The Issue Petitioner seeks licensure by respondent as an acupuncturist, and contends that respondent's proposed denial of his application would be improper because respondent proposes to rely on Rule 21-12.08, Florida Administrative Code, even though it was adopted after the application petitioner filed, and because respondent allowed too much time to pass (a) before requesting additional information from petitioner, (b) before acting dispositively on his application, and (c) before forwarding his request for a formal hearing to the Division of Administrative Hearings. Neither Mr. Bell's age nor whether he paid the $200 application fee is at issue in these proceedings. Petitioner seemed to contend, in a pleading filed three days before the final hearing, that Rule 21-12.08, Florida Administrative Code, is invalid. At the hearing, petitioner argued that Rule 21-12.08, Florida Administrative Code, did not square with Section 455.201, Florida Statutes (1981). The hearing officer declined to reach the merits of this contention, but without prejudice to petitioner's filing a rule challenge pursuant to Section 120.56, Florida Statutes (1981), or pursuing the matter on appeal under the authority of State ex rel. Department of General Services v. Willis, 344 So.2d 580, 592 (Fla. 1st DCA 1977).
Findings Of Fact On July 27, 1981, respondent Department received petitioner's form "Application for Acupuncture Examination." Petitioner's Exhibit No. 1. Thereafter, on September 18, 1981, the Department filed its acupuncture rules with the office of the Secretary of State. Petitioner's Exhibit No. 3. These rules, including Rule 21-12.08, Florida Administrative Code, became effective 20 days later on October 8, 1981. Petitioner's Exhibit No. 3. On September 22, 1981, Mrs. Ann M. Mayne wrote petitioner Bell on behalf of the Department advising him that his "application for the acupuncture examination ha[d] been reviewed . . . [and determined to be] incomplete . . . [for failure to include an] official transcript from a school . . . approved in accordance with Rule 21-12.08 . . . [and/or failure to include an] affidavit . . . signed by an officer of the school . . . certifying to applicant's satisfactory completion of . . . training." Hearing Officer's Exhibit No. 2. The letter also advised: Your school or college has not been approved by this Department. The Department is in the process of trying to determine if your school meets the qualifications as set forth in Rule 21-12.08 in order for your school or college to be considered for approval. [Y]our acupuncture license and admission to the next acupuncture examination is denied, based on the deficiencies as indicated above. If all of this material is received in this office by October 9, 1981, your application will be reconsidered for the November 1981 examination. Otherwise, you will have to be considered for a subsequent examination. In accordance with 120.60(2), Florida Stat- utes, you have a right to a 120.57 hearing on this matter, if you request same within thirty (30) days of the date of this letter. Hearing Officer's Exhibit No. 2. On October 6, 1981, petitioner furnished the Department an official transcript attested to by one Walter D. Sturm, "President and Alumni Director" of the Occidental Institute of Chinese Studies Alumni Association. Petitioner's Exhibit No. 1. The Department of Professional Regulation received a telegram on October 16, 1981, which read: "REQUEST 120.57 HEARING REGARDING ACUPUNCTURE EXAM JASPER ODELL BELL AND YVONNE MARION BELL." Petitioner's Exhibit No. 4. The Department received a letter from petitioner on October 22, 1981, "a follow- up letter to telegram of October 16, 1981." Petitioner's Exhibit No. 1. In this letter, dated October 20, 1981, petitioner stated, "I request a 120.57 hearing . . . due to the September 22nd letter's denial of admission to November acupuncture examination based on deficiencies indicated in that letter and the lack of your response within the 30-day hearing deadline." Petitioner's Exhibit No. 1. From records of the Division of Administrative Hearings, it appears that this letter, together with a request that a hearing officer be assigned, was received by the Division of Administrative Hearings on November 12, 1981. Mr. Inge, deputy director of respondent's Division of Professions, wrote Mr. Bell on November 18, 1981, as follows: Your application for the acupuncture examination has been reviewed and is hereby denied based on the information contained in your application and the findings thereof. Based on the information received from your school or college, it has been deter- mined that your school or college does not meet the criteria as set forth in Rule 21-12.08 in order to be approved by this Department. Pursuant to 120.60(2), Florida Stat- utes, your acupuncture license and admis- sion to the next examination is denied, based on your failure to qualify pursuant to Chapter 468, Part VIII and the rules adopted thereunder. In accordance with 120.60(2), Florida Statutes, you have a right to a 120.57 hear- ing on this matter, if you request same within 30 days of the date of this letter. Hearing Officer's Exhibit No. 1. The parties stipulated that the Department has yet to approve any school or college as meeting the criteria set forth in Rule 21-12.08, Florida Administrative Code. Petitioner's proposed findings of fact and conclusions of law have been given careful consideration, and the proposed fact findings have been adopted to the extent that they were relevant and supported by the evidence, but not otherwise.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That the Department deem petitioner's application approved and, subject to the satisfactory completion of an examination, license petitioner as an acupuncturist. DONE AND ENTERED this 29th day of March, 1982, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of March, 1982.
The Issue Whether the recommended decision to award AXA Equitable Life Insurance Company ("AXA Equitable") a contract to provide 403(b) annuity retirement products to employees of Respondent, Broward County School Board ("School Board"), is clearly erroneous, arbitrary, capricious, contrary to competition, contrary to the School Board's governing statutes, rules or policies, or contrary to the specifications within Request for Proposal ("RFP") 15-010P; and, if so, whether Petitioner, Life Insurance Company of the Southwest ("LSW"), should be awarded a contract to provide annuity retirement products to School Board employees pursuant to the RFP.
Findings Of Fact LSW LSW is a life insurance company that sells fixed annuity deferred plans to school districts, hospitals, churches, governments, and other qualified employer plans. LSW is an active supplemental retirement benefit vendor in 5,300 school districts throughout the country. LSW serves 321,000 annuity policyholders with over $12.7 billion dollars invested.3/ LSW is a current provider of supplemental retirement benefits to the School Board, and it has over 3,700 existing School Board employees as policyholders with over $69 million dollars invested. The School Board's RFP for Annuities (RFP 15-010P) On March 4, 2014, the School Board issued its RFP entitled "403(b)/457(b) Program for School Board Employees," RFP 15-010P, for the purpose of soliciting replies from vendors seeking to provide tax sheltered annuity and/or mutual fund retirement products to the School Board's active, full-time employees (approximately 25,139 employees). The School Board issued Addendum No. 1 to the RFP on March 26, 2014. The retirement benefit products offered as a result of this procurement are optional and supplement the retirement benefits available to qualified School Board employees through the Florida State Retirement System. In issuing the RFP, the School Board seeks to "streamline its 403(b) and 457(b) offerings to a limited number of vendors in an effort to generally improve retirement awareness of all eligible employees and improve retirement savings of participating employees." The School Board seeks proposals with competitive fee and expense structures and minimal to no surrender charges and/or sales charges. The RFP does not limit the number of vendors that may be selected for negotiation or award. The RFP was developed by the School Board's Benefit and Employment Services Department in collaboration with its consultant, Gallagher Benefit Services ("Gallagher"). Gallagher has served as the School Board's consultant on insurance matters for over 20 years. The RFP describes the School Board's current landscape of nine current active annuity vendors, which offer fixed annuities, variable annuities, equity indexed annuities, and mutual funds. The current active annuity vendors include the three recommended annuity product awardees under the RFP (ING, VALIC, and AXA Equitable), as well as LSW. In addition, the School Board has 17 current inactive vendors with a total of 690 accounts.4/ The RFP provides that mutual fund proposals and annuity proposals will be evaluated and ranked separately. The RFP further provides that the School Board "at its sole option will then decide based on the top-ranked Proposer(s) in each category, if a sole provider or multiple providers with annuity and/or mutual fund options are more beneficial to SBBC and its employees." Under the RFP: "A sole provider is either one Awardee for both annuity and mutual fund products or is the only vendor for one of the product offerings. A multiple Awardee(s) is one of many vendors for the same product offerings." On or before April 17, 2014, at 2:00 p.m., the School Board's Supply Management and Logistics Department received proposals in response to the RFP. Proposals for the annuity products were submitted by AXA Equitable, Great American, Horace Mann, ING, LSW, MetLife, and VALIC. Six companies submitted proposals for mutual fund products. In addition, a proposal was submitted by Aspire Financial Services, LLC. The proposals for both annuities and mutual funds were delivered to the School Board's Superintendent's Insurance Advisory Committee ("Insurance Committee") members within two or three days of receipt by the School Board on April 17, 2014. Each of the proposals was several hundred pages in length and described as being roughly the size of a telephone book. The proposals were evaluated by the Insurance Committee. The Insurance Committee is a standing committee composed of persons appointed by the superintendent of schools, including representatives of various labor unions and "meet and confer" groups (populations of employees that are not represented by a labor union). The purpose of the Insurance Committee is to make recommendations regarding insurance matters including the subject RFP. The Insurance Committee regularly provides input in the development of the school district's competitive procurements for insurance and employee benefits and evaluates proposals for such services. No member of the Insurance Committee had any special expertise in mutual funds or annuities. There was a training session and review of the RFP at the Insurance Committee meetings on January 9 and 15, 2014. Section 5.1 of the RFP provides that the Insurance Committee: shall evaluate all Proposals received, which meet or exceed Section 4.2, Minimum Eligibility Requirements and Section 7.1 Indemnification, according to the following criteria: CATEGORY MAXIMUM POINTS A. Experience and Qualifications 10 B. Scope of Services 40 C. Cost of Services 40 D. Supplier Diversity & Outreach Program D.1. Participation 3 D.2. Diversity 4 D.3. Community Outreach 3 TOTAL[:] 100 Failure to respond, provide detailed information or to provide requested Proposal elements may result in the reduction of points in the evaluation process. The Committee may recommend the rejection of any Proposal containing material deviations from the RFP. The Committee may recommend waiving any irregularities and technicalities. "Cost of Services" is an integral part of the RFP. Section 4.7 of the RFP addresses Cost of Services and requires proposers of annuity products to submit their Cost of Services by completing the RFP's Attachment B1, Financial Response Form ("B1 form"). The B1 form requires a series of responses to various items relating to the Cost of Services offered for annuity products. The RFP and B1 form solicit two cost proposals, only: one for "Sole Carrier" and one for "Multiple Carrier." The B1 form has two columns: one for "Sole Carrier" and one for "Multiple Carrier." The RFP and B1 form do not allow for proposers to submit more than one multiple carrier proposal and to alter the B1 form to include an additional column for more than one multiple carrier proposal. The B1 form specifically advises proposers in bold letters that: "If you are proposing annuity product(s), please complete the following form for both being a sole carrier or one of multiple carriers." Reproduced below are the two pages of the B1 form included within the RFP: Section 4.7 of the RFP unequivocally warns: "No deviations from this form are permitted. No conditions or qualifications (e.g., participation requirements) to the quoted rates are acceptable." AXA Equitable's Non-Responsiveness Based on Its Alterations to the B1 Form and Two Multiple Vendor Proposals, and the Insurance Committee's Evaluation of AXA Equitable's Proposals, Recommendation, and Award Notwithstanding the RFP's admonition against alterations to the B1 form, AXA Equitable modified the B1 form in responding to the RFP by adding an additional column and providing two separate multiple carrier proposals. Significantly, AXA Equitable labeled its modified B1 form to provide the following three separate cost proposals: (1) "Sole Carrier"; (2) "Multiple Carrier (2-4 Investment Providers)"; and (3) "Multiple Carrier (2-4 Investment Providers)." Reproduced below are the two pages of the B1 form submitted by AXA Equitable: The last two columns of AXA Equitable's B1 form, although labeled the same, offer different costs for certain categories. Significantly, in the second column, AXA Equitable listed "0.50%" for "Mortality, Expense, and Administrative Charges." However, in the third column, AXA Equitable listed "0.70%" for "Mortality, Expense, and Administrative Charges." In the second column, AXA Equitable also listed a "5 year participant level" for "CDSC or Surrender Charges & Terms." However, in the third column, AXA Equitable listed a "10 year participant level" for "CDSC or Surrender Charges & Terms." The form in AXA's proposal for annuities was also mislabeled "Attachment B2," which is the form for mutual fund submissions. Although AXA Equitable provided information on the wrong form (B2 instead of B1), and mislabeled the second and third columns on its Attachment B2, the information within its response to the RFP made it clear to Gallagher that the second column on both pages was intended to contain AXA Equitable's two separate multiple carrier proposals. The second column on both pages was intended to contain AXA Equitable's two-to-four multiple vendor annuity proposal, and the third column on both pages was intended to contain AXA Equitable's five or more multiple vendor annuity proposal.5/ No other proposer altered the B1 form or submitted more than one multiple carrier proposal. At the hearing, the School Board conceded that it expected the proposers to complete the B1 form without deviation, and that no deviation should be permitted that would allow one vendor to obtain a competitive advantage over another vendor. The School Board conceded at the hearing that AXA Equitable deviated from the B1 form by including an additional column in the form for two separate multiple proposals that was unsolicited. Gallagher prepared executive summaries of the annuity and mutual fund proposals which assembled the proposers' verbatim responses in a side-by-side format corresponding to the RFP's evaluation scoring criteria. The Insurance Committee received these summaries about one week prior to their June 11, 2014, meeting at which a decision was to be made on the various proposals. The summaries for the annuity proposals were over 800 pages in length. A similar-sized comparison was prepared for the mutual fund proposals. The Insurance Committee met on June 11, 2014, to evaluate the annuity and mutual fund proposals. The meeting started at 10:30 a.m. and adjourned at 5:30 p.m., with a break for lunch. No proposal scoring was conducted before the meeting. The Insurance Committee determined at the start of its June 11, 2014, meeting that Aspire's proposal was non-responsive because it lacked the most recent three years of independent audited financial statements required by Section 4.2.5 of the RFP. Substantial discussion occurred during the June 11th meeting as to how to score AXA Equitable because of its two multiple vendor proposals. Some of the Insurance Committee members expressed concern over how to score AXA Equitable's annuity proposal because of its three separate proposals and modifications to the B1 form. In response, Gallagher recommended during the June 11, 2014, meeting that AXA Equitable be scored separately and have three separate scores. During the meeting, AXA Equitable was treated differently than all of the other annuity proposals, because each of the other annuity proposals were scored only twice while AXA Equitable receive three separate scores. Gallagher provided the Insurance Committee with a separate scoring sheet just for AXA Equitable because of its three separate proposals: one for sole carrier, another for two-to-four carriers, and the third proposal for five or more carriers. Once the Insurance Committee scored and ranked each of the proposals for all of the proposed annuity vendors, it was recommended that only then should the committee determine whether the award should be given to a sole vendor or to multiple vendors. At the conclusion of Gallagher's presentation on the annuity and mutual fund proposals, the Insurance Committee was given 20 to 30 minutes to score all of the proposals. Thirteen members of the Insurance Committee scored the proposals. The Insurance Committee's scores ranked the annuity proposals as follows: Sole Vendor Total ING 90 AXA Equitable 76.9 VALIC 74.2 MetLife 69.2 LSW 67.5 Great American 64.2 Horace Mann 61.0 Multiple Vendors Total ING 86.9 VALIC 71.2 AXA Equitable (based on its 2-4 vendor proposal) 69.7 LSW 67.0 AXA Equitable (based on its 5+ vendor proposal) 65.2 MetLife 64.7 Great American 61.9 Horace Mann 59.5 Thus, AXA Equitable's proposal was deemed responsive by the Insurance Committee, and it received three separate scores for its annuity proposals: a score of 76.9 for its sole vendor proposal; a score of 69.7 for its two-to-four vendor proposal; and a score of 65.2 for its five or more vendor proposal. The scoring sheets reflect that AXA Equitable received different scores for cost of services under its two multiple vendor proposals. Notably, nine of the Insurance Committee members scored AXA Equitable's two-to-four vendor proposal higher for cost of services than AXA Equitable's five or more vendor proposal for cost of services.6/ After seeing the rankings of the scores during the meeting, the committee proceeded to pass a motion authorizing negotiations between the committee and the top three ranked annuity vendors, only, until a successful negotiation with three annuity vendors is reached. Day two of the Insurance Committee's meeting (held June 12, 2014) consisted of negotiations between the Insurance Committee and the three highest ranked vendors for annuity and mutual fund products. After negotiating with the top three ranked proposers, the Insurance Committee members voted to award the contracts for annuities to ING, VALIC and AXA Equitable (under its two-to-four vendor proposal), as the three top-ranked responsive proposers with whom the Insurance Committee was able to successfully conduct contract negotiations. The Insurance Committee also voted to award the contracts for mutual fund services to ING, MetLife, and VALIC and to reject Aspire's proposal as non- responsive for failure to meet the RFP's minimum eligibility criteria. The superintendent accepted the Insurance Committee's recommendations. On June 16, 2014, the School Board's Supply Management and Logistics Department posted the School Board's intended recommendation for the award of the RFP. The intended decision is to: (a) award contracts for the provision of annuity programs to ING, VALIC, and AXA Equitable (under its two-to-four vendor proposal); (b) award contracts for the provision of mutual fund programs to ING, MetLife, and VALIC; and (c) to reject Aspire's proposal as being non-responsive for failure to meet the RFP's eligibility criteria. On June 17, 2014, LSW timely filed its Notice of Protest. On Monday, June 30, 2014, LSW filed its Formal Written Protest and Petition for Administrative Hearings and bid protest bond with the School Board. Because the School Board was closed on Friday, June 27, 2014, the formal written protest was timely filed on the School Board's next business day. No bid specification protest was filed concerning either the RFP or Addendum No. 1. AXA Equitable's alteration to the B1 form, which adds a third column and offers one sole vendor proposal and two separate multiple cost proposals, is non-responsive to the RFP and a material deviation. AXA Equitable's alteration to the B1 form affected its price by giving it the opportunity to fine-tune its bid and submit a third cost proposal that was not solicited. AXA Equitable's two multiple vendor proposals contained different charges. The charges for "Mortality, Expense, Administrative Charges" and "CDSC or Surrender Charges & Terms" were higher for AXA Equitable's five or more multiple vendor proposal than its two-to-four vendor proposal. AXA Equitable received three separate scores that were evaluated by the committee while all other annuity proposals received only two scores that were evaluated. Most of the committee members gave AXA Equitable higher scores for its two- to-four cost of services proposal than its five or more cost of services vendor proposal. AXA Equitable's two multiple vendor proposals, which contained different cost proposals, and which were scored separately, allowed AXA Equitable to receive an extra bite at the apple not afforded to any of the other vendors competing for the award and allowed AXA Equitable to gain an unfair competitive advantage over all of the other proposers. Nevertheless, the School Board contends there is no provision in the RFP which prohibits AXA Equitable from submitting more than one multiple vendor proposal, and that at best, AXA Equitable's alteration of the B1 form by adding a third column and submitting three separate proposals, each of which were scored separately, is a minor irregularity that can be waived. The School Board did not determine prior to the filing of LSW's bid protest that AXA Equitable's submission of two multiple proposals was a minor irregularity, and not a material deviation. At hearing, the School Board argued that AXA Equitable, or any other vendor for that matter, could have submitted an infinite number of multiple proposals. The School Board relies on the following language within Section 2.1 of the RFP, which states: SBBC is requesting Proposals with competitive fee and expense structures; minimal to no surrender charges and/or sales charges; performance and/or guaranteed returns that exceed objective benchmarks and peer groups; and education resources and tools that will help SBBC employees understand the importance of retirement savings and plan for the future. Proposers should propose an investment lineup that is in line with current trends in the 403(b) and 457(b) market. For example, group versus individual annuity products, open architecture mutual funds, and institutional share-classes. SBBC encourages the proposal of features that may or may not be offered today, such as designated Roth accounts, investment advice, managed portfolios, etc. At its sole option, SBBC reserves the right to annually review each Awardee and its product offerings for such things including, but not limited to: enrollment; fees and expenses; performance; and benchmarks. This language requests the submission of competitive cost proposals. In no way, however, does this language allow for the submission of more than one multiple vendor proposal and AXA Equitable's modifications to the B1 form by including an additional column and second multiple vendor proposal. The School Board also contends that AXA Equitable's alteration to the B1 form and submission of two multiple vendor proposals is authorized by language within Section 4.7 of the RFP that requires a proposer to complete a B1 form "for each program offered." This language, however, pertains to the requirement to disclose the costs for each type of annuity product offered. It does not allow the submission of a second multiple vendor proposal and AXA Equitable's modification to the B1 form by including an additional column and second multiple vendor proposal. The School Board also relies on Section 5.1 of the RFP, which states that the Insurance Committee "shall evaluate all Proposals received, which meet or exceed Section 4.2, Minimum Eligibility Requirements and Section 7.1 Indemnification." Section 4.2 of the RFP, entitled "Minimum Eligibility," provides as follows: Minimum Eligibility In order to be considered for award and to be further evaluated, Proposer must meet or exceed the following criteria as of the opening date of the Proposal. Proposer is responsible for providing the following information in its response. The Proposer must also include a statement of acknowledgement for each item below. Proposer must agree to the language in Section 7.1, Indemnification. Proposer must be licensed in the State of Florida. Provide a copy of the current license and/or certificate that allows Proposer to provide the services proposed. If Proposer is an insurance carrier, Proposer must be licensed to provide the proposed services in the State of Florida with an AM Best rating of A- or higher and financial size category of VI or larger. In the alternative to the foregoing AM Best and financial-size category, a licensed carrier may satisfy the requirements of 4.2.4. If Proposer is not an insurance company or lacks an AM Best or financial size category, Proposer must provide the most recent three (3) years available of independent, audited financial statements. Each Awardee will agree to provide SBBC an annual fee of $10 per active and inactive participant. Each Awardee will agree to provide an annual fee of $12 per active and inactive participant to fund third-party administrative services. The plain reading of Section 4.2 is that the phrase "following criteria" as used therein pertains to the critera within Section 4.2 (4.2.1, 4.2.2, 4.2.3, 4.2.4, 4.2.5, and 4.2.6), only. To accept the School Board's position would render meaningless the admonitions in Section 4.7 of the RFP and the B1 form against submitting more than one multiple vendor proposal and deviating from the form. Contrary to the School Board's contention, nothing in the RFP allows the alterations to the B1 form and submission of more than one multiple vendor proposal, as submitted by AXA Equitable. In fact, Section 4.7 of the RFP and the B1 form unequivocally prohibit it. To accept the School Board's argument would have allowed AXA Equitable or any other proposer to submit any number of separate multiple proposals with different costs of services and have each of them scored separately. Under the School Board's view, AXA Equitable could have submitted separate multiple vendors of say, for example, one-to-three providers; two-to-four providers; three-to-five providers; four-to-six providers; five-to-seven providers; eight-to-nine providers, etc. (each with different costs of services), until one of them hits and is a winner. The School Board's argument fails to consider that each multiple proposal allowed the committee to give AXA Equitable an extra look and opportunity to fine-tune its bid with the hope that one of its proposals would stand out to the committee and be chosen as a winner. That is precisely what happened in the instant case. Indeed, the Insurance Committee viewed each of AXA Equitable's multiple proposals as a separate proposal and scored them separately with different results. Only after each of the multiple proposals were viewed and scored did the committee then choose to negotiate with the companies that submitted the three topped-ranked proposals. The committee had the opportunity to view AXA Equitable's five or more proposal alongside its two-to-four proposal and sole provider proposal, view the scores from all the proposals, and then determine which way it wanted to go in terms of the number of vendors. After observing that AXA Equitable provided higher costs of services for its five or more proposal than its two-to- four proposal, most of the committee members gave AXA Equitable higher scores for its lower two-to-four cost proposal, and then the committee chose to go with the top three ranked proposals. The Insurance Committee had the opportunity to view AXA Equitable's two-to-four proposal and its five plus proposal separately, rank each of these proposals separately along with the one multiple proposals submitted by each of the other vendors, and then the committee was able to stack each of the proposals against each other, compare them, and decide to go with the top three. This clearly gave AXA Equitable a competitive advantage over the other proposals, which was prohibited by the RFP, and constitutes a material deviation that cannot be waived. AXA Equitable's Non-Responsiveness for Failure to Provide Cost Information Required by the RFP In addition, one of the questions asked in the B1 form was: "What is the Net Revenue Pricing for this plan in basis points?" For the sole carrier proposal, AXA Equitable stated that its net revenue pricing is 1.70. For each of its two multiple carrier proposals, however, AXA Equitable stated: "This would be higher than 1.70 if we are not the single provider." AXA Equitable failed to commit to a specific pricing in basis points for net revenue pricing in each of its two multiple carrier proposals. Net revenue pricing is material to the evaluation of a proposer's cost of services, yet AXA Equitable failed to sufficiently respond to this question on the B1 form in response to the RFP. Some of the Insurance Committee members did not understand what the phrase "net revenue pricing" meant or appreciate the significance of this omission from AXA Equitable's multiple vendor proposals. The evidence presented at hearing failed to establish that any of the committee members deducted points because AXA Equitable failed to provide net revenue pricing for its multiple vendor proposals. AXA Equitable's failure to provide net pricing in basis points in the B1 form for its multiple proposals constitutes a material deviation from the RFP, provided AXA Equitable with a competitive advantage, and is not a minor irregularity that can be waived. The proposers were required to provide the net revenue pricing for their annuity product cost offerings. Net revenue pricing is material to the cost of the services. Thus, AXA Equitable was non-responsive to the RFP by failing to include its net pricing in basis points for its multiple vendor proposals. Nevertheless, the School Board contends that AXA Equitable's omission of net revenue pricing is simply a factor that the committee could consider when scoring its cost proposal. The School Board relies upon Section 5.1 of the RFP, which provides that a "failure to respond, provide detailed information or to provide requested Proposal elements may result in the reduction of points in the evaluation process" and does not require a rejection of AXA Equitable's proposal. The School Board's reliance on Section 5.1 of the RFP is misplaced. The Insurance Committee members did not understand what the phrase "net revenue pricing" meant or appreciate the significance of this omission from the proposal. The evidence did not show that any of the members deducted points because of AXA Equitable's failure to provide net revenue pricing for its multiple carrier proposals. The School Board did not determine prior to the filing of LSW's bid protest that AXA Equitable's failure to provide net pricing in basis points in the B1 form for its multiple proposals was a minor irregularity, and not a material deviation. The Existence of Legacy Carriers Did Not Preclude Negotiations with the Three Top Ranked Annuity Vendors Alternatively, LSW contends that even if AXA Equitable's two-to-four vendor proposal is not rejected as non- responsive, the Insurance Committee lacked the authority to choose to negotiate with the three top-ranked annuity vendors given the number of "legacy carriers" (more than four) that can continue to participate in the payroll deduction even if not selected as a vendor going forward pursuant to the instant RFP. Although it is unnecessary for the undersigned to reach this issue, LSW's contention in this regard is without merit. A selection of the top three vendors in response to the instant RFP does not mean that the legacy carriers must be counted toward the number of vendors ultimately allowed to offer products under the instant RFP. Simply put, the legacy carriers and inactive vendors may continue to provide products to its existing employees alongside the top three vendors chosen pursuant to the instant RFP.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Broward County School Board enter a final order rescinding the proposed award to AXA Equitable for annuity products in favor of an award to LSW as the third-ranked responsive and responsible vendor for supplemental annuity retirement benefits. DONE AND ENTERED this 31st day of December, 2014, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 2014.
The Issue Whether Petitioner made a timely election to participate in the Florida Flexible Benefits Plan (Plan) in accordance with Rule 60P-8.0041(2), Florida Administrative Code and if not, should his participation in the Florida Flexible Benefits Plan (the Plan) for the Plan Year of December 1, 1991, through December 31, 1992, be denied. Whether Petitioner would be entitled to reimbursement from the Plan for medical expenses incurred prior to November 12, 1992, provided it is determined that Petitioner made a timely election to participate in the Plan in accordance with Rule 60P-8.0041(2), Florida Administrative Code.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: At all times material to this proceeding, the Petitioner was a full- time employee of the University of Florida, Institute of Food and Agriculture Science (IFAS) in Hardee County, Florida and as such, was eligible to participate in the Plan Medical Reimbursement Account provided he timely elected to participate and was otherwise qualified. The Respondent is the state agency charged with the responsibility of administering all state insurance plans for state employees in the State of Florida. As part of its insurance program, the State of Florida offers the Florida Flexible Benefits Plan. The Plan is a benefit program for state employees under which specified, incurred medical expense may be reimbursed. The period of coverage for the Plan material to this proceeding was December 1, 1991 through December 31, 1992. Petitioner did not enroll in the Plan during the open enrollment period for all state employees conducted by the Division during the month of October 1991. During the summer of 1992, and again in October 1992, (sometime after the child was born on October 5, 1992) the Petitioner's wife, Karen S. Weaver, contacted the Division by telephone to inquire about, and to get clarification on, enrolling in the Plan based on a "Change In Family Status" (the child' birth) after the effective date of the Plan, December 1, 1991. On both occasions, Karen Weaver talked with an enrollment agent of the Division and, other than the child's date of birth, no effective date was discussed. The enrollment agent advised Karen Weaver that the Petitioner could not apply until after the birth of the child due to the documentation needed concerning the child's birth. Neither Karen Weaver nor Petitioner were ever advised that with proper certification of pregnancy from the wife's doctor that Petitioner could apply before the birth of the child. After the wife's last conversation with the Division, the Petitioner completed and signed a Reimbursement Account Enrollment/Qualifying Status Change Form, Form FB-2 (the Form) which was dated October 23, 1992. Whether the Petitioner returned the Form to IFAS's personnel office by mail or hand delivery is not clear from the record. However, a notation on the bottom of the Form indicates the Form was received by the personnel office of IFAS on November 9, 1993. The Form was received by the Division on November 12, 1992. The instructions in the Revised September 1991 Florida Flexible Benefits Plan booklet on when Form FB-2 must be submitted provides in pertinent part as follows: Requests must be made by submitting a completed Enrollment/Qualifying Status Change Form, FB-2 (available from your personnel office), to DSEI within 31 days of the event's occurrence. . . . The instructions on the reverse side of Form FB-2 as to the submission of the form provides: Return this completed from to your personnel office. It must be received at DSEI within 31 days of your employment or change in family/employment status. The personnel office is responsible for sending the form immediately upon its receipt to DSEI. THE EFFECTIVE DATE OF PLAN PARTICIPATION OR CHANGE IN FAMILY/EMPLOYMENT STATUS WILL BE THE DATE THE SIGNED AND PROPERLY COMPLETED FORM AND DOCUMENTATION ARE RECEIVED BY DSEI. Petitioner was accepted in the Plan with an effective date of enrollment being November 12, 1992, the date the Division received the Form from Petitioner. The Petitioner elected to contribute $900.00 to the Plan Medical Reimbursement Account to fund reimbursement payment for incurred medical expenses. The Petitioner's acceptance in the Plan was based on the Division having: (a) considered the child's birth as a qualifying status change and; (b) determined that the Petitioner had timely elected to participate in Plan in accordance with Rule 60P-8.0041(2), Florida Administrative Code, in that the Form has been completed and dated (not received by the Division) within 31 calendar days of the occurrence of the qualifying status change. There was insufficient evidence to establish facts to show that within 31 calendar days of occurrence (child's birth) of Qualifying Status Change the Petitioner had: (a) placed the Form with the U.S. mail or similar carrier for delivery to the personnel office of IFAS for submission to the Division; (b) placed the Form with the U.S. mail or similar carrier for submission with the Division; (c) hand delivered the Form to the personnel office of IFAS for submission to the Division or; (d) hand delivered the Form to the Division. Notwithstanding that the notation on the bottom of the Form indicates that the personnel office of IFAS had the Form in its possession as early as November 9, 1992, there is competent substantial evidence to show that the Division did not receive the Form until November 12, 1992. Likewise, there is competent substantial evidence to show that the Respondent did not make a timely election to participate in the Plan by submitting the Form to the Division within 31 calendar days of occurrence (child's birth) of qualifying status change as required by Rule 60P-8.0041(2), Florida Administrative Code, notwithstanding that the Form was dated October 23, 1992, well within the first 31 calendar days of occurrence (child's birth) of the qualifying status change. On December 14, 1992, the Petitioner submitted a claim for medical expense reimbursement for his wife and infant daughter for medical expenses incurred in the month of March, April, June, October and December, 1992. By letter dated December 24, 1992, the Division advised the Petitioner that expenses incurred prior to his enrollment date of November 12, 1992, (the date the Form was received by the Division) were not eligible for reimbursement and to resubmit claims for services incurred after November 12, 1992. There was no evidence presented as to whether the Petitioner resubmitted the medical expenses incurred during the month of December 1992, for reimbursement. The Petitioner contends that the Division should grant Petitioner an exception to the requirement that the effective date must be the date Form FB-2 is received by the Division and allow the effective date in this instance to be the date of occurrence, October 5, 1992, (date of child's birth) of qualifying status change. The Petitioner's contention is based primarily on the fact that the verbal instructions from the Division was misleading, and that the Division had made an exception by allowing the Petitioner to participate in the Plan even though the Petitioner had not timely elected to participate in the Plan in accordance with Rule 60P-8.0042, Florida Administrative Code. The Division denied the Petitioner's request for an exception contending that there is no provision for granting an exception in either case. The Division also contends that date Form FB-2 is completed and signed is the date to be used to in calculating the 31-calendar day requirement to determine if an employee has timely elected to participate in the Plan in accordance with Rule 60P-8.0041(2), Florida Administrative Code. The Division's position is expressly stated in Petitioner's exhibit 8 wherein William H. Lindner, Secretary, Department of Management Services, is responding to a letter from Petitioner and states: In your letter you indicated that an exception had been made in the enrollment process. It had not. Subsection 60P- 8.0041(2), F. A. C. (copy enclosed) indicates that an election to participate in the reimbursement accounts must be made within the first 31 calendar days of the occurrence of the Qualifying Status Change. Our records indicate that you made your election on October 23, 1992 which is within 31 days of the birth of your child on October 5, 1992. The records indicate that the Form was signed on October 23, 1992, well within the 31-day requirement but was not received by the Division until November 12, 1992, some seven days after the 31-day requirement had expired.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Respondent, Department of Management Services, Division of State Employees' Insurance enter a final order finding that the Petitioner failed to timely elect to participate in the in Plan in accordance with Rule 60P-8.0041(2), Florida Administrative Code, was not qualified to participate in the Plan, and any participation in the Plan allowed by the Division was void ab initio. It is further recommended that the Division refund all contributions made by the Petitioner to the Plan after adjustment for any reimbursement for medical expenses that may have been made to the Petitioner by the Division. DONE AND ENTERED this 16th day of February, 1994, in Tallahassee, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of February, 1994. APPENDIX TO RECOMMENDED ORDER NO. 93-5571 The following constitutes my specific rulings, pursuant Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Petitioner, Gregory E. Weaver's Proposed Findings of Fact. The following proposed finding(s) of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the proposed finding(s) of fact:1(1); 3-4(5); 5-6(9); 7(6,11); 9(11); 10(6,11); 11(9,16); 12(9); 13(8); 14-15(13); 16(15); 17(16); 18(5) and 19(6). Proposed Finding of Fact 2 is neither material nor relevant to this proceeding. Proposed Finding of Fact 8 is more properly covered in the Conclusions of Law. Proposed Finding of Fact 20 is more an argument than a finding of fact. Respondent's Proposed Findings of Fact. The following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the proposed finding(s) of fact: 1(1,2); 2(3); 3(4,6,9); 4(9); 7(13); and 8(14). Proposed finding of fact 5 is not supported by competent substantial evidence in the record. See Findings of Fact 10 and 11. Proposed finding of fact 6 is adopted in substance as modified in Findings of Fact 6 and 11, except for the first sentence which is rejected as I find no evidence as to the Form being mailed. Proposed findings of fact 9 and 11 ( there is no proposed finding of fact 10) are adopted in substance as modified in Finding of Fact 7 and 8. COPIES FURNISHED: Gregory Weaver Route 1, Box 423 Wauchula, Florida 33873 Augustus D. Aikens, Esquire Division of State Employment Insurance 2002 Old St. Augustine Road, B-12 Tallahassee, Florida 32301-4876 William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307 2737 Centerview Drive Tallahassee, Florida 32399-0950 Alecia Runyon, Director Division of State Employees Insurance 2002 Old St. Augustine Road, B-12 Tallahassee, Florida 32301-4876 Paul A. Rowell, General Counsel Department of Management Services Knight Building, Suite 307 2737 Centerview Drive Tallahassee, Florida 32399-0950
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.
