Findings Of Fact Respondent met Sibley Dennis Carpenter, Jr. (Carpenter) in 1974 or 1975, in connection with a land sale that is not otherwise relevant to this matter. In the summer of 1975, Carpenter asked respondent for assistance in obtaining financing for another, separate land transaction. On that occasion, Carpenter furnished respondent an unaudited, personal financial statement, prepared by an accounting firm, which put the net worth of Carpenter and his wife at slightly less than a half million dollars. On November 19, 1975, respondent became affiliated with Dennis Carpenter Realty, Inc., as a real estate salesman. Because he had other irons in the fire, he only appeared at the office of Dennis Carpenter Realty, Inc., once every month or two. Not until the spring of the following year, after he had been licensed as a real estate broker, did respondent have access to the company's books. In November of 1975, respondent met one Charles W. Van Cura, a hog farmer from Minnesota who expressed an interest in buying land in Florida, and referred Mr. Van Cura to Carpenter. Carpenter, possibly in the company of respondent, showed Mr. Van Cura certain real property belonging to Harvey H. Westphal and Margaret Westphal. Mr. Van Cura made an offer of one hundred fifteen thousand dollars ($115,000.00) for the property and deposited seven thousand five hundred dollars ($7,500.00) with Carpenter towards the purchase price, as evidenced by a binder receipt and deposit, dated December 31, 1975, and signed by Carpenter. Respondent's exhibit No. 1. Carpenter presented the offer to the Westphals, who refused Mr. Van Cura's offer but made a counteroffer of one hundred thirty-five thousand dollars ($135,000.00), by crossing out Mr. Van Cura's figures, substituting their own and signing their names. Both the offer and the counteroffer were "subject to receiving Federal Land Bank Loan of 70 percent of purchase price . . ." Van Cura told Carpenter he was unwilling to accept the Westphals' counteroffer. Carpenter persuaded respondent to buy the property himself, and, on January 6, 1976, Carpenter, respondent and Van Cura met in respondent's office. After some discussion, respondent drew two checks aggregating seventy- five hundred dollars ($7,500.00) to Van Cura's order. Petitioner's composite exhibit No. 6. Van Cura executed a receipt, respondent's exhibit No. 2, reciting that he had received seventy-five hundred dollars ($7,500.00) from respondent. At the time of this transaction, Carpenter could not have refunded Van Cura's deposit from the escrow account of Dennis Carpenter Realty, Inc., because there were insufficient funds in the account. Unbeknownst to respondent, Carpenter had never deposited Van Cura's money in the escrow account. On January 30, 1976, Carpenter drew up a written offer on behalf of respondent to purchase the Westphal property for one hundred thirty-five thousand dollars ($135,000.00). Petitioner's exhibit No. 1. The binder receipt and deposit recited that respondent "and or assigns" had deposited seventy-five hundred dollars ($7,500.00) with Carpenter in earnest money. Although the Westphals accepted this offer, the transaction never closed, for reasons which were not developed in the evidence. The Westphals never made demand for the seventy-five hundred dollar ($7,500.00) deposit, and respondent never got the money back from Carpenter. Respondent has since decided to "treat it . . . as a loan, or write it off." (R119) At no time did respondent relate to the Westphals the history of the earnest money deposit. In May of 1976, respondent was licensed as a real estate broker, and became secretary-treasurer of Dennis Carpenter Realty, Inc. Respondent and Carpenter agreed between themselves that the corporation should open an escrow account on which each could draw individually. This is reflected by a corporate resolution, dated May 4, 1976. Respondent's exhibit No. 7. Such an account was opened. When the first bank statement revealed to respondent that Carpenter had drawn improper checks against the escrow account, however, a second corporate resolution was drafted, dated July 23, 1976, respondent's exhibit No. 9, which authorized respondent, but not Carpenter, to draw against the escrow account.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That the administrative complaint be dismissed. DONE and ENTERED this 15th day of September, 1977, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Bruce I. Kamelhair, Esquire 2699 Lee Road Winter Park, Florida 32789 Mr. W. O. Birchfield, Esquire 3000 Independent Square Jacksonville, Florida 32201
The Issue Whether Respondent properly denied Petitioner's application for licensure as a Life and Variable Annuity and Health Insurance Agent.
Findings Of Fact Petitioner applied for licensure as a Life and Variable Annuity and Health Insurance Agent. Petitioner's application was signed and mailed to the Department of Insurance on or about January 27, 1998. Petitioner's application for licensure was denied by the Department on or about May 5, 1998. Two months later, on July 6, 1998, the Department issued an Amended Denial Letter that set forth the basis for the denial. According to the Amended Denial Letter, Petitioner's license was denied because she failed to meet the licensure requirements set forth in Sections 626.611(1) and (7) and 626.785(1), Florida Statutes. As a basis for the alleged violations, the Department stated: The Office of the Attorney General filed a civil action against you as vice-president and a director of the H.O.M.E. Program, and the H.O.M.E. Program along with other directors, alleging that the Program was formed as a not-for-profit corporation. . . to help people buy a house for themselves to live in. The complaint alleges that the Program offered a variety of services for a "Service Fee," has not provided any services, and that those fees were deposited into an account with NationsBank and the money was then misappropriated by one Jerome Ellington. The Attorney General still has a case pending against the H.O.M.E. Program and has stipulated to dismiss the cause of action against you with prejudice only at the conclusion of the lawsuit against the remaining defendants. You Charita Strode, were terminated from employment with NationsBank for wiring funds out of the H.O.M.E. Program's account in November 1997, after specifically being told by the Regional Service Support Manager that the funds needed to remain in the account until all items had cleared. The bank was placed in a loss situation of over $6,000 and due to your behavior you were terminated because you abused your authority in order to achieve the funds transfer, and did not follow supervisory instructions. That is evidence of lack fitness and trustworthiness. Further, it was determined by the Unemployment Compensation Appeals Bureau that you were discharged for misconduct and the Appeals referee resolved the conflicts in favor of your former employer. Petitioner was employed by NationsBank in January 1994, and, except for a six-month voluntary leave of absence, worked there continuously until she was terminated in January 1998. Prior to going on voluntary leave, Petitioner was manager of the NationsBank Gunn Highway Banking Center. During her first year with NationsBank, Petitioner was a management trainee associate. Thereafter, Petitioner became a manager, a position in which she served for the remainder of her tenure with NationsBank. As a manager, Petitioner was assigned to several NationsBank banking centers and was responsible for the operations, sales, and service of the centers to which she was assigned. Additionally, Petitioner's responsibilities included training and supervising more than fifty associates. In the spring of 1997, Petitioner was promoted from bank officer to an assistant or associate vice-president. While employed at NationsBank, Petitioner received at least two awards for her job performance. In 1997, Petitioner was recognized by NationsBank as a member of Florida Team One, a commendation that recognizes excellence in sales. One of the banking centers managed by Petitioner also received an award for service quality, an award received by only 20 to 30 percent of NationsBank banking centers. In May 1997, Petitioner first met and became acquainted with Jerome Ellington, the owner and founder of the H.O.M.E. Program. According to its literature, the H.O.M.E. Program was a "Christian Home Building Program" designed to assist individuals in building or remodeling their homes. Petitioner was particularly interested in the program because of her desire to become a homeowner. Based on her interest, Petitioner asked Mr. Ellington questions about the H.O.M.E. Program, how to become a member, and how to help other people who might be interested in the program. Petitioner became a client of the H.O.M.E. Program. As a client, Petitioner was required to pay to the program an initial fee of $1700 and a monthly maintenance fee of approximately $170 for three months. Based on her belief that the H.O.M.E. Program was a legitimate organization whose purpose was to assist individuals in purchasing homes, Petitioner told several family members and friends about the program. She told these individuals that the program would allow them to purchase homes for themselves and encouraged them to "look into it." Eventually, like Petitioner, between six and eight of these individuals paid the required fees and became clients of the H.O.M.E. Program. In late June or early July 1997, Petitioner became involved with the H.O.M.E. Program, serving on the program's Financial Advisory Board. The purpose of the Financial Advisory Board was to act as an agent to control the finances of the H.O.M.E. Program. During the time Petitioner was a named member of the advisory board, it met in July or August 1997, to organize that board. Other than this initial organizational meeting, the advisory board never met nor did it ever function in any official manner. In late July 1997, at about the time the H.O.M.E. Program was incorporated, Petitioner was selected by Mr. Ellington to serve as a member and elected as vice-president of the H.O.M.E. Program's Board of Directors (Board or Board of Directors). While Petitioner was on the Board, it seldom met. In July or August 1997, the H.O.M.E. Program set up three bank accounts at NationsBank. Each of the accounts had three signators, all of whom were officers of the H.O.M.E. Program: Bernadette Orsley, treasurer; Jerome Ellington, president; and Petitioner, vice-president. The address of record listed on the H.O.M.E. Program account was 7819 North Dale Mabry Highway, Suite 208, Tampa, Florida. From August 1997 through January 1998, Petitioner took a voluntary leave of absence from NationsBank to do work for the H.O.M.E. Program and to explore the possibility of going into business for herself. Petitioner's work with the H.O.M.E. Program involved setting up "outside services to clients once they got into their homes." Jerome Ellington was the chief executive officer and president of the H.O.M.E. Program. During the time that Petitioner was on the H.O.M.E. Program's Board and the Financial Advisory Board, Petitioner found that Mr. Ellington was not open about the expenditures he claimed to be making on behalf of the H.O.M.E. Program. Attempts were made by Petitioner and one other Board member to develop, initiate, and implement better accounting practices, operational procedures, and financial controls for the H.O.M.E. Program. For example, one recommendation was that two signatures be required on all checks written on the H.O.M.E. Program accounts. However, these efforts proved futile because Mr. Ellington was unwilling to implement any changes and relinquish financial control of the program's finances. By letter dated October 28, 1997, NationsBank advised the H.O.M.E. Program that due to the chargeback activity involving its three accounts, the bank was closing the accounts, effective ten days from the date of the letter. The letter acknowledged that the relationship between NationsBank and the H.O.M.E. Program was "a contractual one and under the terms of our Deposit Agreement either party can terminate the relationship at any time without cause." Chargeback activity occurs when items that are deposited or credited to the account are returned to the bank dishonored for a variety of reasons. NationsBank's concern with the H.O.M.E. Program accounts was that the excessive chargeback activity might possibly place the bank at risk of loss. In October 1997, Patricia McSweeney, then Regional Service Manager for NationsBank, spoke to Petitioner about the H.O.M.E. Program accounts and reiterated the contents of the October 28, 1997, letter from NationsBank. Upon learning from Ms. McSweeney that NationsBank was closing the H.O.M.E. Program's three accounts, Petitioner requested that the bank allow the three accounts to remain open to receive two electronic deposits that were scheduled to be made in November 1997. The electronic deposits were to be made on or about November 5 and 20, 1997. Ms. McSweeney agreed to leave the H.O.M.E. Program accounts open to receive the November electronic deposits and told Petitioner that there could be no check activity on the accounts. This agreement between Petitioner and Ms. McSweeney modified the terms of the October 28, 1997, letter and the accounts remained open beyond the time designated in that letter. However, the modification was not memorialized in writing and no date was established for closing the H.O.M.E. Program accounts once the November electronic deposits were made. With regard to the agreement between Petitioner and Ms. McSweeney, there was a material misunderstanding of how the H.O.M.E. Program accounts were to be handled during this extension. Ms. McSweeney's intent and understanding was that the account would remain open on a "credits-only" basis so that the credits could be received and posted to the account, and then allowed to age. Moreover, Ms. McSweeney believed there would be no check activity in the H.O.M.E. Program account, thereby eliminating or reducing the likelihood that the bank would be placed in a loss situation. On the other hand, Petitioner understood the agreement to mean that no checks could be written on the account or deposited into the H.O.M.E. Program account. However, Petitioner also believed that once the electronic deposits were made to the account, funds could be withdrawn from the account to cover the H.O.M.E. Program's expenses. The anticipated electronic deposits were made to the H.O.M.E. Program account as scheduled on or about November 5 and 20, 1997. After the November 5, 1997, electronic deposit of between $8,000 and $10,000, on November 10, 1997, Petitioner went to the NationsBank Carrollwood Banking Center and withdrew approximately $9,000 from one of the H.O.M.E. Program accounts to make a payment to the H.O.M.E. Program's line of credit. Petitioner believed that this withdrawal was permissible and not inconsistent with or in violation of the agreement with Ms. McSweeney. Furthermore, when Petitioner made the withdrawal, she was unaware of any flag on the account and no bank representative informed her that the account was so designated. At no time, either on November 10, 1997, or later, did any NationsBank representative notify Petitioner that the account was flagged and that the $9,000 withdrawal was improper and should not have been allowed. On or about November 20, 1998, the second electronic deposit was received and posted to the H.O.M.E. Program account. On the morning of November 20, 1997, Petitioner telephoned the NationsBank's Gunn Highway Banking Center and spoke with Michelle Shumate. Petitioner and Ms. Shumate knew each other because prior to Petitioner's going on leave, she was a bank officer and/or manager of the Gunn Highway Banking Center. During her telephone conversation with Ms. Shumate, Petitioner requested that two cashier's checks be drawn from the H.O.M.E. Program account and that the checks be made payable to the H.O.M.E. Program. The funds were to be used for operating expenses of the H.O.M.E. Program. When Petitioner requested the two cashier's checks, she did not perceive the requested transaction as being inconsistent with or in violation of the agreement she and Ms. McSweeney had made. Petitioner's interpretation of the agreement was that the H.O.M.E. Program was only precluded from writing checks to third parties on checks issued on the program's accounts. Because the cashier's checks were certified funds, Petitioner knew that there was no potential, at that time, for a loss situation. After Ms. Shumate's telephone conversation with Petitioner, Ms. Shumate immediately called Ms. McSweeney, her supervisor, and advised her of Petitioner's request for two cashier's checks. At hearing, in explaining her reason for calling Ms. McSweeney, Ms. Shumate made no mention of the account being flagged. Rather, Ms. Shumate stated, "I had knowledge of chargeback activity of the account, and I made it a policy for myself that before doing anything for any H.O.M.E. Program accounts, I would call a supervisor." Based on Ms. Shumate's testimony and written statement concerning Petitioner's request for two cashier's checks, it appears that Ms. Shumate's decision to call Ms. McSweeney was not because the accounts were flagged, but rather because of her personal knowledge of the problems with the H.O.M.E. Program accounts. In response to Ms. Shumate's call, Ms. McSweeney told her that the H.O.M.E. Program accounts were "credit only" accounts and withdrawals or debits were not to be made on the account. Thirty minutes after Petitioner requested the cashier's checks, she came to the drive-through window of the NationsBank Gunn Highway Banking Center to pick up the checks. Ms. Shumate then told Petitioner that Ms. McSweeney had advised her that the H.O.M.E. Program account was a "credit only" account and that there could be no check activity on the account. Pursuant to Ms. McSweeney's directive, Ms. Shumate told Petitioner that if she had any questions, she should call Ms. McSweeney. Petitioner then immediately called Ms. McSweeney from her cellular telephone. However, when Petitioner was unable to reach Ms. McSweeney, she left a voice mail message for her. After leaving the Gunn Highway Banking Center, Petitioner then went to pick up a Ms. Barnes for a 9:00 a.m. meeting. When the meeting concluded, Petitioner took Ms. Barnes back to the H.O.M.E. Program Office located at 7819 North Dale Mabry Highway. Petitioner then went to the NationsBank Carrollwood Banking Center, the banking center closest to the H.O.M.E. Program Office. Petitioner signed in as a representative of the H.O.M.E. Program to request customer service. Petitioner then met with a consumer banker regarding having a wire transfer made from one of the NationsBank H.O.M.E. Program accounts to the program's new account at First Union. Petitioner gave the consumer banker the H.O.M.E. Program account number and the Petitioner and the consumer banker filled out the required forms necessary to effectuate the wire transfer. When the form was completed, the consumer banker initiated the wire transfer in the system and Petitioner left the Carrollwood Banking Center. Immediately prior to the wire transfer, the H.O.M.E. Program account from which the funds were taken had a balance of approximately $23,000. The amount that Petitioner had wire transferred from the NationsBank's H.O.M.E. Program account was $19,800. The purpose of the transfer was to put funds into the H.O.M.E. Program's account at First Union to meet the program's expenses. Petitioner was aware there had been a history of minimal chargebacks on the account, in the form of drafts. Based on this knowledge, when Petitioner initiated the wire transfer, she left a balance in the account that she believed would be sufficient to cover any potential chargebacks from the electronic drafts. Petitioner based the estimate on the past experience of the chargebacks from electronic drafts. When Petitioner requested that funds be removed from the H.O.M.E. Program account, she never anticipated that it would result in or contribute to a loss by NationsBank. When Petitioner requested the wire transfer, neither the consumer banker nor anyone else at the bank told her that the account was flagged and that funds could not be wired from the H.O.M.E. Program account. The transfer went smoothly and in accordance with NationsBank's routine business practices. On the afternoon of November 20, 1997, after the wire transfer was made, Petitioner spoke to Ms. McSweeney, who asked her why she had made the wire transfer. During that conversation, it became clear that there was a misunderstanding between Petitioner and Ms. McSweeney regarding how the H.O.M.E. Program's NationsBank accounts were to be handled in November 1997. Ms. McSweeney told Petitioner that she had told Petitioner "not to do that," apparently referring to their October agreement regarding Petitioner's request to allow the H.O.M.E. Program accounts to remain open in November. Petitioner then told Ms. McSweeney that she had never said that to her. Petitioner indicated to Ms. McSweeney that the H.O.M.E. Program needed funds from the account for its operating expenses and that she never would have asked that the accounts be allowed to remain open to receive the electronic deposits if the organization were absolutely prohibited from accessing the funds. In the days or weeks after the funds were wired from one of H.O.M.E. Program accounts at NationsBank, the chargebacks on the accounts were in excess of any amount that they had ever been. Between November 20, 1998, the date the wire transfer was made, and January 30, 1998, the date Petitioner's termination, NationsBank sustained a loss of approximately $6,000. This loss has not yet been recovered by the bank. Had the wire transfer not been made, NationsBank may not have sustained this loss. However, the approximate $6,000 loss by NationsBank may not be attributable to the November 20, 1997, wire transfer. Two other individuals on the H.O.M.E. Program accounts, including Jerome Ellington, were authorized signators on the H.O.M.E. Program accounts and could have made withdrawals. At the hearing, personnel of NationsBank did not state unequivocally that the other authorized persons on the H.O.M.E. Program accounts had not made withdrawals from the accounts between November 1997 and January 1998. NationsBank personnel did not rule out that such withdrawals had been made, but stated only that to confirm whether such withdrawals had been made, the bank records, which were unavailable, would have to be reviewed. If, in fact, such withdrawals were made, those withdrawals could have contributed to or been responsible for the bank's financial loss. In November 1997, the previously existing problems and disputes within the H.O.M.E. Program organization exacerbated. Mr. Ellington, president and founder of the H.O.M.E. Program, who had previously encouraged Petitioner's involvement in the program, both as a client and officer, now would no longer allow Petitioner to transact business on the H.O.M.E. Program accounts. Consequently, once the excessive chargebanks in the H.O.M.E. Programs account surfaced, Petitioner was unable to move funds back to NationsBank. Her requests to Mr. Ellington that he move funds to NationsBank were disregarded. When Petitioner was on the H.O.M.E. Program's Board of Directors, the Board not only failed to meet on a regular basis, but was also prohibited by Mr. Ellington from functioning as a governing body. Mr. Ellington controlled the H.O.M.E. Program, including the "purse strings" of the organization. Petitioner lost approximately $2,000, the total amount of the funds she invested as a client in the H.O.M.E. Program. Moreover, Petitioner also lost a substantial part of approximately $3,000 to $4,000 of her personal funds that she had used for the H.O.M.E. Program to cover some of its operating expenses. In one instance, during her early involvement with the H.O.M.E. Program, Petitioner co-signed a loan agreement for the organization to have a phone telephone system installed in the program's office. After the H.O.M.E. Program failed to make the payments, Petitioner paid off the loan and received no reimbursements. In the first week of December 1997, Petitioner received a copy of minutes from Special Meeting of the Board held on November 18, 1997. Petitioner received no notice of that meeting and, consequently, was not in attendance. The minutes of the meeting reflect that the only three Board members and/or officers present at the meeting were: Jerome Ellington, president; Jacqueline Garcia Ellington, secretary; and Bernadette Orsley, treasurer. Pursuant to the minutes of the November 18, 1997, Special Meeting of the Board, under the category of "New and Urgent Agenda Items," Mr. Ellington initiated a discussion regarding his dissatisfaction with Petitioner, one other Board member, and two staff members. The minutes reported that Mr. Ellington stated that the organization was facing "certain and immanent (sic) insurrection" by Petitioner and the other three individuals. Moreover, the minutes indicated that the labor force was "being manipulated into a confused state of loyalty and that this along with a confrontation of gross insubordination" by Petitioner and the other three individuals was "usurpatous (sic) to the general operations of the Firm and extremely deleterious to Client confidence." According to the minutes, following the discussion, Mr. Ellington moved to vote on the removal or termination of Petitioner and the other three individuals "in view of their attempted take over of the business and a number of other possible infractions of the law." Following Mr. Ellington's motion, by a unanimous vote of the three Board members/officers attending the Special Meeting, Petitioner and the other absent Board member were removed from the Board and the two staff members were terminated, effective immediately. Prior to Petitioner's receiving the minutes of the Special Meeting, she was unaware of her removal from the Board. On January 30, 1998, near the end of her voluntary leave, Petitioner met with officials of NationsBank. Petitioner was advised that her employment with NationsBank was being terminated, effective immediately, because she had failed to follow and had directly violated instructions of the service support manager, Ms. McSweeney. These charges stemmed from the incident involving the transfer of funds on November 20, 1997. Petitioner explained to NationsBank officials that she did not understand that the agreement with Ms. McSweeney prevented the removal of funds from the H.O.M.E. Program accounts. Petitioner also told the NationsBank officials that her behavior with regard to the accounts was consistent with her understanding of the agreement. In this regard, Petitioner informed NationsBank staff that prior to the wire transfer, in November 1997, she had made a withdrawal from the account to pay on the program's line of credit with no problem. Petitioner also told the bank officials that when that withdrawal was made, no one at the bank advised her that the withdrawal was improper or that the account was flagged. Notwithstanding Petitioner's explanation, NationsBank terminated Petitioner's employment, effective immediately. After Petitioner was terminated from NationsBank, she applied for unemployment benefits. The application was denied and Petitioner appealed. In the Notice of Decision issued on the matter, the appeals referee concluded that the Petitioner, claimant in that proceeding, "intentionally violated direct orders from her supervisor." Petitioner had fiduciary duties with regard to her position as vice-president and member of the Board and member of the Financial Advisory Board of the H.O.M.E. Program. However, for the reasons stated above, Petitioner's efforts to perform these duties were thwarted by tactics employed by Mr. Ellington. On January 10, 1998, Petitioner first learned that the Florida Attorney General's Office had been investigating the H.O.M.E. Program, when she was served with a civil action brought by the Attorney General. The Complaint, filed on December 13, 1997, named the H.O.M.E. Program, Inc., Jerome Ellington, and Board members, including Petitioner, as defendants. Among the allegations contained in the Complaint were that the funds collected by the H.O.M.E. Program had not been placed in an escrow account as had been represented to members and that the program had not initiated construction on any residence for any of its 140 clients. The Complaint also alleged that Mr. Ellington withdrew or transferred approximately $31,000 from a H.O.M.E. Program account and of that amount, $23,000 was transferred by Mr. Ellington from a H.O.M.E. Program's account at NationsBank to First Union on November 27, 1997. Moreover, the Complaint alleged that a substantial amount of those funds were used by Mr. Ellington for his personal expenses and approximately $17,000 of the program funds, at one time in Mr. Ellington's possession, remained unaccounted for. The Complaint contained no allegations that Petitioner or any other Board member had misappropriated H.O.M.E Program funds or, at any time, had organization funds in their possession which could not be accounted for. Pursuant to a Stipulated Settlement Agreement (Agreement) entered into on May 18, 1998, the Complaint was dismissed without prejudice against Petitioner "until the conclusion of the lawsuit against each of the remaining Defendants at which time the cause of action against [Petitioner] shall be dismissed with prejudice, provided that [Petitioner] has complied with the terms of the Agreement." In this regard, the Agreement requires the Petitioner to cooperate and assist the Attorney General's Office in the investigation and litigation relating to the Complaint. The Agreement acknowledged and expressly stated that Petitioner's acceptance of the Agreement did not constitute an admission that she violated the laws of Florida as alleged in the Complaint. To determine fitness and trustworthiness of applicants for insurance licenses, the Department looks at the applicant's history and activities in which the applicant participated. Also, the Department considers other issues, such as whether there were victims of the applicant's activities; whether someone was financially harmed; whether money and/or fiduciary duties were involved; and whether the actions were willful. In evaluating Petitioner's application, the Department had several concerns. First, the Department determined that Petitioner had willfully violated or refused to obey a supervisor's direct orders by moving funds out of the H.O.M.E. Program account and that as a consequence thereof, the bank lost several thousand dollars. In the Amended Denial Letter, the Department alleged that Petitioner accomplished this by "abusing" her position with the bank. From this uncorroborated information the Department received from NationsBank, the Department concluded that Petitioner's conduct demonstrated a lack of fitness and trustworthiness. Second, in making the final decision to deny Petitioner's application, the Department considered the fact that Petitioner had been a named defendant in the aforementioned Complaint filed by the Attorney General. Prior to the Department's issuing the Amended Denial Letter, it was aware that the Complaint had been dismissed as to Petitioner. Nonetheless, the Department found it significant that the Complaint had been dismissed without prejudice and that the Agreement had been reached in exchange for Petitioner's cooperation and testimony. The Department believed that the Agreement did not suggest that the underlying events that gave rise to the allegation in the Complaint did not occur. Finally, as a basis for its decision with regard to Petitioner's application, the Department relied on an Unemployment Appeals Bureau decision denying Petitioner unemployment benefits. The Department apparently found it significant that the referee in that proceeding found Petitioner's account of the events less credible than that of NationsBank and concluded that Petitioner "intentionally violated direct orders from her superior." Based on these considerations, the Department then concluded that the allegations raised in the Complaint demonstrated that Petitioner lacked the fitness to fulfill the fiduciary responsibilities required of an insurance agent. When the Department issued the Amended Denial Letter, it was unaware that Petitioner had been removed from the H.O.M.E Program Board in November 1997, because of her efforts to have the program implement financial controls for the funds it was collecting and expending. The Department was also unaware or failed to consider the short period of time Petitioner was associated with the Board, that Petitioner was a client of the H.O.M.E. Program, and that she lost money as a result of her involvement with the program.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue to Petitioner, Charita Michelle Strode, a license as a Life and Variable Annuity and Health Issuance Agreement. DONE AND ENTERED this 16th day of February, 1999, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 16th day of February, 1999. COPIES FURNISHED: Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Plaza Level 26 Tallahassee, Florida 32399-0300 Steve E. Baker, Esquire Delano Stewart, Esquire Stewart, Joyner, Jordan-Holmes, P.A. 1112 East Kennedy Boulevard Tampa, Florida 33672 Elenita Gomez, Esquire Mechelle R. McBride, Esquire Department of Insurance 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On July 31, 1973, petitioner submitted to respondent its application to organize and operate a new banking facility in St. Cloud, Osceola County, Florida. A filing date of August 20, 1973, was assigned by respondent. Accompanying the application was a long and detailed Economic Survey dated June, 1973, containing economic information and statistics pertaining to the City of St. Cloud and its environs. By letter dated October 26, 1973, the management of the Sun Bank of St. Cloud, the only bank existing in St. Cloud, opposed the establishment of petitioner's proposed bank, citing as grounds therefore the present economic conditions and the limited economic growth prospects for the St. Cloud area. By letter dated February 20, 1974, The First National Bank of Kissimmee protested the granting of a charter for any new bank in Osceola County, contending that "additional banks could only dilute the deposits of the existing banks, and this would not be in the areas' interest." An investigation of petitioner's application was conducted by Frank C. Dobson, a state bank examiner for respondent, on February 19, 1974. By a report dated February 22, 1974, Mr. Dobson recommended disapproval of the application on the ground that three of the five factors were considered unfavorable. Mr. Dobson considered the factor of "financial history, condition of the bank, and fixed assets" to be favorable, as well as the factor of "adeqeacy of capital." Considered unfavorable were future earnings prospects," "general character of management" and "convenience and needs of the community." In contrast to the petitioner's original estimate of total deposits in the amount of $10,000,000.00 at the end of its third year of operation, Examiner Dobson projected deposits of only $6,000,000.00 at the end of the third year and therefore concluded that petitioner would not achieve a profitable position. Based upon his observation that the originally proposed chief executive officer, Mr. John J. Jenkins, might possibly he unable to await favorable action on petitioner's application and that the proposed Vice President and Cashier, Mr. Robert J. McTeer, would need supervision and guidance, Mr. Dobson considered the factor of "general character of management" unfavorable. After a brief resume of each of the proposed directors and officers, Dobson concluded that each was considered "satisfactory" with the exception of McTeer, who was considered only "fair." The unfavorable rating on the factor of "convenience and needs of the community" was based upon Dobson's opinion that the proposed site did not appear conducive to convenient service, the existing bank in St. Cloud was completing a new facility which would provide adequate service for its customers and a national bank application was pending. On October 16, 1974, Fred O. Dickinson, Jr., then State Commissioner of Banking, issued his conditional approval order on petitioner's application. This order indicates that a change in location of petitioner's proposed bank was made and that M. Raymond Daniel was designated as president. Mr. Daniel accepted the conditions on October 18, 1974. In January of 1975, present Comptroller Gerald A. Lewis revoked the conditional approval of Mr. Dickinson. An updated economic survey dated April of 1975 was submitted to respondent on behalf of petitioner. An update investigation was conducted by State Bank Examiner Fred H. Brannen, Jr. on May 21, 1975. Mr. Brannen reviewed the file and found as favorable the factors of "financial history, condition of the bank and fixed assets" and "adequacy of capital." Listed as "borderline-favorable" was the factor of "general character of management." Brannen agreed with the projected figures of the original examiner, Mr. Dobson, and thus reported the factor of "future earnings prospects" as unfavorable. Mr. Brannen found the factor of "convenience and needs of the community" to be unfavorable, noting that the proposed site appeared to be somewhat removed from the existing businesses, Sun Bank of St. Cloud had completed its new facility and planned to use its old building as a remote facility and that the proposed national bank was rejected by regulatory authorities. Based upon his examination, Mr. Brannen concurred with the original recommendation of disapproval. On April 1, 1975, the Sun Bank of St. Cloud filed with respondent its application for authority to open a remote facility at 1001 New York Avenue in St. Cloud. A Comptroller's Conference was held in regard to this application on August 8, 1975, and respondent granted approval for the remote facility on or about September 25, 1975. On June 10, 1975, a Comptroller's Conference was held for the purpose of updating and culminating the investigation of petitioner's application. By a supplement dated June, 1975, petitioner presented additional data concerning existing financial institutions in Osceola County and in six other counties with similar populations as Osceola County. No protestants of the application appeared at this conference. On June 20, 1975, respondent received from the Sun Bank of St. Cloud a 37-page booklet containing comments relating to petitioner's application. It was Sun Bank's conclusion that public convenience and advantage would not be promoted by the establishment of petitioner's bank and that local conditions did not assure reasonable promise of successful operation for petitioner and those banks already established in the community. It appears that petitioner has changed the proposed location of its bank several times since submitting its original application. At the Comptroller's Conference on June 10th, the proposed site was described to be at the intersection of New York Avenue with U.S. Highway 192/441 In its Comments regarding petitioner's application, Sun Bank describes the location formerly proposed the intersection of Neptune Road and U.S. Highway 192/441. This is also the site discussed in the reports of both examiners. 13.. In August of 1975, petitioner presented to respondent a Supplemental Summary relevant to petitioner's application versus the Sun Bank's application for authority to open a remote facility in St. Cloud. On November 17, 1975, Comptroller Lewis concluded that petitioner's proposal did not meet the requirements of F.S. s659. 03(2). As grounds therefore, the Comptroller cited the following: ... The primary service area had a 1970 population of 10,000; the applicants estimate that the service area has a current population of 16,000. The proposed bank's site is approximately .4 of a mile from the existing bank in St. Cloud. The proposed bank would not appear to be any more convenient for the residents of St. Cloud than the existing bank. The applicants have made some showing that the proposed bank would have some pro-competitive advantage for the residents of St. Cloud. However, the banks in Kissimmee are accessible by some of the St. Cloud residents. For this reason, the issue of a monopoly in the existing St. Cloud bank is not as compelling as it might otherwise be. On balance, it appears that the public convenience and advantage would be promoted to some extent by the establishment of the proposed bank, although the case is not an overwhelming one. As shown above, the population base of the service area is fairly small and future growth is not expected to be significant. The population of St. Cloud increased by less than 1,000 persons between 1960 and 1970. The existing bank in St. Cloud had total deposits, as of June 30, 1975, of less than $20 million and its total deposits during the last two calendar years increased by less than $4 million. It appears that local conditions do not assure reasonable promise of successful operation of the proposed bank and the existing banks. On the basis of the foregoing, the Comptroller has concluded that, while the first criterion may be met in this case, the second criterion is not met. Therefore, the application is denied. Since the conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria." Four banks, all members of various statewide holding companies, presently exist in Osceola County. There is one bank, the intervenor herein, in St. Cloud, which bank also has a remote facility in St. Cloud, and there are three banks in Kissimmee, which is eight to ten miles west of St. Cloud. Petitioner's proposed primary service area is defined to be the City of St. Cloud and its environs. Its general service area is defined to be all of Osceola County. Population estimates by witnesses for petitioner and for the intervenor differed. Petitioner estimated the present population of the general service or trade area to be slightly in excess of 41,000, while figures contained in the booklet entitled "Florida Estimates of Population" show Osceola County to have an estimated population of 36,668 as of July 1, 1975. The petitioner estimates the primary service area population to be in excess of 16,000, and this figure was not disputed by the intervenor. In fact, in its application for a remote facility, the intervenor stated that the "Osceola Planning Commission is projecting that the population of the St. Cloud trade area will increase to approximately 45,000 by 1990." As of the 1975 year end, the intervenor Sun Bank, the existing bank In St. Cloud, had total deposits of $21,210,955.50. During the first quarter of 1976, total deposits increased by over $1,600,000.00 at Sun Bank. Over the past five years, deposits at Sun Bank have doubled. The three Kissimmee banks have a combined total of over $40,000,000.00 in deposits. Net profits at the end of 1975 for the existing four banks in the County were as follows: approximately $286,000.00 for the First National Bank of Kissimmee; $216,198.87 for Sun Bank of St. Cloud; $22,359.66 for the Exchange Bank of Osceola; and a figure of minus $56,231.32 for the Flagship Bank of Kissimmee. The Flagship Bank opened in 1974 in a modular unit and moved into a new facility in its second year Using twenty-four factors to measure the economic growth rating of Osceola County, Mr. William C. Payne, a bank marketing consultant, rated said County along with six other counties of similar size. Osceola was rated second, preceded only by Citrus County. The Comparative Figures Report for December 31 1975, as compared with December 31, 1974, shows the following percentages for Osceola County and statewide: OSCEOLA STATEWIDE TOTAL LOANS 12.8+ 4.7- TOTAL TIME DEPOSITS 20.1+ 7.5+ TOTAL DEMAND DEPOSITS 0.4- 2.0- TOTAL DEPOSITS 10.1+ 3.3+ The presidents of three of the four existing banks appeared and testified as protestants to petitioner's application. The presidents of Flagship and First National in Kissimmee felt that a new bank in St. Cloud would have an adverse effect upon them because they each have a number of customers who are residents of St. Cloud. First National estimates that it has 200 customers from St. Cloud representing approximately $500,000.00 in deposits. Sun Bank recognized than most of petitioner's customers would be derived from Sun's bank, and estimated that probably one million dollars in deposits would be lost to petitioner, thus reducing Sun's profit figures. Sun opened its remote facility in St. Cloud in December of 1975 and First National submitted its application for a remote or branch facility in St. Cloud in January of 1976. Due to financial backing and management expertise and assistance, all three presidents felt that a holding company bank, as opposed to an independent bank, would have a better chance of success in St. Cloud. Flagship pays over $14,000.00 per year as a member of a holding company, while Sun and First National each pay approximately $90,000.00 per year. Sun Bank felt that a certain bank could exist in St. Cloud and that it would, in fact, promote competition. All three presidents noted that 1974 and 1975 were lean years for banking, but that loan demands and total deposits were now increasing. As noted above, petitioner's proposed new bank is to be independently owned and operated at the corner of U.S. Highway 192/441 and New York Avenue in St. Cloud. This downtown intersection provides the only permanent stop light on the main thoroughfare through St. Cloud, and the site provides easy access from either the east/west direction of the main highway or the north/south direction of New York Avenue. It should be noted again that this proposed site is not the same site reviewed by the two state bank examiners in their reports nor by the Sun Bank in its Comments submitted to respondent in June 1975. There was no evidence that the proposed name of petitioner's new bank -- Public Bank of St. Cloud -- would create any conflict or confusion with the name of any other existing bank. There is no evidence in the record that petitioner's proposed capital structure is other than adequate. Its total capitalization is proposed to be $1,000,000.00 and its deposits are estimated to be $7,000,000.00 at the end of the third year of operation. Mr. Payne's updated June, 1976, survey (Exhibit 13) contains drawings and details of petitioner's proposed banking house quarters. The physical structure will promote convenience to customers and the proposed costs are sufficient and reasonable. Security and Federal Deposit Insurance Corporation requirements have been met. Petitioner's proposed Board of Directors consists of ten men. Included therein are attorneys, bankers, cattlemen, a physician, a pharmacist, a University of Florida athletic director and those engaged in real estate development and sales. While some directors do not reside in St. Cloud, others have lived there for years, with one director claiming to have some 1,200 blood relatives in the area. Two of the proposed directors, one of which is the proposed chief executive office, has previously been involved with newly chartered banks. At least three of the proposed directors presently serve as directors of other banks in Florida. The proposed president, Mr. Raymond Daniel, will move to St. Cloud and will devote all his time to his duties as president and director. Two of the proposed directors, one of which is the largest shareholder and the other of which is the proposed vice president and cashier, have suits pending against them for considerable amounts of money. One has a judgment against him in the amount of approximately $40,000.00, and the presidents of two banks in Osceola County testified that his reputation in the community as a businessman was not good.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent disapprove petitioner's application to organize and operate a state banking facility in St. Cloud for the reason that petitioner, while showing that it satisfies all other criteria, has failed to illustrate that all its officers and directors possess sufficient ability and standing to assure a reasonable promise of successful operation. It is further recommended that such disapproval be without prejudice to petitioner to file with the respondent, if it so desires, within fifteen days of respondent's final order, an amended list of directors and/or officers and that respondent render a decision upon this criterion within twenty days from the filing thereof. Respectfully submitted and entered this 30th day of July, 1976, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32304 Mr. Clyde M. Taylor TAYLOR, BRION, BUKER & GREENE, P.A. P.O. Box 1796 Tallahassee, Florida 32302 Attorney for Petitioner Mr. Nicholas Yonclas AKERMAN, SENTERFITT & EIDSON Box 231 Orlando, Florida 32802 Attorney for Intervenor Mr. Earl Archer The Comptroller's Office State of Florida The Capitol Tallahassee, Florida 32304 Attorney for Respondent ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING PUBLIC BANK OF ST. CLOUD (proposed new bank), Petitioner. vs. CASE NO. 76-088 STATE OF FLORIDA, DIVISION OF BANKING, Respondent, SUN BANK OF ST. CLOUD, Intervenor. /
The Issue Whether the application to organize Plus International Bank should be approved.
Findings Of Fact On March 24, 2000, the Department received an application (Application) from foreign nationals (Applicants) to organize a new bank, Plus International Bank (New Bank), to be located in Miami-Dade County, Florida. The Department published notice of its receipt of the Application in the April 7, 2000, edition of the Florida Administrative Weekly. The notice complied with the requirements Section 120.80(3)(a)1.a., Florida Statutes, and Rule 3C-105.103(1), Florida Administrative Code.5 By letter dated April 11, 2000, the Department requested the Applicants to supplement their Application with additional information, including information concerning their "promise of successful operation" and the New Bank's "capital structure," its "directors and officers," and its "banking quarters." It was not until November 3, 2000, that the Department received all of the additional information it had requested from the Applicants. The Application identifies four individuals associated with the New Bank who are foreign nationals: Manuel Sacal, Harry Sacal, Alex Sacal, and Roberto Barroso. Manuel Sacal (M. Sacal) is a proposed director of the New Bank and holder of 28% of the bank's outstanding shares of common stock. He is currently the Chief Executive Officer and General Director of Casa De Cambio Plus, S.A. de C.V. (Cambio Plus), a foreign exchange house based in Mexico City, Mexico, and the Chief Executive Officer and General Director of Plusder, S.A. de C.V., a futures brokerage house located in Mexico City, Mexico. As the Chief Executive Officer and General Director of Cambio Plus, a position he has held since 1987, M. Sacal has helped Cambio Plus become one of the largest exchange houses in Mexico. Harry Sacal (H. Sacal), like M. Sacal, is a proposed holder of 28% of the New Bank's outstanding shares of common stock. Alex Sacal (A. Sacal) is a proposed holder of 14% of the New Bank's outstanding shares of common stock. M. Sacal, H. Sacal, and A. Sacal are brothers. They each are citizens of Mexico. Roberto Barroso is a proposed director of the New Bank and holder of 0.1% of the New Bank's outstanding shares of common stock. He is a citizen of Brazil. Mr. Barroso has 30 years of banking experience, primarily in the area of international banking. He has, among other things, managed financial institutions and been involved in making trade financing arrangements. From approximately 1998, until his retirement in June of 2000, he was a Vice-President of Citibank. The other proposed directors of the New Bank identified in the Application -- Enrique Cabanilla, Barry Deutsch, Jaime Medina, Ira Weindruch, Deborah Jacobson, and Patrick Fournie -- are all United States citizens. These individuals, along with Mr. Barroso, have sufficient business experience, ability, standing, and reputation to enable them to perform their duties as the New Bank's directors in a manner that can reasonably be expected to result in the successful operation of the bank. Mr. Cabanilla, who is also identified as the proposed chief executive officer of the New Bank, has had over 30 years of banking experience, with particular emphasis in the areas of international banking and trade finance. He has held banking positions which have required him to be directly involved in credit analysis and approval, bank and personnel administration, direction and control of operations, and the application of routine control and audit functions. In addition, he has been responsible for the management of multi- branch banking operations and all phases of commercial lending. Although Mr. Cabanilla has not had at least one year of direct experience as an executive officer, director, or regulator of a financial institution within the last three years, it appears that he possesses sufficient financial institution experience, ability, standing, and reputation to enable him to perform his duties as the New Bank's chief executive officer in a manner that can reasonably be expected to result in the successful operation of the bank. Mr. Deutsch has had over 30 years of banking/bank consulting experience. He has been an employee of, and consultant to, a number of large United States financial institutions, such as Mellon National Bank, Bank One, and Bank of America. In addition, as a consultant, he has assisted a number of community banks in the South Florida area with strategic planning, marketing, and investor relations. He has also served as a consultant to several Latin American financial institutions, including Banco Popular de Puerto Rico and Grupo Financiero BAC, and to Bank Polska Kasa Opieki in Warsaw, Poland. While Mr. Deutsch has had at least one year of direct experience as an executive officer or director of a financial institution, he last served in such a capacity in 1988. Mr. Medina has had almost 20 years of banking experience, primarily in the area of international banking, and has had a least one year of direct experience as an executive officer of a financial institution within three years of the date the Application was filed with the Department. Mr. Weindruch was an owner and director of RockIsland Bank, an Illinois-state chartered bank, from 1985 until 1991. In addition, he served on the bank's loan, facilities, and personnel committees. He has not served as an executive officer or director of a financial institution since his departure from RockIsland Bank. Ms. Jacobson has extensive experience in the exporting and importing business. She has never been an executive officer or director of a financial institution. Mr. Fournie is the Chief Financial Officer for Surfin, Ltd., the Latin American arm of Direct TV. Prior to assuming his current position, he was employed by Citibank, where he gained considerable experience in international banking. Mr. Fournie has never been an executive officer or director of a financial institution. None of the proposed officers, directors, or major shareholders6 of the New Bank has been convicted of, or pled guilty or nolo contendere to, any violation of Section 655.50, Florida Statutes (which is known as the "Florida Control of Money Laundering in Financial Institutions Act"), any offense described Chapter 896, Florida Statutes, or any other crime. At present, the New Bank does not have a proposed president. The New Bank's business plan reflects that the bank will offer trade financing and commercial loans to small and medium-sized United States exporters and importers located primarily in Florida; commercial loans and small business loans to small and medium-sized businesses in the Miami-Dade County community; and private banking services to high net worth individuals, particularly those who are foreign nationals and permanent or part-time residents of the United States. The Application indicates that, at the time of the opening of the New Bank, 5,000,000 shares of common stock will have been sold at $2.00 per share, producing $10,000,000.00 in start-up capital. (According to the Application, the total number of shares of common stock that the New Bank will be authorized to issue is 7,500,000.) Of the $10,000,000.00 in start-up capital that the New Bank will have at opening, $7,000,000.00 will have been contributed by the Sacal brothers (M. Sacal, H. Sacal, and A. Sacal). Approximately $2,500,000.00 of the remaining $3,000,000.00 in start-up capital has already been raised. The Sacal brothers have committed to increasing their investment in the New Bank after its opening, as circumstances warrant. The Application estimates that net organizational expenses will be $446,642.00. Of the amount ($9,553,358.00) of capital remaining following payment of these expenses, $5,000,000 will be allocated as paid-in capital (5,000,000 shares at $1.00 par value). The New Bank's proposed capital structure will also have paid-in surplus in an amount greater than 20 percent of paid-in capital and a fund designated as undivided profits in an amount greater than five percent of paid-in capital. The initial capitalization of the New Bank appears to be adequate in relation to its proposed business activities. Local conditions in Miami-Dade County indicate reasonable promise of successful operation of the New Bank. The bank's financial plan appears to be reasonable and attainable. The parties have stipulated that the corporate name, "Plus International," is not, and cannot, be reserved with the Department of State inasmuch as the Department of State no longer reserves corporate names. The New Bank, which will be located at 200 South Biscayne Boulevard, Miami, Florida, will have suitable quarters. The Applicants have applied to have the New Bank insured by the Bank Insurance Fund (BIF) of the Federal Deposit Insurance Corporation (FDIC). The application was received by the FDIC on July 11, 2000. DONE AND ENTERED this 9th day of February, 2001, in Tallahassee, Leon County, Florida. ___________________________________ STUART M. LERNER 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 9th day of February, 2001.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following pertinent facts are found: In the latter part of 1973, petitioner submitted to respondent its application for authority to organize a corporation for the purpose of conducting a general banking business to be located on the west side of U.S. Highway 19 at the intersection of Ridge Road in the City of Port Richie. An investigation of the application was conducted by State Supervising Examiner Bruce L. Hieronymus in April of 1974. The application received conditional approval from the former Comptroller of the State of Florida in December of 1974. In January of 1975, such conditional approval was revoked by the present Comptroller. Mr. Hieronymus conducted an update investigation of petitioner's application in mid-March, 1975, noting in his report that additional field examination time should have been allowed and that his recommendation and report was made without audit or verification of some points that could have a definite bearing on the Comptroller's decision. On April 16, 1975, a Comptroller's Conference was held. On October 15, 1975, Comptroller Gerald A. Lewis notified petitioner that he had denied the application for authority to organize the First Bank of Port Richie. The reasons for denial were set forth in a Statement attached to the Order of denial. While the Comptroller found that petitioner's establishment would promote, to some degree, the public convenience in the area, it was further found that: "Growth in the area has been significant. However, there is nothing in the record to indicate that past growth trends will continue. While four of the seven banks in the western area of Pasco County have recorded impressive gains in deposits from June 1974 through June 1975, the increases have been reflected overwhelmingly in time deposits and the savings and loan offices in the area compete heavily for these deposits. The three banks closest to the proposed bank site have not enjoyed significant deposit growth. While Ellis Security Bank reported a total deposit increase of $3.1 million during the period June 1974 through June 1975, Ellis First National Bank of New Port Richey and Peoples State Bank reported decreases in total deposits for the same period of $1.4 million and $7.5 million, respectively. It appears that local conditions do not assure reasonable promise of successful operation of the proposed bank and the existing banks. On the basis of the foregoing, the Comptroller has concluded that, while the first criterion is met in this case, the second criterion is not met. Therefore, the application is denied. Since this conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria." Subsequent to the denial, petitioner requested a hearing in accordance with Chapter 120 of the Florida Statutes. Receiving no response from the Comptroller, petitioner filed for a writ of mandamus in the Leon County Circuit Court. That Court found that the parties had agreed to proceed in accordance with the new Administrative Procedure Act and ordered respondent to grant petitioner a formal hearing. The office of the Comptroller forwarded the petition to the Division of Administrative Hearings and the undersigned Hearing Officer was designated to conduct the proceedings. This being a fact-finding adversary hearing under F.S. Sec. 120.57(1) to determine the issue of whether petitioner should be granted authority to organize and operate a general banking business at the proposed location; and considering the long delay between the Comptroller's conference, the Comptroller's order of denial and the date of the present hearing, as well as the fact that the Comptroller declined to reach any conclusion as to four of the six criteria required to be met for a charter, the parties were permitted to present all relevant evidence to date concerning the issues in dispute. As noted above, the proposed bank is to be located on a corner of the Port Richie Shopping Village, a large shopping center at the intersection of Ridge Road and U.S Highway 19, the latter of which is often described as "murderer's row due to its extremely heavy traffic congestion. This is a signal-controlled intersection with turn lanes and turn arrows, and is the only intersection with a traffic control light for several miles along Highway 19. Large residential areas surround the proposed site and a junior college is being built two miles east of the site. The site provides easy ingress and egress and adequate parking space. While the owners of the shopping center are experiencing financial difficulties in connection therewith, the center enjoys an occupancy rate of approximately 93 percent. County, state and federal offices are also located in or near the shopping center. There are two or three savings and loan institutions located in the immediate area of the proposed site. However, the nearest bank to the south of the proposed site is about 2.3 miles and the nearest bank to the north is 3.5 miles. The seven existing banks in the area are closer together than petitioner would be to any other bank, with the possible exception of the second and third banks to the south of petitioner in New Port Richie. The name of the proposed bank is First Bank of Port Richie. While numerous state and national banks and clearing houses utilize the word "first" in their nomenclature, petitioner's name should cause no conflict or confusion with the name of an existing bank. For its housing quarters, petitioner proposes to construct a permanent two-story building containing some 14,000 square feet, the second floor to be only partially finished. The size and layout of the building allow for growth, flexibility and convenience, and necessary security equipment is planned. Estimated construction costs are reasonable. Petitioner intends to temporarily operate in a modular unit located adjacent to the site of the permanent building so as to allow for construction of the building without interference. The temporary unit will be leased and will comply with federal security and bonding requirements. There is nothing in the record to indicate that petitioner's proposed capital structure is less than adequate. State examiner Hieronymus found this factor to be favorable in both his original and updated reports and no witness testified to the contrary. The examiner's original and updated investigations report as unfavorable the general character of management of petitioner. This conclusion appears to be based primarily upon the examiner's opinion at the time he prepared his reports that the petitioner's proposed president and chief executive officer, Mr. Raymond O. MacDonald, Jr., lacked both directorate experience and experience as the head of a bank. However, the evidence Illustrates, and Mr. Hieronymus admits, that at the time he prepared those reports he was unfamiliar with MacDonald's extensive banking experience, both as an executive vice president of a Tampa bank and as a director of a Lakeland bank. Testimony on this point from other witnesses indicates that the proposed officers and directors represent a cross-section of the community, each with prior business experience and three with prior operative banking experience with both new and established banks. The trade area of the proposed bank consists of approximately fourteen square miles. Since the early 1970's, the Pasco County area has been one of the fastest growing areas in the State of Florida. In mid-1973, the estimated population of the trade area was 9,200 residents. Present estimated population of the trade area is over 16,000, using figures obtained from statistics of the U.S. Post Office. The state average is 12,000 people per bank. In the past five years, the area has experienced an increase in deposits of 123 percent. As in most other areas across the nation, the area in question suffered in 1973/74 from the deleterious effects of inflation and recession, with attendant declines in construction and increases in the percentage of unemployed persons. While one opponent of petitioner's new bank charter testified that the banks in Pasco County had had a "rough go of it" in the past few years, this is not borne out by the evidence relating to the deposit growth and net income experienced by the seven existing banks. This same witness further stated that economic conditions in the area were now beginnings to pick up. Also, the two opponents to petitioner's application, both affiliated with banks in Pasco County, are each considering placing a remote facility or a branch office within the petitioner's proposed trade area. All but one of the seven banks in the area experienced a growth in deposits from the 1974 to the 1975 year end. The one bank which reported a decrease in deposits made a profit of some $77,000.00 in 1975, in spite of a loan write-off of about $700,000.00 in 1974 and problems with poor management. The two newest banks in the community, one of which is the closest bank to the north of petitioner, show excellent growth in deposits from 1974 to 1975. The two opponents who appeared at the hearing each testified that, other than normal competition factors, the proposed bank will have no adverse effect upon the successful operation of their existing banks. When Mr. Hieronymus conducted his investigations concerning the petitioner's proposed bank, he did not get the impression that other bankers in the area were concerned & that petitioner's operation would adversely affect their existing operations. The February, 1976, Comparative Figures Report published by the Florida Bankers Association, which is relied upon in part by respondent in determining whether to grant banking charters, shows Pasco County to have an 8.1 percent increase in deposits from 1974 to 1975 year ends. Since January of 1975, respondent has granted bank charters to banks located in Duval County with a deposit growth of minus .1 percent; in Polk County with a deposit growth of 1.5 percent; and in Hillsborough County with a deposit growth of minus 1.5 percent. Newly chartered banks frequently lose money in their first year of operation. Although the petitioner projected earnings indicating a substantial profit in each of the first three years of operation; Mr. Hieronymus concluded in his report that the opportunity for an acceptable return on investment was less than probable and reported the factor of "future earings prospects," to be "unfavorable." Using the approach of a percentage of average total assets rather than percentage of total capital (as used by petitioner in its projections) and taking into account the petitioner's purchase of the land and changes in the sources and costs of money, Mr. Hieronymus projected a net operating income of minus $14,091.00 the first year, plus $28,976.00 the second year and plus $37,023.00the third year. Deposit growth would increase from $2.5 million to $6.5 million to $9.0 million over the first three years, according to the projections of Mr. Hieronymus. These figures would be higher were petitioner located in its permanent facility during its first year. On cross- examination at the hearing, Mr. Hieronymus stated that these projected figures illustrate that local conditions assure reasonable promise of a profit.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent grant to petitioner authority to organize and operate a general banking business at 800 U.S. Highway 19 North, Port Richie, Florida. Respectfully submitted and entered this 8th day of June, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller The Capitol Tallahassee, Florida 32304 Mr. James M. Barclay Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida Mr. Wilbur E. Brewton and Mr. Clyde M. Taylor Taylor, Brion, Buker and Greene, P.A. P.O. Box 1796 Tallahassee, Florida 32302 Mr. John D. Kiernan 307 West Coast Title Building Sixth Street and First Avenue North St. Petersburg, Florida 33701 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING THE FIRST BANK OF PORT RICHEY (proposed new bank) Petitioner, vs. CASE NO. 76-086 STATE OF FLORIDA, DIVISION OF BANKING Respondent. /
The Issue Whether Respondents committed the offenses described in the Administrative Complaint? If so, what disciplinary action should be taken against them?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: The Parties The Department is a state government licensing and regulatory agency. Raymond Mangicapra is now, and has been at all times material to the instant case, a licensed real estate broker in the State of Florida. He holds license number 0326800. FUGI is now, and has been at all times material to the instant case, a corporation registered as a real estate broker in the State of Florida. It holds registration number 0245691. At all times material to the instant case prior to March 5, 1992, Mangicapra was the broker of record for FUGI. On March 5, 1992, he resigned as FUGI's broker of record and its president. Approximately five months later he returned to FUGI in the capacity of a licensed broker-salesman The Angulo Transaction On or about April 26 1991, Jose Angulo, his wife Martha Salazar Angulo, and their son Carlos Angulo, signed a written contract (hereinafter referred to as the "Angulo contract") to purchase from Lofts Development Corp. (hereinafter referred to as "LDC"), for $98,300.00, real property located in the Willow Wood subdivision in Palm Beach County upon which a residence was to be constructed. FUGI, through its then broker of record, Mangicapra, negotiated the sale for LDC. Mangicapra was also a part-owner of LDC and its qualifying agent. His partner was Vincent Ferri. Ferri, on behalf of LDC, signed the Angulo contract on May 2, 1991. Article II, Section C. of the Angulo contract provided, in part, as follows: Use of Mortgage Loan: Time to Make Application: Purchaser intends to pay for a portion of the Purchase Price by obtaining a permanent mortgage loan ("Mortgage Loan"). Purchaser agrees to make application(s) for such Mortgage Loan from a bona fide lending institution approved by Seller ("Mortgagee") in the amount of [$96,050.00], at applicable interest rates. Purchaser agrees to make application for such Mortgage Loan within five (5) days from execution of this Contract by Purchaser. Purchaser agrees to promptly execute all necessary documents, disclose all information within fourteen (14) days of request and pay all costs as and when requested of it by Mortgagee and/or Seller in conjunction with such application and take all other measures to aid in being approved for a Mortgage Loan, including the making of further applications for a Mortgage Loan. Failure to Obtain Mortgage Loan: Purchaser agrees that in the event Purchaser fails to qualify for such Mortgage Loan or fails to qualify for a Mortgage Loan sufficient in an amount to enable Purchaser to close after duly and promptly complying with all requests of the Mortgagee and/or Seller, Purchaser shall notify Seller of this fact, in writing, whereupon Seller may request that Purchaser make further applications for a Mortgage Loan. In the event that Purchaser fails to qualify for a Mortgage Loan with any Mortgagee after duly and promptly complying with all requests of the Mortgagee and/or the Seller, as provided above, then Seller shall, at its sole discretion, either (a) give a Mortgage Loan to Purchaser at applicable interest rates at the time such Mortgage Loan is closed for the Full Amount; or (b) transfer or otherwise assign a Mortgage Loan obtained by Seller at applicable interest rates at the time such Mortgage Loan is obtained for the Full Amount which Purchaser agrees to assume at closing in lieu of any other Mortgage Loan and for which Purchaser shall reimburse Seller for all loan closing costs, title insurance premiums and escrow balances existing at closing relative to such assumed Mortgage Loan; (c) in the instance where Purchaser is approved for a Mortgage Loan in an amount less than the Full Amount, unless otherwise prohibited by reason of government or lender regulations, take a purchase money second mortgage from Purchaser at applicable interest rates for a term not to exceed five (5) years and Purchaser shall pay all closing costs in connection with such purchase money second mortgage; or (d) return any monies paid hereunder less a sum for engineering and other expenses reasonably incurred in effecting and processing this Contract whereupon this Contract shall be terminated and the parties hereto shall be relieved of all further rights and obligations hereunder. Default by Purchaser: In the event Seller ascertains that Purchaser has failed to qualify for a Mortgage Loan due to Purchaser's failure to duly or promptly comply with all requests of the Mortgagee and/or Seller or due to failure on the part of Purchaser to supply accurate information, then any such event shall constitute default by Purchaser hereunder, entitling Seller to retain all sums paid hereunder as set forth in accordance with Article VI hereof. Notwithstanding anything contained in this Article II to the contrary or notwithstanding a subsequent mortgage disapproval by a Mortgagee, Purchaser specifically agrees that once a mortgage approval is obtained by Purchaser from one Mortgagee, the deposit monies paid by the Purchaser to Seller shall no longer be refundable. . . . Article III, Section D. of the Angulo contract provided, in part, as follows: Subject to the following provisions of this Paragraph, the estimated date of completion for the residence shall be on or about 120 days from mtg approv. . . . . In the event said Residence shall not be completed two (2) years from the date of this Contract as aforesaid, Purchaser shall have the option to cancel this Contract by giving written notice to Seller ("Cancellation Notice") within 5 days after two (2) years from the date of this Contract ("Cancellation Period") and upon such cancellation Seller shall refund to Purchaser his deposit made hereunder. Upon such Refund, all parties to this Contract shall be fully discharged and relieved from the terms and obligations hereof. Liability of Seller is limited to the Refund and in no event shall Seller be liable to Purchaser for any damages which Purchaser may sustain. In the event Purchaser does not send the Cancellation Notice within the Cancellation Period, this Contract shall remain in full force and effect and Purchaser shall not have the right to cancel this Contract unless Seller is otherwise in default of this Contract. Seller shall not be obliged to make, provide or compensate for any accommodations to Purchaser as a result of delayed completion nor shall Seller be liable for any expenses or inconveniences to Purchaser which may directly or indirectly arise from delay of delivery of possession. Article VI, Section A. of the Angulo contract addressed the subject of "Purchaser's Default." It provided, in part, as follows: If Purchaser shall fail to cure such default within such seven (7) day period, Seller shall, and does hereby have the unrestricted option to (1) consider Purchaser in default under this Contract, (2) retain all sums paid to it, whether held in escrow or otherwise, hereunder as agreed upon and liqu[id]ated damages and in full settlement of any claim for damages, and (3) terminate all rights of Purchaser under this Contract. . . . Article VII of the Angulo contract addressed the subject of "Deposit Money." It provided as follows: Seller shall at its option have the right to use the deposit money for any purposes as it deems necessary. Article VIII, Section B. of the Angulo contract provided as follows: Purchaser represents and warrants that this sale of the Property pursuant to this Contract was made by Seller's personnel and Purchaser agrees to indemnify and hold harmless Seller against any claims of real estate brokers for commissions relating to this sale. Article VIII, Section C. of the Angulo contract provided as follows: This Contract may not be assigned, sold or transferred by Purchaser without the prior written consent thereto by Seller, which consent may be withheld in Seller's sole discretion. There was no comparable provision in the contract restricting LDC's right to assign. Article VIII, Section E. of the Angulo contract provided as follows: This Contract shall be binding upon the parties hereto and their respective heirs, executors, legal representatives, successors and, as permitted hereunder, assigns. Addendum E to the Angulo contract, which was signed by the Angulos on April 26, 1991, and by Ferri on May 2, 1991, provided, in part, as follows: The purchaser(s) of a one or two family residential dwelling unit has the right to have all deposit fund[s] (up to 10 percent of the purchase price) deposited in an interest bearing escrow account. This right may be waived in writing by the purchaser(s). Purchaser(s) hereby waive their right to have all deposit funds (up to 10 percent of purchase price) deposited in an interest bearing escrow account. . . . First Union Group, Inc., is the agent for the Seller(s) and will be paid for his services by the Seller(s). . . . The Angulos' initial deposit was a check, which they gave to Mangicapra, made out to FUGI in the amount of $500.00. In conjunction with making this payment, they signed a Reservation Deposit/Contract Deposit Transfer Agreement, which provided, in part, as follows: It is specifically understood that this Earnest Money deposit is to be held in First Union Group, Inc's (hereinafter First Union Group) trust account. Upon acceptance of said reservation/contract between [the Angulos] (buyer) and Lofts Development Corp. (seller), and upon clearance of said deposit, buyer agrees that First Union Group may automatically transfer to seller said Earnest Money and said Earnest Money shall be treated as purchasers['] initial investment deposit. Purchaser agrees that once said reservation/contract between buyer and seller named above is accepted by seller, and there is in effect a purchase agreement, any and all future deposits due per said purchase agreement shall be made payable directly [to] seller. If any future deposits are inadvertently made payable to First Union Group, buyer hereby gives First Union Group the right and authorization to transfer said deposit money to seller. Any deviation to the above must be in writing from buyer at the time of the reservation/contract. . . . The "automatic transfer" of deposit monies from the real estate broker holding these monies to the seller/builder, like that authorized by this signed Reservation Deposit/Contract Deposit Transfer Agreement, was the accepted practice in the area. Mangicapra deposited the $500.00 check he had been given by the Angulos in FUGI's interest-bearing money market escrow account at Capital Bank in Delray Beach, Florida. The deposit was noted on the Angulos's ledger card. Respondents did not have the written permission of all interested parties to place the Angulos' deposit monies in such an interest-bearing account. Respondents received three other earnest money deposits from the Angulos: a check, dated May 30, 1991, payable to FUGI in the amount of $700.00 (hereinafter referred to as the "May 30 check"); a check, dated June 30, 1991, payable to FUGI in the amount of $700.00 (hereinafter referred to as the "June 30 check"); and a check, dated July 30, 1991, payable to FUGI in the amount of $600.00 (hereinafter referred to as the "July 30 check"). The June 30 and July 30 checks were deposited in FUGI's interest- bearing money market escrow account at Capital Bank and the deposits were noted on the Angulos' ledger card. The May 30 check, however, was inadvertently deposited in FUGI's general operating account at Capital Bank, instead of its escrow account, as a result of a bookkeeping error. On or about August 8, 1991, Respondents wrote a check (hereinafter referred to as "check #1395") transferring $4,800.00 from its Capital Bank escrow account to LDC. The $4,800.00 represented escrow funds being held by Respondents in connection with six different transactions. It included $1,800.00 of the $2,500.00 in earnest money deposits that Respondents had received from the Angulos. The transfer of this $1,800.00 to LDC was in accordance with the Reservation Deposit/Contract Deposit Transfer Agreement signed by the Angulos. Upon receiving check #1395, Ferri endorsed it back to FUGI to compensate FUGI for services it had provided LDC and for expenses FUGI had incurred in conjunction with the performance of these services. The endorsed check was deposited in FUGI's interest-bearing money market account at Capital Bank. On or about November 1, 1991, Donna Archer, who was then an employee of FUGI, sent a Verification of Escrow Deposit to Paragon Mortgage Corporation (hereinafter referred to as "PMC"), from whom the Angulos were attempting to obtain a mortgage loan. Archer provided the following erroneous information in this Verification of Escrow Deposit: As Escrow Agent in the [Angulo] transaction, we are now holding the following amount in our escrow account for the above captioned transaction: $2,500.00------- total held in escrow. On or about December 26, 1991, PMC sent the Angulos the following letter advising them that their application for a mortgage loan had been conditionally approved: We are please[d] to inform you that your application for a FHA mortgage in the amount of 95,750.00 has been approved. The following items are contingencies on the loan and must be met prior to closing. Provide independent documentation of YTD income for Martha (i.e. copy of ledger signed by accountant of employer) Amendment of contract to reflect the following, contract to remain current through closing Hazard insurance policy for at least the loan amount Survey with flood certification [C]lear soil treatment guaranty Clear final inspection Proof of 10 year HOW warranty or 2/10 [h]ome buyers warranty At the time this conditional loan commitment was made, the master appraisal of the property was about to expire. Accordingly, an extension of the deadline was sought by PMC. By written agreement, dated April 26, 1992, and signed by Ferri and Jules Minker, the president of Contemporary Community Concepts Corp. (hereinafter referred to as "Contemporary"), LDC, which no longer wished to construct homes in the Willow Wood subdivision, assigned the Angulo contract to Contemporary: In consideration of the sum of $10.00 Ten Dollars lawful money of the United States, I, Vincent A. Ferri, President of Lofts Development Corporation, hereby assign without reservation or limitation and free of encumbrance, the purchase contract between Jose Antonio and Martha Salazar Angulo, his wife and Lofts Development Corporation, dated April 26, 1991 to Contemporary Community Concepts Corporation. The deposit monies indicated and due under the contract in the approximate amount of $1800.00 Eighteen Hundred Dollars, are not transferred by this agreement and remain with Lofts Development Corporation. In fact, the "deposit monies indicated and due under the contract," amounted to $2,500.00, although only $1,800.00 of that amount had been transferred to LDC. In May of 1992, upon attempting to contact Mangicapra to find out why LDC had not yet begun to work on their house, the Angulos discovered that FUGI had closed the office out of which it had been conducting its business. The Angulos brought the matter to the attention of Sharon Couglin of PMC. Couglin wrote a letter to an official at HUD to apprise the agency of the situation. A copy of the letter was sent to the Florida Real Estate Commission. Notwithstanding the Angulos' beliefs to the contrary, FUGI was still in business. It had simply moved to another location in Boynton Beach. (Mangicapra was not at this time, however, associated with FUGI in any way.) Minker contacted FUGI and the Angulos and advised them that the Angulo contract had been assigned to Contemporary. In his discussions with the Angulos, Minker told them that they would be given credit for the earnest money deposits that they had made. The Angulos, in turn, indicated that they wanted Contemporary to proceed with the construction of the house LDC had agreed to build for them. In accordance with the Angulos' stated desires, Contemporary proceeded with the construction of the house. As the house neared completion, the Angulos learned that the conditional mortgage loan commitment they had received was no longer valid because the master appraisal had expired. They thereupon tried to contact FUGI to explore their options. This time they were successful in their efforts to get in touch with a FUGI representative. They spoke with Denise Preziosi, who had replaced Mangicapra as FUGI's broker of record. The Angulos asked Preziosi if they could obtain a refund of their deposit monies in the event they decided that they did not want to go through with their purchase of the house. Preziosi indicated that she did not know the answer to the question and that, in any event, FUGI no longer held any of the Angulos' deposit monies. At the time she made this statement, Preziosi was under the mistaken impression that FUGI had transferred all of these monies to LDC. On or about November 25, 1992, Preziosi sent a letter to Minker, the body of which read, in part, as follows: I am in receipt of a copy of the "Agreement" between Contemporary Community Concepts Corporation and Lofts Development Corporation which Patti faxed to me yesterday. In reading this Agreement, I noticed that the amount stated as a credit to the Angulos is $1800 rather than the $2500 they did in fact pay to Lofts. I understand that you did not nor will not receive any money from Lofts but that you agreed to accept the assignment of the contract and would give them credit for their deposit. In this regard, please amend your records to reflect a credit of $2,500 as deposit monies rather than $1,800. The Angulos made their final color selections for the house in mid- December, 1992. Thereafter Minker obtained a certificate of occupancy for the house. Although Carlos Angulo, in Minker's office, signed a document prepared by Minker agreeing "to complete loan processing for a new loan and to close on [the house] when funds are made available as a result of this application, but not to exceed 60 days," 1/ when Carlos took this document home and presented it to his parents for their signature, they refused to sign it. The Angulos did not "complete loan processing for a new loan." The Angulos have not been refunded any of the $2,500.00 in earnest money deposits they have made, nor have they received any of the interest earned on these deposits. It has not been shown, however, that the Angulos are now, or were at any time previous hereto, entitled to such a refund under the provisions of their contract with LDC. The White-Hunt Transaction On or about May 3, 1990, Stacey White-Hunt signed a written contract (hereinafter referred to as the "White-Hunt contract") to purchase from LDC, for $97,000.00, real property located in the Delray Garden Estates subdivision in Palm Beach County upon which a residence was to be constructed. FUGI, through its then broker of record, Mangicapra, negotiated the sale for LDC. Ferri, on behalf of LDC, signed the White-Hunt contract on May 9, 1990. The White-Hunt contract contained provisions identical in all material respects to Article II, Section C., Article III, Section D., Article VI, Section A., Article VII, and Article VIII, Sections B., C. 2/ and E. of the Angulo contract, as well as Addendum E to the Angulo contract. (These contractual provisions are set out above.) White-Hunt's initial deposit was a check, which she gave to Mangicapra, made out to FUGI in the amount of $500.00. In conjunction with making this payment, she signed a Reservation Deposit/Contract Deposit Transfer Agreement, which was identical in all material respects to the Reservation Deposit/Contract Deposit Transfer Agreement signed by the Angulos. Respondents received one other earnest money deposit from White-Hunt. It was a check payable to FUGI in the amount of $1,000.00. The $500.00 check and the $1,000.00 check were deposited in FUGI's interest-bearing money market escrow account at Capital Bank and the deposits were noted on White-Hunt's ledger card. Respondents did not have the written permission of all interested parties to place White-Hunt's deposit monies in such an interest-bearing account. On or about May 23, 1990, Respondents wrote a check transferring $6,500.00 from its Capital Bank escrow account to LDC. The $6,500.00 represented escrow funds being held by Respondents in connection with various transactions. It included the $1,500.00 in earnest money deposits that Respondents had received from White-Hunt. The transfer of this $1,500.00 to LDC was in accordance with the Reservation Deposit/Contract Deposit Transfer Agreement signed by White-Hunt. White-Hunt sought, but failed to qualify for, a conventional mortgage loan. Thereafter she applied for an FHA mortgage loan. By notice dated October 10, 1991, she was advised that her application had been denied. On February 7, 1992, the law firm representing White-Hunt sent a letter to Respondents, the body of which read as follows: Please be advised that I have been retained by Stacey Hunt with regard to the above- referenced Contract in order to secure a return of her deposit. I have enclosed herein copies of the deposit checks made payable to ERA First Union Group in the total sum of $1,500.00 which were provided to you on April 17, 1990 and May 8, 1990. Since Ms. Hunt has failed to qualify for a mortgage, in accordance with Paragraph (b)(2) of the Contract, this letter shall serve as formal demand for a return of any and all deposits placed with your company and any and all interest accrued thereon. In the event I am not in receipt of a check payable to Ms. Hunt on or before February 14, 1992, I will presume that you have converted these funds and proceed to undertake . . . any and all efforts to have the funds returned including, without limitation, contacting the Florida Real Estate Commission. Preziosi, on behalf of FUGI, responded by letter to the law firm. The body of her letter read as follows: In response to your letter of even date enclosed please find a copy of a Reservation Deposit/Contract Deposit Transfer which was signed on April 17, 1990 by Stacey Hunt. You will note that this agreement states that once a contract between buyer and seller is in effect, any deposit money given to First Union Group, Inc. will be transferred to the seller and treated as the initial investment deposit. Further, all future deposits are to be made payable to the seller. If an additional deposit was received by First Union Group, Inc., it too would be transferred to the seller. In this regard, be advised that on May 23, 1990, $1,500 that was being held by First Union Group, Inc. on behalf of Ms. Hunt was transferred to Lofts Development Corp. as per this agreement. Also enclosed is a copy of the check together with a copy of the escrow cards which represented all deposits transferred via this check. Respondents have not returned any deposit monies to White-Hunt; however, as Preziosi pointed out in her letter, well before White-Hunt had requested a refund from them, Respondents had transferred these monies to LDC in accordance with the Reservation Deposit/Contract Deposit Transfer Agreement White-Hunt had signed.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is hereby recommended that the Commission enter a final order finding Mangicapra guilty of the violations alleged in Counts I, III, IV, V, and XV of the Amended Administrative Complaint to the extent indicated above, suspending Mangicapra's license for a period of 120 days and fining him $3,000.00 for having committed these violations, finding FUGI guilty of the violations alleged in Counts VI, VIII, IX, X, and XX of the Amended Administrative Complaint to the extent indicated above, suspending FUGI's registration for a period of 120 days and fining it $3,000.00 for having committed these violations, and dismissing the remaining allegations set forth in the Amended Administrative Complaint. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 30th day of June, 1993. STUART M. LERNER 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 16th day of April, 1993.
The Issue The ultimate issue to be determined in this matter is whether the application filed by Boulevard Bank to establish a branch at Islamorada, Florida, should be approved or denied. The Applicant contends that all of the requirements set out at Section 658.26, Florida Statutes, and Rule 3C-13, Florida Administrative Code, have been met, and that the application should be approved. The Protestant contends that the Applicant has failed to demonstrate that the public convenience and necessity would be served by the proposed branch.
Findings Of Fact The Applicant, Boulevard Bank, is a full-service, commercial banking institution licensed by the Florida Department of Banking and Finance. Its principal offices are located in Key West, Monroe County, Florida. Boulevard Bank has filed an application with the Department of Banking and Finance to establish a branch banking facility at Islamorada, Monroe County, Florida. Boulevard Bank has acquired property for the facility. The property is located on "Old State Road" and is bounded on the north by Matecumbie Street and on the south by Jerome Street. Boulevard Bank has obtained zoning variances that would allow it to construct a branch banking facility on the property. The primary service area of the proposed branch banking facility would be from Mile Marker 87, northeast of the proposed facility, to Channel 5, southwest of the facility. This area is approximately 15 miles long. In keeping with the geography of the Florida Keys, the service area is quite narrow, approximately 0.3 miles at the widest. The service area is characterized by mixed residential and commercial uses. There are approximately 3,000 full-time residents within the service area. There are many people who live in the area on a part-time basis. During the winter months, the population increases dramatically. There are more than 90 stable businesses located within the service area. There are currently two banking institutions located within the service area of the proposed Boulevard Bank branch. The main office of The Islamorada Bank and a branch of the First Federal Savings and Loan Association of the Florida Keys are located within close proximity to the location of the proposed branch. The Islamorada Bank is the only full-service, commercial banking institution in the service area. The public convenience and necessity would be served by the opening of an additional full-service banking facility within the service area in that the public would be the beneficiary of the favorable impacts of competition. The Applicant proposes to provide a full range of banking services at the proposed branch. Applicant proposes to stay open at hours and on days that The Islamorada Bank remains closed. Competition can have a favorable impact upon interest that is paid to the bank's depositors and interest rates that are charged by the bank on loans. There is no evidence from which it could be concluded that the opening of the proposed branch would in any way damage the fiscal integrity of banking facilities already located within the service area. While the public convenience and necessity would be served by the increased number of facilities and by competition, it does not appear that there has been a dramatic increase in the need for banking services within the service area in recent years. The main office of The Islamorada Bank has not experienced an increase in deposits since 1979. It does not appear that existing banking facilities within the service area are providing inadequate service to residential and business customers. The Applicant is proposing to invest $470,000 in fixed assets, including the cost of land, building, and furniture and equipment to support the proposed branch. The building, which has not yet been constructed, would have dimensions of approximately 30 by 50 feet. The facility would include drive-in banking windows and an automatic teller machine. The Applicant has sufficient capital accounts to support the proposed branch. The Applicant's percentage of capital to total assets exceeds 7.5 percent. The ratio was 7.8 percent on December 31, 1981, and 8.6 percent on June 30, 1982. The operation of the proposed branch would pose no threat to depositors, creditors, or shareholders of the Applicant. Even if the branch operated without a single depositor, the losses to Applicant would not be such as to pose a risk to the integrity of the Applicant, nor to substantially reduce the stockholders' dividends. It is extremely unlikely that the branch would operate without any depositors, and it appears that there is a favorable prospect that the branch would be profitable. The Applicant has sufficient earnings and prospects for earnings to support the expenses of the proposed branch. The Applicant's net profits to assets ratio exceeded 0.5 percent during the past calendar year. For 1981, the Applicant's net profit to total assets ratio was 2.5 percent prior to the payment of federal income taxes, and 1.5 percent after taxes were paid. The Applicant's loans to deposits ratio was 63 percent on December 31, 1981. The Applicant appears to have sufficient management depth to operate the proposed branch without affecting its present services. Applicant proposes to assign Rudy D. Aud as chief operations officer. Mr. Aud is a vice president of the Applicant. He assisted in the establishment of the Applicant's Big Pine Key branch and has operated that facility. The name of the proposed branch would be "Islamorada Branch of Boulevard Bank, Islamorada, Florida." The name would reasonably identify the facility as a branch of the Applicant. The proposed name would not confuse the public either as to the nature of the facility or in relation to other banking facilities. The files of the Department of Banking and Finance, including the Department's confidential file, establish that the Applicant has operated in substantial compliance with applicable laws governing its operations. ENTERED this 17th day of December, 1982, in Tallahassee, Florida. G. STEVEN PFEIFFER Assistant Director 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 17th day of December, 1982. COPIES FURNISHED: Robert T. Feldman, Esquire 417 Eaton Street Key West, Florida 33040 Gustave W. Larson, Esquire 9999 Northeast Second Avenue Suite 307, Shoreview Bldg. Miami Shores, Florida 33138 Elsa Lopez Whitehurst, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 The Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING IN RE: BOULEVARD BANK--Application for authority to establish a branch CASE NO. 82-2623 at Mile Marker 81.4, U.S. Highway 1, Islamorada, Monroe County, Florida. / FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL ORDER Pursuant to notice, a formal administrative hearing was conducted in this matter on November 5, 1982, before G. Steven Pfeiffer, with the Division of Administrative Hearings, in Islamorada, Monroe County, Florida. The purpose of the hearing was to receive evidence concerning the application of Boulevard Bank for authority to open a branch at mile marker 81.4, U.S. Highway 1, Islamorada, Florida. At the hearing, the following appearances were entered: Robert T. Felman, Key West, appeared on behalf of the Applicant, Boulevard Bank; Gustave Larson, Miami Shores, Florida, appeared on behalf of the Protestant, the Islamorada Bank; Elsa Lopez Whitehurst, Tallahassee, Florida, appeared on behalf of the Florida Department of Banking and Finance. No exceptions were filed in this case. Having fully considered the facts and information contained in the record relating to the application of Boulevard Bank for authority to open a branch office at mile marker 81.4, U.S. Highway 1, Islamorada, Monroe County, Florida, The Comptroller of the State of Florida, as Head of the Department of Banking and Finance, hereby renders the following FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL ORDER in the above-styled cause.
Findings Of Fact This case involves the consideration of the Respondent's attempt to assess documentary stamp tax, penalty and interest on the document which the Petitioner recorded; said document being entitled Mortgage Consolidation, Modification and Extension Agreement. This document is recorded in Book 6855 and page 73, Broward County, Florida, Official Records. The date of recordation was December 30, 1976. By joint stipulation, a copy of the document in question has been admitted as joint Exhibit No. 1 by the parties. The Notice of Proposed Assessment setting forth the amount claimed is found as an attachment to the petition. The date of the assessment is May 18, 1977. The only change in the claim by the Respondent, is the concession by the Respondent that the 100 percent penalty no longer applies and that a 25 percent penalty is now in effect. This change may be found in the letter of the Respondent's attorney dated December 12, 1977, which is admitted and made a part of the record herein and attached hereto. As demonstrated, there is no factual dispute between the parties on the issue of what document or item is being claimed as taxable. The dispute arises over the question of taxability. The respondent claims that the document is taxable under the authority of Section 201.08, F.S. and Rule 12A-4.53, F.A.C. The latter provision is an adaptation of the authority set forth in State, Department of Revenue v. McCoy Motel, Inc., 304 So.2d 440, (1 DCA, Fla 1974). The Respondent's assertion of taxability under the theory in McCoy supra is correct. The correctness of the Respondent's interpretation may be understood by contrasting the facts in the McCoy case with those in the case of sub judice. In the McCoy case, McCoy Motel, Inc., in a promissory note which is referred to as the "first note," promised to pay the sum of $1,850,000 to Keyes-Penn Mortgage Company together with interest. McCoy then paid documentary stamp tax on the full amount of the note. Keyes-Penn Mortgage Company subsequently assigned an undivided 67.57 percent interest in that note to the Monumental Life Insurance company and made a further assignment of 32.43 percent of the interest to the Volunteer State Life Insurance Company. On a later date, McCoy gave a note, referred to as the "second note," to Alison Mortgage Investment Trust in which it promised to pay $3,500,000 together with interest. Alison in return agreed to pay Monumental Life Insurance company, as payee of the "first note," payments on the "first note" when they became due. This agreement to pay Monumental Life Insurance Company was premised upon the expectation that McCoy not be in default under the terms of the first or second note, or the corresponding mortgages which were in support of those notes. In this situation, the first and second notes were secured by mortgages on the same property. The mortgage note between McCoy and Alison Mortgage Investment Trust was what is commonly known as a "wraparound" mortgage. That is to say, the "second note" represented the total indebtedness of the "first note" and an additional sum. McCoy paid documentary stamp tax on $1,650,000 of the second note which represented the total sum of the loan less the amount that had been loaned on the "first note." The State of Florida disagreed with this approach and contended that the full amount of the "second note" should be subject to documentary stamp taxes. The Trial Court rejected the State's position and held that the amount of $1,850,000 was part of a contractual agreement between McCoy and Alison Mortgage Investment Trust in which certain monies were to be paid through Alison to the holder of the first mortgage and that McCoy was not under obligation to pay money within the meaning of Chapter 2011, F.S., and not subject to tax for the amount of the "first note." The Appellate Court rejected this contention and concluded that the full amount of $3,500,000 plus interest was a loan made to McCoy Motel, Inc., with the understanding that McCoy was obligated to pay back that amount to Alison Mortgage Investment Trust. Therefore, an excise tax was due on the full amount. This conclusion by the Appellate Court was reached on the basis of an examination of the terms and conditions of the second note which set forth the amount of payment, the amount of interest, and the steps to be taken in the event of default on the payments by McCoy. The Appellate Court held that this obligation to pay the $3,500,000 plus interest was not an executory, contingent or conditional agreement between the parties. Further, the Court held that the documentary stamp tax would be due regardless of whether a part or all of the obligation of a renewal note was subjected to the conditions of Chapter 201., F.S., under an original note. The exception to that ruling, the Court stated, would be if it was a renewal within the meaning of Section 201.09, F.S., which would exempt it from taxation. The McCoy "second note" was not found to be one of the exempt categories. It was not found to be exempt because it was felt that it was not a reiteration of the original note, but was an enlargement of the original contract and obligation, thereby precluding any exemption. The underlying theory of the Court in its holding in McCoy, supra, is grounded on the Court's opinion that the liability to pay documentary stamp tax and the amount of the tax to be paid shall be determined by the form and face of the instrument and not by proof of extrinsic facts. In the present case, Lake Taft Village, Inc. was obligated to pay two first mortgages on separate parcels of land. The initial first mortgage holder was Southport American National Bank, to whom Lake Taft Village, Inc. owed $150,000 under the terms of the note and mortgage. The second parcel was mortgaged to a group known as "Curcie Brothers." This group was owed $450,000 under the terms and conditions of the note and mortgage. Lake Taft Village, Inc. decided to sell the property covered by the two first mortgages. The purchaser of that property was the Petitioner, The Lakes of Pembroke Pines, Inc. At the closing, The Lakes of Pembroke Pines, Inc. paid $970,000 by making a $60,000 down payment and assuming the two mortgages in the amount of $150,000 and $450,000. In addition, Lake Taft Village, Inc. took back a second mortgage for $310,000 from The Lakes of Pembroke Pines, Inc. This second mortgage was a purchase money mortgage and was subordinate on the entire property, encumbered by the two first mortgages. However, before this second mortgage was recorded, the seller and Petitioner entered into an agreement whose terms and conditions are found in the Joint Exhibit No. 1, which is the subject of the dispute. As stated before, this document is entitled Mortgage Consolidation, Modification and Extension Agreement. The document is in fact a "wraparound" mortgage. The reason that it is considered to be a "wraparound" mortgage may be found in the examination of the document itself. The document consolidates the preexisting first mortgages, in which Southport American National Bank and "Curcie Brothers" are the mortgagees, with the second mortgage held by Lake Taft Village, Inc. Moreover, it establishes an interest rate for the payment from the Petitioner to Lake Taft Village, Inc., in addition to the schedule of payments of interest and principle. It also establishes the method by which parcels of property which are encumbered by one of the two first mortgages may be released by the holder of the "wraparound" mortgage. The holder of that mortgage initially was Lake Taft Village, Inc. This provision pertains to the amount of the $150,000 mortgage held by Southport American National Bank. The terms of the document call for the Lake Taft Village, Inc. to pay the first mortgage holder "Curcie Brothers" in lieu of payments by the Petitioner who has assumed that mortgage. Other terms of the document pertain to prepayment of the first mortgages by Lake Taft Village, Inc.; matters to be considered in the event of defaults on the terms of the "wraparound" and numerous other clauses agreed to by the parties in the mortgage consolidation. One further significant item within the document, pertains to the satisfaction agreement between the Petitioner and Lake Taft Village, Inc., in which Lake Taft Village, Inc. is allowed to pay off the first mortgages and be entitled to the assignment of those first mortgages instead of a satisfaction. The terms in the the document clearly indicate that Lake Taft Village, Inc. and the Petitioner are agreeing to modify the conditions under which the Petitioner assumed the two first mortgages at the closing with Lake Taft Village, Inc. It also indicates that there is a consolidation of the responsibilities which the Petitioner has under the assumption of two first mortgages, into an integrated arrangement to pay those mortgages and the amount of $310,000 which constitutes the amount of money owed under the second mortgage held by Lake Taft Village, Inc. The terms of the "wraparound" mortgage being separate and apart from the terms of the assumption of the two first mortgages, and the conditions set forth in the second mortgage to Lake Taft Village, Inc.; it is the Petitioner's responsibility to pay documentary stamp tax on these written obligations, in accordance with Section 201.08, F.S. The exception being if the "wraparound" mortgage constitutes a renewal of the existing promissory note within the meaning of Section 201.09, F.S. It does not constitute a renewal for the existing promissory note, because it is an enlargement of the terms and conditions of the assumption of first mortgages and notes, by changing their terms and consolidating them with the second mortgage held by Lake Taft Village, Inc. Therefore, a comparison of the McCoy "wraparound" mortgage and that of the Petitioner shows them to be sufficiently similar in nature to make the authority set forth in McCoy, supra, applicable. Under that statement of authority, the authority of Section 201.08, F.S. and Rule 12A-4.53, F.A.C., the Petitioner owes documentary stamp tax, penalty and interest. The amount of documentary stamp tax is $1,365. The penalty is 25 percent of that amount, in keeping with the concession set forth in the December 12, 1977, letter of the Respondent's attorney and the interpretation of the undersigned, which is to the effect that a 25 percent penalty shall be imposed for all proposed assessments not final on July 1, 1977. This is in keeping with the provisions of Section 201.17, F.S., as amended by Chapter 77-281, Laws of Florida. This penalty is subject to further reduction if a compromise is entered into between the parties. Interest should be charged at 1 percent per month from the beginning date, in keeping with terms and conditions of Section 201.17, F.S.
Recommendation It is recommended that the proposed assessment of May 18, 1977, be upheld, in that the documentary stamp tax in the amount of $1,365 be upheld and that a penalty in the amount of 25 percent or such lesser amount as compromised by the parties be assessed together with interest. Done and Entered this 6th day of January, 1978, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Norman N. Zipkin, Esquire 225 Northeast 35th Street Miami, Florida 33137 Cecil L. Davis, Jr., Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 194, Carlton Building Tallahassee, Florida 32304
The Issue Whether Respondent Corporation, Southern Insight, Inc., failed to secure payment of workers' compensation coverage as required by Chapter 440, Florida Statutes, and the Florida Insurance Code, and if so, whether the Department of Financial Services, Division of Workers' Compensation (Department) has lawfully assessed the penalty against Respondent in the amount of $27,805.11.
Findings Of Fact The Department is the state agency responsible for enforcing Section 440.107, Florida Statutes, which requires that employers secure the payment of workers' compensation coverage for their employees and otherwise comply with the workers' compensation coverage requirements under Chapter 440, Florida Statutes. Respondent has been a Florida corporation, actively involved in the construction industry providing framing services, during the period of February 16, 2006, through August 17, 2007 (assessed penalty period). At all times material, Respondent has been an "employer," as defined by Chapter 440, Florida Statutes. At all times material, John Cauley has been Respondent's president and sole employee. At no time material did Respondent obtain workers' compensation insurance coverage for John Cauley. On August 17, 2007, Department Investigator Lynise Beckstrom conducted a random workers' compensation compliance check of a new home construction site in Palm Coast, Florida. At that time, Ms. Beckstrom observed four men, including John Cauley, framing a new home. Utilizing the Department's Compliance and Coverage Automated System (CCAS) database, which contains all workers' compensation insurance policy information from the carrier to an insured and which further lists all the workers' compensation exemptions in the State of Florida, Ms. Beckstrom determined that for the assessed penalty period, Respondent did not have in effect either a State of Florida workers' compensation insurance policy or a valid, current exemption for its employee, John Cauley. During the assessed penalty period, Respondent paid remuneration to its employee, John Cauley. John Cauley admitted that during the assessed penalty period he was not an independent contractor, as that term is defined in Section 440.02(15)(d)(1), Florida Statutes. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate of exemption from workers' compensation benefits. Only the named individual on the application is exempt from workers' compensation insurance coverage. On or about April 15, 2006, John Cauley, as Respondent's President, applied for such an exemption. That application was denied. Mr. Cauley received neither an exemption card nor a denial of exemption from the Department. During the assessed penalty period, Respondent was a subcontractor of the contractor, Mass Builders, Inc. 9. Sections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize the Department to issue stop-work orders to employers unable to provide proof of workers' compensation coverage, including proof of a current, valid workers' compensation exemption. Based on the lack of workers' compensation coverage and lack of a current, valid workers' compensation exemption for Respondent corporation's employee, John Cauley, the Department served on Respondent a stop-work order on August 17, 2007. The stop-work order ordered Respondent to cease all business operation for all worksites in the State of Florida. Immediately upon notification by Investigator Beckstrom of his lack of valid exemption, Mr. Cauley submitted a new exemption application, which was granted, bringing Respondent corporation into compliance. However, in order to have the stop-work order lifted so that he can work as a corporation again, Mr. Cauley must pay a percentage of the penalty assessment and enter into a payment plan with the Agency. In the meantime, Mr. Cauley cannot pay the percentage required by the Department if he cannot find work as someone else's employee, which he had been unable to do as of the date of the hearing. Herein, it is not disputed that Respondent was inadvertently out of compliance. Mr. Cauley seeks merely to reduce the amount of the penalty assessment so that removal of the stop-work order against Respondent corporation can be negotiated. On the day the stop-work order was issued, Investigator Beckstrom also served Respondent with a "Request for Production of Business Records for Penalty Assessment Calculation," in order to determine a penalty under Section 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, the Department may request business records for the three years preceding the date of the stop-work order. Logically, however, Ms. Beckstrom only requested business records dating back to February 14, 2006, Respondent's date of incorporation in Florida. The requested records included payroll, bank records, check stubs, invoices, and other related business records. Ms. Beckworth testified that, "Business records requests usually consist of payroll, bank records, taxes, check stubs, invoices, anything relating to that business." This is a fair summation of a much more detailed listing of records required to be kept pursuant to Rule 69L-6.015, Florida Administrative Code, which was in effect at all times material. In response to the Request for Production, Respondent provided Southern Insight Inc.'s corporate bank statements for the assessed penalty period, detailing corporate income and expenses through deposits and bank/debit card purchases. However, Investigator Beckworth did not deem the corporate bank statements produced by Respondent to be an adequate response, and she did not base her calculations for penalty purposes thereon. Mr. Cauley expected that the Department would, and has argued herein that the Department should, have subtracted from the total deposits to Respondent's corporate account (the minuend) the total corporate business expenses (the subtrahend) in order to determine the Respondent's payroll to Mr. Cauley (the difference), upon which difference the Department should have calculated his workers' compensation penalty. In fact, the Department, through its investigator, did not utilize the total amount deposited to Respondent's corporate account, because some deposits "could" have come from a family member of Mr.Cauley. That said, there are no individual names on the account; the account is clearly in the name of the Respondent corporation; and there is no proof herein that any deposits to Respondent's corporate bank account were derived from anyone other than Mr. Cauley, as Respondent's President. Ms. Beckstrom testified that if the Agency had accepted the total of the deposits to this corporate account for the assessed penalty period as Respondent's payroll, the result would have been more than the total amount actually determined by her to constitute Mr. Cauley's payroll, but that statement was not demonstrated with any specificity. The Department also did not use any of the subtracted amounts shown on the corporate bank statements, even though the bank statements listed the same information as would normally be found on a corporate check, including the transaction number, recipient of the money, the date, and the amount for each bank/debit card transaction. All that might be missing is the self-serving declaration of the check writer on the check stub as to what object or service was purchased from the recipient named on the bank statement. Ms. Beckstrom testified that if Mr. Cauley had provided separate receipts for the transactions recorded on the bank statements as bank/debit card entries, she could have deducted those amounts for business expenses from the corporation's income, to arrive at a lesser payroll for Mr. Cauley. In other words, if Mr. Cauley had provided separate receipts as back-up for the transactions memorialized on the corporate bank statements, the Department might have utilized the bank/debit card transactions itemized on Respondent's corporate bank statements as the amount deducted for Respondent corporation's business expenses, so as to obtain the payroll (difference) paid to Mr. Cauley. It is the amount paid to Mr. Cauley as payroll, upon which the Department must calculate the workers' compensation penalty. The reason Ms. Beckworth gave for not using Respondent's bank statements was that without more, the transactions thereon might not be business expenses of the corporation. However, she also suggested that if, instead of submitting bank/debit card statements, Mr. Cauley had submitted checks payable to third parties and if those corporate checks showed an expenditure for a deductible business expense, like motor vehicle fuel, she might have accepted the same expenditures in check form (rather than the statements) in calculating Respondent's payroll. Ultimately, Ms. Beckworth's only reasons for not accepting the bank statements showing recipients, such as fuel companies like Amoco, was "agency policy," and her speculation that Amoco gas could have been put into a non-company truck or car. She also speculated that a prohibition against using bank statements showing deductions might possibly be found in the basic manual of the National Council on Compensation Insurance (NCCI) or in a rule on payrolls (Rule 69L-6.035) which became effective October 10, 2007, after the assessed penalty period. However, the NCCI manual was not offered in evidence; a rule in effect after all times material cannot be utilized here; and no non-rule policy to this effect was proven-up. In addition to not using Respondent's bank statements to calculate a penalty, the Department also did not "impute" the statewide average weekly wage to Respondent for Mr. Cauley. Ms. Beckworth testified that to impute the statewide average weekly wage would have resulted in a higher penalty to Respondent. As to the amount of the statewide average weekly wage, she could only say she thought the statewide average weekly wage was "about $1,000.00". Instead of using Respondent's corporate bank statements or imputing the statewide average weekly wage, Investigator Beckstrom determined that Mass Builders, Inc., was the prime contractor on the jobsite being worked by Respondent, and that Mass Builders, Inc., had not produced proof of securing workers' compensation coverage for Respondent, its sub- contractor. Therefore, she sought, and received, Mass Builders, Inc.'s "payroll records" of amounts paid by the prime contractor, Mass Builders, Inc., to Respondent Southern Insight, Inc., via a separate site-specific stop-work order and business records request directed to Mass Builders, Inc. The only "payroll records" that Mass Builders, Inc., offered in evidence were Mass Builders, Inc.'s check stubs, which Ms. Beckstrom utilized to come up with an income/payroll amount for Respondent Southern Insight, Inc. Mr. Cauley did not know until the hearing that Mass Builders, Inc.'s check stubs had been utilized in this fashion by the Department. However, he ultimately did not dispute the accuracy of the check stubs and did not object to their admission in evidence. In calculating Respondent's total payroll for the assessed penalty period, Investigator Beckstrom considered only the total of the check stubs from Mass Builders, Inc. It is unclear whether or not she reviewed Mass Builders, Inc.'s actual cancelled checks. No one from Mass Builders, Inc., appeared to testify that the stubs represented actual cancelled checks to Respondent or Mr. Cauley. The Department also did not deduct from the total of Mass Builders, Inc.'s check stubs any of the bankcard deductions made by John Cauley from Respondent's corporate bank account, for the same reasons set out above. Mr. Cauley testified, without refutation, that some of the expenses noted on Respondent's bank statements, paid by bank/debit card, most notably expenses for gasoline for his truck, constituted legitimate business expenses of Respondent corporation, which should have been deducted from either the bank statement's total income figure or from the amounts paid by Mass Builders, Inc., to Respondent corporation, before any attempt was made by the Department to calculate the amount paid by Respondent corporation to Mr. Cauley as payroll. Utilizing the SCOPES Manual, which has been adopted by Department rule, Ms. Beckstrom assigned the appropriate class code, 5645, to the type of work (framing) performed by Respondent. In completing the penalty calculation, Ms. Beckstrom multiplied the class code's assigned approved manual rate by the payroll (as she determined it) per one hundred dollars, and then multiplied all by 1.5, arriving at an Amended Order of Penalty Assessment of $27,805.11, served on Respondent on August 22, 2007. Subsequent to the filing of its request for a disputed-fact hearing, in an effort to have the penalty reduced, Respondent provided the Department with additional business records in the form of portions of Southern Insight, Inc.'s 2006 and 2007 U.S. Income Tax Returns for an S Corporation (2006 and 2007 income tax returns). However, neither itemized deductions nor original receipts for Respondent's business expenses were provided to Ms. Beckworth at the same time, and she determined that without itemized deductions, there was no way to calculate Respondent's legitimate business deductions so that they could be deducted from the total of Mass Builders, Inc.'s, check stubs to determine a lesser payroll applicable to Mr. Cauley. Investigator Beckstrom testified that the tax returns, as she received them, did not justify reducing Respondent's payroll used in calculating the penalty. The vague basis for this refusal was to the effect that, "The Internal Revenue Service permits different business deductions than does the Department." Itemization pages (schedules) of Respondent's income tax returns were not provided until the de novo disputed-fact hearing. Confronted with these items at hearing, Ms. Beckworth testified that ordinary business income is not used by the Department to determine payroll, but that automobile and truck expense and legitimate business expenses could be deducted, and that she would probably accept some of the deductions on Respondent's 1020-S returns. Also, if Respondent's bank statement corresponded to the amount on the tax form, she could possibly deduct some items on the bank statements as business expenses before reaching a payroll amount. However, she made no such calculations at hearing. Ms. Beckworth testified that if she had Respondent's checks or "something more" she could possibly deduct the motor fuel amounts. Although Respondent's 2006, and 2007, income tax returns reflected Respondent corporation's income minus several types of business deductions, Ms. Beckstrom testified that the tax deductions were not conclusive of the workers' compensation deductions, because the Internal Revenue Service allows certain deductions not permissible for workers' compensation purposes, but she did not further elaborate upon which tax deductions were, or were not, allowable under any Department rule. She did not "prove up" which deductions were not valid for workers' compensation purposes. Respondent's 2006, tax deductions for "automobile and truck expense" were $2,898.00, and for 2007, were $4,010.00. There was no further itemization by Respondent within these categories for fuel. Other business deductions on the tax returns were also listed in categories, but without any further itemization. The only supporting documentation for the tax returns admitted in evidence was Respondent's bank statements. Respondent believed that the tax returns and possibly other documentation had been submitted before hearing by his accountant. It had not been submitted. The Department never credibly explained why it considered a third party's check stubs (not even the third party's cancelled checks) more reliable than Respondent's bank statements or federal tax returns. Even so, at hearing, the Department declined to utilize the business deductions itemized on Respondent's tax forms or any bank/debit card deductions on its bank statements so as to diminish the amount arrived-at via the Mass Builders, Inc.'s check stubs, and ultimately to arrive at a difference which would show a lesser payroll to Mr. Cauley. Although Mr. Cauley's questions to Ms. Beckstrom suggested that he would like at least all of the fuel company deductions on his bank statements to be considered as business deductions of Respondent Southern Insight, Inc., and for those fuel company expenditures to be subtracted from either the total deposits to the corporate bank account or deducted from the payroll total as calculated by Ms. Beckstrom from Mass Builders, Inc.'s check stub total, he did not testify with clarity as to which particular debits/charges on the bank statements fell in this category. Nor did he relate, with any accuracy, the debits/charges on the bank statements to the corporate tax returns. Upon review by the undersigned of Respondent's bank statements admitted in evidence, it is found that the bulk of Respondent's bank/debit card deductions during the assessed penalty period were cash withdrawals or ATM debits which cannot be identified as being paid to fuel companies or purveyors of construction material. As Investigator Beckstrom legitimately observed, "Big Al's Bait" is not a likely source of motor fuel. "Publix" and "Outback Steak House" are likewise unlikely sources of fuel or construction material, and cannot stand alone, without some other receipt to support them, as a legitimate corporate business entertainment expense. Other debits/charges on the bank statements are similarly non-complying, ambiguous, or defy categorization. However, the undersigned has been able to isolate on the corporate bank statements purchases from the known fuel distributors "Amoco" and "Chevron" on the following dates: 7/09/07, 7/10/07, 6/04/07, 6/04/07, 6/11/07, 5/03/07/ 4/09/07, 4/10/07, 4/13/07, 4/16/07, 3/02/07, 3/05/07, 3/13/07, 3/15/07, 3/20/07, 1/29/07, 5/01/06, 6/02/06, 8/02/06, 11/03/06, totaling $556.98.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, that affirms the stop-work order and concludes that a penalty is owed; that provides for a recalculation of penalty to be completed, on the basis set out herein, within 30 days of the final order; and that guarantees the Respondent Southern Insight, Inc., a window of opportunity to request a Section 120.57 (1) disputed-fact hearing solely upon the recalculation. DONE AND ENTERED this 1st day of July, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 1st day of July, 2008. COPIES FURNISHED: Anthony B. Miller, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 John Cauley, President Southern Insight, Inc. Post Office Box 2592 Bunnell, Florida 32110 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact Stipulated Facts Findings contained in paragraphs 1-28, were stipulated to by the parties. Gary D. Miller and Katherine A. Miller made a note to Southeast Bank (Southeast) dated March 27, 1990, in the stated amount of $80,000 (the Note). Gary D. Miller and Katherine A. Miller (the Millers) executed a Future Advance Note, Modification and Cross-Collateralization Agreement (the Mortgage) in favor of Southeast dated March 27, 1990, and recorded in Volume 4178, page 2981, of the official records of Orange County, Florida. Southeast was doing business and in good standing on March 27, 1990. The Note was consolidated with a promissory note made by the Millers dated June 7, 1988 in the stated amount of $350,000 and replaced by a Consolidated Replacement Note dated April 9, 1991, in the stated amount of $371,250 (the Consolidated Note). The Consolidated Note was defined and secured in a Mortgage Modification Agreement between Southeast and the Millers dated April 9, 1991 and recorded at volume 4278, page 0065 of the official records of Orange County, Florida. Southeast was doing business and in good standing on April 9, 1991. First Union National Bank of Florida (First Union) is the owner and holder of the Note, the Consolidated Note and the Mortgage identified in paragraphs 1,2, and 4 above. The Department timely assessed documentary stamp taxes on the Note. The assessment covers the Consolidated Note. There is no evidence that documentary stamps are attached or affixed to the Note, the Consolidated Note or the Mortgage. No documentary stamp tax were paid on the Note, the Consolidated Note or the Mortgage. The Office of the Comptroller of the currency declared Southeast insolvent and appointed the FDIC as receiver for Southeast on September 19, 1991. The FDIC, as receiver, became the owner and holder of all of the promissory notes and mortgages formerly held by Southeast. The FDIC (as Receiver of Southeast, and corporately) and First Union entered into an Assistance Agreement dated September 19, 1991, under which the FDIC, as Receiver, sold and assigned to First Union the Consolidated Note and the Mortgage. The FDIC, as Receiver, executed an Assignment of Mortgage, subsequently filed in volume 588, page 589, of the official records of Orange County, Florida. First Union is not the same entity as Southeast (by name or otherwise). First Union purchased no portion of the stock ownership of Southeast, rather First Union purchased only those assets and liabilities of Southeast detailed in the Assistance Agreement. Under terms of the Assistance Agreement, First Union expressly assumed only certain specified liabilities. First Union did not expressly assume any liabilities of Southeast relating to payment of taxes under Chapter 201, Florida Statutes. Under the terms of the Assistance Agreement, the FDIC and First Union contractually agreed that the FDIC would indemnify First Union for "costs, losses, liabilities, expenses, judgments, fines and amounts paid in settlement reasonably incurred in connection with claims against" First Union based upon a liability of Southeast that was not expressly assumed by First Union. A claim entitling First Union to indemnification from the FDIC under the terms of the Assistance Agreement is a claim for a liability for "taxes" of Southeast. The definition of "taxes" in the Assistance Agreement includes stamp taxes imposed by states, including interest and penalty. By a Notice dated January 5, 1995, Respondent issued an Official Request for Information to "Southeast Bank, National Association, First Union Bank/Barbara H. Smith." On March 1, 1995, Respondent issued to "Southeast Bank, NA, First Union Bank, N.A." a Notice of Intent to Make Documentary Stamp Tax and Discretionary Surtax Audit (the Notice of Audit). The Notice of Audit was received by First Union on March 22, 1995. First Union timely responded to the Notice of Audit by letter dated May 31, 1995, stating that "any transaction prior to September 19, 1991, which might precipitate liability becomes the responsibility of the FDIC." Respondent treated the May 31, 1995 letter of First Union as a protest of the audit. On June 20, 1995, Respondent issued to "Southeast Bank, N.A.-First Union Bank, N.A." a Notice of Proposed Assessment of $150.00 representing tax and interest on the original $80,000 note of March 27, 1990, or an assessment of tax and interest on the Consolidated Note. Southeast Bank remains under the receivership of the FDIC. Additional Facts FDIC's sale of the Note and Consolidated Note to First Union under terms of the September 19, 1991 Assistance Agreement imbued First Union with ownership rights inclusive of the right to receive payments of principal and interest on the Note and Consolidated Note, as well as the right to foreclose on the makers of the Note and Consolidated Note for nonpayment. Neither the Note or Consolidated Note qualify for exemption from documentary stamp taxes levied pursuant to provisions of Chapter 201, Florida Statutes. Documentary stamp taxes constitute an excise tax on documents, as opposed to a tax on the underlying transaction.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered upholding Respondent's full assessment of tax and penalty against Petitioner. DONE and ENTERED in Tallahassee, Florida, this 25th day of June, 1996. DON W. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1996. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings Petitioner's proposed findings (other than the 28 paragraphs of stipulated findings of fact) consisted of seven paragraphs denominated by letters A-G. No citation to the record was included in these proposed findings. Accordingly, the proposed findings, while reviewed and addressed to the extent possible by the foregoing findings of fact, are rejected. Respondent's Proposed Findings 1.-28. Stipulated facts adopted. 29.-32. Adopted, although not verbatim. COPIES FURNISHED: William W. Gallogly, Esquire First Union Corporation Legal Division 225 Water Street Jacksonville, Florida 32202 Scott M. Covell, Esquire Dept. of Legal Affairs The Capitol - Tax Section Tallahassee, Florida 32314-6668 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
