The Issue This case concerns the issue of whether Respondent's license as an Ordinary Life including Disability agent should be suspended, revoked, or otherwise disciplined for making certain misrepresentations to a Mr. Roger L. Robert in connection with the sale of a life insurance policy to Mr. Robert. A second issue relating to such disciplinary action is whether the Respondent improperly applied to become an insured under a group insurance policy. At the formal hearing, the Petitioner called as witnesses John E. Riley, Roger L. Robert, Angela Stackler, Marie Ellena Mullins, Frederick P. Quinn. The Respondent called as witnesses Baron Kramer, and the Respondent, Stanford J. Sabarsky. The Petitioner offered and had admitted into evidence Petitioner's Exhibits 1 through 7. Counsel for the Petitioner and counsel for the Respondent submitted proposed findings of fact and conclusions of law to the Hearing Officer for consideration. To the extent that the findings of fact herein are consistent with those proposed findings, the proposed findings were adopted by the Hearing Officer. To the extent that the findings herein are inconsistent with the proposed findings the proposed findings were considered by the Hearing Officer and rejected as having been unsupported by the evidence or as being unnecessary to the resolution of this cause.
Findings Of Fact COUNT I As to Count I of the Administrative Complaint, the parties stipulated to certain facts alleged in the Administrative Complaint, and those facts are found as facts in Paragraphs 1 through 9 below: Respondent, Stanford J. Sabarsky, at all times material herein, represented the All American Life Insurance Company as a licensed Ordinary Life, including Disability Agent. Stanford J. Sabarsky did on or about September 16, 1980, contact one Roger L. Robert, President of Freight Sales Centers, Inc. of Tampa, Florida for the purpose of soliciting an application for life insurance from Mr. Robert. At that time and place, Respondent represented to Mr. Robert that he could purchase a seven hundred fifty thousand dollar ($750,000.00) life insurance policy to be issued by the All American Life Insurance Company with an initial annual premium payment of fourteen thousand two hundred and eighty-five dollars ($14,285.00) As a result of said application, the All American Life Insurance Company subsequently issued to Mr. Robert policy number L1124920 effective November 11, 1980, in the face amount of seven hundred fifty thousand dollars ($750,000.00). Premium payments on policy number L1124920 were made by Mr. Robert on a monthly basis from October, 1980, to November, 1981. On or about November, 1981, Mr. Robert received notice from the All American Life Insurance Company that the second annual renewal premium on policy number L1124920 was due. On or about December 4, 1981, Mr. Robert requested that the renewal premium be paid from the cash value of his policy. As a result of the request, the second year annual renewal premium on policy number L1124920 was paid for by a policy loan against said policy, thereby reducing the net insurance protection of that policy. That Respondent, Stanford J. Sabarsky, earned a sales commission due to the issuance of policy L1124920. Prior to purchasing policy L1124920, Mr. Robert was given a sales presentation in his office by the Respondent. It was represented to Mr. Robert, by Mr. Sabarsky, that after the first year's premium was paid, the premium would thereafter be paid by the cash value and he would not have to make any more premium payments. Mr. Sabarsky also explained to him that the cash value could be borrowed out of the policy at approximately seven percent interest. It was Mr. Robert's understanding that after he paid the first year's premium, he would never have to pay out any more money for the life insurance coverage. He expressed this understanding to Angela Stackler, an employee, in the presence of Respondent, and Respondent did not inform him that his understanding was incorrect. In approximately November, 1981, Mr. Sabarsky returned to Mr. Robert's office. At that time, Mr. Sabarsky was questioned by Mr. Robert and his employee Ellena Mullins about the fact that they had received a bill for the next year's premium. In response to the inquiry, Mr. Sabarsky related that the first year's premium would carry the policy and that Mr. Robert wouldn't have to pay any more money. Mr. Sabarsky did not explain to Mr. Robert in November, 1980, or in November, 1981, the out-of-pocket expense which Mr. Robert would have to pay each year in order to borrow the cash value to pay the premium. In order to obtain those loans annually, Mr. Robert, within six years of the policy, would have out-of-pocket interest expense of $3,779.00, and in ten years, would pay interest of $10,163.00 in order to maintain the policy in effect. On April 1, 1982, Mr. Robert, after making inquiry to All American Life Insurance Company, received a letter setting forth the out-of-pocket expenses which would be required of him in order to maintain the life insurance policy in effect. COUNT II As to the allegations of Count II of the Administrative Complaint, the parties stipulated to those facts found in Paragraphs 14 through 16 below. That at all times pertinent to the dates and occurrences referred to in this Administrative Complaint, Respondent, Stanford J. Sabarsky, was qualified and licensed as an insurance agent in this state. On or about January 29, 1979, Stanford J. Sabarsky, while licensed as an insurance agent for Home Security Life Insurance Company, did solicit and sell to Roger L. Robert, President of Freight Sales Center, Inc. of Tampa, Florida, a group disability insurance plan for the employees of Freight Sales Center, Inc. That on or about February 12, 1981, Stanford J. Sabarsky, signed an application to Home Security Life Insurance Company to have his name added to said group disability insurance plan and indicated on said application that he was an employee of Freight Sales Center, Inc. Prior to signing the application on February 12, 1981, the Respondent had asked Roger L. Robert to allow him to add his name to the group disability insurance plan of Freight Sales Center, Inc. As a result of the February 12, 1981, application, the Respondent was, in fact, added as an insured to the group disability insurance policy. He remained as an insured under the policy until approximately May, 1981. In March, 1981, the Respondent submitted a claim to Home Security Life Insurance Company. The claim was paid. The application signed by the Respondent (Petitioner's Exhibit 6) on February 12, 1981, reflected that he worked a minimum of 30 hours per week for Freight Sales Center, Inc, that his date of employment was 1/30/81, and that his base earnings was $600 per week. These facts were not true. At no time from January 30, 1981, to May, 1981, was the Respondent an employee of Freight Sales Center, Inc. The Respondent was aware at the time that he signed the application that he was not an employee of Freight Sales Center, Inc.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department enter a final order suspending Respondent's license as an Ordinary Life including Disability agent for a period of one (1) year. DONE and ENTERED this 12th day of August, 1983, in Tallahassee, Florida. MARVIN E. CHAVIS, 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 12th day of August, 1983. COPIES FURNISHED: William W. Tharpe, Jr., Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 George W. Greer, Esquire 302 South Garden Avenue Clearwater, Florida 33516 Honorable Bill Gunter Insurance Commissioner and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32301
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner, as beneficiary of her deceased father's State of Florida life insurance policy, is entitled to a benefit of $10,000 or $2,500, and is related to how notice of a change in coverage amount and premium was provided to the decedent.
Findings Of Fact At the time of his death on November 29, 2008, Maurice Adkins was covered by the state life insurance plan, as a retired employee of the State of Florida. The Petitioner, Justina Mullennix, is the daughter of Mr. Adkins and is the beneficiary of any life insurance benefits paid or payable from the state life insurance plan on account of the death of her father. Effective January 1, 2000, the coverage for retirees was increased to $10,000.00. The premium for this coverage was $4.20 per month. The DSGI prepared a letter dated July 31, 2006, to notify the retirees that effective January 1, 2007, the life insurance benefit options provided to retirees would change. The changes allowed retirees to elect one of the following options: $2,500 benefit for a monthly premium of $ 4.20. $10,000 benefit for a monthly premium of $35.79. Termination of coverage. The letter dated July 31, 2006, informed retirees that their life insurance premium would remain the same, but that their coverage would be reduced to $2,500, unless they elected coverage in the amount of $10,000 and elected to pay the higher premium. The letter advised the retirees they could change their election up to and including January 19, 2007. Mike Waller, an employee of the DSGI, maintains benefits data for the People First/Division of State Group Insurance. In July 2006, Mr. Waller was asked to prepare a file containing the names and mailing addresses of all retirees who were covered by life insurance. Mr. Waller created the file, prepared in July 2006, to use in a "mail merge," to send all retirees a copy of the letter dated July 31, 2006. In preparing the file containing the mailing addresses of retirees covered by life insurance, Mr. Waller used the addresses of record that he maintained. In July 2006, the address of record for Mr. Adkins was 2877 Belair Road E., Jacksonville, Florida 32207, and was included in the file. Mr. Waller prepared the file and on July 3, 2006, delivered it to Dick Barnum and Thomas Lockeridge. Thomas Lockeridge delivered the file to Laura Cutchen, another employee of the DSGI. The DSGI contracted with Pitney Bowes to mail the letter of July 31, 2006, to all retirees. After obtaining copies of the letter from the print shop of the DSGI, Ms. Cutchen delivered the letters and the file containing names and addresses of retirees to Pitney Bowes to assemble. The letters dated July 31, 2006, in envelopes addressed to each retiree who carried life insurance at the time, were delivered to the U.S. Post Office, accompanied by Ms. Cutchen. The State of Florida first class mailing permit had been applied to each envelope. The letter dated July 31, 2006, was mailed to Mr. Adkins at the Belair address. The return address on the envelope containing the letter was the Division of State Group Insurance, 4050 Esplanade Way, Ste. 215, Tallahassee, Florida, 32399-0949. The letter was not returned to the Division. The letters that were returned to the DSGI were processed by Janice Lowe, an employee of the DSGI. Each letter that was returned to the Division of State Group Insurance was handled in one of two ways: a) if the envelope showed a different address on a yellow sticker applied by the US Postal Service (USPS), the letter was re-mailed to that address; b) if the returned envelope did not provide a different address, a manual search of the database of the Division of Retirement was made, a copy of the print screen showing the address in the Retirement database was made, if different from that on the database of the Division of State Group Insurance, and the original envelope and letter were placed in another envelope and mailed to the address from the Division of Retirement database. A copy of each Retirement screen that was accessed by Ms. Lowe was printed and inserted in alphabetical order in a binder. For every person whose letter was returned, and for which there was not another address, there would have been a Retirement print screen. The absence of a Retirement print screen indicates that the initial letter was not returned. There is no retirement print screen for Mr. Adkins, indicating that the letter to him dated July 31, 2006, was not returned to the DSGI. DMS has contracted with Convergys, Inc., to provide human resources management services, including assisting in the administration of employee benefits. Convergys primarily performs these tasks through an on-line system known as “People First.” Prior to Convergys assuming responsibility for the administration of benefits, DSGI maintained benefits information in the Cooperative Personnel Employment System (COPES). When Convergys assumed responsibility for the management of benefits, the benefits information from COPES was imported into the Convergys People First System. People First became the system of record for the DSGI beginning January 1, 2005. People First and the Division of Retirement do not share databases and each maintains its own database of names and addresses. Once a year the DSGI must hold Open Enrollment for the health program. § 110.123(3)(h)5, Fla. Stat.; Fla. Admin. Code R. 60P-1.003(16). Open Enrollment is the period designated by the DMS during which time eligible persons may enroll or change coverage in any state insurance program. Prior to Open Enrollment each year, the DSGI provides employees and retirees a package that explains the benefits and options that are available for the next plan year. The 2006 Open Enrollment period, for the 2007 Plan Year, ran from September 19, 2006, through October 18, 2006. During open enrollment for Plan Year 2007, the People First Service Center was charged with the responsibility of sending open enrollment packages to State of Florida retirees and other employees. People First mailed Mr. Adkins’s Open Enrollment Package to the 2877 Belair Road E., Jacksonville, Florida 32207 address, on September 3, 2006. The Open Enrollment Package for Plan Year 2007 was mailed by People First through the U.S. Post Office, first class postage paid. The Open Enrollment Package mailed to Mr. Adkins, for 2006 Open Enrollment, was not returned to People First. The Open Enrollment Package mailed to Mr. Adkins on September 3, 2006, contained Mr. Adkins’s 2007 Benefits Statement; a letter from John Mathews, former Director of the DSGI; "Information of Note"; a Privacy Notice; Notice Regarding Prescription Coverage; and a 2007 Benefits Guide. The Information of Note included the following statement: Retiree Life Insurance For Plan Year 2007, those currently enrolled with retiree life insurance may elect to retain the current $4.20 premium for a benefit of $2,500, retain the current benefit of $10,000 for a premium of $35.79, or cancel coverage. If no change is made during open enrollment, participation will continue at the $4.20 premium level. Neither Mr. Adkins nor anyone on his behalf affirmatively elected to continue $10,000.00 in life insurance coverage during the enrollment period in 2006 and 2007. Because the election was not made, at the death of Mr. Adkins, the benefit paid to the Petitioner was $2,500.00. Prior to January 1, 2007, the Life Insurance Trust Fund was used to augment the premiums paid by retirees for life insurance. The premium paid by the retirees did not support a $10,000 coverage level. In year 2006, the DSGI determined that the money in the life insurance trust fund, used to augment the retiree’s benefits from years 2000 through 2007, would not be available after 2007. Beginning January 1, 2007, the change in life insurance coverage was made because the funds in the Life Insurance Trust Fund were no longer available to augment the premium payment required to maintain a benefit level of $10,000.00, for a payment of $4.20 per month by the retirees. In 2006, the DSGI determined that the then-current life insurance premium of $4.20 would support a benefit of $2,500, and that the $10,000 benefits would cost $35.79. The notices provided by the July 31, 2006, letter and the 2006 Open Enrollment Package were sufficient notices of the increase in premium in that they provided a reasonable opportunity within which to make a selection of the level of coverage. On December 30, 1997, the Division of Retirement received a written notice of change of address for Mr. Adkins. The new address was 217 Skye Dr. W, Jacksonville, Florida 32221. Although Mr. Adkins had changed his address with the Division of Retirement, he did not notify the DSGI. A change of address with one division does not automatically change addresses in the other. The two divisions have different databases. During no time relevant to these proceedings have the two divisions shared databases. The DSGI, through People First, used the database of the Division of Retirement to send the 2004 Benefits Statement as an experiment to determine whether DSGI undeliverable returns would decrease. The same database was also used for the mailing of the letter dated September 2, 2003. However, neither DSGI nor People First changed its database after the 2004 Benefits Statement was sent and subsequent information was mailed to the DSGI address of record, based upon the COPES system. Therefore, the letter dated July 31, 2006, and the 2006 Open Enrollment Package for the Plan Year 2007, were mailed to the same Belair address, the address of record. A change of address for Mr. Adkins was not made in the database of the DSGI until December 1, 2008, when People First was provided a change of address. The only change of address that the Petitioner has alleged, was the one provided by Mr. Adkins to the Division of Retirement (only) in 1997.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings of the parties, it is RECOMMENDED that a Final Order be entered by the Department of Management Services, Division of State Group Insurance, dismissing the petition in its entirety. DONE AND ENTERED this 22nd day of January, 2010, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 22nd day of January, 2010. COPIES FURNISHED: Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399 Justina Mullennix 1217 Skye Drive West Jacksonville, Florida 32221 John Brenneis, General Counsel Division of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue Did Mr. Carter violate sections 627.4554(4)(a), 627.4554(4)(c)2., 626.611(5), 626.611(7), 626.611(9), 626.611(13), 626.621(2), 626.621(6), 626.9541(1)(a)1., and 626.9541(1)(e)1., Florida Statutes (2006, 2009, 2010); section 626.9521(2), Florida Statutes (2006, 2010); sections 626.9541(1)(k)2., 626.9541(1)(l), and 626.9521(2), Florida Statutes (2009, 2010); section 626.621(9), Florida Statutes (2010); and Florida Administrative Code Rule 69B-215.210? If so, what discipline should be imposed?
Findings Of Fact At all times material to this proceeding, the Legislature has vested the Department with the authority to administer the disciplinary provisions of Chapter 626, Florida Statutes. § 20.121(2)(g) and (h)1.d., Fla. Stat. (2011). At all times material to his proceeding, Mr. Carter was licensed by the Department as a Florida life (including variable annuity) agent (2-14), life including variable annuity and health agent (2-15), life insurance agent (2-16) and life and health agent (2-18). He has been appointed as an agent for several different life insurance companies, including Allianz, EquiTrust and Great American, but not RiverSource. Counts I through V--W.K. and J.K. 2006, J.K. and W.K., and the MasterDex 10 J.K. was born in 1937 in Madrid Spain, where she finished high school. Spanish is J.K.'s native tongue. She cannot write in English and does not speak or understand English well. When J.K. was 17, she met W.K., a member of the United States' armed services. They married in Spain. Six months after the marriage, the newlyweds moved to Brooklyn, New York, W.K.'s home. They later relocated to Florida. W. K. constructed a mall in New Port Richey containing 18 stores that included a restaurant and a frame shop. J.K. ran the frame shop. Wal-Mart eventually bought the mall. By 2006, J.K. and W.K. had accumulated approximately two million dollars in brokerage investments. Until the decline of his health and mental faculties in 2008, W.K. handled all financial matters for the couple. J.K. did not understand them or have any interest in them. In 2006, J.K. and W.K. met Mr. Carter, who began marketing annuities to them. J.K.'s testimony demonstrated that her memory was significantly impaired. That fact, combined with the fact that W.K. had died several years before the hearing, limit the ability to determine what representations Mr. Carter made to J.K. and W.K. or what information or instructions they gave him. On July 25, 2006, W.K. applied for a MasterDex 10 annuity policy from Allianz Life Insurance Company of North America. He paid an initial premium of $603,470.34 for the policy. W.K. was 73 years old at the time. W.K. obtained the money to fund the policy from the couple's Merrill Lynch brokerage account. Mr. Carter knew this. As part of the annuity application process, Mr. Carter submitted an Allianz "Product Suitability Form" for W.K. Completion of the form is a prerequisite to processing the application and issuing the policy. The stated purpose of the form is "to confirm that your [the applicant's] annuity purchase suits your current financial situation and long-term goals." The form, signed by W.K. and Mr. Carter, stated that an annuity was the source of the funds for payment of the annuity's premium. This statement was not accurate. Mr. Carter knew that it was not accurate. Signing and submitting the application with the suitability form containing this known incorrect statement was a willful deception by Mr. Carter with regard to the policy. Signing and submitting the application with the suitability form containing this known incorrect statement was a dishonest practice in his conduct of the business of insurance. The suitability form also indicated that W.K. expected the annuity to provide him a steady stream of income in six to nine years. Allianz accepted the application and issued the policy. Mr. Carter received a commission of $66,381.73. The MasterDex 10 is a complex financial product with many difficult to understand restrictions, conditions, interest options, bonuses, penalties, and limitations. The MasterDex 10 that W.K. and J.K. purchased paid interest linked to the performance of the Standard and Poors 500 stock market index. It also guaranteed interest of at least one percent. A "Nursing Home Benefit" was one of the options the MasterDex 10 provided. The "benefit" permitted the policy holder to receive payments of the full "annuitization" value of the policy over a period of five years or more if the holder was confined to a nursing home for 30 out of 35 consecutive days. The "annuitization value" is the maximum value that the policy can reach. It is the total of all payments that would be made to the holder if he either (1) let the premium and interest earned accumulate for a minimum of five contract years and then took ten years of interest only payments, followed by a lump sum payment of the annuitization value or (2) equal payments of principal and interest over ten or more years. Policy holders could make additional premium payments to increase the policy value. The policy also permitted limited withdrawals without penalty. After holding the policy for 12 months after the most recent premium payment, a holder could, without penalty, withdraw up to ten percent of the premium paid once a year until a maximum of 50 percent of the premium had been withdrawn. This meant that after one year passed, W.K. could make five annual withdrawals of $60,347.03. The policy also provided for loans on the annuity. In the years following this transaction, Mr. Carter maintained contact with W.K. and J.K. by periodically asking them to join him at a restaurant for lunch. Decline of W.K.'s Health While visiting his mother in Greece in 2008, W.K. fell and hit his head. Afterwards his health declined. On June 3, 2008, W.K. was diagnosed with Alzheimer's disease and determined to be unable to make sound financial and medical decisions. From June 2008, forward, J.K. was very worried about W.K.'s health, caring for him, and making him as comfortable as possible. On November 5, 2008, W.K., at Mr. Carter's suggestion, executed a Durable Power of Attorney, prepared for her by a lawyer, giving J.K. broad authority to act on his behalf in financial matters. At some point, W.K. was admitted to the Bear Creek Skilled Nursing Center and resided there for a period of time. On April 4, 2010, he was discharged from Bear Creek. W.K. resided in Bear Creek for a period of time. Although there is some hearsay evidence about when W.K. entered Bear Creek, the evidence does not corroborate direct evidence or hearsay evidence that would be admissible over objection in circuit court, sufficient to prove when W.K. entered Bear Creek. Consequently, the evidence does not establish the length of time that W.K. spent in the facility and does not establish that W.K. would have been eligible for the "Nursing Home Benefit" described in paragraph 16. After W.K. returned home in April, J.K. engaged an enterprise called "Granny Nannies" to provide caretakers at home. The services cost approximately $12,000 per month. During this period J.K.'s health also declined markedly. Among other things, she had appendicitis and breast cancer. Treatment of the cancer required chemotherapy, which left her in pain and exhausted. During this time Mr. Carter obtained a copy of the power of attorney executed by W.K. in favor of J.K. On June 18, 2010, the court appointed Paula Rego as guardian for W.K and J.K. with authority to act on their behalf in all matters affecting property rights. On November 26, 2010, W.K. died in hospice care after a short hospital stay. The Events of 2010 In December 2009, J.K. met with insurance sales agents and sisters Kimberly Trotter and Chandra Valdez. J.K. had responded to a mail solicitation by them. During the meeting, J.K. and Mss. Trotter and Valdez realized that J.K. knew them because J.K. and W.K. had rented space to the sisters' parents. Capitalizing on the connection and J.K.'s concerns about paying the monthly costs of care for W.K., Ms. Trotter and Ms. Valdez began providing financial advice and marketing annuity products that they sold. They advocated liquidating W.K.'s and J.K.'s existing annuities, including the MasterDex 10. In December 2009, Ms. Trotter and Ms. Valdez sold W.K. and J.K. two annuities with Great American for approximately $661,098. On January 28, 2010, W.K. authorized J.K. and Ms. Trotter to access policy information. In January 2010, Ms. Trotter attempted to liquidate the MasterDex 10 policy and transfer the funds to Great American. Allianz notified Mr. Carter of this in February 2010. He intervened to stop the transfer. On March 3, 2010, Allianz received another request to liquidate the MasterDex 10 from J.K. Allianz sent her what it calls a "conservation letter." The purpose of the letter is to "conserve" the business with the company. The letter also identified needed information, including a copy of J.K.'s power of attorney for W.K. On March 4, 2010, Allianz notified Mr. Carter of the liquidation request. He contacted J.K. and began a successful effort to obtain a letter asking to reverse the liquidation. On March 17, 2010, Ms. Trotter or Ms. Valdez again convinced J.K. to liquidate the MasterDex 10 funds and transfer them to Great American. Again Mr. Carter acted to stop the liquidation. On March 23, 2010, J.K. signed a letter written by Mr. Carter asking for William Pearson to be her new financial advisor. Mr. Carter sent the letter to RiverSource, a company that issued another annuity policy of J.K's. J.K. did not know who Mr. Pearson was. She only signed the letter because Mr. Carter told her that it would help her save money. On March 26, 2010, J.K. submitted a liquidation request form for the MasterDex 10 signing it on behalf of herself and W.K. J.K. submitted the request at the urging of Ms. Trotter and/or Ms. Valdez. Allianz received the request on March 31, 2010. It began processing the full liquidation of the annuity policy. On April 1, 2010, Mr. Carter sent Allianz a letter saying that J.K. did not want to liquidate W.K.'s MasterDex 10 policy. The letter claimed that this was the second time that competing agents had tried to cancel the policy. Allianz reinstated the policy. On April 1, 2010, Mr. Carter sent a handwritten letter to Great American stating that J.K. did not want the MasterDex 10 policy canceled. The letter refers to having previously provided the power of attorney. Mr. Carter signed the letter. J.K. signed the letter on behalf of W.K. and herself. On April 7, 2010, Great American received a typewritten letter addressed to "To Whom It May Concern" stating that J.K. and W.K. wanted to transfer their funds to Great American since "December and January" and that J.K. did not see Mr. Carter on April 1 and did not sign a letter that he sent. On April 9, 2010, Mr. Carter wrote and sent a letter, signed by J.K. at his request, asking Great American to cancel the policies sold by Ms. Trotter and Ms. Valdez and waive all surrender charges. The letter states that J.K. is fighting cancer and that the agents forced her to sign the policy documents. Mr. Carter included with the letter a Withdrawal/Surrender Request Form completed by him and signed by J.K. On April 23, 2010, Mr. Carter wrote a letter to Allianz stating that J.K. needed more than ten percent of the value of the MasterDex 10 policy (the penalty-free withdrawal permitted) to provide the funds needed to take care of W.K. The letter states that W.K. and J.K. wished to change ownership of the policy to J.K. only and then to fully surrender the policy. Mr. Carter's letter is signed by J.K. on her behalf and on behalf of W.K. Mr. Carter enclosed forms with the same date, which he prepared for J.K.'s signature, requesting the change of ownership and liquidation. Allianz sent J.K. a letter, with a copy to Mr. Carter, on April 29, 2010, identifying alternatives to liquidating MasterDex 10 for getting the money needed to care for W.K. The Allianz letter also disclosed that liquidating the policy would result in a substantial loss of money. In part, the letter stated: We understand you wish to surrender your annuity policy. As we review your request, we want to be certain you are aware of all the alternatives that are available to you. This information can help you make an informed decision based on your best financial interests. It is possible for you to access a portion of your policy's value while your policy remains in deferral. This would allow its value to continue to grow tax-deferred, and still provide the cash you need. Your annuity may permit you to take a free withdrawal, policy loan, or partial surrender. Finally, it's important to realize exactly how much you will be giving up should you decide to fully surrender your policy. Your policy's current Accumulation Value is $751,566.07 and its Surrender Value is $585,014.49. By surrendering your policy now, you are giving up the difference between these two values [$166,551.58]. Any one of these options could provide you with needed cash while allowing you to receive your full accumulation value in cash after your policy's 10-year surrender charge period. The letter provided a ten-day period, called a conservation period, during which J.K. could withdraw her request to liquidate the policy. Mr. Carter called Allianz on April 30, 2010, and spoke to Amber Hendrickson. In the recording of the conversation, Mr. Carter sounds agitated and speaks forcefully. J.K. participated in the telephone call. She is quiet and deferential. In the call, J.K. waives the ten-day "conservation" period. Mr. Carter insists that Allianz process the surrender swiftly. Allianz processed the liquidation of the MasterDex 10 on April 30, 2010. It wired funds from the liquidated annuity to J.K.'s Regions Bank account the same day. On April 30, 2010, J.K. signed a check for $475,000 to EquiTrust Life Insurance Company to purchase an annuity. Mr. Carter wrote the check. Also on April 30, 2010, J.K. signed an EquiTrust annuity application completed by Mr. Carter. The form indicates that the policy is not replacing an existing annuity contract. This is not an accurate representation. On April 30, 2010, Mr. Carter also completed an Annuity Suitability Questionnaire for J.K. to sign and submit with the EquiTrust application. He indicated that J.K. had income from a pension. Mr. Carter knew that this was not accurate. Mr. Carter also indicated that J.K.'s income was adequate to cover all expenses, including medical. He knew this was not accurate because he was fully aware of the cost of W.K.'s caregivers and J.K.'s concern about them. The form, as completed by Mr. Carter, is misleading about the source of the funds for purchase of the annuity. He made the technically correct representation that the funds come from a checking account. But the funds were from the liquidation of the MasterDex 10 and were placed in the checking account the same day the application was completed. The funds were actually from the liquidation of the MasterDex 10 annuity. The form also stated that the proposed annuity would not replace any product. Mr. Carter knew this was not accurate also. He knew that the EquiTrust annuity was replacing the MasterDex 10, albeit in a lower amount, because J.K. kept some cash and lost a good deal of money in surrender costs. A letter Mr. Carter sent to EquiTrust on August 16, 2010, when it was investigating complaints about J.K.'s purchase of the annuity, demonstrates that he knew the EquiTrust annuity was replacing the MasterDex 10. Mr. Carter's letter described the surrender and purchase this way: "An amount of $475,000 was placed into the EquiTrust Annuity (Market Power Bonus Index's Fixed account), the remaining balance of $110,038.75 was sent to her checking account, plus two other accounts valued at $50,000 that were closed, and a Jefferson National check that wasn't cashed for $3,500." Also, on April 23, 2010, J.K. signed, on behalf of herself and W.K., a Surrender/Withdrawal Request to RiverSource asking for the full withdrawal of the net accumulation value of their annuity contract with RiverSource. RiverSource sent J.K. a check for $26,430.07. It deducted $2,158.32 for a withdrawal charge and $295.98 for a "rider charge" from the full value of $28,884.37. On May 5, 2010, EquiTrust received J.K.'s policy application documents and check. EquiTrust required additional documents including a financial needs analysis form. Mr. Carter sought an exception to the requirement for a financial needs analysis form. He did not receive the exception. On May 6, 2010, Mr. Carter sent EquiTrust the required financial needs analysis form. He completed the form for J.K., who was 72 at the time. J.K. also signed this form. The form repeats some of the incorrect statements of the previous forms. It is also includes additional incorrect statements. The instructions for the section about "Replacements" states, "complete if an existing life insurance policy or annuity contract will be used to fund this product." Mr. Carter checked "no" as the response to the question: "Is the agent assisting you with this annuity purchase the same agent on the life insurance policy or annuity contract being replaced?" This indicates he is aware that the policy replaces the MasterDex 10. The response was also a representation that he knew to be false, because he was the agent on the policy being replaced. Mr. Carter also indicated on the needs analysis form that the source of funds for the EquiTrust annuity purchase was "Stocks/Bonds/Mutual Funds." Mr. Carter knew that this representation was not correct. It was also inconsistent with the statement on the suitability questionnaire that the funds came from a checking account. On May 18, 2010, J.K. signed a letter, written by Mr. Carter, asking for William Pearson to be her new financial advisor. Mr. Carter sent the letter to Genworth, a company holding another annuity policy of J.K's. J.K. did not know who Mr. Pearson was and only signed the letter because Mr. Carter told her that it would help her save money. J.K. signed a letter, dated May 20, 2010, instructing EquiTrust to cancel the annuity she had with it. On May 23, 2010, Mr. Pearson submitted a form, signed by J.K., using the power of attorney, asking Genworth to liquidate an annuity held for W.K. On May 26, 2010, EquiTrust received the request to cancel J.K.'s policy and advised Mr. Carter. On May 31, 2010, Mr. Carter sent EquiTrust a letter saying that J.K. did not want to cancel and enclosed a letter he prepared, dated May 26, 2010, and signed by J.K. asking EquiTrust to withdraw the cancelation request. The letter also stated that an agent who provided her untruthful information initiated the request. On June 2, 2010, at Mr. Carter's urging, J.K. sent EquiTrust a letter saying she wanted to keep the EquiTrust policy. On June 2, 2010, Mr. Carter sent, by facsimile, a letter written by him and signed by J.K. asking Great American to make Peter Gotsis her annuity agent. J.K. did not know Peter Gotsis and only signed the letter because Mr. Carter asked her to. On June 29, 2010, EquiTrust received a check for an additional $90,302.19 premium for J.K.'s policy. In July 2010, with the assistance of employees at her bank and others, J.K. contacted an attorney. The attorney, Joan Hook, contacted Mr. Carter and the various companies with annuities. Due to the efforts of Ms. Hook, J.K.'s guardian, Ms. Rego, Ms. Karen Ortega of the Department, and others, the series of transactions were undone and J.K. returned to her position before the liquidation of the MasterDex 10 annuity. From December 2010 forward, it was clear to Mr. Carter or anyone else having regular dealings with J.K. that she is confused, uninformed about financial matters, compliant, reasoning poorly, and not capable of making sound decisions. J.K.'s testimony demonstrated that her memory was significantly impaired. That fact combined with the fact that W.K. died several years before the hearing, makes it impossible to determine what representations Mr. Carter made to W.K. and J.K. and to determine what information or instructions they gave him. Much of the evidence related to Counts I through V is hearsay evidence that would not be admissible over objection in a civil action. In addition, there is no expert testimony evaluating the facts of record and analyzing the suitability of the investments advocated by Mr. Carter. Also, there is no evidence of the life expectancy of W.K. and J.K., which is an important factor in evaluating suitability of annuity products. Consequently, the record is inadequate for determining the reasonableness or suitability of the various products promoted by Mr. Carter or of the liquidation of the MasterDex 10. Mr. Carter willfully misrepresented information with regard to the applications for the Allianz and the EquiTrust annuities. This was dishonest. In the process, Mr. Carter also demonstrated a lack of trustworthiness to engage in the business of insurance. These willful misrepresentations were false material statements knowingly delivered to Allianz and EquiTrust. Count VI--G.D. and K.D. G.D. lives in New Port Richey, Florida, where she moved from New York about 40 years ago. She was born on January 17, 1935, and has a ninth-grade education. G.D. had worked as a courier. Her investment experience consists of funding certificates of deposit (CDs), placing money in a mutual fund, and purchasing a Transamerica annuity. She is frugal and a conservative investor. G.D. is married to K.D. who was born April 12, 1927. Both are retired. G.D. met Mr. Carter in January 2010, when she responded to a postcard that he sent suggesting that he could save her money on taxes on social security payments. At that time, G.D. was 75 years old and K.D. was 83. G.D. was and is in bad health due to having suffered four strokes. She had difficulty speaking to Mr. Carter during his sales presentations. G.D. and K.D. disclosed to Mr. Carter that their total monthly family income, including social security and K.D.'s pension income, was approximately $2,400.00. They also disclosed that their assets included approximately $325,000.00 in CDs held with Suncoast Schools Federal Credit Union. G.D. and K.D. each owned an annuity, one with Hartford and one with Transamerica, which they told Mr. Carter about. Together, the annuities had a value of approximately $85,000. G.D. and K.D. also had approximately $66,000 in a money market account. Mr. Carter convinced G.D. and K.D. to liquidate their CDs to purchase two Allianz annuities called a MasterDex 10 Plus. One required payment of a $38,219.39 premium. The other required payment of a $287,365.00 premium. The couple applied for the annuities for G.D., with K.D. as the beneficiary, because he was the older of the two. Mr. Carter completed the applications, which they signed. Part six of the applications is titled: "Replacement (this section must be completed)." It asks two questions. The first is: "Do you have existing life insurance or annuity contracts?" Mr. Carter checked "no" as an answer. This was not correct, and he knew it. The second question asks: "Will the annuity contract applied for replace or change existing contract or policies?" This Mr. Carter correctly answered "no." Section six also asks for the amount of coverage in force. Mr. Carter did not provide this information. Mr. Carter also completed the Florida Senior Consumer Suitability Form Questionnaire for G.D. and K.D., which they signed. The form accurately reflects the couple's net worth, liquid assets, and income. It reports correctly that they owned or had owned CDs, fixed annuities, and variable annuities. The completed form also accurately reflects the couple's desire for guaranteed income. The form discloses that the annuity must be owned a minimum of 15 years to receive its maximum value. The MasterDex 10 Plus annuity is a complicated financial product with a ten percent "bonus" that the buyer does not receive unless she holds the policy for 15 years. In fact, holding the policy for 15 years is the only way to get the full benefit of the policy. While money may be withdrawn earlier, that results in losses of the benefits and in some cases penalties. For instance, if a policy holder chooses to liquidate the policy, the value she receives is only 87.5 percent of the premium paid with one percent interest for the period held. These provisions have a substantial financial effect on the benefits of the annuity. For example, in the fifth year, the cash surrender value of the $38,219.49 premium policy is $36,027.00. About ten months after purchasing the annuities, G.D. and K.D. began having second thoughts about the purchase of the annuities. G.D. consulted with the financial advisor "Wayne" at her bank. G.D. later concluded that she had also misunderstood the interest rate. Mr. Carter had shown her sales material with the ten percent "bonus," which generated a high interest rate of 13.3 percent for one year. But G.D. did not understand that the interest rate only applied in one year, and the money was not immediately available. On November 17, 2010, G.D., with Wayne's help, composed a complaint letter to Allianz that summarized her complaints and requested that her premium payments be returned without fees. On November 28, 2010, Carter responded with a letter to Allianz defending his annuity sales. On December 17, 2010, Allianz's employee, Mary Lou Fleischacker, advised G.D. by letter that the "free look" period for cancelling the contracts had passed. But Fleischacker did request further information about the sales. By two letters dated January 10, 2011, Allianz advised G.D. that she would suffer over $80,000 in penalties if she canceled the contracts. G.D.'s efforts to terminate the annuities prompted Carter to come uninvited into G.D.'s home and insistently demand that G.D. telephone Allianz and cancel her attempt to rescind the contracts. He also asked her, without explanation, to wait one week before liquidating the policies. G.D. refused. Carter repeatedly telephoned G.D. and returned uninvited to the house several times making the same demand. G.D. refused to answer her door. Mr. Carter came to G.D.'s daughter's house uninvited one evening, told her that her mother was going to lose a lot of money, and revealed her mother's financial matters to her. Mr. Carter demanded that G.D.'s daughter deliver to her mother for signature a letter he wrote rescinding the liquidation requests. G.D.'s daughter agreed to get Carter to leave. G.D.'s daughter feared for her mother's safety because of Mr. Carter's harassing telephone calls to her and her mother. She urged her mother to call the police. G.D. called the police and a New Port Richey officer told Mr. Carter to cease the harassment, and then filed a report on January 13, 2011. Mr. Carter did not contact G.D. or her daughter after that. Eventually, with the assistance of Department Investigator Ortega, G.D. was able to obtain the return of her funds from Allianz. There is no expert testimony evaluating the facts of record and analyzing the suitability of the investments advocated by Mr. Carter. Also, there is no evidence of the life expectancy of G.D. and K.D., which is an important factor in evaluating suitability of annuity products. Consequently, the record is inadequate for determining the reasonableness or suitability of the liquidation of the CDs and purchase of the MasterDex 10 Plus annuities as promoted and sold by Mr. Carter. Mr. Carter willfully misrepresented information with regard to the applications for the MasterDex 10 Plus annuity. This was dishonest. In the process, Mr. Carter also demonstrated a lack of trustworthiness to engage in the business of insurance. These willful misrepresentations were false material statements knowingly delivered to Allianz. Mr. Carter's repeated, persistent, and overbearing efforts to require G.D. to speak with him about the cancelation and withdraw it demonstrate a lack of fitness to engage in the business of insurance. Count VII--G.B. G.B. was born on January 14, 1930. She has a high school education. G.B. worked at and retired from Lucent Technology wiring telephone boards. She receives a small pension. Her husband, K.B., managed their financial affairs before he died ten years ago. Before K.B.'s death, the couple maintained investment accounts with Schwab. After K.B.'s death, Schwab employee, Barry Tallman, recommended that G.B. seek financial advice from Christopher Trombetta, CPA. She did so. Mr. Carter and a colleague, Christopher Drew, met with G.B. on June 29, 2010. She was 70 years old, timid, and easily confused. G.B. had responded to a promotional postcard she received from them purporting that the law governing taxes on social security income had changed and that they could lower her taxes. Mr. Carter was the person who presented G.B. information and persuaded her to purchase an annuity in the course of a meeting that lasted one to two hours. The evidence does not permit a determination of what representations and information Mr. Carter presented in his sales meeting with G.B. Her memory of the meeting was not distinct. She was confused about the meeting and did not remember facts precisely or explicitly. Mr. Carter completed applications for EquiTrust annuity products. G.B. signed the applications. Mr. Carter also completed financial needs analyses. G.B. signed them also. A box that asks if the applicant is aware that the annuity may be "a long-term contract with substantial penalties for early withdrawal" was checked "yes." The form also accurately represented that the source of funds for the annuity premium was stocks, bonds, or mutual funds. The other representations in the form were accurate. Mr. Carter persuaded G.B. to purchase two EquiTrust Market Power Plus annuities. G.B. signed two EquiTrust annuity contracts ending with 29F (E-29F) and 30F (E-30F). The initial premium for E-29F was $458,832.71. The initial premium for E-30F was $118,870.34. Both annuities were designed to provide G.B. with income in 2036. The funds for the premium came from the liquidation of her stock brokerage account. Both contracts had 20 percent surrender charges for the first two years of ownership. G.B. could not have surrendered the contract with its full financial benefits without a penalty until she was 95 years old. Mr. Carter delivered the annuity contracts to G.B. on August 6, 2010. The contracts provided G.B. the right to cancel the annuity by returning it within 15 days of the date she received it. Soon afterwards, Barry Tallman notified G.B. that her Schwab accounts had been liquidated. Transamerica Agent William Pearson had liquidated the accounts to transfer the money for purchase of the EquiTrust annuities. She was surprised. G.B. grew concerned about the annuities and consulted Mr. Trombetta and a financial advisor named Judith Gregory on September 20, 2010. With their assistance, G.B. wrote a complaint letter to EquiTrust asserting that Mr. Carter had assured her, among other things, that the annuities would protect her money should she enter a nursing home. G.B. wanted to cancel the annuities and have her full premium returned. G.B.'s letter to EquiTrust said, "I do not want any calls or visits from the agent or the agent's office." Mr. Carter learned of the effort to cancel the annuities. On November 15, 2010, at Mr. Carter's suggestion, he and Mr. Drew returned to G.B.'s home uninvited and unannounced. Mr. Carter insisted on entering and speaking to G.B. Mr. Carter began loudly and forcefully arguing with G.B. She telephoned Mr. Trombetta and asked that he speak to Mr. Carter. Mr. Carter yelled at Mr. Trombetta. Mr. Trombetta credibly describes part of the conversation as follows: And before I could barely get that out, Rick exploded on me. He snapped and he started cursing up and down. F'n me up one side and down the other. And "you don't F'n know what you are talking about. You don't care about this person. You don't f'n know what you are doing;" and this and that. When G.B. returned to the telephone to speak with Mr. Trombetta, he advised her to call the police if Mr. Carter did not leave her house within five minutes. Mr. Carter and Mr. Drew left. EquiTrust eventually returned over $600,000 to G.B. There is no expert testimony evaluating and analyzing the suitability of the investments advocated by Mr. Carter. Also, there is no evidence of G.B.'s life expectancy which is an important factor in evaluating suitability of annuity products. Consequently, the record is inadequate for determining the reasonableness or suitability of the two annuities Mr. Carter sold G.B. Mr. Carter's conduct, in his unannounced visit to G.B. to try to persuade her to change her plans to liquidate the annuities and his conversation with Mr. Trombetta, demonstrated a lack of fitness to engage in the business of insurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order revoking the licenses of Richard Edward Carter. DONE AND ENTERED this 28th day of November, 2012, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 28th day of November, 2012.
The Issue The issues in the case are whether the Respondent erred in 2006 when a life insurance program applicable to retired state employees was amended to provide for two levels of benefits with separate premiums, and, if so, whether the beneficiary of a retired, now deceased, state employee should receive a different life insurance benefit than was paid.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Service, Division of Group State Insurance, enter a final order determining that the life insurance benefit for James W. Black is $2,500.00. DONE AND ENTERED this 13th day of March, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 13th day of March, 2009. COPIES FURNISHED: Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399 Gregory D. Swartwood, Esquire The Nation Law Firm 570 Crown Oak Centre Drive Longwood, Florida 32750 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The issue in this case is whether the Respondent, William Robert Pearson, should be disciplined for alleged statutory and rule violations for his role in several insurance transactions.
Findings Of Fact The Respondent is licensed in Florida as a life including variable annuity agent (2-14), life including variable annuity and health agent (2-15), life agent (2-16), life and health agent (2-18), and health agent (2-40), regulated by the DFS's Division of Insurance Agent and Agency Services. He was so licensed at all times pertinent to this case. He was first licensed in 1988 and has been disciplined once, in September 2002, when he was given a Letter of Guidance for misrepresenting to a Pinellas Park resident that an annuity he sold her would generate interest in excess of 6.8 percent, when the guaranteed rate was three percent for the first year. During the transactions alleged in the Amended Administrative Complaint, the Respondent also was registered with OFR's Division of Securities as a Financial Industry Regulatory Authority (FINRA) broker representative associated with Transamerica Financial Advisors, Inc. (Transamerica). On August 21, 2012, based on some of the same facts alleged in this case, OFR charged the Respondent with failing to observe high standards of commercial honor and just and equitable principles of trade because he: participated in the liquidation of variable and fixed annuities on behalf of several elderly customers referred by insurance agents not licensed as FINRA broker representatives; executed the liquidations recommended to the customers by insurance agent Richard Carter; failed to appropriately record the transactions on the books and records of Transamerica; failed to review the transactions, or have them reviewed by Transamerica, as to suitability; and provided Agent Carter with blank Transamerica letterhead to be used to facilitate the transactions. A Stipulation and Consent Agreement was entered on December 18, 2012, in which the Respondent admitted the OFR charges and agreed to never seek a license or registration as a dealer, investment advisor, or associated person under the Florida Securities and Investor Protection Act, chapter 517, Florida Statutes. A Final Order incorporating the settlement agreement was entered on January 11, 2013. (This Final Order is the basis for Count IX, which was added to the charges in this case, as well as for one of the Respondent's affirmative defenses.) Count I-–Geraldine Busing Geraldine Busing was born on December 1, 1930. She has a high school education. Her husband of 44 years died in 2001. When alive, he handled the family finances. Mrs. Busing's income is from a pension of $728 a month and social security payments of $1,090 a month. In addition, she had substantial investments in two Schwab accounts. During the market decline of 2007-2008, Mrs. Busing became dissatisfied with the performance of her Schwab accounts. An insurance agent named Richard Carter recommended that she invest in annuities, which would reduce her taxes. (In her deposition, testimony was elicited from Mrs. Busing that Agent Carter told her that the Respondent would do her taxes for free for the rest of her life. It is not likely that he made such a representation, and there is no evidence that the Respondent knew about such a representation.) Mrs. Busing followed Agent Carter's recommendation. Agent Carter did not have a FINRA license and approached the Respondent, who worked for Transamerica, to facilitate the liquidation of Mrs. Busing's Schwab accounts, so she could follow Agent Carter's recommendations. The Respondent agreed. The Petitioner alleged that the Respondent provided blank Transamerica forms to Agent Carter and that Agent Carter "shuffled" the forms together with an EquiTrust Life Insurance Company (EquiTrust) annuity application and suitability forms and requested Mrs. Busing's signatures (although, it is alleged, one or more of the signatures on the Transamerica forms were not hers.) It is alleged that, unbeknownst to Mrs. Busing, Agent Carter gave the Respondent these forms, as well as a copy of her Schwab account statements, so he could liquidate her accounts, which totaled $627,000 at the time, "dump" the proceeds into a Transamerica account, and then "funnel" the liquidated assets into two EquiTrust annuities. It is alleged that Mrs. Busing became aware of these transactions in September 2010 after discussions with her accountant. Mrs. Busing testified that she has never met the Respondent and does not know him. She testified that she gave all of her Schwab account information to Agent Carter and did not expect him to share it with the Respondent. She testified that Agent Carter had her hurriedly sign a stack of papers without giving her a chance to review them. She said she was surprised when her stock broker, Barry Tallman, called to tell her that her Schwab accounts had been liquidated and used to open a Transamerica account. She denied ever receiving or signing the Schwab bank check dated July 7, 2010, used to open the Transamerica accounts; denied ever providing the Respondent and Transamerica with information for her customer account information (CAI) form used to open the Transamerica accounts; and denied that several of the Geraldine Busing signatures on the Transamerica documents used for the transactions were her signatures. She admitted to signing a Transamerica check dated August 13, 2010, which was used to purchase the EquiTrust policies. The Respondent testified that he telephoned Mrs. Busing at Agent Carter's request. He testified that she told him she wanted to implement Agent Carter's recommendation to liquidate the Schwab accounts and purchase annuities. He testified that he told her his services were not required because her current broker (Mr. Tallman) could handle it for her, unless she just wanted to avoid confronting her current broker. He said she wanted the Respondent to handle it, and he replied essentially that he would do whatever she and Agent Carter wanted him to do for her. The Respondent testified that he then mailed Mrs. Busing forms she had to fill out, sign, and return to him. He testified that he talked to her briefly by telephone about 15 to 20 times to answer questions she had about the forms. When she told him she received a Schwab check in the amount of about $150,000 and asked if she should mail it to him, he cautioned her that it would be better not to mail it and offered to drive to her house to get the check, which he did and returned immediately to Transamerica to open a Transamerica account with it. He testified that the Transamerica funds were used to purchase EquiTrust annuities at the direction of Agent Carter and Mrs. Busing. The evidence was not clear and convincing that Mrs. Busing's version of the facts is true and that the Respondent's version is untrue. To the contrary, Mrs. Busing's memory did not seem to be very good, and she seemed confused during her testimony. The evidence was not clear and convincing that the Respondent made any investment or insurance recommendations or misrepresentations to Mrs. Busing. The Petitioner's own witnesses (DFS and OFR investigators, Karen Ortega and Mercedes Bujans) testified that the Respondent never acted as Mrs. Busing's insurance agent. It was not proven by clear and convincing evidence that Mrs. Busing incurred tax and commission charges as a result of her Schwab account being liquidated, other than Transamerica's standard "ticket charge" for the transactions, which the Respondent admitted. There was no evidence that the Respondent received any remuneration on the EquiTrust annuity sales. Those commissions went to Agent Carter. The Petitioner contended in its proposed recommended order that the Respondent listed Mrs. Busing's annual income to be between $25,000 and $50,000, her investment objective as growth and income, and her investment time horizon as long-term. (Busing Deposition Exhibit 87). There was no testimony to put the exhibit in context or explain it. On its face, Busing deposition Exhibit 87 was a request from Transamerica to the client to confirm certain information. The form had the Respondent's name printed on it, but it was not signed by either the Respondent or Mrs. Busing, and the evidence did not prove who completed the form. (The CAI form contained similar information and had both their signatures.) The Petitioner contends that the information on the confirmation request was "absurd," because it listed Mrs. Busing's annual income as between $25,000 and $50,000, when her taxable income was $11,108 for 2009 and $8,251 for 2010. There was evidence that her total annual income was about $48,000 for 2007, $32,600 for 2008, $22,358 for 2009, and $19,001 for 2010, with the decline due to the decline in the stock market. The evidence was not clear and convincing that the income information on that form or the CAI form was absurd. The investment objective and investment time horizon on the forms were questionable, but the evidence was not clear and convincing that these were misrepresentations by the Respondent. The Transamerica account was a Pershing money market account used to facilitate the purchase of annuities. The evidence was that a separate suitability analysis would be required by the insurance company offering the annuity. The evidence was not clear that the information in the forms signed by the Respondent was used for the purchase of EquiTrust annuities on behalf of Mrs. Busing. Those purchases were recommended and executed by Agent Carter. The evidence was not clear and convincing that switching Mrs. Busing's investments from Schwab to EquiTrust annuities was not suitable for Mrs. Busing or in her best interest. No expert witness testified to that effect. Counts II through IV–-The Kesishes In 2010, William Kesish and his wife, Josefa, owned several annuities. Mr. Kesish had managed their business affairs before he developed Parkinson's disease and dementia in his old age. After that, Mrs. Kesish cared for him and took over the family's finances by default. Mr. Kesish died on November 26, 2010. Mrs. Kesish was born in Spain in 1937. English is her second language. In 2010, she had difficulty conversing and reading in English and was unable to write in English. After her husband became mentally disabled, she used their bank account to provide for their needs, but she had no investment acumen beyond knowing generally that it was better to make more money from their investments than to make less or to lose money. She was recovering from cancer treatment in 2010 and was physically frail. On May 25, 2010, Paula Rego, a professional guardian, met with an attorney who believed the Kesishes were being exploited and in need of a guardian. Ms. Rego reviewed documentation provided by the attorney and, in June 2010, agreed to Mrs. Kesish's voluntary request to become the guardian of the Kesishes' property. On July 8, 2010, Ms. Rego became aware of the Respondent's involvement in the Kesishes' financial business. She telephoned the Respondent to explain her guardianship role and faxed him on July 15, 2010, to direct him to cancel any investment transactions that were underway. The Petitioner presented the testimony of Ms. Rego to explain her review of the documentation she collected in her research to attempt to piece together the financial transactions involving the Kesishes. She also testified as to the surrender charges and, to some extent, the tax liabilities that resulted from them. She also related statements made by Mrs. Kesish to her and, to some extent, to the DFS and OFR investigators, Karen Ortega and Mercedes Bujans, who also related some of the statements Mrs. Kesish made to them. The Petitioner also introduced an affidavit prepared by Ms. Ortega and signed by Mrs. Kesish on March 31, 2011. All of Mrs. Kesish's statements were hearsay. The hearsay cannot itself support a finding of fact.3/ In general, the hearsay demonstrated that Mrs. Kesish did not have a clear recollection of her interactions with the Respondent at the time of her statements. Agent Carter introduced the Respondent to Mrs. Kesish in March 2010. The Petitioner alleged essentially that Agent Carter schemed and collaborated with the Respondent to exploit the Kesishes by tricking them into financial and insurance transactions that would not be in their best interest, but would generate commissions and fees for them. It was alleged that, as with Mrs. Busing, the Respondent's FINRA licensure was required to buy and sell securities in furtherance of the scheme. The Respondent testified that Agent Carter told him about his clients, the Kesishes, and that he went to meet Mrs. Kesish in person because he had difficulty communicating with her over the telephone due to her hard-to-understand Spanish accent and limited proficiency in spoken English. He testified that she told him she wanted to get out of the stock market and was unhappy with her current stockbroker, Doreen Scott. (That part of the Respondent's testimony was corroborated by Ms. Rego, who concurred that Mrs. Kesish did not like dealing with Ms. Scott because she talked down to her.) The Respondent testified that he went to Mrs. Kesish's house, asked if he could be of assistance to her, and discussed her financial situation with her. He testified that he then returned to his Transamerica office and mailed forms for her to fill out and sign.4/ Similar to his dealings with Mrs. Busing, the Respondent testified that he spoke to Mrs. Kesish several times by telephone to answer questions about the forms. It is reasonable to infer that the Respondent knew Agent Carter would be helping her. The Respondent testified that when the completed forms were returned to him by mail, he telephoned Mrs. Kesish to verify the information on the forms and, in some cases, get information that was omitted to add it to the forms. The Petitioner attempted to prove that the Respondent knew or should have known Mrs. Kesish was mentally disabled and incapable of voluntarily instructing the Respondent to effectuate financial transactions on her behalf. Mrs. Kesish lacked knowledge in investing and was susceptible to being misled and exploited, but it was not proven that Mrs. Kesish was mentally incapacitated or unable to consent to Agent Carter's recommendations or instruct the Respondent. Ms. Rego herself did not find it necessary to initiate involuntary proceedings to establish a plenary guardianship of Mrs. Kesish's person and property until October 2013. (Count II) One of the Kesishes' investments was a Genworth Life and Annuity Insurance Company (Genworth) variable annuity (G-58), which they bought on October 31, 2008, for $86,084.89. It was designed to begin paying monthly income on October 31, 2022. It provided a waiver of surrender charges if either Kesish was hospitalized, admitted to a nursing facility, or died. As of March 31, 2010, G-58 had a contract value of $102,954.90. Mrs. Kesish signed a form on letterhead of the Respondent and Transamerica that expressed her desire for the Respondent to be their insurance agent on G-58. On May 27, 2010, the Respondent used an automated account transfer (ACAT) to liquidate G-58 and transfer the funds to a Transamerica brokerage account he opened for the Kesishes on the same date. The Respondent did not independently determine whether the liquidation was suitable or in the Kesishes' best interest. He relied on Agent Carter to do this. The Respondent and the Kesishes signed the CAI form to open the brokerage account. The surrender of G-58 took effect on June 14, 2010. As a result of the liquidation, the Kesishes were assessed a surrender charge of $4,576.91 and federal tax was withheld, and the net proceeds from the liquidation were $90,314.19. On June 29, 2010, the funds in Mrs. Kesish's Transamerica account were added to an EquiTrust policy Agent Carter had sold her (E-92F). The Respondent testified that this was done at the direction of Agent Carter and Mrs. Kesish. The Respondent did not act as the Kesishes' EquiTrust agent and received no commissions. The Petitioner alleged and proposed a finding that the liquidation of G-58 allowed Agent Carter to represent to EquiTrust that the Kesishes had no other annuities and that the addition to E-92F was not replacing another annuity, which allowed Agent Carter to avoid having Genworth attempt to "conserve" G-58 (i.e., question the Kesishes as to whether they wanted to reverse the liquidation within the grace period for doing so). The evidence cited in support of the allegation and proposed finding is documentation of the initial purchase of E-92F in April 2010, not the addition in June 2010. There was no clear and convincing evidence that actions taken by the Respondent resulted in Agent Carter circumventing the replacement notice requirement, or that the Respondent should be held responsible for what Agent Carter did or did not do regarding the EquiTrust annuity. According to the Respondent, he made no investment recommendations to Mrs. Kesish, and all such recommendations were made by Agent Carter. He testified that he only took action in accordance with the wishes of Mrs. Kesish, who was being advised by Agent Carter. He denied that his purpose was to generate commissions or fees for himself or for Agent Carter, or to enable Agent Carter to conceal the replacement of the Genworth annuity. It was not proven by clear and convincing evidence that the Respondent's testimony was false. The Petitioner's proposed recommended order cites the testimony of Tarek Richey regarding his concerns about the Respondent's use of an ACAT to liquidate annuities, transfer of the proceeds to Pershing accounts at Transamerica, and use of those funds to purchase other annuities. Mr. Richey is a FINRA- licensed securities broker at Questar Capital Corporation, who employed and supervised the Respondent for about a month in early 2011, after he left Transamerica in December 2010. While supervising the Respondent, Mr. Richey was advised of OFR's investigation of the Respondent and reviewed the Respondent's documentation on the subject of OFR's investigation. One of Mr. Richey's concerns from his review of the Respondent's documentation was the use of ACAT, which would not guarantee that the client is aware of resulting surrender charges and tax consequences. He also was concerned that ACAT could have been used to bypass and avoid the use of forms required to analyze the suitability of annuities purchased for the Kesishes (and other clients). While he expressed these concerns, Mr. Richey had no personal knowledge and did not testify that the Kesishes (or the other clients) actually were unaware of surrender charges and tax consequences, or that liquidation was not suitable or in their best interest. Another of Mr. Richey's concerns was that the use of ACAT could result in the replacement of annuities without completing the required forms that would provide notice to the insurance company that its annuity was in the process of being replaced and give it an opportunity to conserve its annuity. Mr. Richey did not know that the use of ACAT actually resulted in the bypass of the replacement policy notice requirements for the Kesishes and other clients. He also did not testify that the Respondent should be held responsible for what Agent Carter did or did not do regarding replacement notices. Ms. Rego testified (based in part on discussions with a financial planner who did not testify) that she did not think the Genworth and EquiTrust transactions were not in the best interest of the Kesishes, mainly because of the Genworth surrender charge and tax consequences. There was no other expert testimony on the subject, and the evidence was not clear and convincing that those transactions were unsuitable or not in their best interest. (Count III) The Kesishes owned a Riversource Life Insurance Company (Riversource) annuity (R-30) that they bought on October 5, 2006. The contract had declining withdrawal charge rates that held at eight percent for the first four years. It had a death benefit rider. On March 23, 2010, a letter on the Respondent's Transamerica letterhead, written in English and signed by Mrs. Kesish, directed Riversource to list the Respondent as the Kesishes' financial advisor. On April 23, 2010, Mrs. Kesish signed a form directing Riversource to liquidate R-30. She also signed a form saying she knew there would be surrender charges. On April 26, 2010, Riversource sent the Kesishes a check for $26,430.07 (which was net after $2,454.30 in surrender charges). The testimony from Ms. Rego as to whether the liquidation of the Riversource annuity was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements, was similar to her testimony with respect to the Genworth liquidation. There was no other expert or other clear and convincing evidence. (Count IV) The Kesishes also had Great American Life Insurance Company (Great American) annuities in the amounts of approximately $560,854 (GA-25) and $28,785 (GA-00), which were purchased in January 2010. GA-25 was owned by the Kesishes' trust, with Mrs. Kesish as trustee; GA-00 was owned by Mr. Kesish. By June 4, 2010, they had contract values of $580,854.71 and $29,970.46, respectively. On June 18, 2010, Agent Carter took Mrs. Kesish to lunch. A letter dated June 18, 2010, signed by Mrs. Kesish for her and her husband, written in English on the Respondent's Transamerica letterhead, directed the transfer of GA-25 to a Transamerica Pershing account (TA-25). An ACAT form dated June 20, 2010, signed by Mrs. Kesish and the Respondent, directed the liquidation of Mr. Kesish's GA-00 and the transfer of the proceeds to the Kesishes' Transamerica Pershing account. This transaction took effect on July 7, 2010.5/ After becoming involved through Attorney Hook, Ms. Rego had numerous discussions with Mrs. Kesish and with Agent Carter regarding the Kesishes' investments. Agent Carter attempted to explain and justify his actions to Ms. Rego and blame other insurance agents who he claimed had essentially stolen his clients by tricking them into replacing Allianz Life Insurance Company of North America (Allianz) annuities sold to them by him with GA-25 and GA-00. Ms. Rego's research notes evidence her understanding that the Great American sales to the Kesishes were unsuitable. During Ms. Rego's discussions and research throughout June 2010, the Respondent's name did not come up, and Ms. Rego was unaware of the Respondent having anything to do with the Kesishes. When she learned about the Respondent's role on July 8, 2010, she attempted to contact him. On July 15, 2010, she faxed the Respondent to instruct him to stop acting on behalf of the Kesishes. There is no clear and convincing evidence that the Respondent did not follow Ms. Rego's instructions.6/ On July 17, 2010, Great American sent Mr. Kesish a conservation letter urging him not to surrender GA-00. Ms. Rego then contacted Great American and had the surrender of GA-25 and GA-00 stopped. Had the transactions not been stopped, the Kesishes $60,000 in surrender charges would have been imposed. There was no other expert testimony or other clear and convincing evidence that the liquidation of the Great American annuities was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts V through VI–-Edith Paz Edith Paz was born on January 20, 1926, and lives in Sun City Center. She has a high school diploma and held various jobs, from retailing to making plates in a dental office. Mrs. Paz married a GI returning from World War II. Her husband was successful in business before his retirement. Meanwhile, Mrs. Paz founded a successful real estate business and invested in the stock market. Mr. Paz died in 1999. In 2001, Mrs. Paz created a revocable trust with herself as trustee. When Mrs. Paz retired, she moved to Sun City Center. She did some investing, but was dissatisfied with her investments and her financial representative at the time. About that time, she met Glenn Cummings, an insurance agent who was a less experienced associate of Agent Carter and also not FINRA- licensed. After several conversations, Agent Cummings gained her trust and advised her to liquidate and consolidate her assets before deciding what other financial products to purchase. He referred her to the Respondent for that purpose. Agent Cummings and Mrs. Paz testified that he referred Mrs. Paz to the Respondent on the advice of Agent Carter to save "exit fees" on liquidating her investments. The evidence was not clear as to how the Respondent would be able to do this. The Respondent testified to his understanding that Mrs. Paz wanted to get out of the stock market and switch to more stable investments and that she had a bad relationship with her stockbroker. The Respondent's testimony is consistent with Mrs. Paz's actual losses in the stock market and her testimony that she listened to and followed the advice of Agent Cummings because she was dissatisfied with her prior financial advisor, a Mr. Shrago. Mrs. Paz testified that she spoke to the Respondent just once, briefly. That conflicts with the testimony of the Respondent and Agent Cummings. Their testimony was that there were several telephone conversations after the initial contact. They related that the Respondent mailed Mrs. Paz the forms that needed to be filled out, that Agent Cummings was with Mrs. Paz when she filled out the forms, and that both spoke to the Respondent several times during the process. According to Agent Cummings, this happened on July 29, 2010, when he visited Mrs. Paz to show her illustrations regarding the annuities he was recommending. While there, he helped her complete the forms the Respondent had sent to have her investments liquidated and consolidated into a Transamerica Pershing account. There also was conflict in the testimony as to whether anyone explained investment options and consequences to Mrs. Paz. She testified that no one gave her any explanation. Agent Cummings testified that he explained everything in detail to Mrs. Paz and that she also talked to the insurance agents who represented the companies whose annuities she would be surrendering. He testified that Mrs. Paz knew exactly what she was doing. The Respondent testified that he had no involvement in those explanations. He testified that he simply made sure he understood what Mrs. Paz wanted him to do for her. (Count V) In May 2007, Mrs. Paz purchased a Jackson National Life Insurance Company (Jackson National or JNL) annuity (JNL-42A) on the advice of Mr. Shrago. The initial premium was $100,000, and it was issued with a five-percent bonus. As of May 25, 2007, it had an account balance of $105,017.01 and was receiving an annual rate of return of 7.75 percent. On July 12, 2010, Mrs. Paz signed a letter directing Jackson National to make the Respondent, who held an appointment to represent Jackson National, her agent-of-record on JNL-42A. The change took effect on July 15, 2010. On July 29, 2010, Jackson National faxed the Respondent a statement of account for JNL-42A, listing the balance as $108,253.48 (which reflected a prior withdrawal of $2,500 by Mrs. Paz). The statement disclosed the surrender charges in effect. After her discussions with Agent Cummings, Mrs. Paz signed forms requesting that JNL-42A be liquidated and the proceeds rolled over into a Great American Life Insurance Company (Great American or GA) annuity (GA-61). The Respondent facilitated the rollover. As a result of the rollover, Mrs. Paz incurred surrender charges of $4,871.41 and a partial recapture of the initial bonus in the amount of $2,706.34, for a total loss of $7,577.75. The Petitioner alleged, and Mrs. Paz testified, that the Respondent never discussed with her that there would be surrender charges. The Respondent did not disagree, but explained that he understood Agent Cummings already had done so and that he just made sure he was following Mrs. Paz's wishes. Concurring, Agent Cummings testified that he did explain the surrender charges to Mrs. Paz. The Petitioner alleged that the Respondent's actions "insulated M[r]s. P[az] from comparative financial counseling by her then current Jackson National insurance agent Gary Mahan." This was not proven by clear and convincing evidence. To the contrary, there was evidence that it was Mrs. Paz's choice to change agents, that Mr. Mahan knew about the change, and that he had no objection to the Respondent taking over for him as agent of record on the policy. The Petitioner also alleged that the Respondent "provided [Agent Cummings] with the Transamerica brokerage application, transfer forms and letter of instructions to transfer JNL 42A" to the Respondent as account representative. It was not proven that these documents were not mailed to Mrs. Paz in accordance with the Respondent's testimony. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Jackson National annuity and purchase of a Great American annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Mrs. Paz testified that Agent Cummings initially told her she would have to pay the Respondent $1,500 as a fee for his services with respect to JNL-42a and later told her the fee would be $2,600. Agent Cummings testified that the Respondent told her what his fee would be during the telephone conversation on July 29, 2010. Regardless who told Mrs. Paz what the Respondent's fee would be, or what she was told it would be, Mrs. Paz made out a $2,607.28 check to Agent Cummings' company, Big Financial, on July 29, 2010. On August 2, 2010, Big Financial gave the Respondent a check made out to the Respondent for $2,530, with the notation "Paz." (It is not clear from the evidence why the Big Financial check was made out for $2,530. When the DFS investigator questioned the discrepancy, Agent Cummings reimbursed Mrs. Paz $77.28.) The Respondent deposited the check the next day. The Allianz compliance guide prohibited agents from charging an additional fee for services that customarily are associated with insurance products. The Great American compliance guide prohibited fraudulent acts. By accepting the check from Big Financial, the Respondent received a fee from Mrs. Paz that was not authorized. (Count VI) Prior to meeting Agent Cummings or the Respondent, Mrs. Paz had investment accounts with Wedbush (WB-37) and Wells Fargo. There were two Wells Fargo accounts, an IRA (WF-15), and a trust account (WF-70). As of June 30, 2010, the Wedbush account (WB-37) had a balance of $349,438.11. The Wells Fargo IRA account (WF-15) had a net value of $51,737.11 prior to June 30, 2010. The Wells Fargo trust account (WF-70) had a balance of $332,798.76 prior to June 2010. The Respondent and Mrs. Paz communicated in the same manner they did for the Jackson National transaction. Mrs. Paz signed forms that enabled the Respondent to transfer the funds in the Wedbush and Wells Fargo accounts into two Transamerica brokerage accounts (TA-02) and (TA-86) using ACAT. Some of the forms referred to the Respondent as Mrs. Paz's "investment professional," but the sole purpose of the Respondent's involvement was to use Transamerica as a funnel to transfer funds from one investment to another. By August 11, 2010, the funds in the TA-02 account were used to purchase an Allianz annuity sold by Agent Cummings in the amount of $335,589.65. The funds in the TA-86 account were used to purchase a Great American annuity (GA-60) sold by Agent Cummings in the amount of $45,769.38. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Wedbush and Wells Fargo accounts and purchase of an Allianz annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts VII and VIII-–The Penwardens Wayne Penwarden was born on December 4, 1943. His wife, Sandra, was born on October 10, 1939. They inherited some money and decided to invest it. As of August 31, 2009, they had Morgan Stanley investment accounts that totaled close to half a million dollars. They also had an annuity with ING USA Annuity and Life Insurance Company (ING) purchased for $150,000 on April 24, 2008. Agent Carter became acquainted with the Penwardens and introduced them to the Respondent. The Amended Administrative Complaint alleged that the Respondent provided required forms to Agent Carter for him to get the Penwardens signatures and, then, used funds from their Transamerica accounts to fund the purchase of Allianz annuities, which was deceitful and against the wishes of the Penwardens. The Petitioner's proposed recommended order proposed no such findings, and there was no clear and convincing evidence that the Respondent was guilty of those acts, that he said or did anything to deceive or mislead or withhold information from them, or took any action regarding them without their full knowledge and consent. (Count VII) On September 30, 2009, the Penwardens signed a change of agent request to make the Respondent their new ING insurance agent. They also signed CAI forms to open Transamerica brokerage accounts and transfer the funds from the Morgan Stanley investment accounts into them, using ACAT. The funds in the Transamerica accounts were then used to purchase Allianz's indexed annuities sold to the Penwardens by Agent Carter. On September 23 and October 16, 2009, the Penwardens purchased two Allianz MasterDex X annuities (MD-47) and (MD-24), respectively, with initial premium payments of $141,269.40 for MD-47 and $373,979.59, plus a premium bonus of $37,397.96, for MD-24. On June 17, 2010, acting on instructions from Agent Carter on behalf of the Penwardens, the Respondent liquidated the ING annuity. On June 30, 2010, the Penwardens added the $115,281.47 proceeds from the liquidation of the ING annuity to MD-47. The Petitioner proposed a finding that the surrender of the ING annuity cost $6,000 in surrender charges, which is true. The Petitioner omits from its proposed finding that the Penwardens received a premium bonus on the Allianz policy that more than offset the ING surrender charge. There was no expert testimony or other clear and convincing evidence that the liquidation of the Penwardens' Morgan Stanley accounts and ING annuity and purchase of Allianz annuities was contrary to their best interests, unsuitable, or in violation of suitability form or replacement notice requirements. (Count VIII) The Penwardens became dissatisfied with Agent Carter, and on November 9, 2010, signed a letter drafted by the Respondent on Transamerica letterhead to substitute him for Agent Carter as their sole financial advisor. On November 12, 2010, the Respondent was notified by Allianz that he would receive no commissions as servicing agent on policies sold to the Penwardens by another agent. On or about November 22, 2010, $37,408.54 was transferred from the Allianz MD-47 annuity into a new Nationwide Life and Annuity Insurance Company (Nationwide or NW) annuity (NW-08). The Respondent also effected a partial Internal Revenue Code, section 1035, exchange from the MD-47 annuity to a new annuity purchased from Nationwide (NW-09) for $23,746.19. On November 7, 2011, the Respondent faxed a request to transfer funds from the MD-24 annuity to fund a North American Company for Life and Health Insurance (North American or NA) annuity (NA-68). The Petitioner proposed a finding that the Respondent undertook these transactions on November 22, 2010, and on November 7, 2011, in order to benefit himself alone by generating commissions to replace the servicing agent commissions he was not getting on the Allianz policies. This was not proven by clear and convincing evidence. To the contrary, the Respondent explained that the transactions were done for the Penwardens' benefit after discussions regarding the benefits of diversifying out of the Allianz annuity into other annuities, which was accomplished cost-free. There was no clear and convincing evidence that these transactions were contrary to the Penwardens' best financial interest or that they were done solely to benefit the Respondent. There was no expert testimony or other clear and convincing evidence that the partial transfers from the Penwardens' Allianz annuities to other Nationwide and North American annuities were contrary to their best interest, unsuitable, or in violation of suitability form or replacement notice requirements. In early December 2011, Mr. Penwarden replaced the Respondent with another insurance agent. The Petitioner alleged that the Respondent went to the Penwardens home to harangue them for two hours about their decision to switch agents. The only evidence on this allegation was the deposition testimony of Mr. Penwarden and the testimony of the Respondent. Mr. Penwarden's testimony as to what occurred was vague. The Respondent agreed that he was disappointed that the Penwardens were switching agents, but testified that he went to the home to retrieve the policies he sold to the Penwardens, which would have to be returned to the insurance companies to cancel at no cost during the "free-look" period. He testified that he waited for an hour or more while Mr. Penwarden tried to find the policies in his home. The evidence was not clear and convincing, and the Petitioner did not propose a finding as to this allegation. Count IX and Related Affirmative Defenses Count IX is based on the Final Order entered in OFR's securities case against the Respondent as an additional ground for discipline under section 626.621(13), Florida Statutes. The Respondent cites it in his affirmative defenses of res judicata and collateral estoppel on Counts I through VIII. See Finding 2, supra. The Respondent also argues that the additional charge is barred by the ex post facto clause of the Florida constitution and due process clauses of the United States and Florida constitutions. As to the due process argument, the Respondent admitted the OFR Final Order in his answer to the original charges. He also had ample opportunity to demonstrate prejudice from the added charge, which he could not, and to present legal arguments, which he did. As to ex post facto, section 626.621(13) was added to the Florida Statutes, effective June 1, 2011. See Ch. 175, §§ 47 and 53, Laws of Fla. (2010). That was before the Respondent entered into the Stipulation and Consent Agreement that formed the basis for the OFR Final Order. Disciplinary guidelines for section 626.621(13) were added to the Florida Administrative Code on March 24, 2014. Fla. Admin. Code R. 69B-231.090(13). As to the collateral estoppel defense, the Respondent testified that he entered into the settlement with OFR because he was under heightened supervision by his employer due to securities violations, and he did not think any employer wanted to provide the required supervision (which he referred to as "baby-sitting.") The Respondent did not testify that he relied on the OFR Final Order to bar charges by DFS or that he believed the OFR Final Order would bar DFS charges.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Agent and Agency Services, enter a final order finding the Respondent guilty of violating section 626.611(7) and rule 69B-215.210 under Count V, and section 626.621(13) under Count IX, dismissing the other charges, and suspending the Respondent's insurance licenses for 12 months. DONE AND ENTERED this 15th day of October, 2014, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 2014.
