The Issue The central issue in this case is whether Petitioner is entitled to be registered as an associated person.
Findings Of Fact Petitioner filed an uniform application for securities registration with the Department. This application sought registration as a general securities representative (5-7) and named Sheffield Securities, Inc. as the firm for whom she intended to work. The application sought information regarding Petitioner's past work experience and specifically inquired as to whether the U.S. Securities and Exchange Commission (SEC) had ever found her to have been involved in a violation of investment-related regulations or statutes. The application also asked Petitioner to disclose whether the SEC had entered an order denying, suspending or revoking her registration or disciplined here by restricting her activities. To both of these questions Petitioner answered "yes." Petitioner's association with the securities industry began in 1972 when she was employed as a secretary for a securities firm. Her work prior to that had been as a bookkeeper. Petitioner obtained her registration and purchased a securities business, Adams & Whitney Securities Corp., in late 1973 or early 1974. Adams & Whitney was registered with the SEC and operated as a broker/dealer buying and selling interests for itself and others. Petitioner was the president and sole principal for Adams & Whitney. On February 9, 1976, the SEC issued a released which claimed Adams & Whitney and Petitioner had wilfully violated and wilfully aided and abetted violations of the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities EXCHANGE ACT of 1934, and Rule lOb-5 in connection with an offer to purchase, and sale of ITS securities and manipulation of the price of the security. The release also alleged Petitioner had violated Section 15(c)(2) of the securities EXCHANGE ACT of 1934 and Rule 15c 2-7 by submitting quotations for ITS securities to a interdealer quotation system without notification to the system of arrangements with other brokers and guarantees of profits. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the ITS charges which the SEC determined to accept. As a result, the registration as a broker-dealer of Adams & Whitney was suspended for a period of four months. Also, Petitioner was suspended from association with any broker-dealer for a period of four months. On June 27, 2977, the SEC issued a release which charged that Petitioner had wilfully violated and wilfully aided and abetted violations of the registration provisions of the Securities Act of 1933, and had willfully violated an wilfully aided and abetted violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities EXCHANGE Act of 1934 in connection with the offer and sale of the common stock of Tucker Drilling Company, Inc. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the Tucker Drilling charges which the SEC decided to accept. As a result, the SEC found that Petitioner wilfully violated and wilfully aided and abetted violations of Sections 5(a) and 5(c) of the Securities Act of 1933. Further, it was found Petitioner willfully violated and willfully aided and abetted violations of Section 10(b) of the EXCHANGE act and Rule 10b-6. Based on its findings the SEC suspended Petitioner from association with any brokers, dealer or investment company for a period of twelve months and barred her from association with any broker, dealer or investment company in a supervisory or proprietary capacity. Prior to the entry of the administrative penalties imposed against Petitioner in connection with the Tucker Drilling charges, the SEC had obtained a civil injunction against Petitioner which permanently enjoined her from violating the federal securities laws in connection with the offer and sale of Tucker securities or any other securities. Petitioner maintained at hearing that the submitted of settlement were offered as an expedient means of resolving the charges since she did not have the financial resources needed to oppose the allegations. In connection with the ITS charges, Petitioner stated she did not improperly scheme to manipulate the stock prices, that she neither bought nor sold shares of ITS, and that she was charged with other broker-dealers who had "made a market" for ITS simply because of her association with them. Further, Petitioner denied she had ever received compensation for deals made with the ITS sales In connection with the Tucker Drilling charges, Petitioner admitted she actively participated in the purchase and sale of the Tucker stock but that she had not known of the improprieties of others involved in the trading. Petitioner denied she had knowingly violated the laws and alleged that by the time she determined something was improper, the investigations had begun. Petitioner found the Tucker incident a "stupid mistake. In 1976, Adams & Whitney went out of business. Petitioner subsequently devoted her energy to her own and family health problems and became a housewife. In 1985, Petitioner's family moved to Florida and she worked as a secretary for a brokerage firm called Brown & Hawk, Inc. From September, 1986 until the time of her application, Petitioner worked as a secretary for Sheffield Securities, Inc. During her employment with Sheffield, Petitioner studied for an successfully passed the examination for S-7 registration. According to Dennis Dixon, who was a financial principal and general securities associated person at Sheffield Securities, Petitioner is a very trustworthy person who is also very capable. According to Don Saxon, the determination that Petitioner had violated the anti-fraud provisions was a great concern to the Department since those violations are the most serious types perpetrated by an individual in the industry.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: Department of Banking and Finance, Office of the Comptroller, Division of Securities and Investor Protection enter a Final Order approving Petitioner's application for registration with restrictions as may be deemed appropriate by the Department. DONE and RECOMMENDED this 25th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of July, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-0531 Rulings on Petitioner's proposed Findings of Fact: Paragraph 1 is accepted. Paragraph 2 is accepted. Paragraph 3 is rejected as argument. Paragraph 4 is rejected as argument or unsupported by the evidence. To the extent relevant see findings made in paragraphs 11 & 12. Paragraph 5 is rejected as argument. Paragraph 6 is accepted to the extent addressed in findings made in paragraphs 10, 11, 12 otherwise rejected as argument unsupported by the record, or irrelevant. The first sentence in paragraph 7 is accepted. The balance of paragraph 7 is rejected as argument. Paragraph 8 is accepted. Paragraph 9 is rejected as argument. The first 4 sentences of paragraph 10 are accepted. The balance of paragraph 10 is rejected as argument. Paragraph 11 is rejected as argument. COPIES FURNISHED: Charles E. Scarlett Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399 Michael J. Cohen, Esquire 517 S. W. First Avenue Fort Lauderdale, Florida 33301 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350
The Issue At issue in this proceeding is whether the proposal of Health Care Pharmacy Providers, Inc. (HCPP), was responsive to the request for proposal issued by the Department of Administration (Department), and whether the Department departed from the essential requirements of law in its evaluation of the responses to the request for proposal.
Findings Of Fact Background On June 14, 1991, the Department of Administration, Division of State Employees' Insurance (Department), issued Request for Proposal No. 91-14 (hereinafter "the RFP") for a statewide prescription drug card program for full- time and part-time state employees, retired employees, COBRA recipients and eligible dependents covered by the State of Florida Employees' Group Health Self-Insurance Plan. The deadline for submitting sealed proposals in response to the RFP, as amended, was established as 2:00 p.m., August 2, 1991. At the time of the deadline, the Department had received a number of proposals, including those of petitioner, Consultec, Inc. d/b/a General American Consultec, Inc. (Consultec), and intervenor, Health Care Pharmacy Providers, Inc. (HCPP). On August 22, 1991, following its evaluation of the proposals, the Evaluation Committee advised the Secretary of the Department that: Based on the evaluation criteria contained in the RFP, the Committee would normally recommend that a contract be offered to Consultec, Inc. The company that was awarded the second most points is Health Care Pharmacies. However, considering the Plan's past claim's history, the Committee projects that, with a contract awarded to Consultec rather than Health Care Pharmacies, an additional claim's cost of approximately $500,000 - $600,000 would be incurred annually. This difference is calculated based on the discount rates of 12.4% versus 15% respectively. The Committee feels it must, therefore, recommend that a contract be offered to Health Care Pharmacies. . . . Thereafter, on August 23, 1991, the Department notified Consultec that it had selected the proposal of HCPP, as the most advantageous to the state, and accorded Consultec notice of its opportunity to contest the Department's decision. Consultec filed a timely notice of protest and formal written protest to contest the Department's decision. Such protest charged that the Department materially departed from the evaluation criteria contained in the RFP, and that the proposal of HCPP was not responsive to the RFP. The Request for Proposal Pertinent to this case, General Conditions 3 and 6 of the RFP provided: 3. PROPOSAL OPENING . . . A proposal may not be altered after opening of the price proposals. . . . * * * 6. AWARDS:As the best interest of the State may require, the right is reserved to reject any and all proposals or waive any minor irregularity or technicality in proposals received. . . . The RFP, as amended, further provided: SECTION IV PROPOSAL COMPLETION 1. Any proposal submitted in response to this RFP must include the certification of compliance on pages 25 and 26 signed by an authorized representative of the respondent. By the signature, the respondent certifies that all provisions of this RFP have been read, understood and agreed. The absence of such certification at the time of bid opening will render the proposal invalid and it will not be evaluated. * * * 3. Each respondent must submit the original of the following in a single envelope: * * * Complete information requested in the 12 subsections of the Proposal Requirements. The respondent must respond to each statement in the same order as they appear in Section VI. Do not re-format or group your replies or your proposal will result in a non-responsive bid. Complete the Cost Proposal as outlined in Section VIII. . . . * * * 6. DOA reserves the right to request verifi- cation, validation or clarification of any information contained in the proposal submit- ted. This may include checking references. SECTION V INQUIRIES * * * Questions regarding this RFP will be answered at the pre-bid conference at the time, date and address shown in the Schedule of Events . . . Responses to such advance written questions, as well as questions raised at the conference, will be recorded in compre- hensive written minutes which will be distri- buted to all parties who received the RFP and who record their presence at the conference. Any changes made in this RFP which are not part of the official minutes of the pre-bid conference will be communicated in writing as an RFP amendment to all parties who received this RFP and who record their presence at the pre-bid conference. * * * 8. The State of Florida reserves the right to reject any and all proposals, to make no award or to issue a new Request For Proposals. SECTION IV PROPOSAL REQUIREMENTS 1.0. LICENSE ORGANIZATION AND HISTORY * * * 1.4 Provide audited financial reports for 1987, 1988, 1989 and 1990, summarizing revenue and expenses for the operation of the prescrip- tion drug card benefit program of your business and the total operation of your prescription drug card business. * * * 2.0 FINANCIAL RESPONSIBILITY * * * 2.2. Provide evidence of a $1 million Performance Bond. * * * PROVIDER NETWORK Develop a statewide network of pharmacies which agree, by contract, to submit claims for participants and to accept the contractor's allowance along with the participant's co-payment as full payment. There must be participating pharmacies in all of Florida's 67 counties. * * * SECTION VIII CRITERIA FOR EVALUATION The Department of Administration shall evaluate each proposal by assessing the re- spondent's reply to all issues addressed in this RFP. The evaluation process shall include: The adherence and response to the Proposal Requirements as specified in Section VI. Lack of response to each point in Section VI will result in a nonresponsive bid. Do not reformu- late or group your replies. The Cost Proposal. SECTION IX EVALUATION OF PROPOSALS CRITERIA: Each evaluation shall be done using the criteria listed in Section VIII. WEIGHTING:The weighted criteria is as follows: ADMINISTRATIVE FEES Category 1 1/1/92 - 12/31/92 40% Category 2 1/1/93 - 12/31/93 40% Enrollment data on the number of state subscribers is found in APPENDIX I of this REP. DISCOUNT PERCENTAGE RATE Category 3 1/1/92 - 12/31/93 20% FORMULA FOR CLAIMS PAYMENT Payment will be the Average Wholesale Price (AWP) less a discount percentage rate, plus a dispensing fee minus a co-payment. Information on prescriptions for participants in the last two fiscal years and partial amounts for the 1991-1992 fiscal year are found in Appendix 2 of this RFP. METHODOLOGY: In order to determine the rela- tive value of the weighted criteria, a 100 point system will be used. Respondents submitting the lowest administrative fees will be awarded the most points. Respondents submitting the highest discount percentage rate will be awarded the most points. Conversion to the 100 point scale will be determined as follows: The administrative fees and discount percentage rate for each of the respondents will be added by category. The sum of each category will be divided by the number of respondents to arrive at the mean for that category. ADMINISTRATIVE FEES The mean for administrative fees will be accorded a value of 20 points per year. Each respondent's response, by category, will be divided into the mean for that category. This factor will be multiplied by the point value of the mean (20 points) to determine the points awarded for the category. Calculations will be rounded to the fifth decimal. An administrative fee of 0 will receive a value of 40 points per year. DISCOUNT PERCENTAGE RATE The mean for the discount percentage rate will be accorded a value of 10 points. Each respondent's response will be divided by the mean for that category. This factor will be multiplied by the point value of the mean (10 points) to determine the points awarded for that category. The total points for each of the three categories will result in that respondent's total points awarded. Maximum points will be 100. SECTION X COST OF PROPOSAL Provide the monthly cost per year for all administrative services per claim for each year of the contract. 1/1/91 - 12/31/92 1/1/93 - 12/31/92 Provide the discount percentage rate for the two-year contact period. 1/1/92 - 12/31/93 SECTION XI CERTIFICATE OF COMPLIANCE * * * We propose to furnish and deliver any and all of the services in the attached Request for Proposals. It is understood and agreed that this proposal constitutes an offer which, when accepted in writing and subject to the terms and conditions of such acceptance, will consti-tute a valid and binding contract between the undersigned and the State of Florida, Department of Administration. It is understood and agreed that we have read the State's specifications shown or referenced in the RFP and that this proposal is made in accordance with the provisions of such specifi- cations. By our written signa-ture on this proposal, we guarantee and certify that all items included in this pro-posal meet or exceed any and all such State specifications. We further agree, if awarded a contract, to deliver services which meet or exceed the specifications. . . . In accordance with Section V of the RFP, Consultec submitted the following question to the Department: What is meant by "providing evidence"? Do you want written assurance that we have the capa- bility to provide these bonds and insurance should we be the successful bidder? The Department answered: Provide evidence means the respondent must show written proof that it acquired the bonds and general liability insurance as required in the RFP and that the State shall be notified by the insurer of any cancellation of the bonds and liability insurance required. While the Department's answer to Consultec's question stated that a respondent "must show written proof that it acquired the bonds," the proof at hearing demonstrated that insurance companies do not issue performance bonds until a contract has actually been awarded. Consequently, no respondent could "provide evidence" of a $1 million performance bond in the manner delineated by the Department. The responsiveness of Consultec's proposal Consultec's proposal was fully responsive to the requirements of the RFP, and contained no material omissions or deviations from those requirements. 1/ In response to Section X of the RFP, as amended, Consultec proposed a monthly cost-per-year for all administrative services per claim for each year of the contract (January 1, 1992 - December 31, 1992, and January 1, 1993 - December 31, 1993) of Zero dollars ($0.00). Consultec also proposed a discount percentage rate from the average wholesale price (AWP) for prescription drugs for the two-year contract period of 12.4 percent. The responsiveness of HCPP's proposal HCPP's proposal was not responsive to the requirements established by the RFP in at least two material particulars. First, it failed to comply with the requirement that it provide audited financial statements for 1987-1990, and second, it failed to provide evidence of a $1 million performance bond. As heretofore noted, Section VI of the RFP required that HCPP provide audited financial reports for 1987 through 1990. The specific requirement read as follows: 1.4 Provide audited financial reports for 1987, 1988, 1989, and 1990, summarizing revenue and expenses for the operation of the prescription drug card benefit program of your business and the total operation of your pre- scription drug card business. In response to such requirement, HCPP submitted a consolidated balance sheet and consolidated statement of operations for National Intergroup, Inc., and its subsidiaries. National Intergroup, Inc., is HCPP's parent company. The financial statements, assuming they were audited, which was not demonstrated by competent proof in these proceedings, failed to include any auditor's notes. More importantly, such statements were consolidated statements of National Intergroup and its subsidiaries, and it is impossible to ascertain from such documents any information concerning the financial health of HCPP, the entity proposing to contract with the Department. Moreover, such statements fail, as required by the RFP, to summarize "revenue and expenses for the operation of the prescription drug card benefit program of [HCPP's] prescription drug card business." Under such circumstances, HCPP's response to the provision of the RFP regarding the provision of financial reports was not responsive. HCPP's response to Section VI of the RFP, that it "Provide evidence of a $1 million Performance Bond" was likewise nonresponsive. Regarding such requirement, HCPP responded: HCPP does not have a Performance Bond as it is not applicable. Following bid opening, the Department contacted HCPP regarding its response to the performance bond requirement and was advised by HCPP that it had framed its response based on its assumption that a performance bond would not be required for a company of its stature. Upon being advised that it indeed was required, HCPP agreed to provide such a bond. Notably, however, HCPP's proposal contained no evidence of its ability or inclination to provide such a bond, and its agreement to do so occurred subsequent to bid opening. Under such circumstances, HCPP's proposal was not responsive to the performance bond requirement of the RFP. HCPP's response to Section VI of the RFP, that it agree to develop a statewide network of pharmacies with participating pharmacies in all of Florida's 67 counties was ambiguous. Pertinent to this requirement, HCPP responded: HCPP proposes a statewide network of pharma- cies including Eckers, Kmart, Pharxnor and numerous independent pharmacies. The total preferred network consists of 820 stores in 53 counties. Upon review of HCPP's response, the Evaluation Committee was of the opinion that HCPP's response evidenced an intention to provide a statewide network, with participating pharmacies in all 67 counties, and that HCPP currently had a network of pharmacies in 53 counties. To clarify such point, the committee contacted HCPP following the bid opening, and HCPP confirmed that the committee's interpretation of its response was accurate. At hearing, the proof confirmed the accuracy of the committee's interpretation of HCPP's response. Under such circumstances, the Department's request for clarification was appropriate, and HCPP's response that it had in fact proposed a 67-county statewide network was not a post-bid opening alteration of its proposal. Finally, HCPP's proposal failed to contain any specific response to paragraphs 5.8, 5.10, 11.1, 11.2, and 11.3 of Section VI of the RFP, as required by paragraph 3C of Section IV and paragraph 1 of Section VIII of the RFP. Such failing, more likely than not, was inadvertent and the fault of the typist who prepared the response, since any response to such paragraphs required no more of the bidder than its agreement to comply with such requirements. HCPP's proposal was, nonetheless, not responsive to paragraphs 5.8, 5.10, 11.1, 11.2, and 11.3 of the RFP. While not responsive to such paragraphs, the Department and HCPP contend that such failing is a minor irregularity since, by execution of Section XI (the Certificate of Compliance), HCPP obligated itself to comply with such requirements. A fair reading of Section XI comports with the position espoused by such parties. Accordingly, it is found, under the circumstances, that HCPP's failure to specifically respond to such paragraphs was a minor irregularity, appropriately waived by the Department. The same conclusion cannot, however, be drawn regarding HCPP's failure to provide audited financial statements or to provide evidence of a $1 million performance bond. Such requirements were required as part of the proposal, and were not so submitted. Additionally, HCPP's response in these particulars was contrary to the express requirements of the RFP. Under such circumstances, HCPP's mere execution of the Certificate of Compliance does not cure the deficiencies of its proposal as to such requirements. In response to Section X of the RFP, as amended, HCPP proposed a monthly cost-per-year for all administrative services per claims for each year of the contract (January 1, 1992 - December 31, 1992, and January 1, 1993 - December 31, 1993) of forty cents ($.40). HCPP also proposed a discount percentage rate from the AWP for the two-year contract period of 15 percent. Evaluation of the cost proposals Applying the weighted criteria established by Section IX of the RFP to Consultec's cost proposal, the Evaluation Committee awarded it the maximum number of possible points (80 points) for its proposed administrative costs, since the proposal reflected no charge for such expenses, and 21.440 points based on its proposed discount percentage rate of 12.4 percent. In all, Consultec received 101.440 points. By comparison, HCPP was awarded 51.666 points for its proposed administrative costs and 25.936 points based on its proposed discount rate of 15 percent. In all, HCPP received 77.603 points. 2/ Notwithstanding that Consultec was the superior respondent, based on the evaluation criteria contained in the RFP, the Evaluation Committee recommended, and the Secretary concurred, that the contract be awarded to HCPP. Such result was occasioned by the committee's conclusion that, notwithstanding the fact that Consultec received the most points under the evaluation criteria, awarding the contract to Consultec rather than HCPP would cost the state an additional $500,000 - $600,000 annually when the cost proposals are evaluated in light of the Plan's past claims history. 3/ The Department, as well as HCPP, do not concede that the Department departed from the methodology established by the RFP but, rather, contend that the point system by which the cost proposals were to be evaluated was but a "starting point" for the evaluation of the cost proposals. Supportive of such contention, those parties note that no where in the RFP was it specifically stated that the proposal with the most points would be awarded the contract and, therefore, the Department's decision to award the contract based on the lowest cost, as opposed to the most points, was not a departure from the established methodology or otherwise improper. Such contention is rejected as being contrary to the terms of the RFP, and otherwise not persuasive. Section VIII of the RFP establishes a two-pronged test for awarding the contract: (1)"The adherence and response to the Proposal Requirements as specified in Section VI," and (2)"The Cost Proposal." 4/ Pursuant to Section X of the RFP, the cost proposal of a vendor is to be evaluated under the weighted criteria established by Section IX of the RFP. Neither Section VIII, IX or X contemplate any other factor, and nothing in the RFP establishes any other test or methodology by which to compare the various responses. Accordingly, under the literal terms of the RFP, Consultec was the prevailing bidder because it received the highest number of points under the methodology established by the Department. While the proof demonstrated that Consultec is the successful bidder when the methodology established by the RFP is properly applied, it further demonstrated that the methodology established by the Department was fatally flawed since, among other things, it neither provided for an exact comparison of bids, nor secured the best values for the public at the lowest possible expense. In this regard, the proof showed that while Consultec proposed zero administrative costs, it in fact proposed to recover such costs by being able to obtain drugs from participating pharmacies at a greater discount than the discount quoted to the state. 5/ Accordingly, while Consultec did have administrative costs, and was planning to recoup those costs, such costs were subsumed in its discount rate, and the methodology established by the Department did not permit an exact comparison of bids. Further, as heretofore, found, the methodology adopted by the Department was not designed to secure the best values for the state. 6/ Considering the flawed methodology adopted by the Department to evaluate the proposals submitted in response to the subject RFP, it is concluded that it is in the best interests of the State of Florida to reject all bids and to extend a new RFP.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered which rejects all proposals, and that a new request for proposals be extended. RECOMMENDED in Tallahassee, Leon County, Florida, this 13th day of November 1991. WILLIAM J. KENDRICK 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 13th day of November 1991.
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
Conclusions THIS CAUSE, arising under Florida’s “Agricultural License and Bond Law” (Sections 604.15-604.34), Florida Statutes, came before the Commissioner of Agriculture of the State of Florida for consideration and final agency action. On August 26, 2009, the Petitioner, Dixie Growers, Inc., an Agent for producers of Florida agricultural products as defined by Section 604.15(10), Florida Statutes, timely filed an administrative claim pursuant to Section 604.21, Florida Statutes, to collect $176,869.20 (including the $50 claim filing fee) for strawberries they sold to Respondent, a licensed dealer in agricultural products. Respondent’s license for the time in question was supported by a surety bond required by Section 604.20, Florida Statutes, written by Lincoln General Insurance Company in the amount of $100,000. On September 2, 2009, a Notice of Filing of an Amended Claim was mailed to Respondent and Co-Respondent. The September 2, 2009 certified claim mailing to the Respondent was returned by the United States postal service on October 5, 2009 marked “UNCLAIMED”. A second certified mailing was sent by the Department to the Respondent at another address of record on October 9, 2009 and it was received by the Respondent on October 23, 2009. On November 10, 2009, the Respondent filed an ANSWER OF RESPONDENT with an attachment to the Department and requested a hearing. Accordingly, this case was referred to the Division of Administrative Hearings (“DOAH”) for a administrative hearing in accordance with the provisions of Section 120.57(1), Florida Statutes. DOAH issued a NOTICE OF HEARING on December 2, 2009 for a hearing to be held on February 25, 2010. The hearing was held with DOAH on February 25, 2010 and the Administrative Law Judge (the “ALJ”) entered her RECOMMENDED ORDER (“R.O.”) on March 24, 2010, a copy of which is attached hereto as Exhibit “A”, to which neither party filed written exceptions with this Department. Upon the consideration of the foregoing and being otherwise fully advised in the premises, it is ORDERED: The Department adopts the ALJ’s R.O. in toto including the following technical corrections to the R.O.: 1. In the caption on page one (1) of the R.O. the Respondent is shown as America Growers, Inc. and it should read American Growers, Inc. 2. On page one (1), paragraph (1) of the R.O., it states Counsel for Respondent, the witness and court reporter appeared ... . It should read Counsel for Petitioner, the witness and court reporter appeared ... . 3. On page two (2) under PRELIMINARY STATEMENT, paragraph (2), it states Petitioner filed a response on the Department’s form titled, .... It should read Respondent filed a response on the Department’s form titled ... . 4. On page three (3) under FINDINGS OF FACT, paragraph number one (1), it states; Petitioner, Dixie Growers, Inc., is a producer of agricultural products in Florida, i.e.., strawberries. It should read; Petitioner, Dixie Growers, Inc., is an Agent for the Producer(s) of agricultural products in Florida, i.e., strawberries. 5. On page five (5), paragraph eleven (11), under CONCLUSIONS OF LAW, it states; Petitioner is a “producer” of agricultural products as defined in subsection 604. 15(9), Florida Statutes. It should read; Petitioner is a “producer’s agent” for the producer(s) of agricultural products as defined in subsection 604.15(10), Florida Statutes. The ALJ’s recommendation that the Respondent, American Growers, Inc., pay Petitioner, $176,819.20 and the $50 filing fee is hereby adopted. For purposes of this Final Order consistent with the requirements of Sections 604.21(7) and (8), Florida Statutes, the ALJ’s recommendation is modified to include that payment shall be made within fifteen (15) days after this Final Order is adopted. In the event Respondent fails to pay Petitioner $176,869.20 within fifteen (15) days of the Final Order, Lincoln General Insurance Company, as Surety for Respondent, is hereby ordered to provide payment under the conditions and provisions of the Bond to CHARLES H. BRONSON, COMMISSIONER OF AGRICULTURE AND CONSUMER SERVICES, as Obligee on the Bond. The Department will notify the Surety in the event it (the Surety) is required to pay. This Order is final and effective on the date filed with the Agency Clerk of the Department. Any party to these proceedings adversely affected by this Final Order is entitled to seek review of this Final Order pursuant to Section 120.68, Florida Statutes (2002) and Rule 9.110, Florida Rules of Appellate Procedure (2003). Review proceedings must be instituted by filing a petition or notice of appeal with the Agency Clerk, 5" Floor, Mayo Building, Tallahassee, FL 32399-0800. A copy of the petition for review or notice of appeal, accompanied by the filing fees prescribed by law must also be filed with the appropriate District Court of Appeal within thirty (30) days of the date this Final Order was filed with the Agency Clerk. = DONE AND ORDERED this27_ day of Frrnach , 2010. TERRY L.’RHODES Assistant Commissioner of Agriculture WA. Filed with Agency Clerk this”? _ day of Bel , 2010. Agency Clerk COPIES FURNISHED TO: Judge Carolyn S. Holifield Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (Certified Receipt No. 7160 3901 9848 8028 7649) Mr. Glenn C. Thomason, Registered Agent American Growers, Inc. P. O. Box 1207 Loxahatchee, FL 33470 (Certified Receipt No. 7160 3901 9848 8028 7656) Ms. Rene Herder, Surety Bond Claims Lincoln General Insurance Company 4902 Eisenhower Blvd., Suite 155 Tampa, FL 33634 (Certified Receipt No. 7160 3901 9848 8028 7663) Mr. John Northrop, Surety Bond Claims Lincoln General Insurance Company 4902 Eisenhower Blvd., Suite 155 Tampa, FL 33634 (Certified Receipt No. 7160 3901 9848 8028 9230) Gregg E. Hutt, Attorney for Petitioner Dixie Growers, Inc. TRENAM, KEMKER, SCHARF, BARKIN, FRYE, O’NEILL & MULLIS, P.A. 101 East Kennedy Boulevard, Suite 2700 P. O. Box 1102 Tampa, FL 33601-1102 (Certified Receipt No. 7160 3901 9848 8028 9247) Ms. Linda Terry Lawton, Vice President Dixie Growers, Inc. P. O. Box 1686 Plant City, FL 33564-1686 (Certified Receipt No. 7160 3901 9848 8028 9254) Steven Hall, Attorney Florida Department of Agriculture and Consumer Services, Suite 520 Mayo Building, M-11 Tallahassee, FL 32399-0800 Mr. Mark Moritz and Mr. Brad Robson, Field Representatives
Findings Of Fact Albert Earl Wise, II, (Al,II) (Case No. 86-2161) began work as a securities salesman in Memphis, Tennessee, approximately November 15, 1982. He was a plumber when an old friend recruited him to be come a salesman with G.I.C. Government Securities, Inc., which was registered with the Department of Banking and Finance, Division of Securities (Department), from June 8, 1982, until October 1, 1985. In February, 1983, Al,II, was transferred to Tampa to work in the branch office being opened there by an office manager named Lonnie Kilpatrick. Kilpatrick had been a government trader with the firm in Memphis. In approximately July, 1984, Al,II, became the Tampa branch manager. As the firm's Florida business expanded, Kilpatrick took over sole ownership and named Al,II, general manager over all the offices in Florida. Al,II, also became vice-president, comptroller and member of the board of directors of G.I.C. Government Securities, Inc. As general manager, Al,II, was responsible for the day-to-day operations of the company. A more accurate description of his duties is that of sales manager as he was primarily responsible for promoting sales and motivating the account executives/sales persons. Al,II's, duties did not include registration of securities, as he possessed no training in that area, nor deciding what products G.I.C.. Government Securities would sell. Notwithstanding having been named comptroller and vice- president, Al,II, was not allowed by Kilpatrick, despite request, to audit or examine the company's books and records. Lonnie Kilpatrick decided what securities the entity would offer, as well as who, if anyone, would have access to the corporate records. Dorothy (also known as D'Oresa) Wise Young (Case No. 86-1848) was employed by G.I.C. Government Securities, Inc., as an associated person from September, 1983, through April, 1985, and as Sarasota branch manager from January through April, 1985. She is Al,II,'s daughter. Albert Earl Wise, III, (Al,III) (Case No. 86-1888) was employed by G.I.C. Government Securities, Inc., as an account executive from February, 1983, through April, 1985, became Boca Raton and Orlando branch manager, and was a member of the board of directors of G.I.C. Government Securities, Inc. Al,III, is Al,II,'s son. Glenn Patrick Young (Case No. 86-1847) was employed by G.I.C. Government Securities, Inc., as an associated person from January through April, 1985. He is Dorothy's husband. David Randall Phillips (Case No. 86-1887) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from August, 1984, to May, 1985. He is a long-time, close friend of Al,III. William Fredrick Mann (Case No. 86-2160) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from February to April, 1985. He is Al,III,'s father-in-law. Al,II, was employed as a general manager of G.I.C. Securities Corporation from at least January 27, 1985 to March 5, 1985 and supervised the sale of securities by unregistered agents of G.I.C. Securities Corporation to following investors located outside the State of Florida: Fred E Martin or Matalie L. Martin $85,000 Post Office Box 449 West Upton, Massachusetts 01587 Gregory E Westerman $50,000 2034 Strathmoor Boulevard Louisville, Kentucky 40205 Karen E Prevett $70,000 72 Old Farm Road Mansfield, Massachusetts 02048 Harvey Notis or Marion Notis $50,000 R. D. 3 Box 1248 Great Harrington, Massachusetts 01230 C. T. George $155,000 Living Revocable Trust Trust Dated 01/31/83 20 Palmer Drive Canton, Massachusetts 02021 Geoffrey P. Pollitt $25,000 313 Simon Willard Road Concord, Massachusetts 01742 Walter Kossman or Virginia Kossman $25,000 1594 S. Circle View Seven Hills, Ohio 44131 Robert Anandale Trustee $30,000 Dated 02/28/84 F.B.O. Robert Allandale c/o Central National Bank 6690 McKenzie Road North Olmstead, Ohio 44070 William P. Giblin $25,000 6433 Beverly Drive Parma Heights, Ohio 44129 Walter Kossman or Virginia Kossman $25,000 1594 South Circle View Seven Hills, Ohio 44131 Dorothy L. Bayman or Dale L. Bayman $85,000 150 Belleair Avenue Dayton, Ohio 45420 Dorothy Wise Young was employed by G.I.C. Securities Corporation as an account executive although not registered with Respondent in any capacity at anytime concerning said employment. Young also sold securities on behalf of G.I.C. Securities Corporation to the following investors despite not being properly registered with Respondent: Albin W. Johnson Box 333 Randolph, Massachusetts 02368 $75,000 T. W. Wenzlick or Viola 421 Jeffrey Drive R. Wenzlick $25,000 New Washington, Ohio 44854 Harvey Notis or Marion Notis $50,000 R. D. 3, Box 142C Great Barrington, Massachusetts 01230 Al,III, was employed by G.I.C. Securities Corporation as an account executive from January to April, 1985, and admitted engaging in the sale of one or more securities while employed by said firm. Al,III, also admitted to not being properly registered in the State of Florida with G.I.C. Securities Corporation. G.I.C. Securities Corporation was denied a license by Order of the Department dated April 16, 1984, in part for material false statements in the application and demonstration of the applicant's unworthiness to transact the business of a broker/dealer. G.I.C. Securities Corporation subsequently filed a petition for formal hearing regarding the Department's denial of registration. On August 30, 1984, G.I.C. Securities Corporation entered into a stipulation, consent agreement and final order with the Department. This written agreement provided that the firm would not apply to the Department for registration under Section 517.12(1), Florida Statutes, for a period of twelve months from August 30, 1984, and that it would fully and faithfully comply with all of the provisions of Chapter 517, Florida Statutes, and the rules of the Department. On the basis of these findings of fact, on April 9, 1985, the Department ordered the firm to cease and desist from violating Chapter 517, Florida Statutes, and more specifically from selling unregistered securities and from selling securities without being lawfully registered to do so. Al,II, also sold unregistered Government National mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Joseph or Bernice Metcalf 4299-14th Street N.E. St. Petersburg, Fl 33703 $25,000 Bruce or Diane J. Fenton 2435 Post Road Sarasota, Fl 33581 $5,000 Betsy O. Lester 1200 Capri Circle S. Apt. 29 Treasure Island, Fl 33706 $10,000 Ernest L. Miller Post Office Box 458 Lake Hamilton, Fl 33851 $7,000 John and Louise Magill 4260 S.E. 20th Place Apt. Cape Coral, Fl 33904 208 $10,000 Mrs. Lina Anker-Simmons Post Office Box 353 Boca Grande, Fl 33921 $10,000 Charles W. Wood or Babetta 211 W. Emily Tampa, Fl 33603 Edmunds $10,000 Margaret McMenamy 1225 N.W. 16th Street Pembroke Pine, Fl 33026 $20,000 Suzanne J. Lewis 4703 Brookwood Drive Tampa, Fl 33629 $10,000 Raymond or Suzanne Lewis 4703 Brookwood Drive Tampa, Fl 33629 $10,000 Deno or Barbara Kazanis 2310 Southern Lights Lutz, Fl 33549 $5,000 William K. Mall, IV 9500 82nd Avenue N. Seminole, Fl 33543 $20,000 Carl E. or Minnie E. Gustafson $10,000 Post Office Box 451 Matlacha, Fl 33909 John A. or Louis Gress $22,000 Post Office Box 1555 Palm Harbor, Fl 33563 Marguerite Gould or Marguerite Robertson $10,000 16183 Dublin Circle Casa Bella Bldg. A-Apt. 103 Ft. Myers, Fl 33908 Robert J. Evans $7,000 Rt. 2, Box 12-B Moore Haven, Fl 33471 Virginia H. or Robert E Bartlett $10,000 4703 Baycrest Drive Tampa, Fl 33615 Robert S. or Helen M. Gerard $5,000 or Frances C. Rafter JT WROS, 4521 W. Rogers Avenue Tampa, Fl 33611 Jacinto R. or Palmira M. Fernandez $10,000 8436 Nebraska Avenue Tampa, Fl 33604 Paul E. or Elizabeth A. Cleveland $10,000 306 Kllburn Road Holiday, Fl 33590 William F. Price $30,000 custodian for Gary Cotton Dan Cook 9105 Tudor Dr #F102 Tampa, Fl 33615 Ruth T. Penner or Laura B. Wood $5,000 1204 W. Risk-Apt. G Plant City, Fl 33566 Edward G. or Eleanor G. Daniels $20,000 4630 B.E. 20th Place Cape Coral, Fl 33904 Frederick S. Crysler $5,000 1200 Johnston Road Unite B-24 Dade City, Fl 33525 Hazel H. Aspinwall or Frederick F. Smith $30,000 69 Arrowhead Drive St. Augustine, Fl 32086 Jay E or Betty A. Yager $20,000 or Martha Dean Post Office Box 465 Astatula, Fl 32705 Katherine B. Wolf $10,000 1850 Palmcrest Lane Clearwater, Fl 33546 Howard J. or Margaret M. Williams $10,000 8290 Oakhurst Road Seminole, Fl 33542 Roy or Dorothy Schreiner $15,000 4112 Robin Way Valrico, Fl 33594 Alfred or Frances Richter $13,000 7248 Antigua Place Sarasota, Fl 33581 Kaye Reid Wainwright $50,000 10671 William Tell Drive Orlando, Fl 32821 Charles A. Kottmeier $25,000 1200 Druid Road S. #7 Clearwater, Fl 33516 Bernie or Sylvia Albert or $10,000 Sharon Terry Albert 10642 Watertown Court Orlando, Fl 32809 Arnold or Gloria Barr $10,000 7503 Willow Court Tampa, Fl 33614 Edward Daniels Development Company $35,000 4630 S.E. 20th Place Cape Coral, Fl 33904 John W. DuBrian $30,900 2912 Tiburon Drive New Port Richey, Fl 33553 Arthur and Ruth P. Hiller $10,000 10702 Westbrook Dr Orlando, Fl 32821 Charles A. Kottmeir $40,000 200 Druid Road S. #7 Clearwater, Fl 33516 Kenneth S. Preston $12,000 11839 U.S. Hwy 41 S. Gibsonton, William E. Fl 33534 Morris $11,000 271-B Deming Avenue North Port, Fl 33596 Walter Leena M. Fennander $7,000 1727 Bayshore Boulevard Dunedin, Fl 33528 Thomas B. or Charlene M. Austin $10,000 309 15th Avenue Indian Rocks Beach, Fl 33535 Katherine Wolf $10,000 1850 Palmcrest Lane Clearwater, Fl 33546 Dorothy Wise Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: George W. Arnold $8,000 618 4th Avenue S. St. Petersburg, Fl 33701 W. R. Bauman or Barbara Nagle $10,000 Post Office Box 16 Yankeetown, Fl 32698 George W. or Marjorie E. Border $10,000 860 N. Lake Avenue Avon Park, Fl 33825 Joan or Jerome Brenan 0005 Granite Lane Orlando, Fl 32821 $10,000 Freida Blockner 14623 Bonaire #607 Delray Beach, Fl 33446 $5,000 John or Elizabeth Grabowski 2308 Castilla Isle Fort Lauderdale, Fl 33301 $10,000 Louis or Mary Hoffman 3512 Spring Valley Drive New Port Richey, Fl 33552 $10,000 Raymond F. Joyce custodian for Salvatore Leone 267 S. Ocean Boulevard #212 C Pompano Beach, Fl 33062 $5,000 John or Caroline Susanec $10,000 215 Stafford Avenue Brooksville, Fl 33512 Stephen Karakay $10,000 Box 3344 Sarasota, Fl 33578 Mrs. Floyd A. Flowers or James A. Monroe $5,000 Route 2, Box 330H Crestview, Fl 32536 Fannie Felicia Caliuzzi $5,000 2742 C. Sherbrook Lane Palm Harbor, Fl 33563 Emma Carolyn Hammond $95,000 130 Devon Drive Clearwater, Fl 33515 A. E. or Joyce LaBeau $12,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 A. E. or Joyce LaBeau $13,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 A. E. or Joyce LaBeau $7,000 1801 Marine Park Way #106 New Port Richey, Fl 33552 Oscar Ritter $5,000 952 N.E. 199th Street #415 N. Miami Beach, Fl 33179 Murial or Sherry Stearns 580 Rio Vista Avenue $9,000 Daytona Beach, Fl 32014 F. William or Frances C. Van 219 87th Street Stone Harbor, N.J. 08247 Ness $6,000 Kaye Reid Wainwright 10671 William Tell Drive Orlando, Fl 32821 $50,000 Adele Althouse 400 Freedom Square U.S.A. Apt. J 619 Seminole, Fl 33542 $5,000 Murial or Sherry Stearns 580 Rio Vista Avenue Daytona Beach, Fl 32014 $10,000 F. William or Frances C. Van 112 S.W. 1st Avenue Seller Apt. Ness $10,000 Delray Beach, Fl 33444 McKinely or Grace Anderson 12408 Oakleaf Avenue Tampa, Fl 33612 $10,000 Mrs. Eileen Coutts 190 S.W. 72nd Terrace Margate, Fl 33068 $18,000 John C. Bertram 1416 Lake Marion Drive Apopka, Fl 32703 $8,000 Luther or Alena D. Ellis Rt. 2, Box 72 Wauchula, Fl 33873 $20,000 F. H. or H. Elizabeth Groezinger $15,000 2308 Crescent Ridge Road Daytona Beach, Fl 32018 Luther or Alena D. Ellis $30,000 Rt. 2, Box 72 Wauchula, Fl 33873 Mrs Isabelia K. Berg $6,000 5421 B Lakefront Blvd. Delray Beach, Fl 33445 Al,III, sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Charles S. Ammerman or Florence F. Ammerman $6,500 710 Lake Hiawassee Orlando, Fl 32811 Eva Wilson $15,000 409 S.E. 2nd Court Deerfield Beach, Fl 33441 Frank or Jean Arnold $18,000 6020 Shakerwood Circle, #G-108 Tamara, Fl 33319 Virginia Cummins or J. H. Cromer $15,000 311 S. Dean Street Westport, Indiana 47283 Morris or Sylvia Erlbaum $10,000 6795 Huntington Lane Bld. #14, Apt. #207 Delray Beach, Fl 33446 Lois G. Crosley $41,000 1626 Silversmith Place Orlando, Fl 32818 Sandy Garrison or Mary M. Boitnott $15,000 3104 Harrison Ave., #C-18 Orlando, Fl 32804 William or Rose Herzog $25,000 Custodian for Ronald Coyne 258-A Hibiscus Drive, M.F.L. Leesburg, Fl 32788 Helen Klein or Shari Weitzner $5,000 3205 Portofina #C-4 Coconut Greek, Fl 33066 Mattye Oliver or Eileen Johnson $3,000 147 W. State Street Kennett Square, PA 19348 Alma Pagliaro or Nancy De Marco $10,000 or Godfrey D. De Marco 9925-B Papaya Tree Trail Boynton Beach, Fl 33436 Gai S. Verner I.T.F. Bill Trilsch $25,000 901 N.W. 31st Avenue Box 13 Pompano Beach, Fl 33069 Harry or Anita Cope $5,000 417 Piedmont I Delray Beach, Fl 33445 Al Rappaport or Ellen Rappaport $15,000 2780 Pine Allen Rd. N. Sunrise, Fl 33329 Godfrey D. De Maro or Nancy De Marco $5,000 9925-B Papaya Tree Trail Boynton Beach, Fl 33436 Morris Erlbaum or Sylvia Erlbaum $10,000 6795 Huntington Lane Delray Beach, Fl 33446 A. Froid or Gertrude Froid $10,000 in trust for Roy Lee Froid 2600 S.W. 18th Terrace Ft. Lauderdale, Fl 33315 Max Pendergrast or Carol Pendergrast $20,000 custodian for Eric & Kurt Pendergrast 1611 S.W. 26th Street Ft. Lauderdale, Fl 33315 Glenn Patrick Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note and GNMA/Mortgage Backed Collateral Note securities, to the following individuals in the following amounts: Wanda G. Baugh $10,500 Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923 Wanda Baugh $5,000 Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923 Norman R. or Margaret 3442 Gerhardt Street A. Keyes $25,000 Sarasota, Fl 33577 Norman R. or Margaret 3442 Gerhardt Street Sarasota, Fl 33577 A. Keyes $25,000 Howard W. or Hazel M. 3300 26th Avenue East Apt. 17-A Bradenton, Fl 33508 Kerr $10,000 David Randall Phillips sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts: Frank G. and Mildred W. Reynolds $2,500 JTWROS 400 S. Orlando #305 Maitland, Fl 32751 Vivian W. McCann or Marilyn Culpepper $10,000 JTWROS 2211 Beatrice Drive Orlando, Fl 32810 Stanislaw Szamrej or Stanislawa Szamrej $10,000 or Zdzislaw Szamrej JTWROS 2204 Stanley Street Orlando, Fl 32803 Paul Gheorghiu or Martha Gheorghiu $2,500 JTWROS 6565 Carder Drive Orlando, Fl 32818 Marjorie R. Romano or Michael Romano $40,000 11508 Benbow Court Orlando, Fl 32821 William Fredrick Mann sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities to Mark Fulkerson or Bea Kuykendall, 7900 Montezuma Trail, Orlando, Fl, in the amount of $41,000. On April 9, 1985, the Department issued an Administrative Charges and Complaint against G.I.C. Government Securities, Inc., alleging among other things the sale of unregistered securities. On June 27, 1985, the Department entered into a Stipulation and Consent Order whereby G.I.C., its officers and directors and other persons acting in cooperation or concert with them or at their direction were permanently enjoined in part from selling unregistered securities and from obtaining money or property by means of untrue or misleading statements. Despite their positions with Kilpatrick's firms, the petitioners were not told, and did not know, that G.I.C. Securities Corporation was not registered with the Department. Al,III, and Dorothy Wise Young were registered in the states of Ohio (Al,III, only), Delaware and Massachusetts, and Kilpatrick, who had the benefit of legal counsel, had told them that it was legal for them to sell from their Florida offices to customers in those states. Likewise, Kilpatrick and the company's legal counsel, Tony Todd, told Al,II, Al,III, and Dorothy in late 1984 that the Government National Mortgage Association GNMA/U.S. Treasury Trust Notes and GNMA/Mortgage Backed Collateral Notes issued by Southern Bond Clearing were exempt from registration. Following Kilpatrick's instructions, they had their salesmen, including Glenn Patrick Young, Phillips and Mann, sell the securities. Despite their respective positions with G.I.C. Government Securities, Inc., and despite their representation on their U-4 Form applications to be associated persons with the firm that they were familiar with Florida's securities laws, none of the petitioners knew that those securities were unregistered securities for which there was no exemption. In March, 1985, Al,II, was in Memphis interviewing with the securities broker Turner & Sellhorn, Inc., about possible employment. At the time, although earning income well into six figures, Al,II, was dissatisfied with the way Kilpatrick was keeping him in the dark about some aspects of the companies' operations and finances. While in Memphis, Al,II, called in to his Tampa office and was told that the Department was engaged in some kind of audit. After he returned to the office, on April 4, 1985, he confronted Kilpatrick and demanded to know what the audit was about. Kilpatrick told him for the first time that violations had been committed by selling unregistered securities and selling for G.I.C. Securities Corporation, which had not been registered. Although Al,II, and Al,III, technically were members of the board of directors of G.I.C. Government Securities, Inc., there were no meetings of the board during their tenure, and Kilpatrick did not fully disclose the details of the firm's operations and finances to them. The Wises also were not made privy to the operations of related firms, such as Southern Bond Clearing. Dissatisfied with the position in which Kilpatrick had placed him and Al,III, Al,II, decided to resign despite Kilpatrick's offer of concessions and an expenses-paid trip to Europe as enticement to Al,II, stay on with the company. Al,II, resigned the next day, effective April 15, 1985. Al,III, resigned as a director on April 17, 1985. When Al,II, resigned, the other petitioners--family and friends whom Al,II, had brought to the company--began discussing plans to leave. On April 9, 1985, Gerald Lewis, as Comptroller, entered the cease and desist orders enjoining G.I.C. Securities Corporation from selling any securities while still unregistered and enjoining both G.I.C. Government Securities, Inc., and G.I.C. Securities Corporation from sales of unregistered securities. But the orders did not otherwise enjoin G.I.C. Government Securities, Inc., from conducting business. When Dorothy Wise Young inquired of a Department employee, the violations were characterized as "technical." The petitioners then decided that, to be able to have uninterrupted income, the others would stay at the company until Al,II, secured employment at Turner & Sellhorn and could hire the others on at Turner & Sellhorn. But on April 30, 1985, Kilpatrick required all employees to sign a new employment contract which provided, among other things, for 90 days notice before an employee could terminate employment. At that point, the petitioners still at the company (i.e., all but Al,II) refused to sign the new contract and resigned from employment. Up to the departure of the petitioners from Kilpatrick's companies, none of them had any reason to think that securities they sold would not be delivered in due course of time to the customers who purchased them. Securities always had been delivered properly during the term of their employment with the companies. The petitioners, like the Department's employees, were not privy to the companies' finances and had no reason to believe the companies would not, or would not be able to, deliver securities that had been purchased. It is not a customary practice in the industry for securities salesmen associated with a broker/dealer to remain responsible for insuring delivery of securities after termination of employment with the broker/dealer. To the contrary, it is customary for the salesman to rely on the broker/dealer to follow through on delivery of securities. On or about July 22, 1985, the petitioners' U-4 Form applications to be associated persons with Turner & Sellhorn, Inc., were granted, and they began employment at Turner & Sellhorn. They mailed notices to their former customers to advise the customers of their new place of employment. Later in the summer of 1985, some of the petitioners were told by former customers both that G.I.C. Government Securities, Inc., had begun selling short-term zero coupon repurchase agreements and that some former customers had not yet received possession of securities purchased from some of the petitioners on or before April 30, 1985, an extraordinary delay. After discussing these developments with Mr. Turner, the petitioners concluded that Kilpatrick's companies might be having financial difficulties and that the former customers might be at risk. The petitioners began to try to contact all of their former customers to caution them about the "zero repos" and to be sure they had received possession of their securities. This was not easy since many of the petitioners' former customers already had left for summer residences up north, some without leaving a forwarding address or telephone number. Glenn Patrick Young sent letters to the U.S. Postal Service and paid its service fee to obtain a good address or telephone number at which to contact six of his former customers If former customers the petitioners were able to contact had not yet received their securities, petitioners advised them to contact G.I.C. Government Securities, Inc., immediately and demand satisfaction--either possession of their securities or return of their investment. They further advised the customers that, if the company did not satisfy them within a week to ten days, they should contact the Department. Thanks to petitioners' efforts, several of their former customers recovered either their security or investment. For example, Al,III, was able to contact former customer Bryant on August 20, 1985, on Bryant's return to Florida and was told that Bryant still had not received the GNMA certificate he had bought on March 26, 1985. Following Al,III,'s advice, Bryant got his certificate on September 6, 1985. Glenn Patrick Young was contacted by former customer Bough about a "zero repo." He advised her not to invest and to contact the Department. Young also called former customers Neukom and Horowitz and, by his advice, helped Neukom get her $23,000 investment returned around September 25, 1985, and helped Horowitz get his $66,000 GNMA certificate on September 6, 1985, after a six month delay. David Randall Phillips helped former customers, including Mrs. Moffat, who called Phillips at his home for help in August, 1985, because she still had not received the security she had purchased in April, 1985. Phillips advised Moffat to write a letter to the Department, and she got her security within five days. Unfortunately, not all of petitioners' former customers had gotten satisfaction--either the security they had purchased or the return of their investment--by the time G.I.C. Government Securities, Inc., went bankrupt on or about October 1, 1985. Some, including Lillian Nelson and Raymond Dennis (customers of Phillips), did not listen to petitioners' advice and counsel. One couple, the Bakers of Ft. Myers, were contacted by Glenn Patrick Young but misinformed him that they had received possession of their security when in fact they had not. Others could not be contacted because petitioners were unable to get a good address or telephone number for them during the summer and early autumn, 1985. Dr. Stanley Pollock of 332 Fifth Avenue, Suite 213, McKeesport, Pennsylvania, purchased three GNMA certificates in the amount of $195,131 from Dorothy Wise Young near the end of her employment at G.I.C. Government Securities. Young tried to telephone Pollock but had a bad telephone connection. She tried to leave a message for Pollock to call her if he had not yet received his securities and, when Pollock did not call her, she assumed that he had received them. In fact, Pollock never got the message because of the bad connection. As a result, Dr. Pollock did not receive or obtain registered ownership of the securities which he had purchased. He currently has a claim pending in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates. At the direction of Richard Johnson of Tampa, Richard J. Hansen, IRA Plans Administrator, Retirement Accounts, Inc., Post Office Box 3017, Winter Park, Florida, purchased two GNMA certificates from Al,III, on behalf of Johnson in the amount of $18,470.37. Mr. Johnson did not receive the certificates. He moved to Wisconsin June through October, 1985, and gave Al,III, no forwarding address or telephone number (although Al,III, could have made contact with Mr. Johnson through Mr. Hansen.) James and Katheryn Putnal of Route 1, Box 14, Myakka City, Florida, purchased an $85,000 GNMA certificate from Glenn Patrick Young on April 12, 1985. In addition, M. Reed and Edna M. Veazey of 2141 Third Street East, Bradenton, Florida purchased a $50,000 Federal Home Loan Mortgage Corporation (FHLMC) certificate from him on February 11, 1985. Both couples moved from Florida (the Putnals from May 8 through August, 1985, and the Veazeys until October, 1985), and neither gave Young a forwarding address or telephone number. Young unsuccessfully tried to locate them through the U.S. Postal Service and then gave up. Before they left to go up north, the Putnals did receive Young's announcement that he had left G.I.C. and was starting employment with Turner & Sellhorn. But when they returned they called G.I.C., not Young, to inquire about delivery of their certificate and were told it was coming, give it time. The Veazeys also contacted G.I.C., not Young, after Young switched to Turner & Sellhorn and, in fact, bought two more GNMA certificates from G.I.C. after Young had left (although they still had not received the security they had purchased from Young on or about February 19, 1985.) Both the Putnals and the Veazeys have had to make claims in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates. While employed by G.I.C. Government Securities, William Fredrick Mann sold GNMA certificates to the following individuals in the following amounts: Louis M. Totka or Marguerite A. Totka 117 Pine Circle Drive $25,000 Lake Mary, Fl 32746 Mignon Weinstein or Philip Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 $40,000 Philip Weinstein or Mignon Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 $55,000 Although Mann was able to contact these former customers in late July or in August, 1985, and advise and counsel them how to get satisfaction (i.e., either possession of the securities they had purchased or return of their investments, for some reason the Totkas and the Weinsteins did not get satisfaction before the G.I.C. bankruptcy. Despite their association with Kilpatrick's G.I.C. companies, the petitioners have been able to maintain a good reputation for competence, honesty and trustworthiness in their business dealings. Testimony of this kind came from Mr. Turner and Mr. Sellhorn of Turner & Sellhorn, Inc., and several of petitioners' former customers--four customers of Al,II; one of Dorothy; four of Al,III; three of Glenn Patrick Young; and three of Phillips. More than being responsible for the violations in which they have participated, petitioners have been fellow victims of Kilpatrick's violations. The most serious of the violations--failure to account for and deliver securities-- occurred after the petitioners left G.I.C. and through no doing of their own.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that a final order be entered in these cases granting the applications of all of the petitioners for registration as associated persons with Certified Capital Corporation. RECOMMENDED this 29th day of April, 1987 in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 29th day of April, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-1847, 86-1848, 86-1887, 86-1888, 86-2160 and 86-2161 To comply with Section 120.59(2), Florida Statutes (1985), the following rulings are made on proposed findings of fact. Respondent's proposed findings of fact were organized and filed separately by petitioner. Petitioners' proposed findings of fact were not timely filed and do not require explicit rulings (although they have been considered, as reflected in the Findings Of Fact.) Respondent's Proposed Findings Of Fact As To Glenn Patrick Young (Case No. 86-1847). 1.-5. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To Dorothy Wise Young (Case No. 86-1848). 1.-8. Accepted and incorporated, along with additional findings. 9. Rejected as contrary to facts found that Dr. Pollock had no contact with Young; in part, subordinate; otherwise, accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To David Randall Phillips (Case No. 86-1887). 1.-5. Accepted and incorporated, along with additional findings. 6. Subordinate to facts found. Respondent's Proposed Findings Of Fact As To Albert Earl Wise, III (Case No. 86-1888). 1.-8. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To William Fredrick Mann (Case No. 86-2160). 1.-6. Accepted and incorporated, along with additional findings. Respondent's Proposed Findings Of Fact As To Albert Earl Wise (Case No. 86-2161). 1.-7. Accepted and incorporated, along with additional findings. COPIES FURNISHED: Michael J. Echevarria, Esquire ECHEVARRIA & BENCHIMOL, P.A. Suite 3016, First Florida Tower 111 East Madison Street Tampa, Fl 33602 Charles E. Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Fl 32399-0305 Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Fl 32399-0305 Charles Stutts General Counsel Plaza Level The Capitol Tallahassee, Fl 32399-0305 =================================================================
Findings Of Fact Respondent Leroy Ellsworth Hardman has been licensed by petitioner as a limited surety agent since 1974. In January of 1976, he opened an office in Sanford, Florida, under the name of Action Bail Bonds. By December of 1978, he had qualified with the clerks of court in Orange, Seminole and Volusia Counties, and had written bonds in all three counties. Respondent decided to open an office in Deland, in addition to his office in Sanford. He leased office space on December 1, 1978, and began renovation. He had arranged for an advertisement to appear in the yellow pages of the Deland telephone directory, effective December 18, 1978, but did not succeed in opening the Deland office until December 19, 1978. Respondent hired Barbara Linkel to be in the office weekdays until four o'clock in the afternoon. He himself visited the office daily. Respondent, who had a 24 hour answering service and wore an electronic pager, instructed Ms. Linkel to notify him if anybody wanted a bond written. Respondent had charge of his Deland office while continuing to have charge of his office in Sanford. On January 29, 1979, John Wolmac, a limited surety agent, registered at the courthouse and began working for respondent, taking charge of the Deland office. On January 31, 1979, respondent executed the first bond written at the Deland office. Respondent's exhibit No. 8. Records of all bonds written at the Deland office were kept on file there until that office closed on May 31, 1979, when the records were transferred to respondent's office in Sanford. At all pertinent times, respondent's records were complete and open to the public for inspection. At the time of the hearing, respondent still had records of every bond executed or countersigned by him.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner dismiss the administrative complaint against respondent. DONE and ENTERED this 8th day of October, 1979, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Thomas A. T. Taylor, Esquire Office of the Insurance Commissioner The Capitol Tallahassee, Florida 32301 James C. Weart, Esquire 201 West Firth Street Suite 206, Paulucci Building Sanford, Florida 32771
