The Issue Whether Petitioner's September 29, 1993, claim (Claim No. 34092993) for reimbursement of expenses for medical services rendered in 1992 should be denied on the ground that said claim was not timely filed with Department of Management Services, Division of State Employees' Insurance (hereinafter referred to as the "Department")?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is now, and has been at all times material to the instant case, a participant in the State of Florida Flexible Benefits Plan (hereinafter referred to as the "Plan") with an established Medical Reimbursement Account. The following were among the medical expenses incurred by Petitioner and members of her immediate family during the 1992 calendar year: DATE TYPE OF SERVICE AMOUNT 6/29/92 Dental $70.00 7/9/92 Dental $310.00 7/11/92 Endodontic $450.00 7/17/92 Optical $266.75 7/22/92 Dental $500.00 7/27/92 Optical $84.70 8/19/92 Optical $416.50 12/29/92 Dental $210.00 In August of 1992, Hurricane Andrew ravaged parts of South Florida. Petitioner's residence was extensively damaged by the storm. Most of the contents of the residence, including medical records and receipts, were destroyed. Petitioner and her family were forced to vacate the premises. They packed their remaining belongings and moved to another location in Dade County, with the intention of returning to their home once the damage to the structure had been repaired. As of the date of the hearing in this case, all of the necessary repairs to the home had yet to be made and therefore the family had not moved back in. Petitioner and the other members of her family were among those residents of South Florida whose lives were significantly disrupted by the hurricane and the destruction and devastation it caused In the aftermath of the hurricane, Petitioner directed her energies toward obtaining a return to normalcy in her life. Although she realized that there were medical expense reimbursement claims that she needed to file with the Department, filing these claims was not a priority of hers. She focused her attention on other matters that she considered to be more deserving of her time given her situation. In January or February of 1993, Petitioner telephoned the Department to inquire if extensions of time for filing reimbursement claims were being given to Plan participants, such as herself, who were still suffering from the consequences of Hurricane Andrew. The person to whom Petitioner spoke advised her that such extensions were indeed being given. Based upon what she had been told by this Department representative, Petitioner reasonably believed that she would be able to file reimbursement claims for 1992 medical expenses after March 1, 1993, without having these claims rejected on the ground that they had been untimely filed. She therefore felt that there was no urgency with respect to the filing of these claims and she acted accordingly. Shortly after gathering all of the supporting documentation she believed she needed, 1 Petitioner, on September 29, 1993, filed a claim with the Department requesting that she be reimbursed from her Medical Reimbursement Account for the medical expenses enumerated in Finding of Fact 2 of this Recommended Order. The Department designated the claim as Claim No. 34092993. Petitioner also sought reimbursement, through the filing of this claim, of certain medical expenses incurred in 1993, including $140.00 for dental work that Petitioner had inadvertently indicated on the claim form had been performed in July of 1992. The work had actually been done in July of 1993. By letter dated October 8, 1993, the Department advised Petitioner that "[o]nly expenses for services rendered during the January 1, 1993 through December 31, 1993 plan year are eligible for reimbursement" and that "[s]ince [her] 1992 expense does not fall within this plan year, it is not reimbursable." Petitioner responded to this advisement by sending the following letter, dated November 28, 1993, to the Department: This is a petition or application requesting a formal hearing on my Claim #34092993 for Payment/Reimbursement for expenses incurred during my period of coverage for 1992. This Claim was denied. My Name is: Luretha F. Lucky My Address is: 10430 S.W. 162nd Terrace (temporary) Miami, Florida 33157 My permanent address is: 10361 S.W. 139th Street Miami, Florida 33176 I am employed at Florida International University, Miami, Florida 33199. I filed my claim late because my home was severely damaged when hit [b]y Hurricane Andrew, August 24, 1992. In addition, the content[s] in my home w[ere] destroyed, therefore, it took awhile for me to collect documentation for my claim from medical personnel. Also, I had to move and the few items saved were packed away. Lastly, I called the Department of Management Services, Division of State Employees' Insurance to inform them of what had happened to me and asked if . . . they were providing extensions on submitting claims. I was told they were. My mistake was not asking and recording the name of the person with whom I spoke. As you can see from my temporary address, I am still not back in my home! In fact we just settled (with the assistance of the Insurance Commissioner's Office) with our insurance company to complete the work on our home. We had to request an extension on filing our income tax for 1992. This past year has been an awful experience for us, and I do hope you will provide me a hearing on my reimbursement. My Claim # is: 34092993. The decision that my claim was denied was received by regular mail. Thank you very much for considering my request.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby: RECOMMENDED that the Department enter a final order finding Petitioner's September 29, 1993, claim (Claim No. 34092993) for reimbursement of expenses for medical services rendered in 1992 to have been timely filed and therefore subject to consideration on its merits. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 15th day of April, 1994. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings 15th day of April, 1994.
Findings Of Fact Respondent DeBellonia is president of Respondent CGFS, Inc. At all times material to these proceedings, the Respondents were business consultants who assisted their clients with the preparation and presentation of information for private lenders who were interested in making business loans. Their business offices were located at North Rocky Point Drive, Suite 800, Tampa, Florida. In late July or early August 1989, Constance J. Jones responded by telephone to an advertisement placed by Respondents in the Tampa Tribune newspaper. The ad communicated to her that the Respondent CGFS, Inc. was interested in providing business financing to new and established businesses. Upon receipt of the telephone call, a secretary at CGFS, Inc. scheduled an appointment for Mrs. Jones with Respondent DeBellonia for August 7, 1989. Mrs. Jones was excited about the appointment because the seller of commercial real property purchased by her and her husband had recently filed a foreclosure action to recover the property. The suit occurred because she and her husband had been unable to make the final balloon payment on the property. The seller had agreed to forebear the possibility of such a suit the year before when Mrs. Jones gave him twenty thousand dollars ($20,000.00) and the promise that she would obtain financing within a year's time and pay the outstanding balance in full. At the close of the year, Mrs. Jones had not been successful in her attempts to acquire the money to pay for the property. This appointment renewed her hopes that she could minimize her losses, settle the suit, and preserve her interest in the property. Prior to arranging her appointment with Respondent DeBellonia, Mrs. Jones had made applications for a loan at several banks. Her requests had been turned down because the banks had determined that the present value of the property was insufficient to provide the collateral needed for the secured loan she was seeking. When Mrs. Jones attended her meeting with Respondent DeBellonia, she voluntarily presented him with a copy of her agreement for deed, a property appraisal, and her owner's title insurance policy. Having submitted herself to a number of loan requests at various banks prior to this appointment, she assumed he would want to see the same documents that had been requested during those loan reviews. Respondent DeBellonia allowed Mrs. Jones to present her situation and her documentation to him in her own manner. He made copies of all of the papers offered to him and returned the originals. At the close of Mrs. Jones' presentation, Respondent DeBellonia agreed to be her business consultant and to assist her in her search for funding. Although Mrs. Jones originally stated that she needed to acquire $94,000.00, this amount was reduced to $20,000.00 when she was informed that the Respondents charge a professional service fee of ten percent of the loan amount ultimately accepted by the clients. To begin work on the funding project, the Respondents requested a non-refundable professional service fee of $1,900.00. Although Mrs. Jones did sign the business consultant agreement, she did not have the money with her to pay the non-refundable fee. When she informed Respondent DeBellonia that she did not have the money, he told her he needed the money as soon as possible so that he could go ahead and work on the transaction. He indicated that he could accomplish a fast transaction for the $20,000.00 in about three days time. According to Mrs. Jones, the seller of the commercial property was willing to forebear on the foreclosure for a while if she could give him $20,000.00 now and if she was actively pursuing a loan which would pay off the balance due. This proposal was another reason she changed her request from $94,000.00 to the $20,000.00 amount. Later that evening, Mrs. Jones telephoned Respondent DeBellonia and told him she needed a new document so that her husband could be on the agreement as well. When the second document was sent, the secretary mistakenly sent out the original agreement with a funding goal of $94,000.00 instead of the reduced request for $20,000.00. Mr. Jones' name had been placed on the document in order to obtain his signature. Both agreements given to Mrs. Jones clearly state that Respondent CGFS, Inc. is not a mortgage broker. Before Mrs. Jones returned a fully executed agreement to the Respondents with the non-refundable fee, she decided to call the Comptroller's Office in Tallahassee to get a business rating to see if this was a good-rated business for her own protection. Although nothing negative was stated by the Comptroller's Office, Mrs. Jones did not get the assurances she was seeking. After that, she decided not to retain the Respondents to provide their business consultant services. Without Mrs. Jones' presumption that the Respondents would eventually seek a mortgage on the real property she intended to purchase, there is no reliable circumstantial evidence which demonstrates that the Respondents were seeking to act as a mortgage broker under the set of facts presented at hearing. Even if the circumstantial evidence and ill-conceived presumptions were considered reliable, the evidence is outweighed by the clear statement within the consultant agreement that Respondent CGFS, Inc. is not a mortgage broker. In addition, if the Respondents had intended to see a mortgage for Mrs. Jones, they would have required her to have her husband sign the agreement because she was an equitable owner of the property in a tenancy by the entirety. Instead, it was Mrs. Jones who later requested that her husband's name be included on the agreement. Respondent DeBellonia clearly manufactured Respondents' Exhibit number E. If this proceeding had turned on his credibility versus the credibility of others, he would not have prevailed in the factual determination. Based upon the facts presented at hearing, the Department initially had reason to believe that the Respondents were violating or about to violate the law by acting as a mortgage broker and mortgage broker business without a license. However, the formal hearing process revealed that Mrs. Jones' impressions of what occurred during her meeting with Respondent DeBellonia were faulty. Documentary evidence prepared during the interview and Mrs. Jones' admissions during the cross-examination resolved the case in Respondent's favor. The actions taken by the Department in filing the Cease and Desist Order were proper, and were not harassment of the Respondents.
Recommendation Accordingly, it is RECOMMENDED: That the cease and desist order issued by the Department on February 20, 1990, be dismissed. DONE and ENTERED this 31st day of September, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY 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 21st day of September, 1990. APPENDIX TO RECOMMENDED IN CASE NO. 90-1720 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO number 1. Accepted. Reject the date of the interview. The rest is accepted. See HO number 2-number 6. Accepted. Accepted. See HO number 5. Accepted. See HO number 9 and number 10. Accept the first two sentences. See HO number 9. Reject the third sentence. Contrary to fact. Reject the fourth sentence. Irrelevant. 8. Accepted. See HO number 11 and number 12. 9. Accepted. See HO number 15 and number 18. COPIES FURNISHED: Stephen M. Christian, Esquire Office of the Comptroller Regional Service Center 1313 North Tampa Street, Ste. 615 Tampa, Florida 33602-3394 Michael C. Mone, Esquire 111 Eighth Street Belleair Beach, Florida 33535 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, Esquire General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350
The Issue The issue is whether Petitioner timely filed his request for claim form requesting reimbursement for certain covered expenses under the Florida Flexible Benefits Program--Reimbursement Plan.
Findings Of Fact Petitioner is a member of the faculty of the University of South Florida. He participates in the Florida Flexible Benefits Program--Reimbursement Program (Program). The Plan allows participants to pay certain eligible medical or dependent day care expenses with pretax earnings. Each year, during an open enrollment period, an employee may elect to participate in the Program and select an amount of salary to be deducted from his or her pay. The amount of salary so deducted is not subject to federal income tax, but is available to reimburse the employee for covered expenses. In order for the Program to continue to enjoy preferential treatment under the federal income tax law, Respondent, which administers the Program, must adhere to certain rules. Most relevant to this case is that that the deducted salary must be at risk. Specifically, an employee is not entitled to a refund of all or part of the deduction if he or she does not timely submit sufficient reimbursable expenses to exhaust his or her account. The Program brochure clearly warns participants of this "use it or lose it" rule. The plan year for the Program is the calendar year. In 1997, Petitioner was a participant in the Program. He and his wife chose not to submit claims for covered expenses, as they paid them during the year. Instead, they accumulated the receipts with the intent of submitting a single claim for their account balance at the end of the plan year. The Program sets a claims filing deadline of April 15 for filing claims arising out of the expenses paid in the preceding calendar year. The Program brochure warns that this deadline means all claims for expenses incurred during a plan year must be postmarked by midnight, April 15 of the following year to be considered for processing. Any claims received after this date will be returned to the participant unprocessed, regardless of the account balances. Participants should file claims as soon as the required documentation is obtained. This case involves only one issue: whether Petitioner timely submitted his claims for reimbursement under the Program. There is no issue concerning Petitioner's payment of these expenses or his account balance. There is no issue whether these expenses are eligible for reimbursement. In early March 1998, Petitioner and his wife collected their receipts for covered expenses from 1997. Petitioner completed a reimbursement form and addressed the envelope to Respondent at the correct address. Wanting to make copies of the materials, Petitioner did not immediately mail the package to Respondent. A few days later, prior to copying the materials or mailing the package, Petitioner's father became ill in the Mideast, where he lives. Petitioner and his wife agreed that she would copy the materials and mail the package to Respondent. On March 21, which marks the birthday of Petitioner's wife and a cultural holiday for Petitioner and his wife, Petitioner's wife telephoned her husband, who was still visiting his sick father. In the ensuing discussion, Petitioner learned that she had not yet mailed the package. They discussed the matter and again agreed that she would copy the materials and mail the package without further delay. Without further delay, Petitioner's wife copied the materials and mailed the package to Respondent at the correct address. She placed the package with sufficient postage in a mailbox across from her home. The package consisted of a claims reimbursement form and receipts for eligible expenses. It appears that she may have written an old return address on the envelope. Respondent never received the package. Respondent's procedures are carefully designed and executed to ensure that it will not lose a claim form. Repeated searches for the missing form never uncovered it. The package was lost after its mailing by Petitioner's wife and prior to its delivery to Respondent. Possibly, the incorrect address precluded notification to Petitioner of problems with delivery. Possibly, the package was just lost. Unfortunately, Petitioner learned only after the April 15 deadline that Respondent had never received the package.
Recommendation It is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, enter a final order determining that Petitioner timely submitted the claim and eligible expenses that were the subject of this case. DONE AND ENTERED this 8th day of March, 2000, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 8th day of March, 2000. COPIES FURNISHED: Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Mohsen M. Milani 15927 Ellsworth Drive Tampa, Florida 33647 Julia Forrester Assistant General Counsel Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399
Findings Of Fact Petitioner is a Florida corporation for profit located at 1933 Commonwealth Lane, Tallahassee, Leon County, Florida. At all times pertinent to this case Petitioner has operated a business in Florida. Respondent is a Florida state agency. Its duties include the administration of Community Development Block Grants in Florida, (hereinafter referred to as CDBG). Petitioner requested Respondent to reimburse money related to administrative services which Petitioner provided to Okaloosa County, Florida related to a CDBG. The petition for those monies was filed in February, 1993. The request for reimbursement was in the amount of $43,274.92. Respondent denied that request. In turn, by opportunity provided by Respondent, Petitioner sought an administrative hearing pursuant to Section 120.57(1), Florida Statutes, to challenge Respondent's preliminary agency decision denying the request for reimbursement. The case was forwarded to the Division of Administrative Hearings to assign a hearing officer to conduct a formal hearing to resolve the dispute between Petitioner and Respondent. The administrative proceeding concerning the reimbursement claim was considered in the case Clark, Roumelis & Associates, Inc., v. State of Florida, Department of Community Affairs, Respondent, DOAH Case No. 93-1306. At the time Petitioner initiated the action to seek reimbursement and was afforded the point of entry to contest the preliminary action denying the reimbursement request, Petitioner employed no more than twenty-five (25) full- time employees and had a net worth of not more than $2 million dollars. Following a formal hearing a recommended order was entered by the undersigned which recommended that Petitioner be paid $43,274.92. The recommended order was entered on September 29, 1993. In turn, Respondent's final order dated December 28, 1993 denied the petition for reimbursement. Petitioner took an appeal to the First District Court of Appeal, State of Florida, Case No. 94-0151. In an Opinion filed February 16, 1995, the First District Court of Appeal decided in favor of Petitioner by reversing Respondent's final order and remanding the case. Respondent sought rehearing and rehearing on en banc which was denied on March 24, 1995 by the First District Court of Appeal. Respondent sought further review before the Florida Supreme Court, Case No. 85,581, which denied that review by not accepting jurisdiction. That decision by the Florida Supreme Court was made on September 6, 1995. On September 13, 1995, Petitioner filed a petition with the Division of Administrative Hearings pursuant to Section 57.111, Florida Statutes. Through that action Petitioner sought the reimbursement of attorney's fees and costs associated with DOAH Case No. 93-1306 and the appeals that followed the December 28, 1993 final order denying the reimbursement. Contrary to the requirements set forth in Section 60Q-2.035(5)(a), Florida Administrative Code, Respondent did not file a response to the petition within twenty (20) days of the filing of the petition seeking reimbursement attorney's fees and costs. Neither party has sought an evidentiary hearing for the Division of Administrative Hearings to consider Petitioner's request for reimbursement of attorney's fees and costs. Therefore this case has proceeded without an evidentiary hearing. Rule 60Q-2.035(7), Florida Administrative Code. In that setting Respondent is deemed to have waived its opportunity to contest whether the attorney's fees and costs claimed are unreasonable; whether Petitioner is not a prevailing small business party in DOAH Case No. 93-1306; whether Respondent's actions in denying Petitioner's claim for monetary reimbursement related to administrative services provided to Okaloosa County, Florida in the CDBG was a decision which was substantially justified in law and fact; whether circumstances exist which would make the award of attorney's fees and costs unjust and to present the defense that the Respondent was only a nominal party in DOAH Case No. 93-1306. See Rule 60Q-2.035(5)(a), Florida Administrative Code. Consistent with Rule 60Q-2.035(7), Florida Administrative Code the following additional facts are found for or against the award of attorney's fees and costs, based upon the pleadings and supporting documents in the files and records in the Division of Administrative Hearings: Petitioner is a small business party and a prevailing small business party in the matters considered in DOAH Case No. 93-1306 and the court appeals that followed. Petitioner's attorney has submitted an affidavit claiming, "In the administrative proceedings of this action, 140.8 hours were expended to the date of Respondent's Final Order of December 28, 1993. Total Fees: $21,120.00." Petitioner's attorney has submitted an affidavit claiming, "In the administrative proceedings of this action, $2,141.78 in costs were incurred to the date of Respondent's Final Order of December 28, 1993." Petitioner's attorney has submitted an affidavit claiming, "In the appellate proceedings in this action (First District Court of Appeal Case No. 94-0151 in Florida Supreme Court, Case No. 85,581), 79.0 hours were expended and $310.66 in costs were incurred to the date of the Supreme Court's denial of September 6, 1995. Total Fees: $13,258.00. Total Costs: $310.66." The affidavits submitted by Petitioner concerning the claim for attorney's fees and costs incurred to the date of Respondent's final order of December 28, 1993, failed to adequately " . . . reveal the nature and extent of the services rendered by the attorney as well as the costs incurred in preparations, motions, [and] hearings . . . in the proceeding" by "itemizing" the claim. Section 57.111(4)(b)1, Florida Statutes. By contrast, the attorney's affidavit filed for attorney's fees and costs in the appellate proceedings was adequate to identify services rendered by the attorney and costs incurred related to appeals in the proceeding. Section 57.111(4)(b)1, Florida Statutes. The amount of attorney's fees and costs for appellate proceedings is within the $15,000.00 cap for recovery of attorney's fees and costs as set forth in Section 57.111(4)(d)2., Florida Statutes.
The Issue Whether the Department of Insurance (hereinafter referred to as the "Department") should remove Respondent from the office of President of Perry & Company, a premium finance company authorized to do business in Florida, pursuant to Section 624.310, Florida Statutes, for the reasons set forth in the Administrative Complaint?
Findings Of Fact Based upon the evidence adduced at hearing, the factual stipulations into which the parties have entered, and the record as a whole, the following Findings of Fact are made: Respondent's Early Employment After graduating from Miami Dade Community College with an A.A. degree in computer science, Respondent was employed as a teller, and then as the head teller, at Pan American Bank in Miami, Florida. He remained in the employ of Pan American Bank for approximately six months. Respondent then went to work for Brickell Bank, another bank located in the Miami area. He started as a new accounts representative, but ultimately became the bank's "in-house computer person" and worked on various computer- related projects for the bank. Respondent was employed by Brickell Bank for a period of two to three years. Respondent left Brickell Bank to become the Vice President of Computer Operations at General Bank. At the time, First Miami Insurance Company (hereinafter referred to as "First Miami"), as well as its immediate parent corporation, General Trust Mortgage Corporation, were wholly owned subsidiaries of General Bank. First Miami was a Florida domestic property and casualty insurer, specializing in the issuance of "non-standard" automobile insurance policies. It was initially licensed by the Department in 1988. The majority shareholders of General Bank were Pedro Ramon Lopez and his wife, Teresa Saldise, who, at all times material to the instant case were practicing attorneys licensed to practice law in the State of Florida. Lopez was General Bank's Chairman of the Board. Saldise was its Vice Chairman of the Board. In late 1988 or early 1989, Respondent, who at the time had no previous experience working in the insurance industry, was assigned by General Bank the task of better automating and otherwise improving the efficiency of First Miami's operations. First Miami was having problems with its telephone and computer systems which, combined with other operational deficiencies, were resulting in delays in policy issuance and claims payments. The Department had received complaints from consumers regarding these delays, which it was investigating. During the investigation, Respondent met with a Department official and explained to him First Miami's computer operations. In the middle of 1989, Respondent became a full-time employee of First Miami. He was given the same title that he had had with General Bank, Vice President of Computer Operations. As Vice President of Computer Operations, Respondent initially reported to Frank Santanaria, who at the time was First Miami's Chief Financial Officer. Subsequently, when he assumed greater responsibility for the operations of the company, he reported to Diana Madero, First Miami's then Executive Vice President. The "Spin Off" of First Miami In August or September of 1989, General Bank decided to "spin off" both First Miami and General Trust Mortgage Corporation and make them independent of the General Bank corporate structure. The "spin off" was intended to satisfy the concerns of federal banking regulators. At the time of the "spin off," Respondent was actively involved in the day-to-day operations of First Miami. Although he did not participate in the decision to "spin off" First Miami, nor was he involved in taking any of the steps necessary to effectuate the "spin off," he was aware, before the "spin off" occurred, that the "spin off" decision had been made and was in the process of being implemented. The Post-"Spin Off" First Miami Following the "spin off," Lopez transferred his ownership interest in First Miami to Saldise. From the date of this transfer until First Miami's liquidation, Saldise was the principal shareholder and President of First Miami and, as such, the person in effective control of the company. She exercised such control through a holding company, First Miami Holding Company, in which she had a 75 percent ownership interest. Respondent was either an officer or director, or both, of First Miami Holding Company from May 23, 1990, until the administrative dissolution of the company on October 9, 1992. Although Lopez was neither a shareholder, officer nor director of First Miami following the transfer, he served as a consultant to the company and, along with his wife, made strategic decisions about the company's direction, its business activities, and its investments. In making these decisions, Saldise and Lopez occasionally sought the legal advice of other attorneys, including Stephen Rubin, with whom they dealt directly. Rubin is a member of The Florida Bar 4/ who has been practicing law since 1969, following his graduation from Columbia University Law School. 5/ He is primarily a litigator who specializes in complex corporate, commercial and regulatory matters, however, he also does general transaction work. Respondent replaced Diana Madero as First Miami's Executive Vice President, in charge of the company's day-to-day operations, sometime around the time of the "spin off" 6/ and he remained in that position until the Department's takeover of the company in June of 1992, receiving a salary of approximately $75,000.00 a year. As Executive Vice President, Respondent reported to Saldise and Lopez. For a period of time following the "spin off" Respondent also held the office of Treasurer. From at least February of 1990, until the Department's takeover of First Miami, Respondent was on its Board of Directors. As of December 31, 1991, the other members of the Board were as follows: Saldise; Raimundo Aleman, the Vice President of Accounting and Treasurer, who was responsible, throughout the period that Respondent was Executive Vice President, for the preparation of all of company's financial statements and reports; Orlando Roberto Soto, the Secretary; and Juan Saldise. November, 1989 Petition for Order to Show Cause Following the "spin off," First Miami acquired approximately $5,000,000.00 of General Bank stock. In November of 1989, federal banking regulators placed General Bank into conservatorship and seized its assets. Such action rendered worthless the General Bank stock held by First Miami. Following the takeover, an article appearing in a Miami newspaper quoted the Department's General Counsel as having said that First Miami was insolvent and that its majority shareholder, Saldise, and her husband, Lopez, had "walked off" with the $5,000,000.00 that First Miami had paid for the General Bank stock that was now worthless. Shortly thereafter, the Department filed in Leon County Circuit Court a Petition for Order to Show Cause against First Miami alleging that there was reason to believe that the company was insolvent. First Miami's business declined after the publication of the newspaper article and the filing of the Petition for Order to Show Cause. Independent insurance agents and premium finance companies were reluctant to continue their dealings with the company. Representatives of two large premium finance companies that had done a considerable amount of First Miami business, Perry & Company and Equivest Premium Finance, visited with Respondent and others at First Miami's offices to inquire about First Miami's solvency. During the pendency of the Petition for Order to Show Cause, the Department, with the assistance of auditors employed by Coopers & Lybrand, conducted an investigation of First Miami. The investigation was headed by Curt O'Shields. During his investigation, O'Shields had discussions with Respondent regarding First Miami's capital and surplus position as of September 30, 1989. Following the investigation, in a February 7, 1990, memorandum to the Department's General Counsel, O'Shields recommended that the Department "settle with [First Miami] and drop the rehabilitation proceedings." O'Shields noted in his memorandum that "[o]perationally, the Company has greatly improved" and "[f]inancially, [it] ha[s] provided evidence to support admitting certain assets sufficient to make the Company solvent." O'Shields' recommendation was followed. On or about February 13, 1990, the Department and First Miami entered into a stipulation which provided as follows: THIS STIPULATION is by and between the State of Florida, Department of Insurance and Treasurer and First Miami Insurance Company. For and in consideration of the mutual promises and covenants set forth hereinbelow, the parties stipulate and agree as follows: The parties stipulate and agree to entry of an Order of Dismissal of Civil Action 89-4343 pending in the Circuit Court of the Second Judicial Circuit In and For Leon County, Florida, and further agree immediately upon the execution of this Stipulation to enter into the Stipulation for Dismissal attached hereto as Exhibit A. First Miami agrees that it will not carry as an admitted asset any stock it may own in General Bank. The parties stipulate and agree that because Forum Reinsurance Company Limited at this time is not an approved reinsurer for purposes of its 1989 annual statement First Miami may not carry as an admissible asset the amount of reinsurance ceded in excess of the amount of First Miami's trust; provided, however, that the Department agrees to promptly review an application for approval of Forum Reinsurance Company Limited as an approved reinsurer, or a request for approval of Forum Reinsurance Company Limited as a SNAR, in good faith and on the same basis as it would review an application from any other insurer. 7/ First Miami for purposes of its 1989 annual statement shall carry its wholly-owned subsidiary, PRLS, Inc. 8/ as an admitted asset at a value of $650,000.00; provided however, that said valuation is contingent on First Miami's obtaining a fully executed contract for sale of said subsid- iary by June 30, 1990. If First Miami does not obtain an executed contract for sale of said sub- sidiary by June 30, 1990, on its June 30, 1990 financial statement and thereafter it shall not carry PRLS, Inc. as an admitted asset. Respondent, approved, but did not execute, the stipulation. The Stipulation for Dismissal, attached to the stipulation as Exhibit A, provided that the parties had "resolved all matters relevant that gave cause to the filing of the PETITION FOR ORDER TO SHOW CAUSE" and that "THEREFORE, the parties agree[d] to entry of an Order by the Court dismissing this action." Such an order was entered on February 13, 1990. Carrera Insurance Underwriters and the "No Down Payment" Program After the entry of the Order of Dismissal, First Miami engaged in a campaign to repair its relationships with independent insurance agents and premium finance companies. It also formed, in June of 1990, a subsidiary, Carrera Insurance Underwriters (hereinafter referred to as "Carrera"), so as to reduce its reliance upon business generated by independent insurance agents. Saldise, Lopez, Madero, Soto and Respondent were the initial members of Carrera's Board of Directors. To attract business, Carrera, at the suggestion of Lopez, instituted a "no down payment" program. Based on the legal research he had done, Lopez concluded that the "no down payment" program was not unlawful. Other insurance companies, independent agents, and agent associations, such as the Latin-American Agents Association and the Specialty Agents Association, complained to the Department about the program. After having received these complaints, the Department contacted First Miami and a meeting between representatives of First Miami and the Department was arranged. The meeting was held in Tallahassee. Among First Miami's representatives at the meeting were Saldise, Lopez and Respondent. The primary spokesperson at the meeting for First Miami was Lopez. Respondent's role at the meeting was to address computer-related issues. Neither at the meeting, nor at any other time, did the Department advise First Miami that it had concerns regarding the legality of the "no down payment" program. The Forum and Munauto Reinsurance Agreements First Miami's reinsurance agreement with Forum Reinsurance Company Limited (hereinafter referred to as "Forum"), which was referred to in the February 13, 1990, stipulation between First Miami and the Department, had been entered into on November 27, 1989. The reinsurance agreement with Forum was negotiated, on First Miami's behalf, by Erin Doherty of Saturn Intermediaries. She received input regarding the preferences of First Miami primarily from Saldise, Lopez and Madero. Respondent assisted in the negotiations by providing computer-generated reports and data. Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez. In conjunction with this reinsurance agreement, a Trust Agreement was entered into by Forum (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). Under the Trust Agreement, First Miami, rather than Forum, had the authority to direct and control the investment of trust fund assets. This was an unusual arrangement inasmuch as it is generally the reinsurer which exercises such direction and control. First Miami directed that the assets of the Forum reinsurance trust fund be invested in insurance premium finance contracts of South Florida Premium Finance Company. South Florida Premium Finance Company was a "captive" premium finance company. It financed only premiums due on policies issued by First Miami. First Miami owned 9.09 percent of the shares of South Florida Premium Finance Company. General Trust Mortgage Corporation owned the remaining shares. Respondent was an officer and director of South Florida Premium Finance Company from February 21, 1990, until October 9, 1992, the date of the administrative dissolution of the corporation. From August 1, 1989, until June 5, 1992, Respondent was either an officer or director, or both, of General Trust Mortgage Corporation. First Miami sought the Department's approval of its reinsurance arrangement with Forum. By letter dated February 26, 1990, which read as follows, the Department granted the requested approval: This is pursuant to your request for the Department to approve Forum Reinsurance Co., Ltd. of Bermuda ("Forum Re") as a "Satisfactory Non-Approved Reinsurer" for purposes of taking credit in First Miami Insurance Company's ("First Miami") accounting and financial statements for calendar year ended December 31, 1989. Your request is hereby granted under Sec. 624.610(2)(b)1, F.S., with the condition that the reinsurance contract entered into by First Miami and Forum Re shall be commuted on or before December 31, 1990 and replaced with another reinsur- ance contract satisfactory to the department. 9/ Forum commuted its reinsurance agreement with First Miami in July or August of 1990. 10/ Forum notified Doherty of its action. Doherty then contacted First Miami and discussed the matter with Respondent. Respondent asked Doherty to find an admitted reinsurer for First Miami that would be agreeable to allowing First Miami to exercise control over the investment of reinsurance trust fund assets. Doherty unsuccessfully attempted to locate such a reinsurer for First Miami. On October 11, 1990, First Miami entered into a written reinsurance agreement with Munauto, S.A., a non-admitted Spanish reinsurer, which covered both current and prior business and was particularly advantageous to First Miami. In conjunction therewith, a Trust Agreement which permitted First Miami to direct and control the investment of trust fund assets was entered into by Munauto (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). 11/ The reinsurance agreement contained an addendum which was signed by Respondent in his capacity as First Miami's Executive Vice President. The Munauto reinsurance and trust agreements were drafted by First Miami's retained attorney, Stephen Rubin. Saldise and Lopez had negotiated these agreements on behalf of First Miami. They first met with Munauto representatives in Spain approximately two to three months before the written agreements were executed. Following this initial meeting, Munauto's Chairman of the Board and its President visited First Miami's offices in Miami where they continued their discussions with Saldise and Lopez. During their visit, they also met with Respondent, who provided them with information regarding First Miami's operations and introduced them to the department heads. Doherty was not in any way involved in the negotiations that culminated in the execution of these agreements. In fact, she was not even aware of the existence of the agreements. As requested by Respondent, Doherty continued her efforts to obtain a suitable reinsurer for First Miami even after these agreements had been executed. Respondent had made such a request at the direction of Saldise, who wanted to explore other reinsurance options. On its Quarterly Statement for the quarter ending September 30, 1990, which was signed by Respondent and filed with Department on November 15, 1990, First Miami provided the Department with the following advisement: Forum has cancelled the Reinsurance Agreement. Munauto S.A. has replaced Forum Reinsurance Co. (P's FOF 46, 1st and 2nd sent) The Munauto reinsurance and trust agreements, however, were never submitted to the Department for approval. Investment in Premium Finance Contracts First Miami was advised by its retained attorney, Stephen Rubin, that it was legally permissible for it invest in the premium finance contract accounts receivable of South Florida Premium Finance Company. Rubin further informed First Miami that it was his legal opinion that First Miami's ownership of these premium finance contract accounts receivable constituted an admitted asset of First Miami under the Insurance Code. He explained that, in his view, First Miami's "participations" in these accounts receivable, based upon promissory notes, were tantamount to "securities," within the meaning of Section 625.012, Florida Statutes. Respondent was among those at First Miami with whom Rubin discussed this matter, and he relied upon Rubin's legal advice. The $1,000,000.00 Dividend On January 29, 1991, at a meeting of the Board of Directors of South Florida Premium Finance Company, the Board declared a "cash dividend of $1,000,000 to the shareholders of record as of December 1, 1990:" First Miami, which held 9.09 percent of the shares; and General Trust Mortgage Corporation, which held 90.91 percent of the shares. Saldise and Respondent were among the Board members present at the meeting. After the meeting, South Florida Premium Finance Company issued the following checks to First Miami and General Trust Mortgage Corporation on the dates and in the amounts indicated: check number 003541, dated May 10, 1991, to First Miami in the amount of $61,325.80; check number 003542, dated May 10, 1991, to General Trust Mortgage Corporation in the amount of $613,325.51; check number 003543, dated April 26, 1991, to First Miami in the amount of $37,387.32; check number 003545, dated April 26, 1991, to General Trust Mortgage Corporation in the amount of $373,914.31. 12/ All four of these checks were signed by Respondent and Aleman for South Florida Premium Finance Company. They all cleared the bank on May 13, 1991. The Immediate Final Order On or about March 1, 1991, the Department received First Miami's Annual Statement for the year ending December 31, 1990. The Department reviewed the statement to ascertain, applying the principles of "statutory accounting" (which differ from generally accepted accounting principles or "GAAP accounting"), First Miami's current ability to meet its obligations. 13/ The review caused the Department to be concerned that First Miami was not currently able to meet its obligations. On March 12, 1991, the Department sent First Miami a letter in which it stated the following: A review of First Miami Insurance Company's Annual Statement indicates that real estate (page 2, line 4.1) was listed at appraised market value, instead of cost, less depreciation. Premium and Agents' balances and installments booked but deferred and not yet due were $6,732,243 at December 31, 1990. Please explain the justification for the admission of this asset. Further, please indicate, how much and when the unearned premium was set up for this asset. Page 72, Schedule P-part 2b, line 12 shows a redun[dan]cy figure of (833), please explain this. The above referenced filing inconsistencies reported in the 1990 Annual Statement should be revised and reported properly in the amended 1990 Annual Statement to be filed with the Department within fifteen (15) days from the date of your receipt of this letter. In addition to the above reporting inconsistencies, the Department has conducted a Diversification analysis of First Miami Insurance Company's Annual Statement, which indicates that the company is not diversified by approximately $4,192,253. With respect to the improper diversification, please submit a business plan to the Department within thirty (30) days from the date of your receipt of this letter, indicating the company's plan of action to correct this concern. Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Two days later, on March 14, 1991, the Department wrote to Respondent advising him that it was "imperative that [he] submit to this Department upon receipt of this letter, Premium Volume Written, Policyholders Surplus, Earned Premiums, and Losses Incurred for the months of January and February, 1991." Respondent responded immediately. In his cover letter to the Department, he stated the following: As per your request, I am attaching a copy of our total page of premiums written for January. The net premium written is $1,110,697.20, our Data processing Department is producing the end of month February reports and should be available by 3:00 p.m. on March 15, 1991. In order to determine our net surplus of January and February Mr. Raimundo Aleman, Vice President of Accounting, is presently working on producing these numbers. Please forgive us for not having these numbers available, but as you know we have spent January and February preparing the end of year blanket. Mr. Aleman will have a full set of Financial Statements for January ready for you by March 22nd. We believe that the February Financial Statement will be completed by the second or third week of April. Should you need further assistance in this matter, please do not hesitate to contact me. In a follow-up letter dated March 27, 1991, Respondent informed the Department of the following: As per your request, please be advised the accounting department has been able to finish the Financial Statement for January 1991. Our net surplus is $3,535,987.00. We are continuing to close February 1991 and as soon as the numbers become available we will forward them to you. Should you need further information regarding the aforementioned, please do not hesitate to call me. By letter dated April 9, 1991, the Department requested the following of Respondent: Pursuant to our conversation on April 1, 1991 concerning issues that are important to the Department of Insurance please confirm in writing. First Miami Insurance Company will not take credit for reinsurance because the reinsurer is an unauthorized Alien carrier, non-approved by the Department. First Miami Insurance Company, Mrs Teresa Saldise, nor her husband, Mr. Pedro Ramon Lopez, have any investments in banks in the United States or abroad. With regards to the 1990 Annual Statement, premiums, Agents Balances and installments booked but deferred and not yet due were $6,732,243, please provide documents substantiating unearned premiums excluding net of reinsurance. In addition, how much of that balance is over ninety days old? The Statement of Actuarial Opinion was not submitted with the Annual Statement, please remit within five (5) days from receipt of this letter. The company's short term assets less short term liabilities indicates a liquidity deficiency of $4,504,955. What is the company doing to improve this deficiency? Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Respondent wrote to the Department on April 15, 1991. In his letter, he stated the following: In response to your letter dated March 12th, 1991, in reference to our Annual Statement, please be advised of the following: Premiums and Agents balances and installments booked but deferred, and not yet due were $6,732,243 at December 31, 1990. This amount reflects premium finance contracts that have been purchased from South Florida Premium Finance. The total of this amount is all outstanding monthly payments from insureds. The amount is backed by unearned premiums in the amount of $11,627,613.73. The net of that amount is also reflected on page 3, number 9. Unearned premiums Part 2A, Column 5, Item 34. Page 72 Schedule P, Part 2B line 12 shows a negative figure of $833. Please see attached. I don't believe that an amended Annual Statement is necessary due to the fact that the above two numbers in my opinion are shown correctly. Should you have any further questions about them let me know. In reference to the Diversification analysis of the First Miami Insurance Company 1990 Annual Statement, I am not sure what statute you are basing yourself on to determine whether there is a diversification problem nor how you arrive at the $4,192,253.00 figure. Can you please refer me to a particular statute or explain the manner you calculate the diversification analysis. If this amount reflects the amount invested in premiums, I believe it is a fully admitted asset according to statute 625.012(3). "Premium notes policy, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest hereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy." Should you have any further questions regarding the above, please do not hesitate to call me. On Friday, May 10, 1991, the Department issued an Immediate Final Order (hereinafter referred to as the "IFO") in which it directed that First Miami "CEASE AND DESIST instanter from writing any new, reinsurance and/or renewal business effective 5:00 P.M. Friday, May 10, 1991," inasmuch as grounds "exist[ed] for the immediate suspension or revocation of FIRST MIAMI'S certificate of authority." The IFO alleged that FIRST MIAMI in the conduct of business under its certificate of authority Is in unsound financial condition. (Section 624.418(1)(a), Florida Statutes) Is using methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or the public. (Section 624.418(1)(b), Florida Statutes) No longer meets the requirements for the authority originally granted. (624.418(1)(d), Florida Statutes) Has violated any lawful order or rule of the department or any provision of this code. (Section 624.418(2)(a), Florida Statutes) Is impaired or insolvent. (Section 624.418(3)(a), Florida Statutes Has failed to have and keep to the extent of an amount equal to its entire reserve and the minimum capital and surplus required to be maintained. (Section 625.305(1), Florida Statutes Has entered into and ceded reinsurance to non-approved reinsurers. (Section 624.610(2)(b), Florida Statutes) Has excess investments in subsidiaries and affiliates. (Section 625.325(2), Florida Statutes) With respect to the issue of reinsurance, the IFO further, more specifically, alleged the following: FIRST MIAMI took a credit for reinsurance in Forum Reinsurance Company, Ltd., a non-approved reinsurer, in the amount of $3,479,939.00, which contract, pursuant to agreement with the DEPART- MENT, was to be replaced with another reinsurance contract satisfactory to the DEPARTMENT by December 31, 1990. In addition, FIRST MIAMI'S 1990 Annual Statement reflects a credit for reinsurance in Munauto Reinsurance, S.A., a non-approved reinsurer, in the amount of $6,358,231.00. The reinsurance contract was entered into in 1990 by FIRST MIAMI with a non-approved reinsurer and has not been approved by the Department in violation of Section 624.610, Florida Statutes. Since neither of these companies are approved by the Department, the Department cannot determine if either can satisfactorily pay current or future claims of the insureds in this state. With respect to the "Premium and Agents' balances and installments booked but deferred and not yet due" referred to in the Department's March 12, 1991, letter to First Miami, the IFO alleged the following: The balance of $6,732,243.00 due from FIRST MIAMI'S subsidiary and premium finance company, South Florida Premium Finance Company, consisting of FIRST MIAMI'S premiums, agents balances and installments shown on the books but deferred and not yet due was 201 percent of policyholders surplus. Such amounts should have been submitted to FIRST MIAMI at the time premiums were financed. As reflected on the 1990 Annual Statement, the amount represents a loan back to South Florida Premium Finance Company and as such, is a receivable from an affiliate which exceeds the allowable statutory limitation by $5,837,107.00 in violation of Section 625.325(2), Florida Statutes. In addition, such amount is not shown as a loan on the 1990 Annual Statement for South Florida Premium Finance Company. Pursuant to section 625.012, Florida Statutes, only those investments and loans held in accordance with the Florida Insurance Code may be considered in determination of financial condition. Therefore the $5.8 million cannot be considered an asset of the company. According to the IFO, although "FIRST MIAMI'S policyholders surplus as indicated on its 1990 annual statement was $3,347,596[, w]ith the adjustments of assets and liabilities required in order to comply with applicable statutes, FIRST MIAMI'S surplus [was] really a negative $7,498,838.00" and therefore it was "in violation of section 624.408, Florida Statutes which require[d] surplus of $1,370,321.00 and [was] impaired or insolvent." The IFO did not specifically address First Miami's "no down payment" program. First Miami received the IFO the afternoon of May 10, 1991, and immediately contacted its attorneys in Tallahassee for legal advice. Respondent was involved in discussions with First Miami's attorneys concerning the IFO. First Miami's Tallahassee attorneys sought and obtained, on Monday, May 13, 1991, an order from a Leon County Circuit Court judge enjoining the Department from enforcing the IFO. Doherty was among the witnesses who gave testimony at the injunction hearing for First Miami. She testified that an admitted carrier, namely U.S. Capital Insurance Company (hereinafter referred to as "U.S. Capital"), was ready, willing and able to enter into a reinsurance agreement with First Miami. Doherty had begun negotiating with U.S. Capital, on behalf of First Miami, in 1990. In addition to enjoining the enforcement of the IFO, the judge ordered First Miami to take the following action: Within twenty-four (24) hours of the time this Order is entered, [First Miami] shall provide to the [Department] an English Language version of any and all reinsurance Treaties or Agreements to which First Miami is currently a party, unless such English version treaties have been previously provided to [the Department]. No later than 5:00 p.m. on May 24, 1991, [First Miami] shall provide to the [Department] proof of existing reinsurance, if not already provided. No later than 4:00 p.m. on May 21, 1991, [First Miami] shall deposit the aggregate amount of One Million ($1,000,000.00) Dollars of its funds into the registry of the court or with the Division of Collateral Securities of the Office of the Treasurer as additional security for the issuance of this Order. No later than 5:00 p.m. on May 24, 1991, First Miami Insurance Company, shall receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars and in exchange therefor shall give to the contributor a surplus note in the form and on the terms customarily approved by the Department of Insurance, and the value of the contributed asset shall not be available for the purpose of writing insurance. [First Miami] shall file, in a timely manner, as required by law, any and all statutorily required, quarterly financial statements, and provide a copy of same immediately to the [Department]. After obtaining the injunction, First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover by the Department in June of 1992. The One Million Dollar Security Deposit On May 14, 1991, Respondent and Aleman, in their capacities as officers of General Trust Mortgage Corporation, gave Sun Bank of Miami written "authorization to debit General Trust Mortgage Corporation master Account #0189000017703 the amount of $1,000,000 and issue a cashier[']s check payable to Teresa Saldise." On or about May 15, 1991, Saldise deposited the check in her money market account at Commercial Trust Bank in Hialeah. On or about May 22, 1991, Saldise withdrew from this account $1,000,000.00, with which she purchased a $1,000,000.00 cashier's check made payable to the Leon County Clerk of the Court. The cashier's check was thereafter deposited with the Leon County Clerk of the Court on First Miami's behalf to comply with the judge's order enjoining the IFO. On May 21, 1991, First Miami executed a note promising to repay the $1,000,000.00 to Saldise and General Trust Mortgage Corporation at an interest rate of 12 percent per year. The note provided that the "principal [was] payable on demand." This note was secured by a mortgage on First Miami's home office property, Units A and D-1 of the Brickell Bay Club Condominium, as well as parking spaces 181 through 381 at the condominium complex. This property was valued at $2.7 million on First Miami's 1990 Annual Statement. In addition, First Miami agreed to pay $25,000.00 in loan points, $10,000.00 in attorney's fees and $63,024.36 for 12 months of "condominium association assessments." Respondent, along with Soto, signed the note and mortgage for First Miami. The documents were duly recorded and a UCC-1 form was filed. In order to facilitate First Miami's compliance with the judge's order, the Department approved the arrangements First Miami had made to obtain the $1,000,000.00 First Miami was required to deposit "as additional security for the issuance of this Order." Subsequently, on January 19, 1992, Saldise and General Trust Mortgage Corporation made a demand for full payment of the loan. First Miami then sought an extension of the repayment period. Saldise and General Trust Mortgage Corporation agreed to an extension of 60 days. In return for the extension, Saldise and General Trust Mortgage Corporation were given additional collateral for their $1,000,000.00 loan, in the form of four mortgage notes having a total value of $1,473,750.00. Respondent and Soto signed, on behalf of First Miami, the paperwork necessary to effectuate this mortgage note extension agreement. Before Respondent did so, though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan. Rubin told Respondent during their discussion regarding the matter that the additional collateral would still be considered assets of First Miami even after the agreement was executed. In its Quarterly Statement as of March 31, 1992, that it submitted to the Department, First Miami disclosed the following regarding the mortgage note extension agreement: The Company notes that certain promissory notes owned by the Company in the original principal amount of $1.47 million have been pledged as additional security for the note issued by the Company on May 21, 1991. The Company's note is also secured by the previously-disclosed mortgage on the Company's headquarters office. The "Company's headquarters office" was listed on the statement as a $2,700,000.00 asset of First Miami, as it had been on all previous quarterly and annual statements submitted to the Department since 1989 Annual Statement. The Saga Bay Property With respect to the requirement contained in the judge's order enjoining the IFO that First Miami "receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars," Saldise and/or Lopez contributed to First Miami 13 real estate parcels located in the Saga Bay development in Dade County, Florida. In exchange therefor, First Miami gave a surplus note, which the Department approved. Post-IFO Reinsurance On May 15 and 16, 1991, Jim Smith, a Reinsurance Financial Specialist with the Department, visited the offices of First Miami. The purpose of his visit was to analyze and review First Miami's reinsurance program. Smith issued a written report detailing his findings on May 20, 1991. In the "Summary" section of his report, Smith stated the following: Based on the information available, the current reinsurance program is highly suspect. I believe there is a possibility that First Miami is re- insuring itself or at a minimum only obtaining limited financial reinsurance. The use of the trust agreement would normally provide some assurance as to the availability of funds. However, the purchase of premium finance contracts from South Florida Premium Finance Company circumvents this normal protection feature. First Miami has purchased over 6 million [dollars] of these contracts since March 20, 1991. 14/ The lack of correspondence between First Miami and Silver Breeze, Ltd. 15/ and/or Munauto S.A. is also of concern. I find it unconscionable that a company would accept a potential $20 million liability without having some preliminary written negotiations or correspondence. Another concern is that Munauto S.A. accepted the previous reinsurer's contract without modifying the terms to protect its interest. 16/ Such action is not characteristic of an arm's length transaction in the reinsurance industry. Also atypical is the wire transfer of funds through General Trust Mortgage, an affiliate, to the intermediary and reinsurer. Smith went on to further state the following: I have reviewed the accounting entries in regard to the Munauto reinsurance treaty and they appear to be normal and booked correctly. I also reviewed debits and credits to the re- insurance trust account at Sun Bank. These entries appeared normal except for use of these trust funds to purchase or invest in South Florida Premium Finance contracts. The terms of the temporary restraining order (TRO) require First Miami Insurance Company to replace the current reinsurer with an approved reinsurer acceptable to the Department. I highly agree with this provision. I would suggest that First Miami has no effective reinsurance lacking supportive evidence to the contrary. Therefore, it is imperative they replace the current re- insurance with an approved reinsurance treaty which actually transfers the underwriting risk. At the request of First Miami, following the issuance of the IFO, Doherty, on First Miami's behalf, while still negotiating with U.S. Capital, commenced negotiations with another potential reinsurer, Dai Ichi Kyoto. In July of 1991, Doherty met with representatives of Dai Ichi Kyoto in London. Respondent was present at the meeting. The negotiations culminated in a signed, conditional reinsurance agreement. Respondent signed the agreement on behalf of First Miami. Under his signature he placed the following handwritten notation, which he initialed: "Subject to approval of the Florida Department of Insurance." The agreement never received the approval of the Department. In early August of 1991, First Miami entered into a series of reinsurance agreements with Warwick Re Insurance and Reinsurance Company, LTD (hereinafter referred to as "Warwick Re"). The agreements were drafted by Rubin, First Miami's retained attorney. In drafting the agreements, he utilized the Munauto reinsurance documents, making revisions where appropriate. Warwick Re was incorporated on August 7, 1991, in Anguilla. The subscribers, each with 250 shares, were General Trust Mortgage Corporation and Procesys, Inc. Respondent signed the necessary documents on behalf of General Trust Mortgage Corporation. Lopez signed on behalf of Procesys, Inc. Prior thereto, on July 31, 1991, in anticipation of its incorporation, Warwick Re had applied for registration as an insurer in Anguilla. Respondent was listed as a director of Warwick Re on the registration form and he signed the form in various places in his capacity as a director. The following day, August 1, 1991, the Boards of Directors of General Trust Mortgage Corporation and Procesys, Inc. each resolved to make a capital investment in Warwick Re in the amount of $100,000.00. Each resolution was signed by Respondent in his capacity as a director. According to a financial statement prepared by Mario Toca, a certified public accountant, as of September 30, 1991, Warwick Re had $20,988,714.00 worth of assets. On August 8, 1991, Bob King of U.S. Capital sent a memorandum to Respondent requesting a decision regarding the offer U.S. Capital had made to First Miami regarding reinsurance. That same day, Respondent sent King a letter in which he stated the following: In reference to the reinsurance treaty between U.S. Capital and First Miami Insurance Company, I would like to advise you that we are negotiating with the Helm Bank the possibility of them pur- chasing the Premium Finance Contracts from us, in consideration of our banking relationship. This means that we would establish a Trust for the outstanding reserves of your portion of the Quota Share. The Trust will invest in A plus Securities only. Should you have any questions, do not hesitate to contact me. On August 22, 1991, King sent Doherty a letter informing her of the following: As a result of First Miami's inability to conclude our proposed transaction, please be advised that we withdraw any and all offers as presented or amended. Unfortunately, we find ourselves unable to proceed with an organ- ization which cannot make a determination as to its objectives and method of transacting business. Respondent was furnished a copy of the letter by King. After receiving King's letter, Doherty faxed a copy of the letter to Lamont Wynn of the Department at Wynn's request. Whereas the Department was swiftly advised of the breakdown in negotiations between U.S. Capital and First Miami, it was not until January 27 1992, that the Department first learned of the reinsurance agreements between First Miami and Warwick Re. On that date, representatives of the Department, including Lisette Lozano, went to the offices of First Miami to review First Miami's books and records. While on the premises, Lozano spoke with Respondent, who, throughout the period he was the Executive Vice President of First Miami, served as First Miami's primary spokesperson in its dealings with the Department. Before speaking with Lozano, Respondent had received instructions from Saldise and First Miami's attorneys that he was to discuss with Department representatives only those matters relating directly to First Miami. Not deviating from these instructions, Respondent told Lozano that Warwick Re was "now the reinsurer of First Miami." Respondent volunteered that Warwick Re was an Anguilla company that owned more than 90 percent of South Florida Premium Finance Company. Lozano, who was not at all familiar with Warwick Re, asked Respondent the names of the officers and directors of the company. Following the instructions he had been given, Respondent told Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami. That same day, January 27, 1992, South Florida Premium Finance Company and General Trust Mortgage Corporation issued checks in the amounts of $200,000.00 and $703,549.16, respectively, payable to Warwick Re. Both checks were signed by Respondent. The next day the checks were deposited in Warwick Re's newly opened account at Sun Bank. The Department ultimately determined that the reinsurance agreements between First Miami and Warwick Re were not "appropriate reinsurance transactions," although it had no proof that Warwick Re was insolvent. Infusion of Additional Capital into First Miami In or about late 1991, Saldise and Lopez made Respondent aware of their plans to formally contribute additional assets to First Miami in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency. Among these assets were ownership interests in the following corporations: Warwick Properties, Inc.; Investors Arts and Antiques, Inc.; Community Broadcasters, Inc.; and Procesys, Inc. Respondent questioned Lopez as to whether the assets which were to be contributed to First Miami would be considered admitted assets under the Florida Insurance Code. Lopez told Respondent that he had researched the matter and come to the legal conclusion that they would be admissible, at least for a three year period. Furthermore, he showed Respondent a draft of a legal memorandum he was preparing which addressed the subject. Respondent subsequently reviewed a second legal memorandum, prepared by another attorney, Marc Cooper, which discussed the admissibility of these assets. Respondent was further advised that although no written contracts effectuating the contemplated transfer of assets had yet been executed, oral agreements to do so did exist. Saldise felt uncomfortable infusing these additional assets into First Miami without written agreements making it clear that it was her intention that the transfer of these assets would be effective only if the Department deemed them to be admitted assets. Rubin, First Miami's retained attorney, drafted these written agreements and related board resolutions. Although it was originally contemplated that these written agreements would be prepared and signed before the end of 1991, they were not ready for execution until March of the following year. 17/ Saldise instructed Respondent to sign the agreements on behalf of each of the parties. Respondent felt ill at ease doing so and asked Saldise whether it was appropriate for him to sign on behalf of more than one party. Saldise assured him that it was inasmuch as he was an officer of each of the parties on behalf of whom he would be signing. Respondent also sought Rubin's legal advice on the matter. Rubin told Respondent that there was no reason, from a legal standpoint, why he could not follow Saldise's instructions regarding execution of the written agreements. Respondent also asked Rubin if the agreements actually accomplished what Saldise and Lopez had intended: to give legal title of these assets to First Miami. Rubin responded in the affirmative to this inquiry, although he further advised Respondent, as he had Saldise, who nonetheless decided to proceed with the transfer of assets, that if a conservatorship or liquidation proceeding were initiated by the Department all of First Miami's assets would be frozen and unavailable to Saldise personally. 18/ Another matter about which Respondent was concerned was the effective date of the agreements, which the agreements indicated was December 31, 1991. He therefore raised the subject with Rubin. Rubin advised Respondent that there was "no problem" with the December 31, 1991, effective date since the written agreements, although they would be signed after that date, merely memorialized what had already been orally agreed upon by the parties prior to December 31, 1991. Relying on the advice he had been given, Respondent, in late March of 1992, executed the written agreements as he had been instructed, thereby formally effectuating the contribution of assets to First Miami, but only after one of the agreements, which had originally reflected a December 31, 1991, date of execution, had been modified, at his insistence, to accurately reflect the date he actually signed the agreement. Payment of Attorney's Fees First Miami authorized payment of past and future attorney's fees incurred by Saldise and Lopez in defending themselves in a federal court proceeding involving General Bank. In this federal court proceeding, which was initiated after the "spin off" of First Miami, the federal government was attempting to freeze the personal assets of Saldise and Lopez. These personal assets included many, if not all, of the assets that Saldise and Lopez planned to contribute, and that later actually were contributed, to First Miami. If these assets planned for contribution were frozen, they would be unavailable to First Miami. Accordingly, First Miami felt that it was appropriate to expend funds, in the form of payment of Saldise's and Lopez's attorney's fees, in an effort to prevent this from happening. Notice to the Department of the Capital Infusion First Miami notified the Department of the capital contributions made to the company by including in the 1991 Annual Statement it submitted to the Department the following footnote, footnote 18, which was drafted by Rubin and reviewed by Respondent: PURSUANT to contracts entered between Liborio Financial Group 19/ and First Miami Insurance Company, Liborio has agreed to contribute its ownership of four subsidiary corporations, including assets owned by these subsidiaries, to First Miami subject to the satisfaction by First Miami of the condition precedent with respect to two of the subsidiaries that the State of Florida Department of Insurance finds that all assets held by First Miami qualify as admitted assets, and that First Miami is in compliance with capital and surplus requirements. This footnote was included in the 1991 Annual Statement at the specific direction of Saldise and Lopez. Respondent had disagreed with Saldise's and Lopez's method of disclosure and had suggested that instead they meet with Department representatives prior to the filing of the 1991 Annual Statement to disclose the information contained in footnote 18. Saldise and Lopez, however, vetoed Respondent's suggestion. The Contributed Assets Warwick Properties, Inc. Warwick Properties, Inc., (hereinafter referred to as "WP") was incorporated on July 31, 1991. Respondent was one of the incorporators. From the date of its incorporation until its administrative dissolution on October 9, 1992, Respondent was an officer, director or both of the corporation. According to a financial statement prepared by CPA Toca, as of December 31, 1991, WP had total assets of $4,500,660.00 and total liabilities, excluding stockholders' equity of $1,176,638.00. Among its assets was an apartment complex known as the Marianna apartments. In October of 1989, these apartments were appraised by Philip Spool, ASA, who estimated their market value at $2,100,000.00. The apartments were valued at $2,300,000.00 in an appraisal conducted in June of the following year by Appraisal and Real Estate Economics Associates, Inc. The written appraisal report was issued on July 9, 1990. This appraisal was referred to in Note 6 of Toca's financial statement, which read as follows: As stated in Note 1, property is recorded at historical cost in accordance with generally accepted accounting principles. However, the estimated current value of land and building based on an independent appraisal performed on July 9, 1990 amounted to $2,300,000. Another asset held by WP was a third mortgage on Saldise's personal residence. In an appraisal conducted in August of 1988, by Appraisal and Real Estate Economics Associates, Inc. the residence was valued at $3,275,000.00 using a "cost approach" and $3,250,000.00 using a "sales comparison approach." Investors Arts and Antiques, Inc. Investors Arts and Antiques, Inc., owned works of art and antiques. These items had been appraised and assigned valuations. Investors Arts and Antiques, Inc., also owned 52.5 percent of Community Broadcasters, Inc. The other shareholders were Maria Elena Prio and Carrie Meek. Community Broadcasters, Inc., held a Federal Communications Commission license to operate a radio station in the Miami area and had obtained certain programing rights as a result of having entered into an agreement with Business Radio Network, Inc. Respondent was at no time an officer or director of either Investors Arts and Antiques, Inc., or Community Broadcasters, Inc. According to a financial statement prepared by CPA Toca, as of March 23, 1992, Investors Arts and Antiques, Inc., had total assets of $2,487,700.00, with donated capital amounting to $2,487,200.00. These donations of capital had been made by Saldise and Lopez. Procesys, Inc. According to a financial statement prepared by CPA Toca, as of December 31, 1991, Procesys, Inc., had total assets and liabilities of $75,065.00. In a note to his statement, Toca made the following comment: In accordance to the Statements of Accounting Standards (SFAS Nos. 2 and 86), the costs incurred internally in creating computer software are charged to expense until the completion of a working model. Thereafter, all costs are capitalized and amortized based on current and future revenues. Accordingly, subject to future revenues, the "Company's" management, estimates that the products developed have a market value of $3,000,000. Procesys, Inc. owned the ATRACK computer software system, which was designed for use by companies providing automobile insurance. First Miami used the ATRACK system pursuant to a licensing agreement it entered into with Procesys, Inc., which agreement the Department had approved. Although it was used extensively by First Miami to deal with day-to- day operational matters, the system did not have an accounting function and therefore was not used by First Miami for that purpose. Lopez helped to develop the ATRACK system when he was involved in another insurance company, International Bankers Insurance Company, prior to his involvement in First Miami. Respondent refined and modified the system to meet the particular needs of First Miami. In February of 1992, pursuant to Lopez's request, Respondent asked Alberto Alphonso, the owner of Microcare Service Corporation (hereinafter referred to as "Microcare"), the vendor which provided First Miami with computer-related goods and services, to appraise the value of the ATRACK system. 20/ Alphonso was a friend of Respondent's whom Respondent had known since his community college days. Alphonso's corporation, Microcare, had previously been owned by Respondent under the name Computer Technology Systems, Inc. Upon the transfer of his ownership interest to Alphonso, Respondent resigned his position as an officer/director of the corporation and has not held any similar position since his resignation. He did do some "moonlighting" work through Microcare, and his wife, Dania Campos, continued to work as a secretary for the corporation for a short period of time after the transfer. Otherwise, however, neither he nor his wife have had any involvement in the affairs of Microcare, nor have they received any dividends or corporate disbursements from the corporation. Alphonso agreed to do the appraisal. On or about February 17, 1992, he submitted his written report to Lopez. Alphonso stated in the report that in his "opinion, based upon potential revenues of this product, that obtaining exclusive marketing and copy rights would have a fair market value of $3,087,500." In early April of 1992, Respondent approached the owner of Nationwide Computer Systems, Inc., Mike Burns, an MIT graduate with an extensive computer background, requesting that he provide another opinion concerning the fair market value of the ATRACK system. Respondent explained to Burns that he was "in a rush to get the appraisal." Respondent did not specifically state why he needed the appraisal, but Burns was left with the impression that it was "just required to fill some requirement to have three appraisals." Respondent advised Burns of the appraisal Alphonso had done and showed Burns Alphonso's report. In doing so, Respondent commented that he was "comfortable with the appraisal." Burns was at first reluctant to undertake the task because he thought that someone else might be better qualified to do so. He felt more confident about his qualifications after learning of Alphonso's appraisal because he considered himself at least as qualified as Alphonso, with whom he was familiar, to do such an appraisal. He therefore ultimately agreed to accept the assignment. On or about April 13, 1992, Burns submitted his written report to Respondent. In the concluding paragraph of his report, Burns stated the following: It is my opinion that the ATRACK software uses the most modern tools and operating platform and the skills of programmers and designers are above- average, and that its modular design will give it an advantage in opening new markets. For this reason I have evaluated the software at $2.90 million in its current form. I am assuming that programmers associated with the software will bring their expertise and experience with the software. If a new programming staff is required, there will be substantial up-front learning curve costs. My estimate is based upon the information I could gather in a limited time-frame. The staff of First Miami Insurance was open to all my requests and no attempt was made to keep me from any data I required. Some supporting material is included. Valuation of First Miami's Home Office In January of 1989, First Miami's home office property was appraised by Appraisal and Real Estate Economics Associates, Inc., and given a market value of $1,600,000.00. Thereafter, the property was extensively renovated. Following the completion of these extensive renovations, a second appraisal of the property was done by Fred Carach. In his report, Carach opined that, as of October 29, 1989, the property had a market value of $2,700,000.00 In the IFO proceeding, the Department did not raise as an issue the value of the home office property. At no time did the Department voice any concerns regarding the appraisers that conducted these two appraisals for First Miami of its home office property. While they may not have shared their thoughts on the matter with First Miami representatives, Department officials did question whether First Miami was overstating the true value of its home office property. They therefore retained Charles Failla to provide them with an appraisal of the property. In his written report, Failla opined that, as of March 13, 1992, the date of the report, the property had a market value of $800,000.00. Valuation of South Florida Premium Finance Company Onyx Financial Group, Inc., (hereinafter referred to as "Onyx") is a company located in Miami, Florida, which South Florida Premium Finance Company retained to provide an appraisal of its market value in anticipation of making a public offering. (The public offering, however, was never made.) On or about December 11, 1991, Onyx provided such an appraisal. Onyx sent the appraisal to Respondent. First Miami used the appraisal to prepare financial statements that were later submitted to the Department. First Miami's Handling of Claims As noted above, at the time that Respondent was initially assigned to work for First Miami, the company was experiencing difficulty in timely paying claims and, as a result, was the subject of numerous consumer complaints made to the Department. In response to concerns expressed by the Department about these complaints, First Miami made improvements to its telephone and computer systems and hired additional claims adjustors as well as a new claims manager. It also, in large measure through the efforts of Respondent, developed and implemented a specific procedure to track and quickly respond to these complaints. Immediately after First Miami took these measures, there were fewer reported delays. As of May 13, 1991, the date the IFO was enjoined, the Department was satisfied with the remedial steps taken by First Miami and had "concluded that the consumer complaint problem [was] not related to any solvency problems." Statistics maintained by the Department's Division of Insurance Consumer Services, however, reveal that, for the entire calendar year of 1991 and for the first two months of 1992, the Department received a relatively large number of consumer complaints about First Miami, most of which related to alleged delays in paying claims. The numbers, by line of insurance, were as follows: 1991 Jan/Feb 1992 "P/P Auto No-Fault" 64 26 "Other P/P Auto Liab" 376 71 "P/P Auto Phys Damage" 317 86 The numbers for Allstate and State Farm Insurance Companies, which held much larger shares of the respective markets than did First Miami, in comparison, were as follows: Allstate 1991 Jan/Feb 1992 "P/P Auto No-Fault" 118 28 "Other P/P Auto Liab" 398 23 "P/P Auto Phys Damage" State Farm 154 19 1991 Jan/Feb 1992 "P/P Auto No-Fault" 133 23 "Other P/P Auto Liab" 267 42 "P/P Auto Phys Damage" 187 27 According to these statistics, however, First Miami did not have the highest "Complaint Index" (which is arrived at by dividing the insurer's 1991 complaint share by its 1990 market share) for all of the lines of insurance covered. As evidenced by the Department's statistics, "non-standard" insurers, like First Miami, tend to have a higher "Complaint Index" than other insurers. Following the hiring of its new claims manager, First Miami developed a written claims handling procedure, which provided, in part, as follows: Step 1. New claims are received via telephone, mailed or faxed to First Miami Insurance Company by the insured, claimant, attorneys or agent. Customer Service completes the automobile loss notice (ACCORD FORM), and verifies coverage. Step 2. Accord forms are given to the Data Entry Department to complete a new loss report form. Step 3. Claims manager or assistan[t] manager reviews accord form, assigns preliminary reserves and assigns claims to adjuster. The choice of adjuster to handle the claim will depend on the type and severity of the claim. The most qualified adjusters will handle the most serious claims. The initial reserves are as follows when the amount of loss cannot be reasonably estimated. PD, COLL 800 to 1,100 COMP 500 to 800 PIP 2,000 Ded 400 PIP full 1,000 BI-UM 1,000 Step 4. Data Entry Clerk sets up new loss [reserve] based on preliminary reviews. The adjuster must review the accuracy of the reserve or the files which are processed on diary. Adjustment, both upward and downward, must be made on all coverage where appropriate. The police report is requested and appraisal assignment is made. The file is returned to the cabinet to await 15 day diary cycle. File will be reviewed Bi-monthly by adjuster and manager/supervisor. SETTLEMENT OF CLAIM: The adjuster can settle claims up to $3,000. Anything over $3,000 requires the signature of the claims committee which meets once a week. After claim has been settled, the unit supervisor reviews claims file to verify coverage and liability. RELEASE OF PAYMENT: Proper release forms must be received before final payment/check is issued. Unit supervisor is allowed to release payments up to $2,000. If payment is from $2,000 to $3,000, it must be released by either the claims manager or his assistant. If over $3,000, payment must be released by Alex J. Campos, EVP. 21/ After payment is released, and outstanding reserves are closed out on the "Reserve History Sheet[,]" [t]his claims report is printed out on the "Daily Close Report" which indicates that the remaining reserves have been eliminated. . . . In addition, First Miami's adjusters were given written instructions they were expected to follow. Through these written instructions, the adjusters were advised of, among other things, the following: All of the adjuster's claims handling activities, should be directed towards achieving the major claims handling goals which are: Provide the best possible customer service. Comply with the insurance policy/contract and the law. Minimize our losses and expenses. In handling a claim, the adjuster not only deals with facts and figures, but also with people. Therefore, the adjuster is responsible for helping to build friendly and satisfactory relations with the insured-claimant and the public. The adjuster may be the only contact the insured-claimant has with the insurer, other than the sales agent. A person who receives prompt attention and fair treatment will want to continue his or her relationship with us. An insurer with a reputation for fast, fair claims service is likely to attract new policyholders. One of our primary goals is to comply with the insurance contract/policy[, a]s we have both a moral and legal obligation to assure the insured receives the protection purchased. This also includes complying with any applicable law. The adjuster is responsible for seeing that moral, legal, and contractual obligations are fulfilled. While we as an insurer are committed to fulfilling all our obligations, we are also committed to controlling and reducing our losses/expenses. This can be achieved by limiting our claims payments to only those legitimately established by contract and law. Thus, again, the adjuster is responsible for prompt and efficient processing of claims and claims data. As this last paragraph may suggest, First Miami, at the insistence of Saldise and Lopez, had a very "conservative" claims payment philosophy: to pay claims only after they had been thoroughly investigated and determined to be valid. Conducting such investigations necessarily delayed the processing of claims. 22/ The use of a claims committee to review claims was an essential component of First Miami's "conservative" approach to the payment of claims. First Miami's claims committee consisted of a core of three individuals: an attorney retained as a consultant by First Miami; the claims manager; and the assistant claims manager. The attorney on the claims committee was Carlos Lidsky. Lidsky has practiced personal injury and insurance law in the State of Florida for approximately the past 20 years. From time to time, Lidsky and his two colleagues on the claims committee would invite additional individuals, including Respondent, to sit on the committee for particular meetings and join in the discussions and deliberations. On those occasions that he sat on the claims committee and, as a member thereof, withheld approval of questionable claims, he reasonably believed that the committee's actions were in the best interest of First Miami's shareholders and policyholders. Assisting the claims committee in evaluating claims involving medical issues was a nurse and a physician that First Miami had hired for that purpose in an effort to combat fraudulent claims. The physician was a respected orthopedic specialist, who also was a minor shareholder of General Trust Mortgage Corporation, First Miami's parent corporation. Where the claims committee was presented with objective evidence of bodily injury, it invariably approved payment up to the policy limits. In those personal injury protection cases where there was no such evidence, however, the committee withheld its approval and contested the claim. In a significant number of personal injury protection cases, Lidsky advised First Miami to invoke the arbitration clause of the policy and First Miami followed his advice. This often led to a compromise and settlement of the claim. Where First Miami was presented with a subrogation claim and there was an indication that there may have been some comparative negligence, the matter was investigated before any payment was made. Lidsky had standing instructions to, on behalf of First Miami, negotiate in good faith all disputed subrogation claims, (including not only those filed against First Miami but those filed by First Miami as well) and enter into, what are referred to in the industry, as "bulk settlement" agreements. At one point in time during the latter stages of First Miami's existence, the aggregate amount of pending subrogation claims made against it by State Farm Insurance Company and Allstate Insurance Company and separate claims being handled by Bell Adjusting Company was $1,200,000.00. None of these claims were ever paid. 23/ First Miami, however, through Lidsky, who acted at the specific direction of Saldise and Lopez, did enter into "bulk settlement" negotiations with State Farm Insurance Company (whose pending subrogation claims against First Miami at the time amounted to approximately $492,000.00) in an effort to resolve these pending claims, as well as those unpaid subrogation claims First Miami had made against State Farm. 24/ These negotiations were not fruitful. They terminated without any agreement being reached. Lidsky believed that State Farm had not negotiated in good faith and so informed Respondent, who had not participated in the negotiations. Unable to reach a settlement with First Miami, State Farm resorted to litigation, suing the alleged tortfeasors. Other claims-related lawsuits were filed against First Miami policyholders. On occasion, First Miami was also sued. In some of these cases, the plaintiffs prevailed. Lidsky and First Miami's Claims Department were responsible for seeing to it that First Miami policyholders who were the subject of a lawsuit received the legal representation First Miami was obligated to provide. Respondent was not made aware of any case where First Miami refused to provide such representation. First Miami's Loss Reserves In his capacity as Executive Vice President of First Miami, Respondent did not himself establish the levels of the company's reserves. First Miami maintained two types of reserves: an individual case reserve regarding specific claims, and an IBNR ("Incurred But Not Reported") reserve. First Miami's Claims Department established claims reserves for individual cases. Two actuaries, one employed by First Miami, Jeff Cohn, and the other an independent contractor, James Stergiou, reviewed and certified the actuarial soundness of First Miami's IBNR reserve. Stergiou provided Respondent with written statements certifying the adequacy of First Miami's IBNR reserve for the years 1990 and 1991. In its communications with First Miami, the Department never raised any questions regarding Stergiou's qualifications to provide such certifications, and Respondent had no reason to believe that Stergiou was not so qualified. First Miami's Lawsuit Believing that the Department and Insurance Commissioner, in concert with the Latin-American Agents Association and the Specialty Agents Association, had acted in violation of civil rights and antitrust laws in its dealings with First Miami, Saldise and Lopez decided in December of 1991, or January of 1992, that First Miami should file a lawsuit against these parties to seek redress. Two attorneys, Sonny Meyers and Stephen Rubin, were retained to represent First Miami in connection with such contemplated legal action. Saldise requested Respondent, in preparation for a meeting with Meyers and Rubin, to review various matters pertinent to the lawsuit, including the chronology of events concerning the "no down payment" program about which the Latin-American Agents Association and the Specialty Agents Association had complained to the Department. The meeting was held on February 4, 1992. A court reporter was present at the meeting. Following the meeting, a transcript of the meeting was prepared. 25/ The lawsuit was ultimately filed in federal court in Miami. Disposition of Carrera Thereafter, as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the "no down payment" program that had generated so much controversy. Carrera was initially sold to Victor Madero, Diana Madero's husband, for between $900,000.00 and $1,000,000.00. At the time of the sale, Diana Madero had an insurance agency of her own and was not in any way connected with First Miami. The sale was negotiated by Lopez on behalf of First Miami. After Mr. Madero had made three or four payments, he decided that he did not want to remain in the insurance business. He made no further payments and First Miami "took back" Carrera from him. Thereafter, First Miami sold Carrera to Lewis Sands for approximately the same price Madero had paid. Payments were to be made over a 12 year period and interest was charged. Sands made payments of approximately $66,000.00 before defaulting. As a result of the default, First Miami again took possession of Carrera. It subsequently sold Carrera to Frank Davila for approximately the same price Madero and Sands had paid. Payments were to be made for a period of less than 12 years and interest was charged. Following the sale to Davila, which, like the sale to Sands, was negotiated by Respondent 26/ and another First Miami Vice President, Sergio Fonte, First Miami had no ownership interest or involvement in the operation of Carrera. Carrera was administratively dissolved on August 13, 1993. Financial Statements Raimundo Aleman, First Miami's Chief Financial Officer, reported to Respondent during the time Respondent was the company's Executive Vice President. As noted above, Aleman was responsible for formulating and placing the entries on the Quarterly and Annual Statements First Miami submitted to the Department. He was designated on the statements as First Miami's "contact person." As a general rule, before the statements were sent to the Department, Respondent reviewed Aleman's work product to determine if there were any obvious omissions or mistakes. With respect to the Quarterly Statement as of March 31, 1992, however, Respondent only reviewed the footnotes. All of First Miami's Quarterly and Annual Statements contained a sworn attestation, signed by certain of its officers, certifying that the information contained therein was complete and accurate "according to the best of their information, knowledge and belief." Respondent signed this attestation as Treasurer on the 1989 Annual Statement, the Quarterly Statement as of March 31, 1990, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990. He signed none of the other financial statements that First Miami submitted to the Department, with the exception of the Quarterly Statement as of September 30, 1991, which he executed on behalf of Saldise. These other financial statements that First Miami submitted to the Department, but which Respondent did not sign, were: the 1990 Annual Statement; the Quarterly Statement as of March 31, 1991; the Quarterly Statement as of June 30, 1991; the 1991 Annual Statement; and the Quarterly Statement as of March 31, 1992. Respondent was listed as a Vice President and Director on these statements, all of which were signed by Aleman in his capacity as Treasurer. Respondent was not aware, nor did he have any compelling reason to believe, that any of the financial statements that First Miami submitted to the Department during the time he was its Executive Vice President contained misleading or inaccurate information concerning First Miami's financial condition or any other matter of significance to the Department. There was no intent on Respondent's part to deceive the Department. In discharging his duties as First Miami's Executive Vice President, including those duties related to the preparation and filing of the financial statements the company submitted to the Department, Respondent reasonably relied upon the advice and opinions of attorneys, accountants, appraisers, actuaries and other professionals concerning matters which, by all appearances, were within the scope of these professionals' expertise. For instance, he reasonably relied upon the professional opinions that had been rendered regarding the admissibility and valuation First Miami's assets and the adequacy of the company's loss reserves. His views concerning the financial condition and solvency of First Miami, understandably, were shaped by these opinions. The On-site Review and Respondent's Deposition After First Miami filed its 1991 Annual Statement on or about March 15, 1992, the Department conducted an on-site review at First Miami's offices. Respondent served as First Miami's primary spokesperson during the review, answering questions posed by the Department's representatives concerning, among other things, the 1991 Annual Statement that First Miami had filed. In doing so, Respondent expressed the view that the transactions reflected in footnote 18 were "bona fide . . . with economic substance behind them" and that First Miami was not insolvent, which is what he reasonably believed. Subsequently, various First Miami officials were subpoenaed and deposed by the Department. Respondent was among those deposed. First Miami had designated Respondent as its representative for purposes of responding to a subpoena with which it had been served by the Department. Although Aleman was more knowledgeable than Respondent about the financial affairs of First Miami and the contents of its 1991 Annual Statement, he was not so designated because of his difficulty in orally communicating in the English language. Aleman, though, did retrieve documents for Respondent's use at the deposition. Prior to the deposition, Respondent consulted with Lopez and First Miami's attorneys with respect to the company's position concerning the admissibility of assets. During his deposition, in responding to questions, Respondent relied upon the documents he had been given by Aleman, as well as the notes he had taken during his pre-deposition meeting with Lopez and the other attorneys. Conservatorship and Liquidation of First Miami On or about May 14, 1992, First Miami filed its Quarterly Statement as of March 31, 1992, with the Department. Certain assets which appeared on the 1991 Annual Statement were not included in this Quarterly Statement. Saldise had directed Aleman to delete these assets in response to the concerns the Department had expressed regarding their inclusion in the 1991 Annual Statement. After the filing of this Quarterly Statement, the Department instituted conservatorship and liquidation proceedings in Leon County Circuit Court and, in conjunction therewith, sent personnel to First Miami's offices. During the conservatorship, which commenced on May 29, 1992, Respondent, who had been cooperative in his prior dealings with the Department, remained on the payroll of the company. He prepared computer programs to assist in the calculation of commission payments. In addition, he provided to Department personnel on the premises valuable information concerning the operations of First Miami, including its computer system. An unopposed order liquidating First Miami and appointing the Department Receiver was entered on June 5, 1992. Among the findings set forth in the order was that First Miami was "insolvent as defined in section 631.011(11), Florida Statutes (1991)." Among the directives set forth in the order was the following: All affiliated companies including, but not limited to General Trust Mortgage Corporation, Liborio Financial Group, Inc., First Miami Holding Corporation, South Florida Premium Finance Company, Procesys, Inc., Investors Arts & Antiques, Warwick Properties Inc., Carrera Insurance Underwriters, Inc., Camino Insurance Underwriters, Inc., and Warwick Re are hereby directed to make their books and records available to the Receiver . . . . The order further provided that "[a]ll officers, directors, agents and employees and all other persons representing [First Miami] or currently employed by [First Miami] in connection with the conduct of its business are discharged forthwith." The Department determined that, at the time of liquidation, First Miami had admitted assets totalling $4,203,356.00, which fell into the following categories: Mortgage loans on real estate: First liens $1,465,889.00 Real estate: Properties occupied by $800,000.00 27/ the company Cash on hand and on deposit: Cash on deposit $1,247,553.00 Short term investments $594,672.00 28/ Electronic data processing equipment $95,242.00 On its last financial statement, the Quarterly Statement as of March 31, 1992, First Miami had listed a total of $27,340,837.00 of admitted assets. The difference between the Department's June 5, 1992, total and First Miami's March 23, 1992, total was, in large measure, the product of the Department's disagreement with First Miami and with the professionals upon which First Miami relied 29/ as to the admissibility and valuation of certain of First Miami's assets. Post-Liquidation Activities Following the entry of the order of liquidation, Respondent was retained for a period of two or three weeks to continue to assist the Department/Receiver, as well as the Florida Insurance Guaranty Association, which had taken over the responsibility of processing and paying claims made against First Miami. No other First Miami officer or director was similarly retained. 30/ Saldise and Lopez left Miami for Madrid, Spain, a day or two after the entry of the liquidation order. First Miami had almost 600 claims-related cases in litigation at the time of liquidation. Lidsky's office handed the files in these cases over to the Florida Insurance Guaranty Association at the Department's request. As of January 31, 1994, for both loss claims and expenses, the Florida Insurance Guaranty Association had paid $12,397,234.35 on behalf of First Miami. As of March 7, 1994, it had reserved $1,638,369.14 to pay additional loss claims on First Miami's behalf. Respondent's Present Employment Situation Respondent is currently the President (but not a director) of Perry & Company, a premium finance company authorized by the Department to do business in the State of Florida. Perry & Company's Chairman of the Board is Richard Perry. Perry has known Respondent for approximately four or five years. He first became acquainted with Respondent when Respondent was employed by First Miami. At the time, Perry & Company was one of the companies that financed premium payments on insurance policies issued by First Miami. Perry was very much impressed with the operational efficiency of First Miami. On behalf of Perry & Company, he extended Respondent an offer of employment, at a higher salary than Respondent was receiving from First Miami. Respondent declined this initial offer of employment. Perry renewed the offer after he learned that First Miami had been liquidated and placed in receivership. Before he did so, though, he asked Harry Landrum, a Tallahassee consultant and lobbyist, to check with his sources at the Department to find out if, given Respondent's previous association with First Miami, Perry & Company's relationship with the Department would suffer if the company hired Respondent. Landrum reported back to Perry that his sources had only kind words to say about Respondent. Having received this favorable report about Respondent, Perry felt comfortable renewing his offer of employment to Respondent. This time Respondent accepted Perry's offer. Respondent began his employment with Perry & Company in July of !992, when he assumed the position of Executive Vice President. His primary responsibility as Executive Vice President was in the area of data processing. In December of 1992, Respondent became Perry & Company's President, the position he holds today. As President of Perry & Company, Respondent is responsible for virtually all of the company's day-to-day operations. To date, he has successfully discharged these duties. During his affiliation with Perry & Company, Respondent has not engaged in any conduct that has jeopardized the financial soundness of the company. He has not caused, nor is it likely, based upon his past performance with Perry & Company and as Executive Vice President of First Miami, that he will cause, Perry & Company or those with whom the company does business to suffer any unwarranted loss or damage.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 1994.
The Issue The issue in this case is whether the Petitioner is entitled to an award of attorney's fees and costs pursuant to section 57.111, Florida Statutes (2011).1/
Findings Of Fact The parties have stipulated that the Petitioner is a "small business party" as the term is defined at section 57.111(3)(d). On June 21, 2010, the Petitioner applied to acquire an existing alcoholic beverage "quota" license from another licensee. The Petitioner had to pay a fee to transfer the license pursuant to section 561.32(3)(a), Florida Statutes (2010), which provides as follows: Before the issuance of any transfer of license herein provided, the transferee shall pay a transfer fee of 10 percent of the annual license tax to the division, except for those licenses issued pursuant to s. 565.02(1) and subject to the limitation imposed in s. 561.20(1), for which the transfer fee shall be assessed on the average annual value of gross sales of alcoholic beverages for the 3 years immediately preceding transfer and levied at the rate of 4 mills, except that such transfer fee shall not exceed $5,000; in lieu of the 4-mill assessment, the transferor may elect to pay $5,000. Further, the maximum fee shall be applied with respect to any such license which has been inactive for the 3-year period. Records establishing the value of such gross sales shall accompany the application for transfer of the license, and falsification of such records shall be punishable as provided in s. 562.45. All transfer fees collected by the division on the transfer of licenses issued pursuant to s. 565.02(1) and subject to the limitation imposed in s. 561.20(1) shall be returned by the division to the municipality in which such transferred license is operated or, if operated in the unincorporated area of the county, to the county in which such transferred license is operated. (emphasis added). License transfer applicants are required to provide gross sales records pursuant to Florida Administrative Code Rule 61A-5.010(2)(b), which provides as follows: An applicant for a transfer of a quota liquor license shall provide records of gross sales for the past 3 years or for the period of time current licensee has held license in order that the division may compute the transfer fee. An applicant may, in lieu of providing these records, elect to pay the applicable transfer fee as provided by general law. The gross sales records provided to the Respondent by the Petitioner were for the five-month period between January 21 and June 21, 2010, and totaled $573,948.94 for the period. To compute the transfer fee, the Respondent divided the reported gross sales ($573,948.94) by five to estimate an average monthly gross sales figure of $114,789.79.2/ The Respondent multiplied the estimated average monthly gross sales by 12, to estimate annual gross sales of $1,377,477.48. The Respondent then applied the 4-mill rate to the estimated annual gross sales and determined the transfer fee to be $5,509.91. The Respondent also calculated the transfer fee through a formula set forth on a form that had been challenged as an unadopted rule by an applicant in a 2008 proceeding. While the 2008 rule challenge was pending, the Respondent commenced to adopt the form as a rule, but the dispute was ultimately resolved without a hearing, after which the Respondent discontinued the process to adopt the rule. According to the formula on the form, the transfer fee was $5,599.50. Because both of the Respondent's calculations resulted in transfer fees in excess of $5,000, the Respondent required the Petitioner to pay the statutory maximum of $5,000. The Petitioner paid the $5,000 transfer fee under protest. The Petitioner asserted that the appropriate transfer fee should have been $765.27. The Petitioner's calculation used the reported five months of gross sales ($573,948.94) as the total annual gross sales for the licensee. The Petitioner divided the $573,948.94 by three to determine a three-year average of $191,316.31 and then applied the 4-mill rate to the three-year average to compute a transfer fee of $765.27. On March 17, 2011, the Petitioner filed an Application for Refund of $4,234.73, the difference between the $5,000 paid and the $765.27 that the Petitioner calculated as the appropriate fee. The Application for Refund was filed pursuant to section 215.26, Florida Statutes, which governs requests for repayment of funds paid through error into the State Treasury, including overpayment of license fees. Section 215.26(2) requires that in denying an application for a tax refund, an agency's notice of denial must state the reasons for the denial. As authorized by section 72.11(2)(b)3, Florida Statutes, the Respondent has adopted rules that govern the process used to notify an applicant that a request for refund has been denied. Florida Administrative Code Rule 61-16.002(3) states as follows: Any tax refund denial issued by the Department of Business and Professional Regulation becomes final for purposes of Section 72.011, Florida Statutes, when final agency action is taken by the Department concerning the refund request and taxpayer is notified of this decision and advised of alternatives available to the taxpayer for contesting the action taken by the agency. By letter dated May 9, 2011, the Respondent notified the Petitioner that the request for refund had been denied and stated only that "[w]e reviewed the documentation presented and determined that a refund is not due." The Respondent's notice did not advise that the Petitioner could contest the decision. On May 16, 2011, the Petitioner submitted a Request for Hearing to the Respondent, asserting that the Respondent improperly calculated the transfer fee by projecting sales figures for months when there were no reported sales. On August 4, 2011, the Respondent issued a letter identified as an "Amended Notice of Denial" again advising that the Petitioner's refund request had been denied. The letter also stated as follows: The Division cannot process your refund application due to the fact that the transferee has not provided the Division records which show the average annual value of gross sales of alcoholic beverages for the three years immediately preceding the transfer. On September 14, 2011, the Respondent forwarded the Petitioner's Request for Hearing to the Division of Administrative Hearings (DOAH Case No. 11-4637). By letter dated October 10, 2011, the Respondent issued a "Second Amended Notice of Denial" which stated as follows: We regret to inform you that pursuant to Section 561.23(3)(a), Florida Statutes, your request for refund . . . in the amount of $4,234.73 is denied. However, the Division has computed the transfer fee and based upon the records submitted by you pursuant to Rule 61A-5.010(2)(b), F.A.C., the Division will issue the Applicant a refund in the amount of $2,704.20. The records referenced in the letter were submitted with the original application for transfer that was filed by the Petitioner on March 17, 2011. The Respondent's recalculated transfer fee was the result of applying the 4-mill levy directly to the reported five months of gross sales reported in the transfer application, resulting in a revised transfer fee of $2,295.80 and a refund of $2,704.20. On October 11, 2011, the Respondent filed a Motion for Leave to Amend the Amended Notice of Denial, which was granted, over the Petitioner's opposition, on October 21, 2011. DOAH Case No. 11-4637 was resolved by execution of a Consent Order wherein the parties agreed to the refund of $2,704.20 "solely to preclude additional legal fees and costs," but the Consent Order also stated that the "Petitioner expressly does not waive any claim for attorneys' fees in this matter pursuant to F.S. 57.111." The Petitioner is seeking an award of attorney's fees of $8,278.75 and costs of $75, for a total award of $8,353.75. The parties have stipulated that the amount of the attorney's fees and costs sought by the Petitioner are reasonable. The Respondent failed to establish that the original calculation of the applicable transfer fee was substantially justified. The evidence fails to establish that there are special circumstances that would make an award unjust.
Findings Of Fact Florida Export Tobacco Co., Inc., Petitioner, operates, as a concessionaire, duty-free stores at Miami International Airport. The premises are owned by the Dade County Aviation Department and the stores are leased to Petitioner pursuant to the terms of a lease and concession agreement dated 19 July 1977, effective 1 August 1977 and continuing until 30 September 1987. (Exhibit 1 to Deposition) Pursuant to this agreement Petitioner occupies six stores and additional warehouse space at the Terminal Building and the International Satellite Facility. Article II in Exhibit 1 entitled Rental Charges and Payments provides for rental payments for each store and space occupied based upon a fixed fee of $X per square foot per year with the dollar per square foot cost varying with the space occupied. In addition to this minimal rental fee, Section 2.03 of this agreement provides: County Profit Participation: As additional consideration for the rights and privileges granted Concessionaire herein, Concessionaire shall pay the County a portion of its profits. As a convenience and in order to eliminate requirements for detailed auditing of expenditures, assets and liabilities and in order to provide an even flow of annual revenues for budgeting and bond financing purposes, said portion of the profits of the Concessionaire shall be calculated as the amount by which sixteen percent of the monthly gross revenues, as defined in Arti- cle 2.07, exceeds the sum of monthly rental payments required by Articles 2.01 and 2.04. Concessionaire shall pay such portion of its profits to County by the twentieth (20th) day of the month following the month in which the gross revenues were received or accrued. For the period October 1, 1982 through September 30, 1987, the percent of monthly gross revenues to be paid by Concessionaire as a portion of its profits shall be eighteen percent, payable and calculated in the same manner as above. The lessor provides air conditioning, garbage and sewage disposal facilities, security, and many other services to the lessee in addition to the space leased. From October 1976 through September 1977 Petitioner paid $40,499.66 in additional sales tax over the guaranteed minimum amount; for the year ending September 1978 this additional sales tax was $66,284.85; for the year year ending September 1979 this additional sales tax was $93,837.15; and for the year ending September 1980 this additional sales tax was $137,521.87. (Exhibit 2 to the Deposition) As the owner of the facility Dade County has the option of operating the various facilities and services available to the public or having these operated by a concessionaire. Dade County has opted for the manner it believed more profitable to the county and in the case of the duty free stores this has resulted in leasing the space to a concessionaire. The hotel at the airport is operated by the Aviation Department under a management contract. It is Petitioner's and Dade County's position that a sales tax should not be paid on the county profit participation charges because, if the Aviation Department operated the stores there would be no sales tax on any rental income and the County operates the facilities at the airport so as to maximize profits to the county. Therefore by requiring the concessionaire to pay sales tax, this reduces the profit available to share with the County.
