Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole (including the admissions made by Respondent), the following Findings of Fact are made: Background Information Respondent is now, and has been since 1978, licensed by Petitioner as a general lines insurance agent. During the period of her licensure, Petitioner has not taken any disciplinary action against her. Professional Future Development Corporation (hereinafter referred to as "Professional") is an insurance agency located at 2234 Northwest 2nd Avenue in Miami, Florida. Respondent owns and works as an insurance agent for Professional. Count I Joseph Ha is the owner of Dashiwa Corporation. Dashiwa Corporation operates the Liberty Flea Market in Miami, Florida. Ha enlisted Respondent's services to obtain workers' compensation insurance for his business. 3/ In November and December of 1993, Ha provided Respondent with monies (in the form of checks made out to Professional) to be used to pay the premiums for such insurance. Respondent deposited the checks in Professional's bank account. She did not properly and promptly (in the regular course of business) remit the premium payments to the insurer. Instead, without Ha's consent, she used these monies to help pay the medical expenses of a cousin who had AIDS. As a result of Respondent's dereliction, Ha's business was without the workers' compensation insurance coverage Respondent was supposed to obtain for him. Respondent has yet to make a complete refund of the monies Ha provided her to obtain such coverage. Count II On or about December 21, 1993, Rene Hernandez, on behalf of his mother, Gloria Hernandez, provided Respondent with a down payment (in the amount of $251.00) for insurance that Respondent was to obtain for an automobile owned by Gloria Hernandez. The balance of the premium was to be financed by a premium finance company. Respondent failed to take the necessary steps (in the regular course of business) to obtain insurance for Gloria Hernandez's automobile. In March of 1994, Hernandez's automobile was involved in an accident. As of the date of the accident, Respondent had neither obtained insurance for the automobile, nor had she refunded (in the regular course of business) the monies she had been given to obtain such insurance. Following the accident, in June of 1994, Respondent finally secured coverage for Hernandez's automobile Count III On or about August 15, 1994, Jacquetta Jackson provided Respondent with a down payment for insurance that Respondent was to obtain for an automobile that Jackson owned. The application for such insurance coverage was bound on or about that same day. Respondent submitted the application (on an outdated form) to Bankers Insurance Company (as a member of the Florida Automobile Joint Underwriting Association) on or about November 14, 1994. The application was accompanied by a "sight-draft" from a premium finance company in an amount less than the gross premium that was due for the requested insurance coverage. Rule 2B of the Rules of General Practice of the Florida Automobile Joint Underwriting Association provides that premiums are to be submitted to the insurer on a gross remittance basis within one business day after the application for coverage is bound. Respondent failed to comply with the requirements of Rule 2B in her efforts to obtain automobile insurance for Jackson. By letters dated November 14, 1994, and December 20, 1994, Bankers Insurance Company notified Respondent that it had rejected the application she had submitted on behalf of Jackson because the application had been submitted on an outdated form and had not been submitted in accordance with the requirements of Rule 2B. It was not until January 18, 1995, that Respondent submitted another application to Bankers Insurance Company on behalf of Jackson. 4/ The insurance that Jackson had requested was finally obtained on February 28, 1995 (from Fortune Insurance Company by another insurance agent to whom Respondent had transferred the matter). Respondent never advised Jackson, during the period that Jackson was without coverage (from on or about August 15, 1994, to February 28, 1995), that the requested insurance had not been obtained. Count IV On or about September 26, 1994, Roderick Cole provided Respondent with a down payment for insurance that Respondent was to obtain for an automobile that Cole owned. The application for such insurance coverage was bound on or about that same day. Respondent submitted the application (on an outdated form) to Bankers Insurance Company (as a member of the Florida Automobile Joint Underwriting Association) on or about November 14, 1994. The application was accompanied by a "sight-draft" from a premium finance company in an amount less than the gross premium that was due for the requested insurance coverage. Respondent failed to comply with the requirements of Rule 2B in her efforts to obtain automobile insurance for Cole. Bankers Insurance Company subsequently notified Respondent by letter that it had rejected the application she had submitted on behalf of Cole because the application had been submitted on an outdated form and had not been submitted in accordance with the requirements of Rule 2B. It was not until January 18, 1995, that Respondent submitted another application on behalf of Cole. The insurance that Cole had requested was finally obtained on March 7, 1995 (from Fortune Insurance Company by another insurance agent to whom Respondent had transferred the matter). Respondent never advised Cole, during the period that Cole was without coverage (from on or about September 26, 1994, to March 7, 1995), that the requested insurance had not been obtained.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Petitioner enter a final order: (1) finding Respondent guilty of the violations noted in the Conclusions of Law of this Recommended Order; (2) penalizing Respondent for having committed these violations by revoking her license; and (3) dismissing the remaining allegations of misconduct advanced in the Administrative Complaint. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 5th day of December, 1996. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of December, 1996.
The Issue Whether the Petitioner application for licensure as a resident life, variable annuity and health agent should be granted or denied.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for issuing licenses "authorizing a person to be appointed to transact insurance or adjust claims for the kind, line, or class of insurance identified in the document." §§ 626.015(9) and 626.112(1)(a), Fla. Stat. Prior to December 4, 2002, Mr. Porras was licensed in Florida as an insurance agent. He was also part-owner of The Garpo Group, Inc. ("Garpo Group"), an insurance agency. On October 18, 2002, the Department (formerly the Department of Insurance) and Mr. Porras entered into a Settlement Stipulation for Consent Order ("Settlement Stipulation") as a result of an investigation by the Department that resulted in allegations of wrongdoing on the part of Mr. Porras. In the Settlement Stipulation, Mr. Porras agreed to surrender his agent's licenses to the Department. Mr. Porras did not admit in the Settlement Stipulation that he committed the acts alleged by the Department. A Consent Order was entered on December 4, 2002. The Consent Order incorporated the terms of the Settlement Stipulation and provided that the surrender of Mr. Porras's licenses "shall have the same force and effect as a revocation pursuant to Section 626.641, Florida Statutes"; that Mr. Porras "shall not engage or attempt or profess to engage in any transaction or business for which a license or appointment is required under the insurance code or directly or indirectly own, control, or be employed in any manner by any insurance agent or agency . . . ."; and that Mr. Porras "shall not have the right to apply to the Department for another license under the Insurance Code within two (2) years of the effective date of revocation." Neither the Settlement Stipulation nor the Consent Order included a deadline by which Mr. Porras was required to divest himself of his ownership interest in the Garpo Group. On April 24, 2003, a Purchase and Sale Agreement ("Agreement") was executed whereby Mr. Porras, Eduardo Garcia, Mayda Garcia, and Luis Garcia, who were identified as the principals of the Garpo Group, agreed to sell the Garpo Group to Jose Peña and Peter Rivero. The Agreement included a purchase price of $50,000.00, payable in an initial deposit of $20,000.00, with the remaining balance to be paid "in monthly installments of no less than $500.00 (Five Hundred Dollars), and no more than $2,500.00 (Two Thousand Five Hundred Dollars)." A Special Condition of the Agreement provided that Mayda Garcia, "Shareholder/Registered Agent/General Agent/Director," and Luis Garcia, "Shareholder/Director," would "remain in Corporation in their current capacity until final payment for sale of business is paid." Mr. Porras retained an interest in the monthly payments to be made by Mr. Peña and Mr. Rivero for the purchase of the business. In accordance with the terms of the Consent Order, Mr. Porras surrendered his license and did not subsequently engage in the transaction or solicitation of insurance. Mr. Porras did not exercise any control over the Garpo Group after entry of the Consent Order. Mr. Porras worked for the Garpo Group as a bookkeeper from May 2004 through October 2004.3 He was paid $175.00 per week, and his duties included reconciling the Garpo Group's bank accounts, entering deposits in the system, and cutting checks on the Garpo Group accounts.4 It can be reasonably inferred from the evidence presented by Mr. Porras regarding his understanding of the terms of the Consent Order that Mr. Porras was aware when he accepted employment with the Garpo Group that the terms of the Settlement Stipulation and of the Consent Order prohibited him from any involvement in the business of the Garpo Group, including employment "in any manner."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the Department of Financial Services enter a final order finding that Lorenzo Alejandro Porras violated the terms of a Consent Order entered by the Department of Financial Services and denying his application for licensure as a resident life, variable annuity, and health agent, pursuant to Section 626.611(13), Florida Statutes. DONE AND ENTERED this 29th day of March, 2006, in Tallahassee, Leon County, Florida. S PATRICIA M. HART Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of March, 2006.
The Issue The issue in this case is whether the Respondent, William Robert Pearson, should be disciplined for alleged statutory and rule violations for his role in several insurance transactions.
Findings Of Fact The Respondent is licensed in Florida as a life including variable annuity agent (2-14), life including variable annuity and health agent (2-15), life agent (2-16), life and health agent (2-18), and health agent (2-40), regulated by the DFS's Division of Insurance Agent and Agency Services. He was so licensed at all times pertinent to this case. He was first licensed in 1988 and has been disciplined once, in September 2002, when he was given a Letter of Guidance for misrepresenting to a Pinellas Park resident that an annuity he sold her would generate interest in excess of 6.8 percent, when the guaranteed rate was three percent for the first year. During the transactions alleged in the Amended Administrative Complaint, the Respondent also was registered with OFR's Division of Securities as a Financial Industry Regulatory Authority (FINRA) broker representative associated with Transamerica Financial Advisors, Inc. (Transamerica). On August 21, 2012, based on some of the same facts alleged in this case, OFR charged the Respondent with failing to observe high standards of commercial honor and just and equitable principles of trade because he: participated in the liquidation of variable and fixed annuities on behalf of several elderly customers referred by insurance agents not licensed as FINRA broker representatives; executed the liquidations recommended to the customers by insurance agent Richard Carter; failed to appropriately record the transactions on the books and records of Transamerica; failed to review the transactions, or have them reviewed by Transamerica, as to suitability; and provided Agent Carter with blank Transamerica letterhead to be used to facilitate the transactions. A Stipulation and Consent Agreement was entered on December 18, 2012, in which the Respondent admitted the OFR charges and agreed to never seek a license or registration as a dealer, investment advisor, or associated person under the Florida Securities and Investor Protection Act, chapter 517, Florida Statutes. A Final Order incorporating the settlement agreement was entered on January 11, 2013. (This Final Order is the basis for Count IX, which was added to the charges in this case, as well as for one of the Respondent's affirmative defenses.) Count I-–Geraldine Busing Geraldine Busing was born on December 1, 1930. She has a high school education. Her husband of 44 years died in 2001. When alive, he handled the family finances. Mrs. Busing's income is from a pension of $728 a month and social security payments of $1,090 a month. In addition, she had substantial investments in two Schwab accounts. During the market decline of 2007-2008, Mrs. Busing became dissatisfied with the performance of her Schwab accounts. An insurance agent named Richard Carter recommended that she invest in annuities, which would reduce her taxes. (In her deposition, testimony was elicited from Mrs. Busing that Agent Carter told her that the Respondent would do her taxes for free for the rest of her life. It is not likely that he made such a representation, and there is no evidence that the Respondent knew about such a representation.) Mrs. Busing followed Agent Carter's recommendation. Agent Carter did not have a FINRA license and approached the Respondent, who worked for Transamerica, to facilitate the liquidation of Mrs. Busing's Schwab accounts, so she could follow Agent Carter's recommendations. The Respondent agreed. The Petitioner alleged that the Respondent provided blank Transamerica forms to Agent Carter and that Agent Carter "shuffled" the forms together with an EquiTrust Life Insurance Company (EquiTrust) annuity application and suitability forms and requested Mrs. Busing's signatures (although, it is alleged, one or more of the signatures on the Transamerica forms were not hers.) It is alleged that, unbeknownst to Mrs. Busing, Agent Carter gave the Respondent these forms, as well as a copy of her Schwab account statements, so he could liquidate her accounts, which totaled $627,000 at the time, "dump" the proceeds into a Transamerica account, and then "funnel" the liquidated assets into two EquiTrust annuities. It is alleged that Mrs. Busing became aware of these transactions in September 2010 after discussions with her accountant. Mrs. Busing testified that she has never met the Respondent and does not know him. She testified that she gave all of her Schwab account information to Agent Carter and did not expect him to share it with the Respondent. She testified that Agent Carter had her hurriedly sign a stack of papers without giving her a chance to review them. She said she was surprised when her stock broker, Barry Tallman, called to tell her that her Schwab accounts had been liquidated and used to open a Transamerica account. She denied ever receiving or signing the Schwab bank check dated July 7, 2010, used to open the Transamerica accounts; denied ever providing the Respondent and Transamerica with information for her customer account information (CAI) form used to open the Transamerica accounts; and denied that several of the Geraldine Busing signatures on the Transamerica documents used for the transactions were her signatures. She admitted to signing a Transamerica check dated August 13, 2010, which was used to purchase the EquiTrust policies. The Respondent testified that he telephoned Mrs. Busing at Agent Carter's request. He testified that she told him she wanted to implement Agent Carter's recommendation to liquidate the Schwab accounts and purchase annuities. He testified that he told her his services were not required because her current broker (Mr. Tallman) could handle it for her, unless she just wanted to avoid confronting her current broker. He said she wanted the Respondent to handle it, and he replied essentially that he would do whatever she and Agent Carter wanted him to do for her. The Respondent testified that he then mailed Mrs. Busing forms she had to fill out, sign, and return to him. He testified that he talked to her briefly by telephone about 15 to 20 times to answer questions she had about the forms. When she told him she received a Schwab check in the amount of about $150,000 and asked if she should mail it to him, he cautioned her that it would be better not to mail it and offered to drive to her house to get the check, which he did and returned immediately to Transamerica to open a Transamerica account with it. He testified that the Transamerica funds were used to purchase EquiTrust annuities at the direction of Agent Carter and Mrs. Busing. The evidence was not clear and convincing that Mrs. Busing's version of the facts is true and that the Respondent's version is untrue. To the contrary, Mrs. Busing's memory did not seem to be very good, and she seemed confused during her testimony. The evidence was not clear and convincing that the Respondent made any investment or insurance recommendations or misrepresentations to Mrs. Busing. The Petitioner's own witnesses (DFS and OFR investigators, Karen Ortega and Mercedes Bujans) testified that the Respondent never acted as Mrs. Busing's insurance agent. It was not proven by clear and convincing evidence that Mrs. Busing incurred tax and commission charges as a result of her Schwab account being liquidated, other than Transamerica's standard "ticket charge" for the transactions, which the Respondent admitted. There was no evidence that the Respondent received any remuneration on the EquiTrust annuity sales. Those commissions went to Agent Carter. The Petitioner contended in its proposed recommended order that the Respondent listed Mrs. Busing's annual income to be between $25,000 and $50,000, her investment objective as growth and income, and her investment time horizon as long-term. (Busing Deposition Exhibit 87). There was no testimony to put the exhibit in context or explain it. On its face, Busing deposition Exhibit 87 was a request from Transamerica to the client to confirm certain information. The form had the Respondent's name printed on it, but it was not signed by either the Respondent or Mrs. Busing, and the evidence did not prove who completed the form. (The CAI form contained similar information and had both their signatures.) The Petitioner contends that the information on the confirmation request was "absurd," because it listed Mrs. Busing's annual income as between $25,000 and $50,000, when her taxable income was $11,108 for 2009 and $8,251 for 2010. There was evidence that her total annual income was about $48,000 for 2007, $32,600 for 2008, $22,358 for 2009, and $19,001 for 2010, with the decline due to the decline in the stock market. The evidence was not clear and convincing that the income information on that form or the CAI form was absurd. The investment objective and investment time horizon on the forms were questionable, but the evidence was not clear and convincing that these were misrepresentations by the Respondent. The Transamerica account was a Pershing money market account used to facilitate the purchase of annuities. The evidence was that a separate suitability analysis would be required by the insurance company offering the annuity. The evidence was not clear that the information in the forms signed by the Respondent was used for the purchase of EquiTrust annuities on behalf of Mrs. Busing. Those purchases were recommended and executed by Agent Carter. The evidence was not clear and convincing that switching Mrs. Busing's investments from Schwab to EquiTrust annuities was not suitable for Mrs. Busing or in her best interest. No expert witness testified to that effect. Counts II through IV–-The Kesishes In 2010, William Kesish and his wife, Josefa, owned several annuities. Mr. Kesish had managed their business affairs before he developed Parkinson's disease and dementia in his old age. After that, Mrs. Kesish cared for him and took over the family's finances by default. Mr. Kesish died on November 26, 2010. Mrs. Kesish was born in Spain in 1937. English is her second language. In 2010, she had difficulty conversing and reading in English and was unable to write in English. After her husband became mentally disabled, she used their bank account to provide for their needs, but she had no investment acumen beyond knowing generally that it was better to make more money from their investments than to make less or to lose money. She was recovering from cancer treatment in 2010 and was physically frail. On May 25, 2010, Paula Rego, a professional guardian, met with an attorney who believed the Kesishes were being exploited and in need of a guardian. Ms. Rego reviewed documentation provided by the attorney and, in June 2010, agreed to Mrs. Kesish's voluntary request to become the guardian of the Kesishes' property. On July 8, 2010, Ms. Rego became aware of the Respondent's involvement in the Kesishes' financial business. She telephoned the Respondent to explain her guardianship role and faxed him on July 15, 2010, to direct him to cancel any investment transactions that were underway. The Petitioner presented the testimony of Ms. Rego to explain her review of the documentation she collected in her research to attempt to piece together the financial transactions involving the Kesishes. She also testified as to the surrender charges and, to some extent, the tax liabilities that resulted from them. She also related statements made by Mrs. Kesish to her and, to some extent, to the DFS and OFR investigators, Karen Ortega and Mercedes Bujans, who also related some of the statements Mrs. Kesish made to them. The Petitioner also introduced an affidavit prepared by Ms. Ortega and signed by Mrs. Kesish on March 31, 2011. All of Mrs. Kesish's statements were hearsay. The hearsay cannot itself support a finding of fact.3/ In general, the hearsay demonstrated that Mrs. Kesish did not have a clear recollection of her interactions with the Respondent at the time of her statements. Agent Carter introduced the Respondent to Mrs. Kesish in March 2010. The Petitioner alleged essentially that Agent Carter schemed and collaborated with the Respondent to exploit the Kesishes by tricking them into financial and insurance transactions that would not be in their best interest, but would generate commissions and fees for them. It was alleged that, as with Mrs. Busing, the Respondent's FINRA licensure was required to buy and sell securities in furtherance of the scheme. The Respondent testified that Agent Carter told him about his clients, the Kesishes, and that he went to meet Mrs. Kesish in person because he had difficulty communicating with her over the telephone due to her hard-to-understand Spanish accent and limited proficiency in spoken English. He testified that she told him she wanted to get out of the stock market and was unhappy with her current stockbroker, Doreen Scott. (That part of the Respondent's testimony was corroborated by Ms. Rego, who concurred that Mrs. Kesish did not like dealing with Ms. Scott because she talked down to her.) The Respondent testified that he went to Mrs. Kesish's house, asked if he could be of assistance to her, and discussed her financial situation with her. He testified that he then returned to his Transamerica office and mailed forms for her to fill out and sign.4/ Similar to his dealings with Mrs. Busing, the Respondent testified that he spoke to Mrs. Kesish several times by telephone to answer questions about the forms. It is reasonable to infer that the Respondent knew Agent Carter would be helping her. The Respondent testified that when the completed forms were returned to him by mail, he telephoned Mrs. Kesish to verify the information on the forms and, in some cases, get information that was omitted to add it to the forms. The Petitioner attempted to prove that the Respondent knew or should have known Mrs. Kesish was mentally disabled and incapable of voluntarily instructing the Respondent to effectuate financial transactions on her behalf. Mrs. Kesish lacked knowledge in investing and was susceptible to being misled and exploited, but it was not proven that Mrs. Kesish was mentally incapacitated or unable to consent to Agent Carter's recommendations or instruct the Respondent. Ms. Rego herself did not find it necessary to initiate involuntary proceedings to establish a plenary guardianship of Mrs. Kesish's person and property until October 2013. (Count II) One of the Kesishes' investments was a Genworth Life and Annuity Insurance Company (Genworth) variable annuity (G-58), which they bought on October 31, 2008, for $86,084.89. It was designed to begin paying monthly income on October 31, 2022. It provided a waiver of surrender charges if either Kesish was hospitalized, admitted to a nursing facility, or died. As of March 31, 2010, G-58 had a contract value of $102,954.90. Mrs. Kesish signed a form on letterhead of the Respondent and Transamerica that expressed her desire for the Respondent to be their insurance agent on G-58. On May 27, 2010, the Respondent used an automated account transfer (ACAT) to liquidate G-58 and transfer the funds to a Transamerica brokerage account he opened for the Kesishes on the same date. The Respondent did not independently determine whether the liquidation was suitable or in the Kesishes' best interest. He relied on Agent Carter to do this. The Respondent and the Kesishes signed the CAI form to open the brokerage account. The surrender of G-58 took effect on June 14, 2010. As a result of the liquidation, the Kesishes were assessed a surrender charge of $4,576.91 and federal tax was withheld, and the net proceeds from the liquidation were $90,314.19. On June 29, 2010, the funds in Mrs. Kesish's Transamerica account were added to an EquiTrust policy Agent Carter had sold her (E-92F). The Respondent testified that this was done at the direction of Agent Carter and Mrs. Kesish. The Respondent did not act as the Kesishes' EquiTrust agent and received no commissions. The Petitioner alleged and proposed a finding that the liquidation of G-58 allowed Agent Carter to represent to EquiTrust that the Kesishes had no other annuities and that the addition to E-92F was not replacing another annuity, which allowed Agent Carter to avoid having Genworth attempt to "conserve" G-58 (i.e., question the Kesishes as to whether they wanted to reverse the liquidation within the grace period for doing so). The evidence cited in support of the allegation and proposed finding is documentation of the initial purchase of E-92F in April 2010, not the addition in June 2010. There was no clear and convincing evidence that actions taken by the Respondent resulted in Agent Carter circumventing the replacement notice requirement, or that the Respondent should be held responsible for what Agent Carter did or did not do regarding the EquiTrust annuity. According to the Respondent, he made no investment recommendations to Mrs. Kesish, and all such recommendations were made by Agent Carter. He testified that he only took action in accordance with the wishes of Mrs. Kesish, who was being advised by Agent Carter. He denied that his purpose was to generate commissions or fees for himself or for Agent Carter, or to enable Agent Carter to conceal the replacement of the Genworth annuity. It was not proven by clear and convincing evidence that the Respondent's testimony was false. The Petitioner's proposed recommended order cites the testimony of Tarek Richey regarding his concerns about the Respondent's use of an ACAT to liquidate annuities, transfer of the proceeds to Pershing accounts at Transamerica, and use of those funds to purchase other annuities. Mr. Richey is a FINRA- licensed securities broker at Questar Capital Corporation, who employed and supervised the Respondent for about a month in early 2011, after he left Transamerica in December 2010. While supervising the Respondent, Mr. Richey was advised of OFR's investigation of the Respondent and reviewed the Respondent's documentation on the subject of OFR's investigation. One of Mr. Richey's concerns from his review of the Respondent's documentation was the use of ACAT, which would not guarantee that the client is aware of resulting surrender charges and tax consequences. He also was concerned that ACAT could have been used to bypass and avoid the use of forms required to analyze the suitability of annuities purchased for the Kesishes (and other clients). While he expressed these concerns, Mr. Richey had no personal knowledge and did not testify that the Kesishes (or the other clients) actually were unaware of surrender charges and tax consequences, or that liquidation was not suitable or in their best interest. Another of Mr. Richey's concerns was that the use of ACAT could result in the replacement of annuities without completing the required forms that would provide notice to the insurance company that its annuity was in the process of being replaced and give it an opportunity to conserve its annuity. Mr. Richey did not know that the use of ACAT actually resulted in the bypass of the replacement policy notice requirements for the Kesishes and other clients. He also did not testify that the Respondent should be held responsible for what Agent Carter did or did not do regarding replacement notices. Ms. Rego testified (based in part on discussions with a financial planner who did not testify) that she did not think the Genworth and EquiTrust transactions were not in the best interest of the Kesishes, mainly because of the Genworth surrender charge and tax consequences. There was no other expert testimony on the subject, and the evidence was not clear and convincing that those transactions were unsuitable or not in their best interest. (Count III) The Kesishes owned a Riversource Life Insurance Company (Riversource) annuity (R-30) that they bought on October 5, 2006. The contract had declining withdrawal charge rates that held at eight percent for the first four years. It had a death benefit rider. On March 23, 2010, a letter on the Respondent's Transamerica letterhead, written in English and signed by Mrs. Kesish, directed Riversource to list the Respondent as the Kesishes' financial advisor. On April 23, 2010, Mrs. Kesish signed a form directing Riversource to liquidate R-30. She also signed a form saying she knew there would be surrender charges. On April 26, 2010, Riversource sent the Kesishes a check for $26,430.07 (which was net after $2,454.30 in surrender charges). The testimony from Ms. Rego as to whether the liquidation of the Riversource annuity was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements, was similar to her testimony with respect to the Genworth liquidation. There was no other expert or other clear and convincing evidence. (Count IV) The Kesishes also had Great American Life Insurance Company (Great American) annuities in the amounts of approximately $560,854 (GA-25) and $28,785 (GA-00), which were purchased in January 2010. GA-25 was owned by the Kesishes' trust, with Mrs. Kesish as trustee; GA-00 was owned by Mr. Kesish. By June 4, 2010, they had contract values of $580,854.71 and $29,970.46, respectively. On June 18, 2010, Agent Carter took Mrs. Kesish to lunch. A letter dated June 18, 2010, signed by Mrs. Kesish for her and her husband, written in English on the Respondent's Transamerica letterhead, directed the transfer of GA-25 to a Transamerica Pershing account (TA-25). An ACAT form dated June 20, 2010, signed by Mrs. Kesish and the Respondent, directed the liquidation of Mr. Kesish's GA-00 and the transfer of the proceeds to the Kesishes' Transamerica Pershing account. This transaction took effect on July 7, 2010.5/ After becoming involved through Attorney Hook, Ms. Rego had numerous discussions with Mrs. Kesish and with Agent Carter regarding the Kesishes' investments. Agent Carter attempted to explain and justify his actions to Ms. Rego and blame other insurance agents who he claimed had essentially stolen his clients by tricking them into replacing Allianz Life Insurance Company of North America (Allianz) annuities sold to them by him with GA-25 and GA-00. Ms. Rego's research notes evidence her understanding that the Great American sales to the Kesishes were unsuitable. During Ms. Rego's discussions and research throughout June 2010, the Respondent's name did not come up, and Ms. Rego was unaware of the Respondent having anything to do with the Kesishes. When she learned about the Respondent's role on July 8, 2010, she attempted to contact him. On July 15, 2010, she faxed the Respondent to instruct him to stop acting on behalf of the Kesishes. There is no clear and convincing evidence that the Respondent did not follow Ms. Rego's instructions.6/ On July 17, 2010, Great American sent Mr. Kesish a conservation letter urging him not to surrender GA-00. Ms. Rego then contacted Great American and had the surrender of GA-25 and GA-00 stopped. Had the transactions not been stopped, the Kesishes $60,000 in surrender charges would have been imposed. There was no other expert testimony or other clear and convincing evidence that the liquidation of the Great American annuities was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts V through VI–-Edith Paz Edith Paz was born on January 20, 1926, and lives in Sun City Center. She has a high school diploma and held various jobs, from retailing to making plates in a dental office. Mrs. Paz married a GI returning from World War II. Her husband was successful in business before his retirement. Meanwhile, Mrs. Paz founded a successful real estate business and invested in the stock market. Mr. Paz died in 1999. In 2001, Mrs. Paz created a revocable trust with herself as trustee. When Mrs. Paz retired, she moved to Sun City Center. She did some investing, but was dissatisfied with her investments and her financial representative at the time. About that time, she met Glenn Cummings, an insurance agent who was a less experienced associate of Agent Carter and also not FINRA- licensed. After several conversations, Agent Cummings gained her trust and advised her to liquidate and consolidate her assets before deciding what other financial products to purchase. He referred her to the Respondent for that purpose. Agent Cummings and Mrs. Paz testified that he referred Mrs. Paz to the Respondent on the advice of Agent Carter to save "exit fees" on liquidating her investments. The evidence was not clear as to how the Respondent would be able to do this. The Respondent testified to his understanding that Mrs. Paz wanted to get out of the stock market and switch to more stable investments and that she had a bad relationship with her stockbroker. The Respondent's testimony is consistent with Mrs. Paz's actual losses in the stock market and her testimony that she listened to and followed the advice of Agent Cummings because she was dissatisfied with her prior financial advisor, a Mr. Shrago. Mrs. Paz testified that she spoke to the Respondent just once, briefly. That conflicts with the testimony of the Respondent and Agent Cummings. Their testimony was that there were several telephone conversations after the initial contact. They related that the Respondent mailed Mrs. Paz the forms that needed to be filled out, that Agent Cummings was with Mrs. Paz when she filled out the forms, and that both spoke to the Respondent several times during the process. According to Agent Cummings, this happened on July 29, 2010, when he visited Mrs. Paz to show her illustrations regarding the annuities he was recommending. While there, he helped her complete the forms the Respondent had sent to have her investments liquidated and consolidated into a Transamerica Pershing account. There also was conflict in the testimony as to whether anyone explained investment options and consequences to Mrs. Paz. She testified that no one gave her any explanation. Agent Cummings testified that he explained everything in detail to Mrs. Paz and that she also talked to the insurance agents who represented the companies whose annuities she would be surrendering. He testified that Mrs. Paz knew exactly what she was doing. The Respondent testified that he had no involvement in those explanations. He testified that he simply made sure he understood what Mrs. Paz wanted him to do for her. (Count V) In May 2007, Mrs. Paz purchased a Jackson National Life Insurance Company (Jackson National or JNL) annuity (JNL-42A) on the advice of Mr. Shrago. The initial premium was $100,000, and it was issued with a five-percent bonus. As of May 25, 2007, it had an account balance of $105,017.01 and was receiving an annual rate of return of 7.75 percent. On July 12, 2010, Mrs. Paz signed a letter directing Jackson National to make the Respondent, who held an appointment to represent Jackson National, her agent-of-record on JNL-42A. The change took effect on July 15, 2010. On July 29, 2010, Jackson National faxed the Respondent a statement of account for JNL-42A, listing the balance as $108,253.48 (which reflected a prior withdrawal of $2,500 by Mrs. Paz). The statement disclosed the surrender charges in effect. After her discussions with Agent Cummings, Mrs. Paz signed forms requesting that JNL-42A be liquidated and the proceeds rolled over into a Great American Life Insurance Company (Great American or GA) annuity (GA-61). The Respondent facilitated the rollover. As a result of the rollover, Mrs. Paz incurred surrender charges of $4,871.41 and a partial recapture of the initial bonus in the amount of $2,706.34, for a total loss of $7,577.75. The Petitioner alleged, and Mrs. Paz testified, that the Respondent never discussed with her that there would be surrender charges. The Respondent did not disagree, but explained that he understood Agent Cummings already had done so and that he just made sure he was following Mrs. Paz's wishes. Concurring, Agent Cummings testified that he did explain the surrender charges to Mrs. Paz. The Petitioner alleged that the Respondent's actions "insulated M[r]s. P[az] from comparative financial counseling by her then current Jackson National insurance agent Gary Mahan." This was not proven by clear and convincing evidence. To the contrary, there was evidence that it was Mrs. Paz's choice to change agents, that Mr. Mahan knew about the change, and that he had no objection to the Respondent taking over for him as agent of record on the policy. The Petitioner also alleged that the Respondent "provided [Agent Cummings] with the Transamerica brokerage application, transfer forms and letter of instructions to transfer JNL 42A" to the Respondent as account representative. It was not proven that these documents were not mailed to Mrs. Paz in accordance with the Respondent's testimony. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Jackson National annuity and purchase of a Great American annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Mrs. Paz testified that Agent Cummings initially told her she would have to pay the Respondent $1,500 as a fee for his services with respect to JNL-42a and later told her the fee would be $2,600. Agent Cummings testified that the Respondent told her what his fee would be during the telephone conversation on July 29, 2010. Regardless who told Mrs. Paz what the Respondent's fee would be, or what she was told it would be, Mrs. Paz made out a $2,607.28 check to Agent Cummings' company, Big Financial, on July 29, 2010. On August 2, 2010, Big Financial gave the Respondent a check made out to the Respondent for $2,530, with the notation "Paz." (It is not clear from the evidence why the Big Financial check was made out for $2,530. When the DFS investigator questioned the discrepancy, Agent Cummings reimbursed Mrs. Paz $77.28.) The Respondent deposited the check the next day. The Allianz compliance guide prohibited agents from charging an additional fee for services that customarily are associated with insurance products. The Great American compliance guide prohibited fraudulent acts. By accepting the check from Big Financial, the Respondent received a fee from Mrs. Paz that was not authorized. (Count VI) Prior to meeting Agent Cummings or the Respondent, Mrs. Paz had investment accounts with Wedbush (WB-37) and Wells Fargo. There were two Wells Fargo accounts, an IRA (WF-15), and a trust account (WF-70). As of June 30, 2010, the Wedbush account (WB-37) had a balance of $349,438.11. The Wells Fargo IRA account (WF-15) had a net value of $51,737.11 prior to June 30, 2010. The Wells Fargo trust account (WF-70) had a balance of $332,798.76 prior to June 2010. The Respondent and Mrs. Paz communicated in the same manner they did for the Jackson National transaction. Mrs. Paz signed forms that enabled the Respondent to transfer the funds in the Wedbush and Wells Fargo accounts into two Transamerica brokerage accounts (TA-02) and (TA-86) using ACAT. Some of the forms referred to the Respondent as Mrs. Paz's "investment professional," but the sole purpose of the Respondent's involvement was to use Transamerica as a funnel to transfer funds from one investment to another. By August 11, 2010, the funds in the TA-02 account were used to purchase an Allianz annuity sold by Agent Cummings in the amount of $335,589.65. The funds in the TA-86 account were used to purchase a Great American annuity (GA-60) sold by Agent Cummings in the amount of $45,769.38. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Wedbush and Wells Fargo accounts and purchase of an Allianz annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts VII and VIII-–The Penwardens Wayne Penwarden was born on December 4, 1943. His wife, Sandra, was born on October 10, 1939. They inherited some money and decided to invest it. As of August 31, 2009, they had Morgan Stanley investment accounts that totaled close to half a million dollars. They also had an annuity with ING USA Annuity and Life Insurance Company (ING) purchased for $150,000 on April 24, 2008. Agent Carter became acquainted with the Penwardens and introduced them to the Respondent. The Amended Administrative Complaint alleged that the Respondent provided required forms to Agent Carter for him to get the Penwardens signatures and, then, used funds from their Transamerica accounts to fund the purchase of Allianz annuities, which was deceitful and against the wishes of the Penwardens. The Petitioner's proposed recommended order proposed no such findings, and there was no clear and convincing evidence that the Respondent was guilty of those acts, that he said or did anything to deceive or mislead or withhold information from them, or took any action regarding them without their full knowledge and consent. (Count VII) On September 30, 2009, the Penwardens signed a change of agent request to make the Respondent their new ING insurance agent. They also signed CAI forms to open Transamerica brokerage accounts and transfer the funds from the Morgan Stanley investment accounts into them, using ACAT. The funds in the Transamerica accounts were then used to purchase Allianz's indexed annuities sold to the Penwardens by Agent Carter. On September 23 and October 16, 2009, the Penwardens purchased two Allianz MasterDex X annuities (MD-47) and (MD-24), respectively, with initial premium payments of $141,269.40 for MD-47 and $373,979.59, plus a premium bonus of $37,397.96, for MD-24. On June 17, 2010, acting on instructions from Agent Carter on behalf of the Penwardens, the Respondent liquidated the ING annuity. On June 30, 2010, the Penwardens added the $115,281.47 proceeds from the liquidation of the ING annuity to MD-47. The Petitioner proposed a finding that the surrender of the ING annuity cost $6,000 in surrender charges, which is true. The Petitioner omits from its proposed finding that the Penwardens received a premium bonus on the Allianz policy that more than offset the ING surrender charge. There was no expert testimony or other clear and convincing evidence that the liquidation of the Penwardens' Morgan Stanley accounts and ING annuity and purchase of Allianz annuities was contrary to their best interests, unsuitable, or in violation of suitability form or replacement notice requirements. (Count VIII) The Penwardens became dissatisfied with Agent Carter, and on November 9, 2010, signed a letter drafted by the Respondent on Transamerica letterhead to substitute him for Agent Carter as their sole financial advisor. On November 12, 2010, the Respondent was notified by Allianz that he would receive no commissions as servicing agent on policies sold to the Penwardens by another agent. On or about November 22, 2010, $37,408.54 was transferred from the Allianz MD-47 annuity into a new Nationwide Life and Annuity Insurance Company (Nationwide or NW) annuity (NW-08). The Respondent also effected a partial Internal Revenue Code, section 1035, exchange from the MD-47 annuity to a new annuity purchased from Nationwide (NW-09) for $23,746.19. On November 7, 2011, the Respondent faxed a request to transfer funds from the MD-24 annuity to fund a North American Company for Life and Health Insurance (North American or NA) annuity (NA-68). The Petitioner proposed a finding that the Respondent undertook these transactions on November 22, 2010, and on November 7, 2011, in order to benefit himself alone by generating commissions to replace the servicing agent commissions he was not getting on the Allianz policies. This was not proven by clear and convincing evidence. To the contrary, the Respondent explained that the transactions were done for the Penwardens' benefit after discussions regarding the benefits of diversifying out of the Allianz annuity into other annuities, which was accomplished cost-free. There was no clear and convincing evidence that these transactions were contrary to the Penwardens' best financial interest or that they were done solely to benefit the Respondent. There was no expert testimony or other clear and convincing evidence that the partial transfers from the Penwardens' Allianz annuities to other Nationwide and North American annuities were contrary to their best interest, unsuitable, or in violation of suitability form or replacement notice requirements. In early December 2011, Mr. Penwarden replaced the Respondent with another insurance agent. The Petitioner alleged that the Respondent went to the Penwardens home to harangue them for two hours about their decision to switch agents. The only evidence on this allegation was the deposition testimony of Mr. Penwarden and the testimony of the Respondent. Mr. Penwarden's testimony as to what occurred was vague. The Respondent agreed that he was disappointed that the Penwardens were switching agents, but testified that he went to the home to retrieve the policies he sold to the Penwardens, which would have to be returned to the insurance companies to cancel at no cost during the "free-look" period. He testified that he waited for an hour or more while Mr. Penwarden tried to find the policies in his home. The evidence was not clear and convincing, and the Petitioner did not propose a finding as to this allegation. Count IX and Related Affirmative Defenses Count IX is based on the Final Order entered in OFR's securities case against the Respondent as an additional ground for discipline under section 626.621(13), Florida Statutes. The Respondent cites it in his affirmative defenses of res judicata and collateral estoppel on Counts I through VIII. See Finding 2, supra. The Respondent also argues that the additional charge is barred by the ex post facto clause of the Florida constitution and due process clauses of the United States and Florida constitutions. As to the due process argument, the Respondent admitted the OFR Final Order in his answer to the original charges. He also had ample opportunity to demonstrate prejudice from the added charge, which he could not, and to present legal arguments, which he did. As to ex post facto, section 626.621(13) was added to the Florida Statutes, effective June 1, 2011. See Ch. 175, §§ 47 and 53, Laws of Fla. (2010). That was before the Respondent entered into the Stipulation and Consent Agreement that formed the basis for the OFR Final Order. Disciplinary guidelines for section 626.621(13) were added to the Florida Administrative Code on March 24, 2014. Fla. Admin. Code R. 69B-231.090(13). As to the collateral estoppel defense, the Respondent testified that he entered into the settlement with OFR because he was under heightened supervision by his employer due to securities violations, and he did not think any employer wanted to provide the required supervision (which he referred to as "baby-sitting.") The Respondent did not testify that he relied on the OFR Final Order to bar charges by DFS or that he believed the OFR Final Order would bar DFS charges.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Agent and Agency Services, enter a final order finding the Respondent guilty of violating section 626.611(7) and rule 69B-215.210 under Count V, and section 626.621(13) under Count IX, dismissing the other charges, and suspending the Respondent's insurance licenses for 12 months. DONE AND ENTERED this 15th day of October, 2014, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 2014.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times relevant to this proceeding, Respondent, Barrett Chambers Miller, was licensed as an agent with Independent Life and Accident Insurance Company in the State of Florida. On March 11, 1981, Respondent signed a Combination Agent's Contract Form 1-7759 with the Independent Life and Accident Insurance Company. Part I, Article 2, of the contract requires the agent to "pay over all monies collected to the manager of the district" or to his representative and forbids the agent to retain any monies collected for any purpose. Part I, Article 1, of the contract requires the agent to "keep true records of the business on the books [and] to forward to the company on company forms a true account each week of his business. Among the "company forms" routinely used by agents in the conduct of their business are: (1) the Premium Receipt Book, (2) the Collection Book, (3) the Ordinary Remittance Report, (4) the Field Accounting Route List, and (5) the Balance Due Account Deficiency Sheet. The Premium Receipt Book is used to record the premium paid by the policyholder; is annotated whenever a premium is paid; and bears the premium paid, the date paid, and the signature or initials of the agent receiving the payment. The Collection Book page bears the name and address of the premium payer, the policy number(s), the type of plan, some statistics as to the insured, the death benefit, and the date on which the premium is paid each month. The Ordinary Remittance Report carries, as to each policy on the agent's debit (list of policyholders to be serviced), an account of the periodic premium collections recorded during the week covered by the report. The Field Accounting Route List is used by the agent to indicate weekly collections on weekly premium payments, and the Balance Due Account Deficiency Sheet is used to charge back deficiencies to the agent's account that are found in his collections turned in weekly. Count I: On May 26, 1981, Annie McKibben, owner of Policies A 39189 on the life of Carol L. Cox, A 39190 on the life of Ronny Cox, Jr., and A 39191 on the life of Stacey Cox, paid to the Respondent by check payable to Independent Life the amount of $13.96, total premium for the three policies listed. The premium card for that policy reflects an altered payment of $13.98 with the signature "B. C. Miller" for the May 1981 payment on the 26th of that month. The Collection Book page reflects collection on May 26, 1981. The Ordinary Remittance Report for the week of May 25, 1981, shows collection of $13.96. There is no Field Accounting Route List in evidence for this account, but the Balance Due Account Deficiency Sheet for the week of August 17, 1981, reflects deficiencies for money not turned in for all three policies for the collections made thereon on May 26, 1981. The check with which Mrs. McKibben paid the premiums in question was subsequently deposited to the account of Independent Life at the Florida First National Bank of Jacksonville. Respondent denies any wrongful withholding on this account. Count II: On some date in June, 1981, Wilma L. Robinson, owner of Policies B 03628 and A 67660, both in her name, wrote Check No. 348 on the Flagship Bank of Jacksonville in the amount of $48.68, payable to Independent Life Insurance and reflecting the notation "Ins. June." Someone, she is not sure who, gave that check to a representative of the company. Her payment book reflects a payment of $23.03 received by B. C. Miller on June 16, 1981. The Collection Book reflects collection on June 16, 1981. The Remittance Report reflects collection on June 16, 1981. The Deficiency Account Sheet, however, reflects a deficiency for money not turned in in the total amount of $23.03. Mrs. Robinson is not sure to whom her check was given. She was sick during that period, and it may be that her husband actually delivered the check; and in early 1981, she began mailing her payment checks in. However, to the best of her knowledge, she had never seen Respondent until he came to her home on January 4, 1983. Count III: In June, 1981, Mrs. Evelyn Reynolds had four policies with Independent Life: 017872 on Debbie Spivey, A0037496 on Angela Reynolds, A0010351 on Sherry D. Reynolds, and A14776 on Robert Reynolds. Though she cannot identify to whom she made her payment that month, her routine practice was to make the payment monthly, sometimes by check and sometimes by cash. On some occasions, Respondent and a Mr. McGroarty from the company both came to get her payment. On some occasions, she left the payment with her mother and does not know to whom it was made. Mrs. Reynolds' payment book shows a payment of $24.02 made on June 9, 1981, with the initials "BCM" reflected in the block for the signature of the agent. The Collection Book page shows collection on June 9, 1981; and the Remittance Report does as well, but the Deficiency Sheet shows a deficiency of $24.02 for monies not turned in but collected that date. Mr. Miller unequivocally denies the initials in the payment book were put there by him, nor was any entry on the Collection Book page relating to this account put there by him. Count IV: Mrs. Evie Bennett does not recognize the Respondent. She has only seen him once before in her life, on New Year's Day, 1983, when he came to her house. She did not meet with him on August 4, 1981, and did not make any payments to him. Her payment book for Policy No. B0000499 in her name reflects a premium payment in the amount of $9.51 made on August 4, 1981; and the entry in the block for the signature of the agent reads "Receipt Miller." The Collection Book page for this account reflects a collection on August 4, 1981, of $9.51. Other pertinent documents reflect a deficiency by reason of monies not turned in of $9.51 for this collection. Mr. Miller denies the entries in both the Payment Receipt Book and the Field Report were made by him. Mr. Edward Cooper owned Policies 05 18285A on Edward Thomas; and 0536115A and 0536115B, both on Mary Cooper. He normally paid his premiums by check once a month to whatever agent came to collect. He does not know to whom he made the payment on July 7, 1981, nor does he know whether he paid on that day by check or cash, notwithstanding his written statement on November 24, 1981, witnessed by Mr. Pat McGroarty, indicates he paid the payments on his Premium Receipt Book to the Respondent. The payment card for these policies reflects that on July 7, 1981, an individual who used the signature "B. C. Miller" received payment of $20.80, representing premiums of $4.16 for each of five weeks including June 29, 1981; July 6, 1981; July 13, 1981; July 20, 1981; and July 27, 1981. The Field Accounting Route List for this Respondent in the period in question reflects a remittance of $16.64 with a shortage of $4.61, which shortage is also reflected on the deficiency page. Mr. Miller admits the signature on the payment card is his, but contends the card was altered. Mr. Kerry Fossett is a field auditor for Independent Life Insurance Company and in November, 1981, was requested to conduct an audit of Respondent's agency. As a part of the audit, he checked policyholders' receipt books and compared them to the agent's account. His audit showed discrepancies on 19 premium receipt cards for a total shortage of $141.75, of which amount the sum of $100.98 occurred when Respondent had the agency. The remainder of the shortage occurred either before or after Mr. Miller was in the job. During the course of the audit, Mr. Fossett found at least one instance where Mr. McGroarty made a collection on Mr. Miller's account and failed to turn it in. In the opinion of the auditor, the shortages in the account of $30 before Mr. Miller took over, when it was handled by Mr. McGroarty, were theft. Mr. McGroarty was discharged from employment with Independent Life and Accident Insurance Company approximately one week after the audit was completed. Mr. Baucom, assistant vice president of the company and custodian of the personnel records, indicated the audit done on Respondent's records revealed a shortage of $361.50. This was subsequently adjusted to $126.18 as a result of the company withholding commissions due Respondent. On February 4, 1983, Mr. Baucom wrote to the Department of Insurance, State of Florida, requesting to withdraw a charge of deficiency against Respondent previously submitted on December 7, 1981, on the basis that the company was not satisfied with the documentation of the alleged deficiency. Thereafter, on April 5, 1982, he again wrote the Department of Insurance reinstating the charge based upon subsequent receipt of "satisfactory documentation" and Mr. Miller's "attitude." Gracie Williams, a policyholder with Independent Life, experienced somewhat of a problem with the company when she and her husband tore down a house on which they had been paying premiums. When the house was removed, they mentioned the fact to Mr. McGroarty, but he did nothing about it. As a result, they paid several months' premiums on property that did not exist. In fact, when Respondent complained about this to Mr. McGroarty, he was told to collect the money or McGroarty would take it from another policy. Jennie L. Wilder also had difficulties on her policy with Independent Life's agent named "Alligood" (sic). She had paid her premiums for six months in advance, but because the agent delayed remitting the premium, she got credit for only three months. On the other hand, Catherine C. DiPerna and her husband have been insured with Independent Life for quite a while. Part of that time, the Respondent was her agent/collector. On June 16, 1981, just about the time of the other alleged shortages in Respondent's remittances, she paid her premium payment to Mr. Miller by check. The check was cashed, she did not receive a notice of lapsed policy, nor did she have any problem with her policy, even though on the Ordinary Remittance Report for the same period used by the Petitioner in the allegations relating to Mrs. Robinson shows no money received from the DiPernas. On March 11, 1981, upon the recommendation of Mr. R. Brenner, an investigator with the Department of Insurance, Respondent went to work for Independent Life as a debit agent in Jacksonville, Florida, under the supervision of Mr. Pat McGroarty, who, also, had had the debit (account) before. After the basic company indoctrination course, Respondent underwent on-the-job training under McGroarty. He never, during the entire time he worked for the company, accepted total responsibility for the account because, in his opinion, there were large discrepancies between the premium receipt cards and the company records when he was assigned the account. Respondent discussed these difficulties with McGroarty and other officials of the company, such as Mr. Ivanoski, Mr. Tharpe, and Mr. Baucom. In April, 1981, Miller saw that his signature as agent was forged on a policy owned by the Petitioner's witness Cooper on the life of Cooper's nephew, Edward Thomas, who, at all times pertinent, was an inmate in the state penitentiary. When Respondent mentioned this to McGroarty, McGroarty told him that Cooper had forged the names and Respondent was with McGroarty when he delivered the policy to Cooper. This is one of the policies which form the allegation in Count V of the Complaint and about which there is an obvious alteration on the Premium Receipt Book showing an increase in the weekly premium of one cent because of a change from a health policy to a life policy. Other difficulties with this particular account were brought by Miller to the attention of the district manager who forced McGroarty to make up the shortage from his own pocket. During a part of the time Respondent worked with the company, he also handled fire policies on a temporary license. He found so many irregularities and such out-and-out corruption, he states, that he intentionally failed the state examination for an industrial fire license. Even after instructions came from the home office terminating Respondent's work in fire insurance, the district manager instructed him to continue to collect fire premiums and turn them over to McGroarty. As a result of all of this, deficiencies show up on his fire accounts for periods after the time he ceased fire business. In fact, documents show collections by Miller on his accounts, even after he left the employ of the company. Respondent unequivocally denies any wrongdoing with regard to his accounts.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law stated above, it is RECOMMENDED: That the Administrative Complaint against the Respondent dated August 27, 1982, and amended on September 24 and December 28, 1982, be DISMISSED. RECOMMENDED this 28th day of February, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1983. COPIES FURNISHED: Rhoda Smith Kibler, Esquire David Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 S. Perry Penland, Esquire Penland, McCranie & Shad, P.A. Suite 1103, Blackstone Building Jacksonville, Florida 32202 The Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301
Findings Of Fact At all times material to this case, and at the time of the hearing, Charles Joseph Maher ("Respondent") was licensed in Florida as a life and health agent and general lines agent, doing business as "Maher Insurance". Medford On or about December 13, 1989, the Respondent completed an application for insurance and received a check in the amount of $557.00 from Kenneth Medford of North Fort Myers, Florida for automobile insurance to be issued by Atlanta Casualty Company. The check was made payable to the insurer. Although Mr. Medford testified that the Respondent told him the coverage would be bound, the insurance application clearly provides that the coverage was not bound at the time the application was completed. The Respondent mailed the application and check to Atlanta Casualty Company. Neither the application nor the check were received by Atlanta Casualty Company. There is no evidence that the Respondent mishandled the application and check or converted said funds to his own use. The check tendered by Mr. Medford has never been deposited and has never cleared the Medford checking account. Grandpa's Cycle Center On or about October 24, 1990, the Respondent received a check in the amount of $482.50 from Grandpa's Cycle Center of Fort Myers, Florida, constituting the estimated down payment on liability insurance to be issued by Bankers Insurance Company through the Florida Joint Underwriters Association. The actual down payment on the liability insurance was $250.00 which was remitted in the due course of business by the Respondent to Bankers Insurance Company. The policy was subsequently issued. A representative of the Respondent thereafter contacted Grandpa's Cycle Center and informed the insured that a refund of the excess down payment was due to the insured. The insured directed the Respondent's representative to retain the excess pending further direction. In part due to other matters not addressed by the Administrative Complaint filed in this case, the business relationship between the Respondent and the insured became somewhat strained and the insured terminated the relationship. On or about January 3, 1991, the Respondent tendered a check for $355.00 to the insured. The Respondent identified the total amount tendered to include a refund of $232.50 excess down payment and the remainder as "return premium" for a policy which had apparently been cancelled in August, 1990.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order dismissing the complaint filed against Charles Joseph Maher. DONE and RECOMMENDED this 9th day of February, 1993, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 February, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-0490 The following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3-4, 7. Rejected, not supported by the greater weight of the evidence. Respondent The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3(a)-(k), 5(a)-(m). Rejected as cumulative or unnecessary except as otherwise adopted in this Recommended Order. COPIES FURNISHED: Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, General Counsel Office of State Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Lisa Santucci, Esq. Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300 Charles J. Maher Post Office Box 1420 Fort Myers, Florida 33902-1420
Findings Of Fact Based upon all of the evidence, including the stipulation of facts, the following findings of fact are determined: Petitioner, Florida Surplus Lines Association, Inc. (Association), is a Florida nonprofit corporation organized and maintained for the benefit of its members who include surplus lines agents and insurers and others who place surplus lines insurance. Petitioner's members are licensed or regulated by the Department of Insurance pursuant to Part VIII of Chapter 626, Florida Statutes. The parties have stipulated that petitioner has standing to bring this action on behalf of its members. Surplus lines insurance is a specialty line of insurance written for certain types of risks that authorized insurance carriers (those holding a certificate of authority) will not or cannot cover. It constitutes a limited, out-of-state insurance market that supplements the "authorized" in-state insurance market. Thus, when Florida residents cannot obtain coverage from authorized Florida insurers, they may seek insurance from out-of-state insurers (not authorized to do business in the state) who "export" the coverage to Florida surplus lines insurers who then handle the placement of the insurance. Under this statutory scheme, petitioner's members are not authorized insurers who hold certificates of authority but rather they are made "eligible" by the Department of Insurance to receive exported business. They do, however, countersign surplus lines policies covering Florida risks. On April 29, 1993, Chapter 93-128, Laws of Florida, became effective. The new law was the result of the extensive damage caused by Hurricane Andrew, which struck the southeastern coast of Florida in late August 1992. Section 2 of the law created an emergency management, preparedness, and assistance trust fund to be administered by the Department of Community Affairs and funded by the imposition of an annual surcharge of $2.00 on "every homeowner's, mobile homeowner's, tenant homeowner's, and condominium unit owner's policy" and $4.00 on "every commerical fire, commercial multiple peril, and business owner's property insurance policy" issued on or after May 1, 1993. Therefore, the new law applied to all residential and commercial casualty policies issued on or after May 1, 1993. Petitioner's members offer policies that fall within these broad categories. The same section required the surcharge to be paid by the policyholder and collected and remitted by the insurer. Since petitioner's members are engaged in the business of offering insurance policies, and they countersign property insurance policies, they are "insurers" as that word is commonly used and understood. Finally, section 2 has been codified as Section 252.372, Florida Statutes (1993). Section 2 of chapter 93-128 provided further that respondent, Department of Revenue (DOR), "shall collect, administer, audit, and enforce the surcharge pursuant to section 624.5092, Florida Statutes." This meant that DOR would utilize the procedures outlined in section 624.5092 for administering and collecting the newly-imposed tax. That statute prescribes the manner in which taxes should be paid to and collected by DOR. To implement this new responsibility, on August 20, 1993, DOR published notice in the Florida Administrative Weekly of its intent to adopt new rule 12B-8.0012. The proposed rule, which is quite lengthy in text, reads as follows: 12BN-8.0012 Insurance Policy Surcharge: Rate and Computation. Every insurer, including surplus lines and surplus lines agents, must collect a surcharge of $2 and $4 from the policyholders of certain types of property insurance issued or renewed on or after May 1, 1993. The proceeds will be deposited into the Emergency Management, Preparedness, and Assistance Trust Fund. The $2 surcharge applies to each residential dwelling fire policy, homeowner's, mobile homeowner's, tenant homeowner's, condominium unit owner's, and any other type of insurance coverage on residential property, issued or renewed on or after May 1, 1993. The $4 surcharge applies to each commercial fire, commercial multiple peril, and business owner's property insurance policy issued or renewed on or after May 1, 1993, including marine policies if the coverage includes real property. The surcharge does not apply to policies on tangible personal property, except multiple peril type policies on residential or commercial property and mobile homes. For purposes of this rule, the date of issue or renewal shall be the effective date of the policy. The surcharge applies to all policies issued or renewed even if they are subsequently cancelled. However, if the policy is cancelled back to the effective date, the surcharge shall not apply. The surcharge must be collected by the insurer from the policyholder and must be remitted in the same manner as the insurance premium tax to the Department of Revenue on Form DR-907, Insurance Premium Tax Quarterly Return, and on Form DR-908, Insurance Premium Tax Return. The surcharge on surplus lines policies must be remitted by the surplus lines agents, unless the surplus lines insurer collects and remits the surcharge, and must be remitted on Form DR-907 and Form DR-908. The surcharge is required to be remitted by the surplus lines agent for only the surplus lines policies. The authorized insurer is required to collect and remit the surcharge for all other policies. The $250 quarterly and annual filing fees do not apply to either the surplus lines agent or the surplus lines insurer. The insurance premium tax on surplus lines will continue to be remitted to the Department of Insurance as required. The surcharge is required to be remitted on the required return for the calendar quarter the policy is issued or renewed without regard to the collection of the surcharge from the policyholders. The insurer is responsible for collecting the surcharge and may cancel the policy for nonpayment of the surcharge. The first installment on the surcharge was due June 15, 1993, for May and June with the subsequent installment due on October 15 for the calendar quarter ending September 30. A separate line denoting the surcharge is provided on the revised Form DR-907 and the revised Form DR-908, annual return, which is due by March 1. The estimated payment must be based on at least 90 percent of the actual number of policies subject to the surcharge to avoid penalty and interest as provided in s. 624.5092, F.S. Penalty and interest may be compromised as provided in s. 213.21, F.S. The surcharge is not considered to be a part of the premium charge, and is therefore not subject to the insurance premium tax. The surcharge is imposed on the policy- holder and will not be considered for retaliatory tax purposes whether or not the surcharge is collected from the policyholder. The text of the notice identified Subsection 213.06(1), Florida Statutes, and Chapter 93-128, Laws of Florida, as the specific authority for adopting the rule and Section 624.5092, Florida Statutes, and Chapter 93-128, Laws of Florida, as the laws being implemented. Finally, the notice summarized the new rule as one which "provid(ed) guidance for computing and remitting the $2 and $4 surcharge," and further stated its adoption was "needed to conform the rule to the 1992 and 1993 statutory revisions." Of significance to this controversy are all or parts of sections (1) and (8) of the proposed rule which expressly provide that the surcharge is applicable to surplus lines policies. Petitioner generally contends that surplus lines policies were not specifically referred to in either chapter 93- 128 or section 624.5092 and thus the surcharge was not intended to apply to that type of transaction. For this reason, among others, it argues that the proposed rule goes beyond the terms of the enabling statutes. In 1989, Chapter 89-167, Laws of Florida, created Section 624.5092, Florida Statutes, which transferred the responsibility for the administration and collection of all taxes enumerated in subsection 624.5092(3) from the Department of Insurance to DOR. That subsection identifies Sections 624.5091, 624.4425, 624.475, 624.509-624.515, 627.356, 627.357, 629.5011, 637.406, 651.027, and 440.57, Florida Statutes, as the taxing statutes which DOR is obligated to administer. Omitted from this subsection are Section 626.932, Florida Statutes, which imposes a premium receipts tax on surplus lines insurance transactions, and Section 626.933, Florida Statutes, which sets forth the procedure for collecting that tax. Therefore, surplus lines insurance transactions are not identified as being subject to the administration procedures in subsection 624.5092(3). The parties have stipulated that under section 624.5092 DOR is authorized to administer, collect and enforce insurance taxes prior to 1989 on all open years for all insurers subject to Section 624.509, Florida Statutes. They have also stipulated that DOR has the authority to assess surcharges and tax for all insurers that are subject to Sections 624.509 and 624.5091, Florida Statutes. These two statutes pertain to the payment of a premium tax and retaliatory tax, respectively, by insurers holding a certificate of authority. Surplus lines insurers do not possess such authorization. Neither chapter 89-167 nor chapter 93-128 amended sections 626.932 or 626.933. As noted earlier, those sections impose a surplus lines tax and the manner for collecting the same, respectively. Also, they did not amend subsection 624.5092(3) to include any tax imposed by Part VIII of chapter 626, the state surplus lines act. Section 4 of chapter 93-128 amended subsection 624.5092(1) by adding the underscored language below: The Department of Revenue shall administer, audit and enforce the assessment and collection of those taxes to which this section is applicable. The Department of Insurance is authorized to share information with the Department of Revenue as necessary to verify premium tax or other tax liability arising under such taxes and credits which may apply thereto. Besides the substantive contentions, petitioner also contends the rule's economic impact statement (EIS) is inadequate because DOR did not consider the rule's impact on small businesses. In making that assessment, DOR utilized the provisions of Subsection 120.54(2)(a)1.-5., Florida Statutes, and found the impact on small businesses to be minimal, that is, affected persons need only file a two page form on a quarterly basis reflecting the number of surplus lines policies issued or renewed during the preceding quarter. Given these minimal statutory requirements, DOR could not consolidate or simplify the reporting requirements, exempt small businesses, establish less stringent schedules, establish alternative performance standards, or create less stringent reporting requirements. Finally, copies of the proposed rule were sent to the minority business sections of the Department of Commerce and Department of Management Services, and DOR did not receive any reply or comment from those agencies. DOR did not receive a request for an economic impact statement from any affected person. Also, it received no information regarding any economic impact on any businesses affected by the proposed rule or on the size of businesses affected by the proposed rule prior to the initiation of this proceeding. Although some of petitioner's members qualify as small businesses as that term is defined within Section 288.703, Florida Statutes, and petitioner advised DOR of its position regarding the invalidity of the proposed surcharge, there is nothing of record to indicate that petitioner, or any of its members individually, specifically requested preparation of an EIS or provided information sufficient to make DOR aware of specific concerns regarding the economic impact of the proposed rule.
The Issue Whether Respondent's insurance agent licenses should be disciplined because selling a commercial note to an unqualified elderly person on February 11, 1999, demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, in violation of Sections 626.611(7), Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for regulating and licensing the sale of insurance in Florida, in accordance with the provisions of Chapter 626, Florida Statutes. Respondent, Kevin Ira Frye, is currently eligible for licensure and licensed in the this state as a health insurance agent, life insurance agent, life and health insurance agent, and life, including variable annuity agent, pursuant to licensure number A090874, and was so licensed at all times relevant to these proceedings. In the fall of 1998, Juanita Crouch of Spring Hill, Florida, expressed an interest in purchasing a long-term care insurance policy by responding to a solicitation she received in the mail from Respondent's agency. In response to her inquiry, Respondent came out to her home to discuss the insurance. Ms. Crouch at this time was a 75-year-old retired homemaker and widow. Her only income was $1,100 a month stipend from her deceased husband's social security and her interest income from two Certificates of Deposit (CDs). She did not graduate from high school. She had never worked outside of the home, being a homemaker all of her life; her husband handled all of the family finances prior to his death. She does not own any stocks, bonds or any other investments. Mrs. Crouch resides in a home purchased for her by her daughter, Linda Bruno-Lagos, and placed in her name through a recorded Articles of Agreement. Mrs. Crouch could not be considered a sophisticated investor. In addition, her health was poor, and her memory was some-what impaired. Mrs. Crouch possessed $25,000 deposited in two bank CDs that were coming due during the relevant time period. Mrs. Crouch was looking for a investment with a reasonable rate of interest so that she could deposit the funds in order to augment her small income. This $25,000 represented her only savings. Respondent, at this time, became aware that the CDs were coming due and during their next appointment, solicited Mrs. Crouch to take her $25,000 in savings and purchase a commercial promissory note to be issued by First American Capital Trust (FACT). FACT uses the proceeds from the issuance of the notes to fund the medium credit purchases of vehicle loans secured by perfected liens on new and used automobiles and light trucks. Respondent represented to Mrs. Crouch that, by purchasing the FACT note, she would be investing in a guaranteed financial instrument similar to a bank Certificate of Deposit. Mrs. Crouch would enjoy a 9.75 percent guaranteed interest rate on her investment over a nine-month period. Respondent gave Mrs. Crouch various brochures, including a document entitled "Disclosure Statement." The brochures purported to show that the investment was fully insured and guaranteed. No provision of this disclosure statement was ever explained by Respondent to Mrs. Crouch, including the disclosure warning by FACT that this investment was "inherently risky." Mrs. Crouch testified that she did not understand the information and was relying on Respondent's representations. This testimony is credible. Respondent testified that he purposely avoided explaining any provision of the disclosure statement. Respondent believed that it was Mrs. Crouch's sole responsibility to read the brochures and understand the details of the investment. In fact, Respondent testified that telling potential investors that they could lose all of their money was something he didn't discuss, as it might discourage sales. Respondent left the brochures explaining the investment with Mrs. Crouch to read and review, which she did not do. Respondent was aware, or should of been aware, that Mrs. Crouch, given her age and financial circumstances as a retiree, desired to place her funds only in safe, low risk, investments. Mrs. Crouch did not meet the suitability standards to purchase the FACT note, as set forth in the disclosure statement prepared by FACT. FACT required potential investors to have either a net worth of $1,000,000, or an annual income in excess of $200,000 a year, or in the alternative, no more that 20 percent of an individuals total assets could be invested. The application submitted by Respondent lists her net worth as between $150,000 and $250,000. Mrs. Crouch's actual net worth is significantly less than this sum. Respondent prepared the application, which Mrs. Crouch signed, and he determined the estimate of Mrs. Crouch's net worth. Respondent was either aware or should have been aware that Mrs. Crouch did not have such a net worth as was listed on her application, and, therefore, did not meet FACT's eligibility requirements. She should not have been sold the note. Mrs. Crouch elected to invest her $25,000 with FACT to purchase the note. On February 11, 1999, she gave the funds to Respondent, which was promptly remitted to FACT. On March 8, 1999, FACT issued a Certificate of Commercial Note, at the full redemption value of $26,961.35 in the name of Juanita Crouch, with a maturity date nine months from the date of the note. In December of 1999, Mrs. Crouch received a letter from FACT informing her that FACT had filed for bankruptcy protection on September 30, 1999. A receiver has been appointed who is attempting to recover assets. Mrs. Crouch never received any return on her purchase of the FACT note. She filed a claim in the U.S. Bankruptcy Court, but with the exception of two small payments from the receiver, she has never received any payments on the note. She has apparently suffered a loss of most, if not all, of her principal of $25,000. Mrs. Crouch, relying on Respondent's representations, thought she was purchasing a note that would pay a fixed yield with very low risk. What she unknowingly purchased was a commercial note that carried a warning from FACT that "extending credits to retail buyers with medium credit ratings is inherently risky." Mrs. Crouch was clearly unaware of this risk and Respondent made no attempt to make her aware. Despite the representations made to Mrs. Crouch by Respondent, at no time was her investment insured or guaranteed by the Federal Deposit Insurance Corporation, or any insurance company, nor any other entity. In fact, the Disclosure Statement states that the private insurance covers the vehicle loans only and not the notes directly. Respondent failed to disclose to Mrs. Crouch that her note and investment was not insured, even though he testified that he was aware of and understood that the note itself was not insured at the time of the sale. Respondent has been a licensed insurance agent since December 9, 1997, and was employed by Senior American Insurance and Financial Services. Respondent has not previously been disciplined by Petitioner.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED as follows: Respondent, Kevin Ira Frye, be found guilty of violating Section 626.611(7), Florida Statutes. Pursuant to Rule 4-231.080, Florida Administrative Code, Respondent's licenses and eligibility for licensure be SUSPENDED for a period of six months, followed by a two-year period of probation upon such reasonable conditions as the Department may require. DONE AND ENTERED this 6th day of February, 2003, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of February, 2003. COPIES FURNISHED: James A. Bossart, Esquire Department of Financial Services 200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0333 Sidney Werner, Esquire Piper, Ludian, Howie & Werner, P.A. 5720 Central Avenue St. Petersburg, Florida 33707 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
