. 17) Machules was advised by AFSCME that the check being held for him would be returned to the Department if he did not pick it up before May 22, 1989. By letter dated May 13, 1989 (Ex. 17) Machules requested AFSCME to forward the check to him. This was done on May 25, 1989, (Ex. 17). On June 1, 1989, (Ex. 17) Machules acknowledged receipt of the check "as part payment for a future settlement." By letter dated June 23, 1989, (Ex. 16) AFSCME legal counsel advised that the union would not provide legal counsel at an abandonment hearing but would provide a representative to assist him at such a hearing. On the witness stand Petitioner acknowledged signing the settlement agreement and his letter of resignation from the Department; and that he received and cashed a check in the amount of $50,572.33. He also received an accounting of all deductions from the $76,717.33 noted in the stipulated settlement. Petitioner contends that because he didn't receive $76,717.33 in December 1988 the settlement stipulation became void as well as did his resignation. He could point to no line of either document indicating the stipulated settlement was void or voidable if all conditions were not met by December 31, 1988. In fact, Petitioner testified that he really didn't expect to get the check until January 1989, at the earliest. Delays in cutting the warrant and paying Petitioner the funds due under the settlement was due to Petitioner's failure to promptly provide proof to the Comptroller of his other earnings between February 1985 and December 1988. Respondent has fully complied with the terms of the settlement stipulation.
Recommendation It is recommended that all claims of John J. Machules resulting from the charges of abandonment of position in February, 1985, be dismissed. ENTERED this 19th day of July, 1989, in Tallahassee, Leon County, Florida. K. N. AYERS 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 19th day of July, 1989. COPIES FURNISHED: John Zajac AFSCME 1703 Tampa Street, Suite 1 Tampa, Florida 33602 John Hale, Esquire 200 East Gaines Street 4l3-B Larson Building Tallahassee, Florida 32399-0300 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowell, Esquire General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Conclusions THIS CAUSE came before the BOARD OF MEDICINE (Board) pursuant to Sections 120.569 and 120.57(4), Florida Statutes, on August 5, 2011, in Jacksonville, Florida, for the purpose of considering a Settlement Agreement (attached hereto as Exhibit A) entered into between the parties in this cause. Upon consideration of the Settlement Agreement, the documents submitted in support thereof, the arguments of the parties, and being otherwise full advised in the premises, the Board rejected the Settlement Agreement and offered a Counter Settlement Agreement which was accepted on the record by the parties. The Counter Settlement Agreement incorporates the original Settlement Agreement with the following amendments: 1. The costs set forth in Paragraph 3 of the Stipulated Disposition shall be set at $6,697.92. 2. The requirement for community service set forth in Paragraph 7 of the Stipulated Disposition shall be deleted. 3. The requirement for the continuing medical education (CME) in Paragraph 8 of the Stipulated Disposition shall be deleted. 4. Respondent’s license is permanently restricted as follows: Respondent is prohibited from engaging in telemedicine to treat citizens of the United States. IT IS HEREBY ORDERED AND ADJUDGED that the Settlement Agreement as submitted be and is hereby approved and adopted in toto and incorporated by reference with the amendments set forth above. Accordingly, the parties shall adhere to and abide by all the terms and conditions of the Settlement Agreement as amended. This Final Order shall take effect upon being filed with the Clerk of the Department of Health. DONE AND ORDERED this | yh day of _( gus’ F BOARD OF MEDICINE 2011. Executive Director For GEORGE MAS, M.D., Chair CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Final Order has been provided by U.S. Mail to FRANK C. PIERRE, M.D., 10175 Collins Avenue, Suite 808, Bal Harbour, Florida 33154; to Anthony C. Vitale, Esquire, Law Center at Brickell Bay, 2333 Brickell Avenue, Suite A-1, Miami, Florida 33129; to Allen R. Grossman, Esquire, Grossman, Furlow & Bayo, LLC, 2022-2 Raymond Diehl Road, Tallahassee, Florida 32308; and by interoffice delivery to Veronica Donnelly, Department of Health, 4052 Bald Cypress Way, Bin #C-65, Tallahassee, Florida 32399-3253 this | aay of wot 2011. Mabie I abatio, Deputy Agency Clerk
