Findings Of Fact Terry G. Jewell is the sole proprietor of an unincorporated business, wherein Jewell engages in business as a real estate broker-salesman. His net worth is less than $2,000,000. In DOAH Case No. 87-2192, the Division filed an Administrative Complaint dated April 20, 1987, wherein the Division essentially alleged that Jewell was co-owner and agent for Sun Country Homes of North Florida, Inc., a corporation engaged in the business of constructing homes; that Jewell, as vice- president and agent for Sun Country Homes, entered into a contract with the Koblinskis to build their house; that Sun Country Homes received approximately $74,900.00 to build the home; that Sun Country Homes did not pay certain materialmen and contractors; and that Jewell did not pay the outstanding liens. The Division sought revocation and other penalties against Jewell's license as a real estate broker-salesman, alleging that Jewell was guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction. After hearing, a Recommended Order was entered by the undersigned on September 25, 1987, recommending dismissal of the Administrative Complaint. The recommendation was based on findings that Jewell's contacts with the Koblinskis were solely as an officer, co-owner and agent for Sun Country Homes of North Florida, Inc.; that all sums paid by the Koblinskis were to Sun Country Homes and were deposited to its corporate account; that the president of Sun Country Homes mismanaged the corporate funds and did not pay some of the subcontractors on Koblinskis' home, that Jewell quit the corporation then he found out about this; that Jewell did all he could to assist the Koblinskis once he had resigned from the corporation; that the president of the corporation disappeared with the Koblinskis' money; and that Jewell did not benefit from the funds paid by the Koblinskis to Sun Country Homes of North Florida, Inc. The recommendation was based on conclusions of law that the contract was between the Koblinskis and Sun Country Homes of North Florida, Inc.; that Jewell had no intent to deceive the Koblinskis; that it is well settled law that disciplinary action cannot be taken against a real estate broker's license for conduct not connected with the licensee's business as a broker; and that Jewell did not violate Section 475.25(1)(b), Florida Statutes, as alleged. The Final Order of the Division, through the Florida Real Estate Commission, adopted the Findings of Fact, Conclusions of Law and Recommendation in the Recommended Order and dismissed the Administrative Complaint. The affidavit which initiated this action was filed on February 5, 1988, and was later supplemented by the Petition for Small Business Party's Attorney's Fees and Costs. The affidavit, which was an application for an award of fees and costs, was timely, having been filed within 60 days after the date on which Jewell became a prevailing small business party. In this case, the 60 days is calculated from the date on the Certificate of Service showing mailing of the Final Order to the parties. See Section 57.111(4)(b)2, Florida Statutes. According to the affidavit of William C. Andrews, and the statements of account attached thereto, Jewell incurred legal fees of $3,252.50 and costs of $957.21. These fees and costs are found to be reasonable since the Division has not filed a counter affidavit or response questioning their reasonableness. According to the Petition, the disciplinary action in DOAH Case No. 87- 2192 was substantially unjustified at the time it was initiated: because the Administrative Complaint was an attempted disciplinary action taken against Petitioner's real estate broker-salesman's license for conduct not connected with the licensee's business as a broker-salesman, and there was a complete absence of evidence to show any wrong doing on the part of the Petitioner.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Petitioner, the Department of State, Division of Licensing, enter a final order finding the Respondent, Velda Sue Hopkins, guilty of violating Sections 493.304(4), 493.313(6), and 493.319(1)(g) , Florida Statutes (1987), and imposing a fine of $500. RECOMMENDED this 27th day of June, 1988, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1050 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1988.
Findings Of Fact Forbes, Walsh & Kelly is a New York corporation licensed to deal in securities under the laws of New York. The company through its secretary, Mr. Robert E. Kelly, contacted the Division of Securities on March 2 and 21, 1979 concerning the procedure for registering to be a securities dealer in Florida. After receiving the appropriate application forms and a copy of the relevant Florida Statutes, Forbes, Walsh & Kelly filed its application on March 26, 1979, to be licensed in Florida as a securities dealer. On April 2, 1979, FWK was notified that its application as a dealer was being held in abeyance, pending receipt of the corporate by-laws, a branch office application, and other materials. Subsequently, on April 20, 1979, FWK applied for a branch office license with Respondent, Carl F. Bailey, Jr. to be the company's "principal" and branch manager in Florida. Between March 26, 1979 and June 26, 1979, while Mr. Carl F. Bailey was not licensed as a securities salesman and while FWK was not registered as a securities dealer, FWK through Bailey executed approximately 774 security sales transactions on behalf of their customers. On June 27, 1979, the Division told FWK that its registration as a security broker-dealer had been approved. At the same time notice was also given that the application for a branch office in Orlando was approved as was the transfer of Carl F. Bailey's registration as a salesman for FWK. Between March 26, 1979 and August 14, 1979, in the course of its business, FWK through Carl F. Bailey "introduced" approximately 263 security transactions on a fully disclosed basis to Robb, Peck, McCooey & company, Inc., which though registered as a securities dealer in New York was not at that time so registered in Florida. Aside from the instant order of suspension, neither Carl F. Bailey, Jr. nor FWK has ever been charged with previously violating the Florida Securities Act. FWK and Carl F. Bailey, Jr., have at least two very satisfied customers, Mr. A.J. Rusterholtz and Mr. Richard W. Baker. They testified in support of Respondents at the final hearing. No evidence was presented to show that either Carl F. Bailey or FWK ever made any inquiry with the Division about when they would be eligible to engage in securities transactions in Florida after submitting their applications for registration. FWK through its Orlando branch office serves approximately 500 securities customers, many of whom are in direct daily contact with the office.
Recommendation In light of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the registration of Forbes, Walsh, Kelly & Company, Inc., as a dealer and to operate a branch office and the registration of Carl F. Bailey, Jr., as an associated salesman, with Forbes, Walsh, Kelly & Company, Inc. be suspended for a period of 65 business days from the effective date of the Department's final order. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of October, 1980, in Tallahassee, Florida. MICHAEL P. DODSON Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Philip J. Snyderburn, Esquire Director, Division of Securities Office of Comptroller The Capitol, Suite 1402 Tallahassee, Florida 32301 Patrick T. Christiansen, Esquire AKERMAN SENTERFITT & EIDSON 17th Floor, CNA Building Post Office Box 231 Orlando, Florida 32802
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all relevant times, respondent, Passport Internationale, Inc. (Passport or respondent), was a seller of travel registered with the Department of Agriculture and Consumer Services (Department). As such, it was required to post a performance bond with the Department conditioned on the performance of contracted services. In this case, petitioner, Helen Stahler, has filed a claim against the bond in the amount of $198.00 alleging that Passport failed to perform on certain contracted services. In response to an offer run in a local newspaper on an undisclosed date in early 1991, petitioner agreed to purchase a five-day, four-night trip for two to the Bahamas at a cost of $99.00 per person. For this, she wrote two checks payable to Passport, each in the amount of $99.00. Although Passport has no record of the transaction, it may be reasonably inferred that the advertisement was run by, and the package purchased directly from, Passport since petitioner's checks were endorsed by Passport and deposited in a bank used by that entity. After receiving a videotape, brochure and travel certificate, petitioner attempted by telephone to reserve certain dates for her trip. Because the certificate could not be used on a weekend, a fact not known at the time the certificate was purchased, petitioner became frustrated and requested a refund of her money by letter dated January 27, 1992. To date, she has never received a refund of her money.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the claim of petitioner against the bond of respondent be granted in the amount of $198.00. DONE AND ENTERED this 9th day of January, 1995, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 1995. COPIES FURNISHED: Helen Stahler 11200 Walsingham Road, Number 69 Largo, Florida 34648 Julie Johnson McCollum 2441 Bellevue Avenue Daytona Beach, Florida 32114 Robert G. Worley, Esquire 515 Mayo Building Tallahassee, Florida 32399-0800 Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard D. Tritschler, Esquire The Capitol, PL-10 Tallahassee, Florida 32399-0810
The Issue The issue is whether the Petitioner's application for registration as an associated person of Koch Capital, Inc. should be denied.
Findings Of Fact Petitioner, Glenn D. Whaley submitted a Form U-4, Uniform Application for Securities Industry Registration, seeking registration as an associated person of Koch Capital, Inc. One of the states in which Petitioner sought registration was the State of Florida. The Department of Banking and Finance (Department) is the Florida agency charged with the administration and enforcement of Chapter 517, Florida Statutes, the Florida Securities and Investor Protection Act (the Act), and its implementing rules. The Department denied Mr. Whaley's application for registration as an associated person in a letter dated August 27, 1990, based upon its determination that he had violated the Act, that he had filed an application for registration which contained a material false statement; and that his disciplinary history within the securities industry constituted prima facie evidence of his unworthiness to transact the business of an associated person. Mr. Whaley has been employed in the securities industry since approximately 1984, and has been employed with several different securities dealers, including Rothschild Equity Management Group, Inc. (Rothschild), Fitzgerald Talman, Inc., and H. T. Fletcher Securities, Inc. The effective date for Mr. Whaley's registration as an associated person of Rothschild in the State of Florida was April 18, 1985. In October 1985, Department examiner Michael Blaker, conducted an examination of the books and records of Rothschild. The examination revealed violations of the provisions of the Act, including the sale of securities by unlicensed representatives. The commission reports and sales journals prepared by Rothschild revealed that Mr. Whaley, while unregistered with the Department, had effectuated approximately sixteen (16) sales of securities during the period of April 1 through 17, 1985. On May 15, 1989, the State of Missouri Commissioner of Securities issued a cease and desist order against Fitzgerald Talman, Inc. and Glenn D. Whaley. The order found that Mr. Whaley had offered for sale and sold securities on behalf of Fitzgerald Talman, Inc. in the State of Missouri without benefit of registration for himself or the securities. On or about November 8, 1989, the Department issued an Administrative Charges and Complaint against Mr. Whaley seeking revocation of his registration as an associated person of H. T. Fletcher Securities, Inc. based on his failed to timely notify the Department of the Missouri Cease and Desist Order, as required by Rule 3E-600.010(1)(a), Florida Administrative Code. The Administrative Charges and Complaint were served on November 13, 1989. On or about December 12, 1989, the Department issued a Default Final Order revoking Mr. Whaley's registration with H. T. Fletcher Securities, Inc., based upon his failure to request a hearing regarding the Administrative Charges and Complaint. The Form U-4 requires the applicant to swear and affirm that the information on the application is true and complete to the best of his knowledge and that false or misleading answers will subject him to administrative penalties. The Form U-4 application contains no disclosure of the Department's December 1989, revocation of Petitioner's registration with H. T. Fletcher Securities, Inc., as required by Question 22E.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Banking and Finance enter a Final Order denying the application of Mr. Whaley for registration as an associated person of Koch Capital, Inc., in the State of Florida. RECOMMENDED this 25th day of January, 1991, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 January, 1991. COPIES FURNISHED: Margaret Karniewicz, Esquire Department of Banking and Finance The Capitol, Legal Section Tallahassee, Florida 32399-0350 Glenn D. Whaley 5400 Northwest Fifth Avenue Boca Raton, Florida 33487 Honorable Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact Petitioner filed application for registration with respondent a a securities agent with First Florida Securities Inc., Pompano Beach, Florida, on March, 1977. Although he met the various statutory and regulatory procedural requirements for registration, on or about May 19, 1977, he was advised by the Director, Division of Securities, of intended denial of his application and advised of his right to petition for an administrative hearing. Petitioner did so request a hearing on June 2, 1977. The stated ground for the proposed denial of the application in accompanying "Administrative Charges and Complaint" was as follows: "The license application of respondent was refused or denied by the Division of Securities, Department of Banking and Finance, State of Florida, by stipulation and consent on February 18, 1976. Said denial constitutes prima facie of unworthiness to transact the business of a securities salesman In the State of Florida." The above-mentioned "Stipulation and Consent" resulted from a prior application denial by respondent of an application by MFP Petroleum Exploration and Investment, Inc., its officers and salesman, including petitioner. The grounds for denial of petitioner's application in that instance were that he had sold unregistered securities in the form of shares in oil drilling ventures in violation of Section 517.07, F.S., while not registered as a securities salesman in further violation of Section 517.12(1), F.S. The various parties in that administrative proceeding consented to the denial of their applications by stipulation without admitting the allegations of respondent. (Exhibits 1, 2, 4, 5) Petitioner has never been registered with respondent as a securities dealer, agent or salesman. He testified that when he joined MFP sometime in 1974, its president, Mark F. Preddy, led him to believe that one selling interests in oil drilling ventures need not register as a salesman in Florida. Consequently, he sold such interests to clients for several months before he learned that it was necessary for him to be so registered. Some nine months after commencing employment with MFP, he went to Shreveport, Louisiana, to take securities examinations for Florida and the NASD. After waiting approximately three months more to obtain the results of the MFP application for registration, he resigned from the firm. He admitted selling during the entire nine-month period in which he had been associated with MFP, even though he knew during a substantial portion of that period that registration was required. After his resignation, he authorized an attorney to execute the "Stipulation and Consent" which authorized respondent to deny his application for registration. (Testimony of Weber, Exhibits 2, 3, 5) A client of petitioner testified as to the latter's honesty and conscientiousness. (Testimony of Hansis) Respondent's Assistant Director, Division of Securities, stated the Division's position that although it felt justified in denying petitioner's current application, it would be amenable to reevaluate any application submitted one year from the final order in this proceeding and, if petitioner's record was clear and he otherwise met requirements for registration, it would issue the same on a supervised basis for a period of one year. (Testimony of Brandi)
Recommendation That petitioner Paul Anthony Weber be issued a certificate of registration as a securities salesman pursuant to Chapter 517, Florida Statutes. DONE and ENTERED this day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Ryland Terry Rigsby, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Paul Anthony Weber 1745 Northeast Fifty-Second Street Ft. Lauderdale, Florida 33308
The Issue Whether the Respondent should be denied registration to transact business as a registered Florida Securities salesman.
Findings Of Fact The Applicant, William Russell Taylor, applied for a certificate of registration as a Securities salesman with Hibbard O'Connor & Weeks, 2740 East Oakland Park, Fort Lauderdale, Florida, on March 19, 1975. The Division of Securities, Department of Banking and Finance, refused to register Applicant-Respondent Taylor for the reason that Applicant-Respondent Taylor answered "No" on his application to sell securities with the Division of Securities, Department of Banking and Finance, to the question "16. Have you ever been arrested?". Criminal Docket 28943 of the United States District Court, Eastern District of Michigan, shows that Applicant-Respondent Taylor had in fact been arrested, was found guilty of the violation of the National Motor Vehicle Theft Act, and was committed to the custody of the Chief Probation Officer of the Court for the term and period of three (3) years. Applicant-Respondent Taylor was given due notice of the hearing before the Division of Administrative Hearings, Department of Administration, but failed to appear.
The Issue Whether Respondent's license as a registered securities salesman/agent should be suspended or revoked for alleged violations of Sections 517.07 and 517.16(1)(a), Florida Statutes, as set forth in the Administrative Complaint. At the commencement of the hearing, it was noted that the Notice of Hearing was styled incorrectly in showing David R. Edstrom as Petitioner rather than Respondent. This clerical error was harmless in view of the language contained in the body of the notice which identified the word "Respondent" as being a registered securities salesman/agent. Notice of Hearing was issued on September 15, 1976, by the Hearing Officer. Neither the Respondent nor any representative in his behalf-appeared at the hearing. Accordingly, the matter was heard as an uncontested proceeding, pursuant to Rule 28-5.25(5), Florida Administrative Code. On October 6, 1976, Respondent informed the Hearing Officer that he had forgotten the hearing and inquired as to the possibility of another hearing. (Supp. Exhibit 1). By letter of October 12, 1976, counsel for Petitioner objected to Respondent's request, citing the trouble and expense of preparing for and attending the hearing, together with the difficulty encountered in securing witnesses. (Supp. Exhibit 2) On October 14th, Respondent renewed his request, and in the alternative, requested that his license be suspended temporarily until the outcome of an appeal of a criminal conviction. (Supp. Exhibit 3) Rule 28-5.25(9), F.A.C., provides that a hearing officer shall not grant a Motion for re-hearing or reconsideration. Although this Rule admits of no exception, it does not necessarily preclude the agency involved from authorizing a new proceeding in the interests of substantial justice, upon good cause shown. In this instance, Respondent's absence admittedly was due solely to his own negligence and therefore he is not entitled to the requested relief. It is noteworthy that the Notice of Hearing included the following sentence: "The right is reserved to take such action as the law permits if either party fails to appear at the time and place set for their hearing."
Findings Of Fact Respondent is a registered securities salesman/agent under license issued on October 3, 1972, by the Petitioner. (Admin. Complaint). Respondent was president of S.E.I., Inc., Miami, Florida at the time of the alleged statutory violations. (Testimony of Campbell, Exhibit 3). In the summer of 1973, Carl Eigner of Boynton Beach, Florida, having seen newspaper advertisements of Hartwell and Associates, Inc., concerning investments in promissory notes, contacted the firm and met one of its salesman, Bill Taylor. Taylor in formed Eigner that investments in promissory notes issued-by the 2609 corporation, a real estate developer, were safe and that the value of land covered by mortgages which secured the promissory notes, by law, had to be worth twice the cost of any investment. He further stated that the directors of S.E.I., Inc. investigated developers and if found to be in sound condition, recommended sale of their notes. Taylor also told him that he would receive a "valid registered mortgage" in Polk County. Eigner thereupon withdrew money to purchase a $10,000 promissory note issued by the 2609 Corporation, secured by a mortgage deed on 4 lots. Eigner paid $9,850.00 for the note by check to Taylor. The difference of $150.00 represented interest that Eigner otherwise would have received if he had left his funds on deposit. At the time of purchase, Taylor told Eigner that he had nothing to worry about because the land value had been checked by S.E.I., Inc. At no time did Taylor advise him that the note or mortgage was registered with or exempt from registration with the State Division of Securities. The promissory note provided for monthly interest payments at the rate of 12 percent per annum, commencing December 1, 1973. It also provided that the note or any payments thereunder could not be transferred by the holder to anyone who is not a bona fide resident of Florida without the prior consent of S.E.I., Inc. The note further provided. that it would be valid only upon approval by S.E.I., Inc., as sales/agent for the 2609 Corporation. In addition to the signature of the President of 2609 Corporation on the face of the note, it also contained the following: "Sale approved: S.E.I., Inc. by David R. Edstrom, President." This block showed the signature of Respondent. (Testimony of Eigner, Exhibit 3) The securities of 2609 Corporation have never been registered with the Petitioner pursuant to Chapter 517, Florida Statutes. (Exhibit 4) Petitioner submitted in evidence certified copies of an Information and verdicts in criminal proceedings in Palm Beach County, Florida against Respondent, Case No. 75-1242-CF. These proceedings resulted in the conviction of Respondent for the sale of unregistered securities to Carl Eigner and/or Edith Eigner, Robert S. Cox and/or David F. Cox, and Michael J. Leonardi and/or Diana Leonardi, and others in violation of Sections 517.07 and 517.302, Florida Statutes. The conviction is presently on appeal. Although received in evidence, the evidence of criminal convictions is not competent evidence to establish the facts upon which they were rendered and therefore cannot be used as a basis for a finding of fact in these proceedings. (See Boshnack v. World Wide Rent-A-Car, Inc., 195 So.2d 216 (Fla., 1967).
Recommendation That the registration of Respondent, David R. Edstrom as a registered securities salesman/agent be revoked for violation of Section 517.07, Florida Statutes, as authorized by Section 517.16(1)(a), Florida Statutes. DONE and ENTERED this day of October, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard Gentry, Esquire Division of Securities Department of Banking and Finance 239 Carlton Building Tallahassee, Florida 32304 Mr. David R. Edstrom 5748 Northeast 16th Avenue Ft. Lauderdale, Florida 33334
The Issue The central issue in this case is whether Respondent is guilty of the violations alleged in the administrative complaint dated January 19, 1989; and, if so, what penalty should be imposed.
Findings Of Fact Based upon the prehearing stipulation filed by the parties, the testimony of the witnesses, and the documentary evidence received at the hearing, the following findings of fact are made: The Department is the state agency charged with the responsibility of regulating and disciplining real estate licensees. The Respondent, Charles P. Grimes, is, and has been at all times material to the allegations of the administrative complaint, licensed as a real estate broker in the State of Florida, license number 0034301. In November, 1980, a contract for sale and purchase of real estate was drafted between Dorothy Langham Scott, seller, and Phillip Crawford, buyer. The contract, which was subsequently executed by both parties, provided that a deposit in the amount of $18,500 was to be held in escrow by Respondent. A separate brokerage agreement between Respondent and the seller, executed November 30, 1980, provided that Respondent would receive a brokerage fee of ten percent of the total gross sales price. The brokerage agreement specified that "should the buyer default and not close the transaction in accordance with the Contract, the Broker shall not be entitled to any commission." The agreement further provided that Respondent would "use reasonable diligence and his best efforts to see that the transaction is closed in accordance with the executed Contract." The contract described in paragraph 3 did not close. Subsequently, the seller sued Respondent in the Circuit Court in Palm Beach County, Case no. 82-1974 CA (L) 01 B. On August 13, 1985, an amended final judgment was entered which provided, in part: The facts adduced at trial indicate that Crawford and Scott entered into a contract for the purchase and sale of certain real property, located in Putnam County and that for no apparent reason Crawford defaulted on the contract. The evidence is clear and convincing and unrefuted. Crawford has admitted several letters which he says were communicated to the attorney for Scott. However, the substantial weight of the evidence will not support his repudiation of the contract. Accordingly, it is clear that as between Scott and Grimes, the real estate agent who was allegedly holding the deposit under the provisions of the deposit receipt contract, Scott is entitled to a judgment for $18,500.00, plus its costs and attorney's fees. John L. Burns, an attorney who represented the seller, Scott, during the contract negotiations in November, 1980- January, 1981, received a letter from Respondent on December 12, 1980. That letter, dated December 5, 1980, provided: "I have enclosed the signed contract and have received the deposit check from Dr. Crawford." On or about January 29, 1981, Mr. Burns received a letter from Respondent which indicated that the contract would close in March, 1981. Respondent did not advise the seller that the deposit on the Crawford/Scott contract was not in escrow. Respondent erroneously assumed that a deposit from the buyer (which had been deposited on another contract for sale and purchase) could be applied to the contract. That deposit, in the amount of $20,000.00, was not transferred and was not used to satisfy the amended judgment entered in Scott's favor.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Professional Regulation, Florida Real Estate Commission, enter a final order finding the Respondent guilty of the violation of Section 475.25(1)(b), Florida Statutes, imposing an administrative fine in the amount of $1000.00, suspending his license for a period of 60 days, and placing the Respondent on probation for a period of two years. It is recommended that the Respondent be found not guilty of the other alleged violations. DONE and ENTERED this 18th day of December, 1989, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of December, 1989. APPENDIX TO CASE NO. 89-2517 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE DEPARTMENT: Paragraphs 1 through 4 are accepted. With regard to paragraph 5, it is accepted that on or about November 30, 1980, Respondent was attempting to procure the contract described; however, the exact date the parties executed the contract is not known. The contract was ultimately executed by both parties but did not close. Consequently, the proposed fact, as written, is not supported by the record. Paragraphs 6 and 7 are accepted. With regard to paragraph 8, it is accepted that the contract did not close and that a court of competent jurisdiction determined that the deposit should be awarded the seller; otherwise, the paragraph is rejected as outside the scope of this record. Paragraph 9 is accepted but is irrelevant. Paragraph 10 is accepted. Paragraph 11 is rejected as irrelevant. Paragraph 12 is accepted. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: None submitted. COPIES FURNISHED: James H. Gillis Senior Attorney Department of Professional Regulation, Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Glenn M. Blake Blake & Torres, P.A. 200 South Indian River Drive Suite 101 Fort Pierce, Florida 34950 Darlene F. Keller Division Director Department of Professional Regulation, Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 =================================================================
Findings Of Fact The Office of the Comptroller, Department of Banking and Finance, Division of Securities and Investor Protection (Department), is an agency of the State of Florida charged with the responsibility to administer and to enforce the provisions of Chapter 517, Florida Statutes (1987), and administrative rules promulgated thereunder, related to regulating the practice of securities dealers, "associated persons" and investment advisors. It regulates sales and other transactions in securities and investments, as those items are defined in that chapter. The Respondent, David John Kury, has been registered with the Department since 1967 as an associated person under Chapter 517, Florida Statutes. Pursuant to that registration, he is authorized to engage in the offer and sale of securities to clients. Since 1967 he has also been registered with the National Association of Securities Dealers (NASD). Since July 21, 1987, Respondent Kury has been registered with the Department as an associated person of American Capital Equities, Inc. (American), and he has also been registered as an associated person with the following broker/dealers: Associated Planner Securities Corporation (Associated); Prudential Bache Securities, Inc.; and E. F. Hutton. These registrations cover the period of time from April 1978 through May 1987. During all times Respondent Kury has been registered with the Department as an associated person of American, he has been simultaneously registered with the NASD as a "principal" of American. American is a corporation incorporated under the laws of the State of Missouri, which has been lawfully registered with the Department as a broker/dealer since approximately August 1984. American operates a branch office at 116 West Government Street, Pensacola, Florida. This office has been lawfully registered with the Department and in continuous operation since approximately August 21, 1987. Respondent Kury has been the branch manager of the office during all the period of time it has been registered with the Department. Kury has been registered with the Department as a principal of the Kury Investment Advisory Corporation (KIAC), pursuant to Chapter 517, Florida Statutes, since approximately March 2, 1988. That corporation is incorporated under the laws of the State of Florida and has been registered itself with the Department as an investment advisor, pursuant to Chapter 517, since approximately March 2, 1988. The Respondent corporation maintains its principal place of business also at 116 West Government Street, Pensacola, Florida, at which address Respondent Kury maintains the branch office of American. Respondent Kury is and has been at all pertinent times the sole owner, officer, director and chief operating officer of the Respondent corporation. Since March 2, 1988, Respondent David Kury has been registered as an investment advisor himself, with KIAC. He is also registered in approximately 15 other states as an associated person, thereby being authorized to offer and sell securities in those states as well. Kury Financial Planning Group, Inc. (Group) is a corporation organized under the laws of the State of Florida on or about October 23, 1985. It maintains its principal place of business at the above-referenced address as well. Respondent David Kury is the registered agent, sole officer and director of Group. Since approximately 1976, Kury has engaged continuously in the business of financial planning for individuals in the Pensacola area. Pursuant to this business, he has recommended various financial products, including securities and insurance products for individuals' personal portfolios. He has also rendered advice to clients concerning matters that are not involved with securities or insurance, although the bulk of his financial planning advice and experience relates to these two areas. During the twenty or more years he has been licensed as an associated person only one minor complaint has been lodged against Kury by a client. He has never been the subject of a complaint or an investigation by the Securities Exchange Commission, the NASD, the State of Florida or any other state securities regulatory agency. Neither has he been the subject of a complaint or investigation by the Florida Department of Insurance. He is a member of the Institute of Certified Financial Planners, a member of the International Association for Financial Planning and is in the Registry of Financial Planning Practitioners, a very select group comprised of only a very small percentage of the total number of certified financial planners in the United States. The Respondent, Mr. Kury, has been highly successful as an associated person dealing in securities and as a financial planner. In 1983, while employed with E. F. Hutton as a salesperson, selling securities and investments, the Respondent earned commissions in excess of $500,000 for that year and was one of the largest producers for E. F. Hutton in the entire nation for that year. He received commendations directly from the Chairman of the Board of E. F. Hutton and other senior management for his sales efforts and his integrity. His personal share of the commissions earned that year amounted to $330,000. It is obvious that the Respondent has substantial earning power due to his knowledge, experience and other capabilities in the field of securities and investment sales and advice and the field of financial planning. The Department, commencing on or about May 20, 1988, conducted an investigation and examination of the affairs of Kury Investment Advisory Corporation and the branch office of American, of which Respondent David Kury was branch manager, located at 116 West Government Street, Pensacola, Florida. It was thus determined (and established by clear and convincing evidence in this proceeding) that David Kury, as well as Kury Financial Planning Group, Inc. ("Group") sold or offered for sale both personal notes of David Kury, as well as corporate promissory notes of the Group, since approximately 1975. At the present time, there are approximately 50 persons holding 83 notes in amounts ranging from $5,000 to $200,000. These notes have maturities ranging from three months to four years, with investment return rates ranging from 9 percent to 13 percent. Some of the note-holders were told by Respondent Kury that certificates of deposit, by comparison, were then available to the note-holders or investors at rates ranging from two to three percent less than the rates offered by Kury and Group for the subject personal and/or corporate promissory notes. The total principal amount outstanding, represented by the corporate and personal promissory notes at issue, is approximately $2.4 million. The total principal and accrued interest as of June 15, 1988 is approximately $2.8 million. The total principal amount with accrued interest at the maturity of the notes in question would amount to approximately $3.1 million. The 50 note- holders are clients of the Respondent's. The notes were offered to them in the context of being investment alternatives to certificates of deposit and other "passive" investments, with the primary inducement being higher rates of return on the notes. Respondent David Kury and/or the Corporation failed to maintain and preserve an adequate record of purchases and sales of equity securities by maintaining a "purchase and sales blotter," as well as a "securities received and delivered blotter" and failed to maintain a current "trial balance." These items were not maintained in the ordinary course of business by Respondent David Kury and the Corporation. (See Section 517.121, Florida Statutes, and Rule 3E- 600.014, Florida Administrative Code). During approximately the last 13 years, Respondent David Kury has utilized the proceeds of the personal and corporate notes to pay business expenses for himself and the corporations he controls, as well as certain personal expenses, including the financing of his home (at a cost of approximately $1,000,000). The Respondents have sold or offered for sale the notes, both personal and corporate, without having them registered with the Department, which is required if they are deemed securities. The Respondents did not provide the purchasers of these notes a prospectus for purposes of Section 517.07, Florida Statutes. Group has engaged in the offer and sale of these notes to the note- holders or investors without being registered with the Department to engage in such activities, as required by law, if it be deemed that these notes indeed are securities. Respondent David Kury, in his individual capacity, and on behalf of Group, has engaged in the offer or sale of the notes without being registered with the Department to engage in such activities, either in his individual capacity or on behalf of Group, if the notes are deemed securities. Kury and the Corporation engaged in the business of "investment advisor" prior to lawful registration of that corporation with the Department to engage in such activity. Kury and the Corporation have rendered investment advice since at least September 18, 1987, notwithstanding the fact that the Corporation did not obtain lawful registration with the Department to engage in such activities until March 2, 1988. David Kury was the branch office manager for the registered branch office of American. He failed to establish, maintain and preserve certain books and records required by Florida law for registered branch offices of brokerage firms. In particular, he failed to establish and maintain the purchase and sales blotter reflecting all equity securities sold by American through Kury's branch office. Additionally, as branch office manager for a registered branch office of American, he failed to maintain and preserve a "securities received and delivered blotter." The Corporation, and Kury acting on its behalf, has failed to maintain a current trial balance indicating proof of current money balances in the corporate accounts. Respondent Kury, in his individual capacity and on behalf of Group, sold securities and/or investments (the notes) without making disclosures as to certain material facts, which disclosures were necessary in order for the purchasers or investors not to be misled. Statements were made in conjunction with the sales to the investors under circumstances, such that the omitted material facts, which were not disclosed, were necessary in order to prevent these investors or purchasers from being misled. See Section 517.081, Florida Statutes. Specifically, Kury and Group omitted to inform the investors of the following material facts: Information about the risks to the purchasers of the notes, including his and the Group's ability or inability to repay the notes generally and provision for repayment in the event of Kury's death. Information as to the use to be made of the proceeds of the notes, which in fact were used to finance business operating losses, business operating expenses and to repay personal debts of Kury, and to assist in the financing of personal living expenses of Respondent Kury. (d) Information concerning approximately $4,000,000 in liabilities and outstanding indebtedness of Respondent Kury individually and/or the Corporation and/or the Group. The $2.3 million negative net worth of Kury and/or the Corporation and/or the Group. The fact that Kury's previous employment with E. F. Hutton and Company had been terminated in 1984, partially because of his borrowing money from investors, in violation of Hutton's internal policies and NASD rules. In fact, Respondent Kury had borrowed an aggregate sum of approximately $327,172 from approximately 17 different clients by the time of his termination by Hutton. The fact that Kury's previous employment with Associated Planners Securities Corporation had been terminated in 1987 due to his borrowing money from investors in violation of that company's internal policies and NASD rules. The fact that Kury's personal and group life insurance policies were inadequate to pay the total indebtedness represented by the subject notes, in the event of Kury's death. The fact that Kury's representations concerning his abilities to borrow from banks and other financial institutions were predicated in part on inaccurate financial statements which under- estimated liabilities and overstated net worth without including on those statements the aggregate indebtedness represented by the outstanding personal and corporate notes. The fact that he had submitted an inaccurate financial statement to the Florida Comptroller's Office in connection with the charter application of American Bank and Trust Company during the Summer and Fall of 1985 in the process of becoming an organizer and founding director of that bank. The fact that he was using the money generated from the sale of the promissory notes, at least in part, to repay principal and interest payments due on other, earlier promissory notes. The fact that Kury failed to relate to the note-holders and investors how the promised rate of interest on the notes was reasonably related, if at all, to the risk associated with the investment involved and how it might be related to any other factor commonly known to influence interest rates. Witnesses Catone, Engelman and Boyd, testifying as Respondent's witnesses, in part established that the appropriate disclosures referenced above were not made. Additionally, Kury's explanation for submitting the false financial statements to lending institutions and to the Comptroller was to the effect that he did not wish to violate the confidentiality of the note sales transactions with the note-holders or investors. This rationale is illogical and self-serving, however, and is not accepted. Disclosing accurate financial information, required by law, to banks would have only required, at most, that Kury list the aggregate indebtedness he owed, the type of indebtedness owed, as well as information concerning principal balances, interest rates and repayment terms. Such information required on these financial statements would not have involved divulging the note-holders names or any confidential information pertaining to the note-holders, including the amounts of their individual notes. Law Professor Stuart Cohn was accepted as an expert in state and federal securities laws and corporate finance. It has thus been established that Kury and the Group sold approximately $2.4 million worth of personal and corporate promissory notes which are established to be securities and investments, as discussed infra., to at least 50 investors. This constituted, in effect, the borrowing of money from clients or customers, which is a prohibited business practice for a registered "associated person," investment advisor and financial planner. See Rule 3E-600.013(2)(a), Florida Administrative Code, and Article III, Section 2, NASD Rules of Fair Practice. Kury also effected securities transactions with customers which were not recorded on the regular books and records at American Capital Equities, for whom he was functioning and registered as an "associated person." In particular, he engaged in, sales and offers to sell securities in his capacity as an associated person of American, the Corporation and the Group and failed to record those transactions on the books of American. This is a prohibited business practice. See Rule 3E-600.13(2)(c), Florida Administrative Code. He engaged in private securities transactions without notifying his principal, American. See also Article III, Section 40, NASD Rules of Fair Practice. The Respondents' activities, largely ongoing at the time of the investigation, posed an immediate, serious threat to investors or potential investors because the Respondent's activities constituted, at least in part, the operation of a "pyramid" or "ponzi" scheme. This occurs when funds from new investors, in this case the more recent purchasers of the notes, are used to satisfy interest and principal obligations coming due to earlier investors or note purchasers. Therefore, as time progresses, and more of such notes or securities are sold, then more and more investors will be subject to losing their investments and suffer financial hardship. This occurred in the instant situation through the practice engaged in by the Respondent of "note rollovers" or renewals when due without paying principal and interest owed, or all of it, as well as by making new note sales and using the proceeds, or some of them, to pay earlier investors in spite of the above-described adverse consequences. The threat to the public welfare, as described above, is also represented by the fact that Kury and the Group have undergone an obligation to the note purchasers in excess of $2.8 million as of June 15, 1988, with ultimate liability on the notes of more than $3.1 million, at the respective maturity dates, in the aggregate. The $2.4 million to $3.1 million liability to these investors vastly exceeds the assets available to the Respondents to satisfy the note obligations. Kury admitted that the Respondents are insolvent and currently unable to meet the total financial obligations represented by the notes.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that a Final Order be entered by the Department of Banking and Finance finding the, Respondents guilty as charged, and in the above particulars, and that the registrations of the Respondents as associated person and investment advisors be revoked, provided however, that such revocation should be suspended and held in abeyance contingent on the Respondent David John Kury, under the close supervision and direction of the Department, embarking upon a plan whereby, by continued practice under his registrations, he will repay the principal and interest due all the investors involved in this proceeding within a time certain, as directed by the Department. That plan should include creation of an escrow or trust account, managed by an independent escrow agent, such as a bank, into which, pursuant to an approved plan and schedule, a substantial portion of revenues earned by Kury in the practice as an associated person, investment advisor and any other registration pursuant to the regulation of the Department, shall be deposited for the use and benefit of the subject investors. This arrangement should continue until the investors have been fully repaid principal and interest due them. Should the Respondents, David John Kury and Kury Investment Advisory Corporation, refuse to accept such an arrangement or violate its terms and conditions, their registrations should be immediately revoked. DONE and ENTERED this 9th day of January, 1989, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-3419 Petitioner's Proposed Findings of Fact: 1-3. Accepted. 4. Rejected as not constituting a Finding of Fact. 5-19. Accepted. Rejected as subordinate to the Hearing Officer's Findings of Fact on this subject matter and to some extent not supported by the evidence of record. Accepted. Accepted in part but subordinate to the Hearing Officer's Findings of Fact on this subject matter. 23-26. Accepted. Respondent's Proposed Findings of Fact: 1-8. Accepted. 9-14. Constitute statements of issues presented and recitation of evidence presented and are not Proposed Findings of Fact. COPIES FURNISHED: Reginald R. Garcia, Esquire Charles E. Scarlett, Esquire Office of Comptroller The Capitol Tallahassee, Florida 32399-0350 Philip J. Snyderburn, Esquire SNYDERBURN, RISHOI & SWANN Suite 240 280 West Canton Avenue Winter Park, Florida 32789 Donald A. Rett, Esquire MANG, RETT & COLLETTE, P.A. Post Office Box 11127 Tallahassee, Florida, 32302-3127 Honorable Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
