The Issue In DOAH Case No. 98-4750, the issues are whether Respondent Gregory Bruce Sample is guilty of three counts of conducting insurance business under a suspended license and, if so, the penalty. In DOAH Case No. 98-4751, the issues are whether Respondent Kathy Joy Sample is guilty of three counts of aiding and abetting her husband, Gregory Bruce Sample, in conducting insurance business while under a suspended license and, if so, the penalty.
Findings Of Fact By Consent Order filed July 9, 1997, Petitioner suspended the license of Respondent Gregory Bruce Sample (Mr. Sample) to transact insurance business for six months from the date of issuance of the order. The Settlement Stipulation for Consent Order dated June 26, 1997, provides that, during the suspension period, Mr. Sample shall not "directly or indirectly own, control, or be employed in any manner by any other insurance agent or agency within the State of Florida " Mr. Sample and Alan Avery formed Avery Sample Financial Group, Inc. (Avery Sample), in May 1996. Mr. Sample and Mr. Avery had previously sold life insurance, property and casualty insurance, and mutual funds with Prudential Insurance Company, where Mr. Sample had been employed for 16 years. After forming Avery Sample, Mr. Sample and Mr. Avery concentrated on the sale of fixed annuities to a largely older clientele. The record does not clearly reveal the circumstances that led to the suspension of Mr. Sample's license. He testified that one of Petitioner's representatives attributed the prosecution to a "witchhunt" against Prudential. According to Mr. Sample, he was prosecuted partly because the agent whose acts had led to the prosecution had left the company. Mr. Sample's license remained suspended through the date of the hearing. Although the initial suspension was for six months, Petitioner extended the suspension, evidently indefinitely, upon discovery of the facts that are involved in this case. A large part of the marketing effort of Avery Sample is through the use of free seminars at restaurants in Southwest Florida, where Avery Sample would also provide free meals and non-alcoholic beverages to seminar attendees. Avery Sample typically offered two or three seminars a week in Southwest Florida. Prior to the suspension of Mr. Sample's license, Mr. Sample and Mr. Avery would discuss fixed annuities as investments and answer the questions of attendees. They would then set up appointments with individual attendees, at which time they would try to sell them annuities or other insurance products. Mr. Sample's wife, Respondent Kathy Joy Sample (Mrs. Sample), regularly worked at the seminars. They have been married 21 years and have two children, who are 20 and 19 years old. She worked inside the home while the children were younger and began working outside the home relatively recently. She has had her insurance license for two years. Initially, Mrs. Sample helped at the seminars by merely greeting and conversing with people and answering their more general questions. Eventually, as she learned the insurance business in early 1997, she assumed more substantive duties, even before the suspension of Mr. Sample's license. She has only sold annuities, since the suspension of Mr. Sample's license. Following the suspension of Mr. Sample's license, Mrs. Sample's name was listed on the brochures distributed at the seminars, and Mr. Avery introduced her as his partner, as she became the "Sample" in "Avery Sample." At this time, Mrs. Sample began making appointments for attendees to see her at the Avery Sample office for the purpose of purchasing annuities. In September 1997, Mr. Avery telephoned Mr. Sample and suggested that he sell viaticals. Viaticals are contracts in which third parties purchase life insurance contracts involving insureds who, due to illness, are presumably close to death. Prior to the suspension of Mr. Sample's license, Avery Sample changed the lease to drop his name, and Mr. Sample acquired his own telephone line and office, although the office is in close proximity to the Avery Sample office. Ann Cuzzolina and her husband, Frank Cuzzolina, are 76- year-old retirees. Mr. Cuzzolina worked 30 years at the Goddard Space Center. While still employed by Prudential Insurance Company, Mr. Sample acquired Mr. Cuzzolina's file in 1983 or 1984 due to departure of another Prudential agent. Although Mr. Sample did no business with Mr. Cuzzolina, he wrote small life insurance policies for Mr. Cuzzolina's son. In the latter half of 1996, Mr. Sample and Mr. Cuzzolina discussed four Metropolitan Life annuities that the Cuzzolinas owned. Mr. Sample explained that the Cuzzolinas could take the money from two of the annuities and make more money in new annuities. After the Cuzzolinas expressed interest in this option, Mr. Sample checked the penalty provisions in the annuity contracts for cashing out of the annuities in 1996. He found that they would lose an additional $800 if they cashed out in 1996, rather than wait one year until 1997. The increased interest rate would not make up this amount of penalty, so Mr. Sample advised the Cuzzolinas to wait until 1997 to cash in their annuities. Mr. and Mrs. Sample fully disclosed to the Cuzzolinas the penalties that they would incur if they cashed in their existing annuities. In no way did either Mr. or Mrs. Sample mislead or deceive the Cuzzolinas in this transaction, and Petitioner has failed to prove that the new annuities were not better investments than the old annuities that they were replacing. In Mr. Sample's mind, the sale to the Cuzzolinas was a done deal in 1996, so he testified unhesitatingly that he and Mrs. Sample went and visited the Cuzzolinas in 1997 to finish up the deal. Thus, in August 1997, as the annuity anniversary dates passed so that the lower penalty would apply, Mr. Sample called Mr. Cuzzolina and, according to Mr. Sample's testimony, said that he and Mrs. Sample would come visit the Cuzzolinas to do what they had planned in 1996. After agreeing upon a date, Mr. and Mrs. Sample visited the Cuzzolinas at their home. Mrs. Sample filled out most of the applications, except for the Cuzzolinas' names that Mr. Sample had filled in the prior year. Then, on September 30, 1997, Mr. Sample accompanied Mrs. Sample when she delivered the new annuities to the Cuzzolinas. Mrs. Sample's testimony on the Cuzzolina transaction is similar to her husband's testimony, although she testified that it may have been Mr. Sample who called the Cuzzolinas. Margaret Brennan is a 72-year-old retired housewife. In March 1997, she received in the mail a postcard inviting her to an Avery Sample seminar at the local Olive Gardens restaurant. At the end of the seminar, she signed a card to set up an appointment with Mr. Sample. At the appointment, Mrs. Brennan purchased a $30,000 annuity from Financial Benefit Life Insurance Company. Following this transaction, she telephoned Mr. Sample and set up an appointment for her husband, who purchased a $30,000 annuity from Jackson Life Insurance Company. In September 1997, either Mr. Sample contacted Mrs. Brennan to sell her a viatical or she contacted him, in which case it would have been to purchase another annuity. Either way, they set up an appointment at the office of Mr. Sample. Mr. and Mrs. Brennan had $45,000 more to invest, and Mrs. Brennan agreed to purchase a viatical from Mr. Sample and an annuity from Mrs. Sample. According to Mr. Sample, he sat in his office with Mrs. Brennan while Mrs. Sample came in and filled out the annuity application form. Because this was repeat business, it was basically order-taking on Mrs. Sample's part, which may explain Mrs. Brennan's failure to recall meeting Mrs. Sample. After Mrs. Sample performed her task, which took only five minutes, she departed, and Mr. Sample sold Mrs. Brennan a $15,000 viatical. Rosemary Almand is a 75-year-old retired schoolteacher. She attended an Avery Sample seminar at a local Olive Gardens restaurant on June 10, 1998. While at the seminar, she filled out a card expressing interest in purchasing an annuity. Pursuant to an appointment, Ms. Almand visited Mrs. Sample's office on June 18. Mrs. Sample met Ms. Almand at the receptionist's desk and accompanied her to the conference room, where she and Ms. Almand were joined by Mr. Sample because Ms. Almand had placed a question mark on the card beside "viaticals." Ms. Almand informed Mr. and Mrs. Sample that she checked up on everyone trying to sell her anything and had previously sued people. She expressed skepticism about viaticals. Mr. Sample sensed that she was an unlikely client for viaticals, so he excused himself after 5-10 minutes. Mrs. Sample sold Ms. Almand an annuity after Mr. Sample left the meeting. Rethinking the situation over the weekend, Mrs. Sample decided not to do business with Ms. Almand, so she contacted the insurer a few days later and cancelled the application, returning all of Ms. Almand's money to her. Petitioner has proved by clear and convincing evidence that Mr. Sample transacted insurance business with the Cuzzolinas, but not Mrs. Brennan or Ms. Almand, while his license was suspended. Mr. Sample called the Cuzzolinas to transact insurance business and met with them in August 1997 while his license was suspended, but before he had begun to sell viaticals. There was no purpose for Mr. Sample's participation at the August 1997 meeting but the transaction of insurance business. As for Mrs. Brennan and Ms. Almand, the evidence is far from clear and convincing that Mr. Sample transacted insurance business. There were numerous problems in the testimony of these clients. This is not merely a failure of Petitioner to prove its case by clear and convincing evidence. On this record, it is more likely than not that Mr. Sample did not transact insurance business with either of these individuals. Similarly, Petitioner has not proved by clear and convincing evidence that Mr. Sample failed to disclose the penalties that the Cuzzolinas would pay for cashing in their annuities. To the contrary, the evidence is clear and convincing that he did make this disclosure. Petitioner has not proved by clear and convincing evidence that Mrs. Sample aided or abetted Mr. Sample in his transaction of business with the Cuzzolinas. Mrs. Sample seems to have taken a great interest in ensuring that she and her husband understood the substantial limitations imposed upon him by the suspension. She testified that she emphatically made it quite clear to Mr. Sample that he was to honor the restrictions accompanying the suspension and that she was unwilling to be a party to his circumvention of the suspension in the Cuzzolina transaction. Her demeanor in presenting this testimony left no doubt as to its sincerity and did not preclude the possibility that she may have been disconcerted by his post-suspension activity on the Cuzzolina transaction and expressed some irritation with him and expressed some irritation with him over his behavior. In any event, it is quite clear that Mrs. Sample took Mr. Sample's suspension seriously, and it is likely that she insisted, to the best of her ability, that her husband do so also. It was Mrs. Sample, not Mr. Sample, who spoke with an investigator of Petitioner to determine the limits of what Mr. Sample could do without a license. In the course of these discussions, she misunderstood some advice concerning the ability of Mr. Sample to wrap up his insurance business before the suspension started. She misunderstood the investigator to see that Mr. Sample could wrap up, after the suspension, some insurance business pending at the time of the suspension, and she conveyed this misunderstanding to Mr. Sample. However, the term of the suspension is clear, and this misunderstanding does not justify Mr. Sample's involvement in the Cuzzolina transaction. The exculpatory findings of the preceding paragraphs would be the same under the preponderance evidentiary standard.
Recommendation It is RECOMMENDED that Petitioner dismiss the Administrative Complaint against Mrs. Sample; dismiss all allegations against Mr. Sample concerning the Brennan and Almand transactions and the allegation of nondisclosure in the Cuzzolina transaction; and find Mr. Sample guilty of violating Section 626.641(4), Florida Statutes, in the Cuzzolina transaction; and impose an additional suspension of 18 months, which would commence at the conclusion of the original six-month suspension on or about January 7, 1998. DONE AND ENTERED this 6th day of April, 1999, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of April, 1999. COPIES FURNISHED: Mechele R. McBride Division of Legal Services 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Robert J. Coleman Coleman & Coleman 2300 McGregor Boulevard Post Office Box 2089 Fort Myers, Florida 33902 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300 Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Respondents committed the offenses set forth in the Administrative Complaint and, if they did, the penalties, if any, which should be imposed.
Findings Of Fact On May 15, 1989, Petitioner filed an Order to Cease and Desist, Administrative Charges and Complaint with Notice of Rights against several parties including the following Respondents to the instant proceeding: Habersheir Securities, Inc. (Habersheir); Raymond Hayden (Hayden); Sharieff Mustakeem (Mustakeem); and Frank J. Hurt, III (Hurt). By Order Imposing Sanctions entered November 30, 1989, a default pursuant to Rule 1.380(b)(2)(C), Florida Rules of Civil Procedure, was entered against Habersheir, Hayden, and Mustakeem. No appearance was made by Habersheir, Hayden, or Mustakeem at the formal hearing, although Notice of Hearing was served upon them. Habersheir is a corporation whose main office in Atlanta, Georgia, has been registered with Petitioner as a broker/dealer since June 22, 1987. The Florida branch office of Haersheir was located at 100 West Cypress Creek Road, Suite 810, Fort Lauderdale, Florida 33309. The branch office was registered with Petitioner on September 29, 1988. At all times pertinent hereto, Mustakeem was the president of Habersheir and the majority owner of its stock, while Hayden was a vice- president of Habersheir. At the time of the final hearing, neither Mustakeem nor Hayden was registered with Petitioner. At all times pertinent hereto, Hurt was qualified for registration with Petitioner as a principal. Hurt's registration with Petitioner had not, prior to the filing of this matter, been disciplined. The application submitted by Habersheir to Petitioner on September 7, 1988, listed Hurt as the "Designated Manager in Charge Registered as Principal in Florida". Form BD is a form required by Petitioner in the application process. On Schedule E of the Form BD filed by Habersheir on November 14, 1988, Hurt is listed as the "Supervisor" of the Florida Branch. Hurt's name and his registration with Petitioner as a principal were used in connection with the registration of the Florida Habersheir branch to gain a favorable review of the application by Petitioner. Such use was without compensation to Hurt, but was with his knowledge and permission. Hurt was a salesman who had been employed by Habersheir for a short period of time when the application for the Florida branch office was filed. He was not an officer of Habersheir and had no managerial authority. At no time did Hurt intend to serve the Florida branch office of Habersheir in any capacity and at no time did he have any authority to supervise or otherwise manage that office. Representatives of Habersheir transacted business in Florida between September 7, 1988 and September 28, 1988, prior to Habersheir's branch office being registered in Florida with Petitioner on September 29, 1988. Associated persons working for Habersheir sold securities in or from the branch office in Fort Lauderdale, Florida prior to the associated persons being registered with the Petitioner. Habersheir's branch office in Fort Lauderdale, Florida, failed to maintain records and make available for Petitioner's inspection its cash receipt and disbursement blotter, securities received and delivery blotter, order tickets, and customer confirmations on all transactions as required by Section 517.121, Florida Statutes, and by Rule 3E-600.014(4), Florida Administrative Code. Habersheir also failed to maintain copies of its associated persons files as required by Rule 3E- 600.0014 (5)(a), Florida Administrative Code. At all times pertinent to this proceeding, Habersheir was a member of the National Association of Securities Dealers (NASD). Between November 7, 1988, and November 30, 1988, Habersheir's authority to transact business was suspended by NASD. Habersheir failed to notify its Fort Lauderdale, Florida, branch office of its suspension by NASD. Consequently, business was transacted by that branch office while Haersheir's authority to transact business was suspended by NASD.
Recommendation Based on the foregoing findings of facts and conclusions of law, it is RECOMMENDED that the State of Florida, Department of Banking and Finance, Division of Securities, enter a final order which: Revokes all registrations presently held by Habersheir Securities, Inc., and which assesses an administrative fine against Habersheir Securities, Inc. in the amount of $10,000.00 for its violations of Sections 517.12(5), and 517.121(1), Florida Statutes; and Which dismisses the administrative complaint against Sharieff Mustakeem, Raymond Hayden, and Frank J. Hurt, III. DONE AND ENTERED this 27th day of February, 1990, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASE 89-3886 The following rulings are made on the findings of fact submitted by Petitioner: The proposed findings of fact In paragraphs 1-10 are adopted in material part by the Recommended Order. The proposed findings of fact In paragraph 11 are adopted in part by paragraph 1 of the Recommended Order, and are rejected in part as being unnecessary to the findings made. COPIES FURNISHED: Randall L. Rubin, Esquire Assistant General Counsel Office of Comptroller 401 N.W. 2nd Avenue Suite N-708 Miami, Florida 33128 Oliver Lee, Esquire Troutman, Sanders, Lockerman & Ashmore Candler Building, Suite 1400 127 Peachtree Street, N.E. Atlanta, Georgia 30303-1810 Frank J. Hurt, III 6666 Powers Ferry Road Suite 202 Atlanta, Georgia 30339 Preston Spears 91 Farmington Drive Woodstock, Georgia 30188 Rahim Davoudpour 1972 Benthill Drive Marietta, Georgia 33062 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, Florida 32399-0350 =================================================================
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent's decision to deny petitioner's capital expenditure proposal to lease the Cambridge Convalescent Center in Tampa be AFFIRMED. Respectfully submitted and entered this 9th day of September, 1977, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Art Forehand Administrator Office of Community Medical Facilities Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Frank M. Gafford, Esquire Post Office Box 1789 Lake City, Florida 32055 Chriss Walker, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue The parties’ stipulation filed March 21, 1997, states there are no disputed facts and describes these disputed issues of law: whether proposed rule 61D-2.002 is an invalid exercise of delegated legislative authority; whether proposed rule 61D-2.002 violates the 4th Amendment of the United States Constitution; and whether proposed rule 61D-2.002 violates Article I, Sections 12 and 23 of the Florida Constitution.
Findings Of Fact Petitioners hold valid pari-mutuel permits and licenses to operate pari-mutuel facilities and conduct pari-mutuel wagering in the State of Florida, and are governed by Chapter 550, Florida Statutes, and the rules promulgated by the Respondent (Division) under Chapter 550, Florida Statutes. The Proposed Rule and Statutory Underpinings Proposed rule 61D-2.002 provides: 61D-2.002 Authorized Search The Division, investigating violations of Chapter 550, or enforcing the provisions thereof, and the rules promulgated thereunder, shall have the power to permit persons authorized by the Division to search the person, or to enter and search the stables, rooms, lockers, vehicles, and automobiles or other places within a pari- mutuel wagering permitted facility at which a race, game meeting, or pari-mutuel wagering is held, or other permitted or licensed places where racing animals eligible to race at said race meeting are kept. Searches of persons shall be limited to those individuals licensed by the Division on a permitted facility. Each licensee, in accepting a license, does thereby consent to such search. Division personnel who are authorized to conduct searches are as follows: Division Investigators, Chief Inspectors, Division Veterinarians, Division Judges/Stewards, Regional Managers and Auditing Field Personnel. All Division personnel authorized to conduct searches must follow the Division of Pari-Mutuel Wagering’s Search Guidelines, herein incorporated by reference. The incorporated Search Guidelines provide: Searches are conducted by authorized personnel of the Division of Pari-Mutuel Wagering. Searches of individuals will be limited to occupational licensees, only on Pari- Mutuel facilities licensed to conduct pari- mutuel events by the Division of Pari-Mutuel Wagering. Routine searches are conducted on licensee’s vehicles, stables, compounds, or other areas of a pari-mutuel facility, to determine that there are no violations of Statutes or Rules governing pari-mutuel wagering, and are not limited to drug related violations. The persons and areas of routine searches shall be randomly selected. However, all licensees shall be subject to the search process, and care must be taken to ensure this process is not used to abuse the rights of any one individual. To ensure fairness to all participants, the following procedure will be followed: An Inspection/Search Report Form will be prepared on all searches, to include the name of the subject, the area(s) inspected, and the findings. If there are no violations, it should be so noted. If there are violations, they shall be listed, and what action was taken. Inspection/Search reports will be kept on file for each facility, and will be periodically reviewed. Searches of barns, and kennels will only be conducted in the presence of the trainer, or a person of authority representing the trainer, or the stable/kennel operator. Exceptions, [sic] are cases where the stable or kennel is unsecured, with no one in attendance, and drugs, medications or paraphernalia or other contraband are observed in plain view, or there is a reason to believe that contraband will be removed if the search is not carried out immediately. The search will then be conducted only under the following circumstances: [sic] A witness, other than bureau personnel, is present. A greyhound or horseman’s representative, a Steward/Judge, the Chief Inspector, or the Security Chief, or one of his representatives. On Searches that are the result of a drug positive, reported violations, or as a result of an investigation, a report of investigations shall be prepared, and the Search report shall be attached as a supplement to the report. On all cases where drugs, contraband, or evidence is confiscated, a case will be opened, and a copy of the search report, Report of Investigation, and a copy of the Property receipt will be attached to the case file. Proposed rule 61D-2.002 cites section 550.0251(3), Florida Statutes, as the specific authority, and section 550.0251, Florida Statutes, generally, as the law implemented by the proposed rule. Section 550.0251(3), Florida Statutes, provides: The division shall adopt reasonable rules for the control, supervision, and direction of all applicants, permittees, and licensees and for the holding, conducting, and operating of all racetracks, race meets and races held in this state. Such rules must be uniform in application and effect, and the duty of exercising this control and power is made mandatory upon the division. Section 550.0251(3), Florida Statutes, is the general rulemaking authority of the Division of Pari-Mutuel Wagering. There is nothing in its text which addresses searches and seizure by the Division. Proposed rule 61D-2.002 cites no other statute as the specific authority for the rule. Section 550.0251, Florida Statutes, the “law implemented”, is entitled “The powers and duties of the Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation”. The Division argues that certain provisions within that section are implemented by the proposed rule. Section 550.0251(4), Florida Statutes, provides: The division may take testimony concerning any matter within its jurisdiction and issue summons and subpoenas for any witness and subpoena duces tecum in connection with any matter within the jurisdiction of the division under its seal and signed by the director. Section 550.0251(5), Florida Statutes, grants the Division the authority to promulgate rules concerning the testing of occupational licenseholders for controlled substances or alcohol. Chapter 550.0251(9), Florida Statutes, authorizes the Division to conduct investigations in enforcing Chapter 550, Florida Statutes, and also defines an active investigation as an investigation being conducted with “a reasonable, good faith belief that it could lead to an administrative, civil or criminal action” by the appropriate authorities. Section 550.0251(11), Florida Statutes, requires that the Division shall supervise and regulate the welfare of racing animals at pari-mutuel facilities. Those subsections do not expressly authorize the Division to conduct the activities contemplated by its proposed rule. Practices by the Division The Division uses routine searches to locate drugs or other contraband, including mechanical devices used to affect the performance of an animal. The proposed rule would permit a strip search of an individual, but pat-downs are most common. Drugs and drug paraphernalia and illegal electric devices have been uncovered in these searches. Training of Division investigators in the Division’s policies and procedures is primarily on-the-job training. All of the investigators have some law enforcement background. Under the proposed rule Division personnel authorized to conduct searches are not limited to Division investigators. The Division considers random searches an important function within the Division’s responsibility to prevent individuals from violating Chapter 550, Florida Statutes. The Division, while not required by the rule, generally involves personnel of the licensee in the searches. Members of the Florida Thoroughbred Breeders’ and Horsemens’ Association are often invited on random barn inspections because they make good witnesses. Security personnel hired by the tracks also conduct random searches under procedures adopted by the facilities.
The Issue Whether Respondents directly or indirectly represented or aided an unauthorized insurer, an insurance or annuity product; whether Respondents knew or reasonably should have known that the annuity contracts with the unauthorized insurer violated Section 626.901, Florida Statutes; whether Respondents knowingly placed before the public a statement, assertion, or representation with respect to the business of insurance that was untrue, deceptive, or misleading; whether Respondents knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public any false material statement; whether Respondents demonstrated a lack of fitness and trustworthiness to engage in the business of insurance; whether Respondents engaged in unfair or deceptive practices or otherwise showed themselves to be a source of injury or loss to the public; and whether Respondents otherwise acted in violation of the Florida Insurance Code provisions as specifically detailed in Petitioner’s Amended Administrative Complaint, and, if so, what penalty, if any, should be imposed on Richard P. Eberhardt’s insurance agent license and/or Nancy Eberhardt’s license.
Findings Of Fact General facts applicable to both Respondents Respondent, Richard Eberhardt (RE), is currently licensed in the State of Florida as a Life Including Variable Annuity & Health Life, Life & Health, and Health insurance agent. RE was initially licensed by Petitioner as a non- resident insurance agent on May 6, 2004. Previously, RE was a licensed insurance agent in Nebraska, Indiana, and Arizona. Respondent, Nancy Eberhardt (NE), is currently licensed in the State of Florida as a Life Including Variable Annuity, Life Including Variable Annuity & Health, Life, Life & Health, and Health insurance agent. NE was initially licensed by Petitioner as a non-resident insurance agent on January 2, 2003, and then as a resident agent on October 5, 2004. Previously, NE was a licensed insurance agent in Arizona. Petitioner has historically mailed, and subsequently made available on line, the Intercom, an insurance agent newsletter. The heading to the newsletter, reads in part: “Publication for Agents and Adjusters from the State of Florida Department of Financial Services.” These newsletters contained warnings regarding unauthorized sales of insurance products, and explanations as how an agent could verify whether or not an insurer was authorized to do business in Florida. Petitioner’s records evidence that the newsletters were distributed to insurance agents from the July – October 1996 through December 2006 editions. Respondents became licensed Florida agents in January 2003, and it is a reasonable assumption that they received or had computer access to those publications. Both Respondents are listed in Petitioner’s records as being the owners of LLQ Consulting, LLC. Respondent NE is listed as being the insurance agent-in-charge of LLQ Consulting, LLC. Pursuant to records on file with the Florida Secretary of State, LLQ Consulting, LLC, is an Arizona-limited liability company that is authorized to do business in Florida. Respondent RE was originally listed as manager; however, since April 22, 2005, Respondent NE has been listed as the manager. At all times pertinent to the dates and occurrences referred to herein, Respondents were licensed in Florida as insurance agents. Petitioner has jurisdiction over Respondents’ insurance agent licenses and appointments, pursuant to statute. National Foundation of America (NFOA) The NFOA is a registered Tennessee corporation that was formed on January 27, 2006, and headquartered in Franklin, Tennessee. Respondents assert that the difference between a charitable gift annuity and a charitable installment bargain sale is that a charitable gift annuity is under Internal Revenue Code (IRC) Section 501(m) and the payout to the investor is based on a mortality table of the donor’s expected life. Therefore, it is a tax free exchange of an asset by a donor at less than the asset’s fair market value to a charitable organization in exchange for an annuity issued by the charitable organization. On the other hand, Respondents argue that an installment bargain sale is under Section 453 of the IRC and 26 C.R.F. Sections 1.1011-2 of the IRC regulations. It is an exchange of an asset owned by the donor at less than fair market value to a charitable organization in exchange for an annuity. The IRS allows the donor to deduct the difference between the fair market value of the asset and the amount that the charitable organization pays for the asset. The payout of the annuity is for a specific term and not tied to a mortality table. Therefore, NCF did not consider the Charitable Installment Purchase to be an insurance transaction or the sale of an insurance product under state insurance laws. Nevertheless, an NFOA Corporate Resolution, dated April 16, 2006, provides for the corporate authority to “liquidate stocks, bonds, and annuities . . . in connection with charitable contributions or transactions. . . .” This same resolution also provides for the corporate ability to “enter into and execute planned giving or charitable contribution transactions with donors, including executing any and all documentation related to the acceptance or acquisition of a donation, . . . given in exchange for a charitable gift annuity. “ On September 18, 2006, the State of Washington Office of Insurance Commissioner issued an Order to Cease and Desist in the matter of National Foundation of America, Richard K. Olive, and Susan L. Olive, Order No. D06-245. The Order, among other things, was based on NFOA’s having not been granted a Certificate of Authority (COA) as an insurer in Washington and having not been granted tax exempt status under Section 501(c)(3) of the IRC. On April 13, 2007, the OIR issued an Immediate Final Order (IFO) in the matter of National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, and Robert G. DeWald, Case No. 89911-07, finding that the activities of NFOA, et al., constituted an immediate danger to the public health, safety or welfare of Florida consumers. OIR further found that, in concert, NFOA, et al., were “soliciting, misleading, coercing and enticing elderly Florida consumers to transfer and convey legitimate income tax deferred annuities for the benefit of themselves and their heirs to NFOA in exchange for charitable term certain annuities”; and that NFOA, et al., had violated provisions of the FIC, including Sections 624.401 and 626.901, Florida Statutes. NFOA has never held a license or COA to transact insurance or annuity contracts in Florida, nor has NFOA ever been registered pursuant to Section 627.481, Florida Statutes, for purposes of donor annuity agreements. NFOA was never a registered corporation with the Florida Department of State, Division of Corporations. New Life Corporation of America (“NLCA”) d/b/a National Community Foundation (“NCF”) has been registered with OIR as a Section 627.481, Florida Statutes, donor annuity organization, since October 1997. NCLA subsequently changed its name to New Life International (“NLI”), which continued to use the d/b/a/ NCF. NLI is presently registered as a donor annuity organization with OIR. NFOA appealed OIR’s IFO to the First District Court of Appeal of Florida (1st DCA). The 1st DCA dismissed NFOA’s appeal on July 24, 2007. Therefore, NFOA operated as an unauthorized insurer in Florida. On May 17, 2007, the Internal Revenue Service (IRS) sent a letter to the Texas Department of Insurance stating that NFOA was not classified as an organization exempt from federal income tax as an organization described in Section 501(c)(3) of the IRC. On May 23, 2007, the Tennessee Department of Commerce and Insurance (DCI) filed a Verified Petition for Appointment of Receiver for Purposes of Liquidation of National Foundation of America; Immediate and Permanent Injunctive Relief; Request for Expedited Hearing, in the matter of Newman v. National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna MyIntyre, Kenny M. Marks, and Hunter Daniel, Chancery Court of the State of Tennessee (“Chancery Court”), 20th Judicial District, Davidson County, Case No.: 07-1163-IV. The Verified Petition states at paragraph 30: NFOA’s contracts reflect an express written term that it is recognized by the IRS as a charitable non-profit organization under Section 501(c)(3) of the Internal Revenue Code (Prosser, attachment 4), and NFOA represents in multiple statements and materials that the contract will entitle the customers to potential generous tax deductions related to that status. The IRS states that it has granted NFOA no such designation. The deceptive underpinning related to NFOA’s supposed tax favored treatment of its contracts permeates it entire business model and sales pitch. This misrepresentation has materially and irreparably harmed and has the potential to harm financially all its customers and the intended beneficiaries of the contracts. These harms are as varied in nature and degree as the circumstances of all those individuals’ tax conditions, the assets turned in to NFOA, and the extent to which they have entrusted their money and keyed their tax status and consequences to reliance on such an organization. On August 2, 2007, the Commissioner for the Tennessee DCI, having determined that NFOA was insolvent with a financial deficiency of at least $4,300,000.00, filed a Verified Petition to Convert Rehabilitation by Entry of a Final Order of Liquidation, Finding of Insolvency, and Injunction, in the matter of Newman v. National Foundation of America, et al. On September 11, 2007, pursuant to a Final Order of Liquidation and Injunction entered in the matter of Newman v. National Foundation of America, et al., the Chancery Court placed NFOA into receivership after finding that the continued rehabilitation of NFOA would be hazardous, financially and otherwise, and would present increased risk of loss to the company’s creditors, policy holders, and the general public. On February 6, 2008, the IRS sent a letter to the court appointed Tennessee DCI Receiver (“Receiver”) for NFOA stating that NFOA does not qualify for exemption from federal income tax as an organization described in Section 501(c)(3) of the IRC. The IRS, in determining that NFOA did not qualify for tax exempt status, stated that the sale of NFOA annuity plans has a “distinctive commercial hue” and concluded that NFOA was primarily involved in the sale of annuity plans that “constitute a trade or business without a charitable program commensurate in scope with the business of selling these plans.” The IRS letter also provides that consumers may not take deductions on their income tax returns for contributions to NFOA. Insurance Agent’s Duties An insurance agent has a fiduciary duty to his or her clients to ensure that an insurer is authorized or otherwise approved by OIR as an insurer in Florida prior to the insurance agent selling the insurer’s product to his client. There are several methods by which an insurance agent could verify whether or not an insurer was authorized or otherwise approved (hereinafter “authorized”) as an insurer in Florida by OIR. It is insufficient for an insurance agent to depend on the assurances of the insurer itself or his or her insurance business peers as to whether an insurer needs to be authorized in Florida. Respondents asserted that, prior to selling NFOA annuities in 2006, they had performed due diligence in order to determine whether or not NFOA was authorized in Florida. Respondents testified that at the time they performed their due diligence, they viewed a State of Florida website that seemingly indicated that OIR does not regulate donor annuities. Respondents’ testimony lacks credibility as to the timing of Respondents’ claimed due diligence. The websites that seemingly indicate that OIR does not regulate donor annuities did not come into existence until September 12, 2008, for OIR and January 16, 2009, for Petitioner, which would have been several years after any due diligence that Respondents claim that they performed. As further noted below, the sale of the NFOA annuities to Mr. Bisch and Ms. Clark occurred in 2006, well in advance of the September 2008 and January 2009 creation of any websites that might seemingly indicate a lack of OIR regulation of donor annuity organizations. While the OIR 2008 and DFS 2009 websites may be somewhat confusing, at all times relevant to these matters, donor annuity organizations have been and continue to be regulated by OIR pursuant to Section 627.481, Florida Statutes, and Florida Administrative Code Rules 69O-202.001 and 69O-202.015. Due to the importance of income tax considerations in a consumer’s decision making process as to whether or not to purchase an insurance product, insurance agents have a fiduciary duty to their clients to verify the validity of any representations that an insurer’s product has an IRC Section 501(c)(3) tax exempt status, prior to the insurance agent’s selling the product to his or her clients. There are several methods by which insurance agents could verify whether or not an insurer has an IRS 501(c)(3) tax exempt status. Respondents admitted, in their testimony, that they had depended on the assurances of others and assumed that NFOA did not need to be authorized as an insurer in Florida. Respondents also admitted in their testimony that, but for the different names, the NFOA paperwork was the same as that of NCF. Respondent’s testimony is contradictory and lacks credibility in that NCF was qualified and registered with OIR as a donor annuity organization and NFOA was not. Nevertheless, Respondents claim NFOA was not and did not need to be regulated by OIR. Respondents testified that they had verified with the IRS that NFOA had applied for Section 501(c)(3) tax exempt status. However, Respondents were aware that the tax exempt status had not been granted to NFOA at any time relevant to this proceeding. Respondents knew income tax considerations were materially important to their clients. However, none of the NFOA materials nor any Florida consumer contracts signed or provided by Respondents to their clients contain any disclaimer language informing consumers that the Section 501(c)(3) tax exempt status had been applied for but had yet to be granted by the IRS. Respondents received commissions totaling $22,062.80 for selling NFOA annuities to Florida consumers. Respondents have failed to return any of these commissions to the Receiver for NFOA in the state of Tennessee. Count I: Consumer – Jacob Bisch On February 20, 2006, Respondents solicited and induced Jacob Bisch of Cape Coral, Florida, then aged 75, to transfer or otherwise surrender ownership of his existing annuity contract with Allianz Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into was signed by Respondent RE. Bisch credibly testified as to both Respondents’ involvement in the sale of the NFOA annuity. NE wrote a letter asking that the commission for this sale be issued in her name. The commission check was ultimately paid to LLQ Consulting, LLC, a company owned by both Respondents and which NE was registered as the insurance agent- in-charge. Respondents knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondents, by use of the NFOA donor annuity agreement, knowingly misrepresented to Bisch that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondents knew or should have known that NFOA did not hold tax exempt status with the IRS. Bisch’s testimony was credible that tax considerations were the prime consideration in the purchase of the NFOA annuity from Respondents. Based upon Respondents’ transaction of insurance, Bisch presently anticipates losing approximately $26,320.04. This amount includes a surrender penalty of $16,823.04 incurred for transferring his original Allianz annuity to NFOA, and after receiving partial refunds from the NFOA Receiver. Based upon Respondents’ transaction of insurance with Bisch, Respondents were paid a commission of $4,062.80 by NFOA. Count II: Consumer – Fay Ann Clark Culminating on May 8, 2006, Respondents solicitated and induced Fay Ann Clark of Ft. Myers, Florida, then aged 70, to write a check for $200,000.00 in return for an NFOA annuity. The NFOA agreement that Clark entered into, and which was signed by Respondent RE, was entered into less than three weeks after Clark requested rescission of two NCF annuities that Respondents had previously sold Clark. Proceeds from the rescission of the NCF annuities enabled Clark to purchase the NFOA annuity. Prior to the rescission of the NCF annuities, on or about October 21, 2005, Clark had surrendered two Allianz Life Insurance Company annuities. Proceeds from the surrender of the Allianz annuities were used to purchase the NCF annuities. Respondent NE signed the NCF annuities agreement and was the advisor. Respondent NE, by use of a check drawn on Respondents’ joint checking account, refunded Respondents’ commission for the NCF sales to Clark. Sales documentation and correspondence clearly and convincingly evidence both Respondents’ involvement in Clark’s Allianz to NCF and NCF to NFOA transactions. Respondents knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondents, by use of the NFOA donor annuity agreement, knowingly misrepresented to Clark that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondents knew NFOA was not tax exempt. Based upon Respondents’ transaction of insurance, Clark paid $200,000.00 for an NFOA annuity, paid $7,971.00 in penalties to the IRS (U.S. Treasury), and presently anticipates losing approximately $42,000.00. Clark has received a partial refund from the NFOA Receiver. Based upon Respondents’ transaction of insurance with Clark, Respondents were paid a commission of $18,000.00 by NFOA. Petitioner has proven by clear and convincing evidence that Respondents directly or indirectly represented or aided an unauthorized insurer to do business in Florida. Petitioner has proven by clear and convincing evidence that Respondents knew or reasonably should have known that the annuity contracts they contracted with clients were with an unauthorized insurer. Petitioner has proven by clear and convincing evidence that Respondents knowingly placed before the public a statement, assertion, or representation with respect to the business or insurance that was untrue, deceptive or misleading. Petitioner has proven by clear and convincing evidence that Respondents knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public a false material statement. Petitioner has proven by clear and convincing evidence that Respondents demonstrated a lack of fitness and trustworthiness to engage in the business of insurance. Petitioner has proven by clear and convincing evidence that Respondents engaged in unfair and deceptive practices or showed themselves to be a source of injury to the public. Neither Respondent has had prior disciplinary charges filed against them in Florida.
Recommendation Based upon the foregoing Finds of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services: Finding that Respondents violated Subsections 626.901(1), 626.901(2), 626.9541(1)(b)4., 626.9541(1)(e)1.e., 626.611(7), 626.621(2), and 626.621(6), Florida Statutes, as charged in Counts I and II of Petitioner’s Amended Administrative Complaints; Revoking Respondent Richard Eberhardt’s, licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; Revoking Respondent Nancy Eberhardt’s, licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; 4. Providing that if either of the Respondents, subsequent to revocation, makes an application to Petitioner for any licensure, a new license will not be granted if the applicant Respondent fails to prove that he or she has otherwise satisfied the financial losses of his or her NFOA clients or if the applicant Respondent otherwise fails to establish that he or she is eligible for licensure. DONE AND ENTERED this 27th day of April, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 27th day of April, 2010.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearings the following facts are found: At all times pertinent to this proceeding, Petitioner was a producer of agricultural products in the State of Florida as defined in Section 604.15(5), Florida Statutes (1983). However, since the pallets were not an agricultural product produced by Petitioner and were not considered in the price of the bahia sod but were exchanged back and forth between Petitioner and his customer, including Respondent American, they are not considered to be an agricultural product in this case and are excluded from any consideration for payment under Section 604.15-604.30, Florida Statutes. The amount charged Respondent American for these pallets was $1,188.00. At all times pertinent to this proceeding, Respondent American was a licensed dealer in agricultural products as defined by Section 604.15(1), Florida Statutes (1983), issued license No. 3774 by the Department, and bonded by Respondent Peerless Insurance Company (Peerless) in the sum of $15,000 - Bond No. SK-2 87 38. At all times pertinent to this proceeding, Respondent Peerless was authorized to do business in the State of Florida. The complaint filed by Petitioner was timely filed in accordance with Section 604.21(1), Florida Statutes (1983). During the month of January, 1985 Respondent American purchased numerous pallets of bahia grass sod from Petitioner paying $16.00 per pallet but has refused to pay for 240 pallets at $16.00 per flat for a total amount of $3,840.00 picked up by Respondent American's employees and billed by Petitioner between January 16, 1985 and January 26, 1985. Respondent American did not contest having received 204 pallets of bahia grass sod represented by invoice number. 6774- for 18 pallets on 1/16/85; 6783, 6785, and 6788 for 18 pallets each on 1/17/85; 6791, 6793, 6794, 6795, and 6800 for 16 pallets each on 1/18/85 and 6799 for 18 pallets on 1/18/85, 6831 for 18 pallets on 1/28/85; and 6834 for 16 pallets on 1/30/85 but contested invoice numbers 6835 and 6836 for 18 pallets each on 1/26/85. Gary L. Curtis stipulated at the hearing that Respondent American had received the 36 pallets of bahia grass sod represented by invoice numbers 6835 and 6836 which left only the matter of Respondent American's contention that it was owed credit for 20 pallets of bahia sod received in December, 1984 that was of poor quality and fell apart and had to be replaced because it could not be used. The evidence was insufficient to prove that any of the sod purchased by Respondent American from Petitioner fell apart or was of poor quality and as a result could not he utilized by Respondent American.
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein it is RECOMMENDED that Respondent American be ordered to pay to the Petitioner the sum of $3,840.00. It is further RECOMMENDED that if Respondent American fails to timely pay the Petitioner as ordered then Respondent Peerless be ordered to pay the Department as required by Section 604.21, Florida Statutes (1983) and that the Department reimburse the Petitioner in accordance with Section 604.21, Florida Statutes (1983). Respectfully submitted and entered this 10th day of March, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 10th day of March, 1986. COPIES FURNISHED: Doyle Conner, Commissioner Department of Agriculture and Consumer Services The Capitol Tallahassee, Florida 32301 Robert Chastain, General Counsel Department of Agriculture and Consumer Services Mayo Building, Room 513 Tallahassee, Florida 32301 Ron Weaver, Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 Joe W. Kight, Chief License and Bond Mayo Building Tallahassee, Florida 32301 Gary L. Curtis, President American Sod Company, Inc. Post Office Box 1370 Longwood, Florida 32750 Mid Florida Sod Company 4141 Canoe Creek Road St. Cloud, Florida 32769 Peerless Insurance Company 611 Aymore Road/Suite 202 Winter Park, Florida 32789 Raymond E. Cramer Esquire Post Office Box 607 St. Cloud, Florida 32769
The Issue The issues in the case are (1) whether the decision of the Agency for Health Care Administration (AHCA) to not select Little Havana Activities and Nutrition Centers of Dade County, Inc. (Little Havana), for the award of a contract for the provision of long-term care managed care services pursuant to AHCA Invitation to Negotiation Solicitation No. AHCA ITN 011- 12/13, entitled "Statewide Medicaid Managed Care--Long Term Care, Region 11" (ITN) was contrary to the AHCA's governing statutes, rules, polices or any applicable ITN specification, and, if so, whether such selection decision was clearly erroneous, contrary to competition, arbitrary, or capricious; whether Little Havana's response to the ITN was responsive; whether Little Havana was a responsible vendor; and (4) whether Little Havana's protest is barred for failure to submit the required protest bond.
Findings Of Fact AHCA was created by chapter 20, Florida Statutes, as the chief health policy and planning entity for the state of Florida. AHCA is the state agency authorized to enter into contracts with private entities for the provision of long-term managed care services to Medicaid enrollees under section 409, part IV, Florida Statutes (2012).1/ Long-term care services to be provided under these contracts include nursing facility care and services provided in assisted living facilities, hospice, and adult day care, along with other services specifically required by law. Section 409.966 requires AHCA to select a limited number of eligible plans to participate in the state-wide Medicaid managed care program, and further requires AHCA to conduct separate procurements for 11 statutorily-prescribed regions in Florida. § 409.966(2), Fla. Stat. Separate and simultaneous procurements were to be conducted in each of the 11 regions. On June 29, 2012, AHCA issued the ITN, which solicited responses from vendors seeking to provide long-term care services to Medicaid enrollees in each of the 11 regions. The only procurement at issue in this proceeding is for Region 11, which comprises Miami-Dade and Monroe counties. On July 13, 2012, AHCA issued Addendum No. 1 to the ITN. On July 30, 2012, AHCA issued Addendum No. 2 to the ITN. On August 7, 2012, AHCA issued Addendum No. 3 to the ITN. On August 17, 2012, AHCA issued Addendum No. 4 to the ITN. These addenda included the questions posed by the vendors concerning the ITN and AHCA's responses. The ITN included instructions, 67 specific questions, certifications, and attestations. No protests of the terms, conditions or specifications of the ITN were filed within 72 hours of the release of the ITN or the addenda. In accordance with section 409.981(2)(k), the ITN stated that AHCA would issue a minimum of five and a maximum of ten contract awards for Region 11. Section 409.981(2)(k) requires that a least one of the contracts must be with a provider service network if any provider service network submitted a responsive bid. The ITN stated that AHCA, at its sole discretion, would determine the number of contracts to be issued. The ITN provided: The State has established certain requirements with respect to responses submitted to competitive solicitations. The use of "shall," "must," or "will" (except to indicate futurity) in this ITN, indicates a requirement or condition from which a material deviation may not be waived by the State. A deviation is material if, in the State's sole discretion, the deficient response is not in substantial accord with the ITN requirements, provides an advantage to one respondent over another, or has a potentially significant effect on the quality of the response or on the cost to the state. Material deviations cannot be waived. The words "should" or "may" in this ITN indicate desirable attributes or conditions, but are permissive in nature. Deviation from, or omission of, such desirable feature will not in itself cause rejection of a response. Little Havana is a Florida not-for-profit corporation with its principal place of business at 700 Southwest Street, Miami, Florida, 33130. Little Havana, American Eldercare, Sunshine, United, Coventry, Molina, Amerigroup Florida, Humana, Freedom Health, Inc. (Freedom), Wellcare of Florida, Inc. (Wellcare), Universal Healthcare, Inc. (Universal), Simply Health Care Plans, Inc. (Simply), Advantage Florida Health Plan, Inc. (Advantage), and Florida Healthcare Plus, Inc. (Florida Healthcare) each submitted a response to the ITN. Little Havana and all Intervenors timely submitted their responses to the ITN. American Eldercare was the only Provider Service Network (PSN) to submit a response to the ITN. AHCA appointed 16 evaluators to evaluate and score the vendor responses for Region 11. There were six "core evaluators," Evaluators 1 through 6. Specialty evaluators, Evaluators 7 through 16, scored in such areas as clinical services, quality management, compliance history, information technology, and financials. The evaluators were qualified to perform the evaluations. AHCA's decision to use the number of evaluators it used was reasonable. The ITN established the following evaluation criteria that would be used by evaluators when scoring each vendor's response: mandatory criteria; financial stability; review of provider comments; past performance evaluation; cost proposal; and technical response evaluation. After the evaluations were completed, AHCA tabulated the total scores awarded by each of the evaluators for each vendor and ranked the vendors. AHCA's process for calculating the final vendor rankings in Region 11 was as follows. The scores from Evaluators 7 through 16 for each vendor were compiled, and AHCA calculated an average based on the number of evaluators who scored each particular question. Those averages were then added to the scores for each of the Evaluators 1-6. This combination of scores represented each vendor's "total score" for each core evaluator. The vendor's total scores for Evaluators 1 through 6 were ranked in order from the highest to the lowest by evaluator. The rankings for each vendor were added, then divided by six to determine average rank. In Region 11, the top seven vendors were invited to negotiate. AHCA selected the seven highest-ranking vendors, American Eldercare, Sunshine, United, Coventry, Humana, Molina, and Amerigroup Florida to enter into negotiations for a contract. Based on AHCA's tabulations of the evaluators' scores, Little Havana's ranking was the eighth highest among the vendors. AHCA did not select Little Havana for negotiations. On January 15, 2013, AHCA issued its Bid Proposal Tabulation for the ITN, and noticed its intent to award contracts to the following vendors: American Eldercare, Sunshine, United, Coventry, and Amerigroup Florida. In addition to identifying those vendors to which AHCA intended to award contracts, the Bid Proposal Tabulation identified the final scoring evaluation ranking of each scored vendor as follows: Molina, 1.00; American Eldercare, 2.17; Humana, 4.00; United, 4.33; Coventry, 5.17; Sunshine, 6.33; Amerigroup Florida, 6.67; Little Havana, 7.50; Universal, 9.50, Wellcare, 9.67; and Simply, 9.67. On January 15, 2013, Little Havana filed its notice of intent to protest AHCA's intended contract awards. The formal written protest was due to be filed within ten days of the filing of the notice of intent to protest. § 120.57(3)(b), Fla. Stat. The tenth day after the filing of the notice of intent to protest fell on Saturday, January 26, 2013; thus, the formal written protest was due to be filed on Monday, January 28, 2013. Fla. Admin. Code R. 28-106.103. On January 25, 2013, Little Havana filed with AHCA, by facsimile transmission, a formal written protest, challenging AHCA's decision to select other vendors, to the exclusion of Little Havana, for negotiation and contract awards. AHCA received the copy of the protest and bond on January 25, 2013. The protest which Little Havana transmitted to AHCA included a copy of the protest bond required to be submitted pursuant to section 287.042(2)(c). On January 25, 2013, Little Havana sent the original formal written protest and the original protest bond to AHCA by Federal Express. Federal Express did not deliver the original protest and bond to AHCA until January 29, 2013, one day after the deadline for filing the protest and bond. In order to have standing to be awarded a contract, Little Havana's reply to the ITN must be responsive. The ITN established mandatory criteria as a threshold for determining whether vendor replies would be responsive, including a "signed Attachment K, Required Statements, as required in Attachment C, Special Conditions, Section C.46, Other Required Documentation." The ITN provided that "responses failing to comply with all mandatory criteria will not be considered for further evaluation" and would be considered non-responsive. ITN Section C.46 requires the vendor to certify that it currently operates as one of the following: health maintenance organization (HMO), long-term care provider service network, exclusive provider organization, accountable care organization, or other insurer that meets the ownership and financial requirements of a long-term care provider service network. Attachment K of the ITN contained the certification that the vendor currently operates as an HMO and stated: I hereby certify my company currently operates as one (1) of the following: ? HMO Health Maintenance Organization (HMO) and possess a current Florida Certificate of Authority and Health Care Provider Certificate (641 Part III) or a Florida Certificate of Authority and a Limited Health Care Provider Certificate (641.2018 and 641 Part III) in at least one (1) Florida county. Attachment K required the vendor to check the box for the plan that it was currently operating and required the signature of the vendor's qualified representative. Because of the time frames for program implementation2/ and the human and financial scale of the procurement, the purpose behind the ITN requirement that vendors currently operate as an HMO or other eligible plan is to ensure that vendors are experienced enough to hit the ground running and avoid start-up issues. The attestations and certifications are important to AHCA program integrity, and there are a number of attestations required in the course of business between AHCA and managed care organizations. These attestations include verifications regarding the accuracy, validity, and completeness of encounter data, billing, and fraud and abuse reportings. AHCA cannot validate every detail in each submission by the contractors, so AHCA relies upon attestations to validate that submittals are complete, accurate, and conform to the parameters of the attestation. In its response to the ITN, Little Havana checked the box in Attachment K certifying that it currently operates as an HMO and possessed a current Certificate of Authority and Health Care Provider Certificate, but did not check any other option that it currently operated as another type of eligible plan. Manuel Marrero, Chairman of the Board for Little Havana, signed the certification that Little Havana was currently operating as an HMO; however, he had no knowledge whether Little Havana was operating as an HMO at the time of its response submittal. Little Havana had a Certificate of Authority from the Florida Office of Insurance Regulation and a Health Care Provider Certificate from AHCA. Although Little Havana was authorized to operate as an HMO, at the time of the submittal of its response to the ITN, Little Havana was not currently operating as an HMO. Little Havana had no income from its HMO. Little Havana has never had a single enrollee in its HMO; has never paid a claim as an HMO; is not accredited as an HMO; has never billed any person for participation in its HMO, and has never provided any service to any patient as an HMO. Little Havana serves clients through the Nursing Home Diversion Program administered by the Department of Elder Affairs and intends to transfer those clients into its new HMO if it is awarded a contract pursuant to the ITN. In the responses to the ITN, AHCA took the certifications and attestations of the vendors to be complete and accurate. After the initiation of the bid protest by Little Havana, AHCA learned that Little Havana was not currently operating as an HMO at the time it submitted its response to the ITN. Had AHCA been aware that Little Havana was not currently operating as an HMO at the time Little Havana submitted its response to the ITN, AHCA would have deemed Little Havana's response as non-responsive and would not have scored its response. Had AHCA known that Little Havana was not currently operating as an HMO at the time of its ITN response, AHCA would have considered Little Havana not to be a responsible vendor for untruthfully certifying in Attachment K that it was currently operating as an HMO. The determination of whether a vendor is responsible is dependent on the vendor's integrity and the agency's ability to trust that the vendor will act in the state's best interests and adequately perform the contract. The truthfulness of an attestation is one component to the consideration of whether a vendor is responsible. If a vendor is found not to be responsible, AHCA would not contract with that vendor. Attachment E-1-A of the ITN required the vendors to make the following attestation: I hereby certify that no modification and/or alteration has been made to the forms, narrative and/or instructions contained in Attachment E-1-A, Submission Requirements and Evaluation Criteria Components and that the response adheres to the Agency's prescribed response allowances for response narrative and attachments. The attestation form stated: IN THE EVENT THE AGENCY DETERMINES THE RESPONDENT HAS MODIFIED AND/OR ALTERED ATTACHMENT E-1-A, SUBMISSION REQUIREMENTS AND EVALUATION CRITERIA COMPONENTS, AND/OR HAS OTHERWISE CIRCUMVENTED THE AGENCY'S PRESCRIBED ALLOWANCES FOR RESPONSE SUBMISSION, THE AGENCY WILL REJECT THE RESPONSE. Little Havana's response contained the attestation that it had not modified or altered Attachment E-1-A, Submission Requirements and Evaluation Components. As part of its response to question 67 of the ITN relating to Little Havana's provider network, Little Havana was to submit two forms, which were to be downloaded from an AHCA website as part of the ITN. The forms included an embedded scoring formula, which would automatically calculate the number of points to be awarded and assign point totals based on the data filled in by the vendors. Little Havana did not download and use the forms as prescribed in the ITN. Little Havana altered or modified the ITN forms in that Little Havana did not use the forms, but developed and used its own forms. The purpose of Question 67 was to determine whether the vendors had an adequate provider network. The ITN required the vendors to provide a list of currently contracted network providers and copies of letters of agreement or letters of intent from providers who intend to join the network. The question further directed: The respondent shall: Follow the instructions in Exhibit 1, Regional Contracts and Agreements Completion Instructions; Complete Exhibit 2, Network Contracts and Agreements--Facility Services; and Complete Exhibit 3, Network Contracts and Agreements--Non Facility. Question 67 further stated: "Response must include Exhibits 2 and 3 referenced above and no maximum attachments. Exhibits 2 and 3 to Question 67 were electronic Excel spreadsheets which were to be accessed and downloaded from the AHCA website as part of the ITN. Each exhibit was preceded in the ITN with two pages of "Completion Instructions" followed by spreadsheets. The ITN repeatedly made clear that responding vendors (referred to in the ITN as "Respondents") were to use the prescribed Excel spreadsheet forms to provide the requested information. Specifically, the Completion Instructions stated: Respondents to this ITN must complete Exhibit 2, Network Adequacy--Facility Services and Exhibit 3, Network Adequacy-- Non Facility within this attachment. Failure to provide the information requested will affect the overall scoring of the response, as specified in Attachment E, Part II, Evaluation Criteria. * * * EXHIBIT 2, NETWORK ADEQUACY--FACILITY SERVICES: Using Table 1-LTC Provider Qualifications and Network Adequacy Requirements in Attachment D-II, Core Contract Provisions, Exhibit 7, Item I., as a reference, the Respondent shall complete Exhibit 2, Network Adequacy--Facility Services, within this attachment. The Respondent shall list on this form all facility service providers with which the Respondent has a signed agreement or contract with to serve the populations covered in Attachment D-II, Core Contract Provisions. * * * EXHIBIT 3, NETWORK ADEQUACY-NON-FACILITY: Using Table 1-LTC Provider Qualifications and Network Adequacy Requirement in Attachment D-II, Core Contract Provisions, Exhibit 7, Item I., as a reference, the Respondent shall complete Exhibit 3, Network Adequacy--Non-facility Services, within this attachment. The Respondent shall list on this form all non-facility service providers in which the Respondent has a signed agreement or contract with to serve the populations covered in Attachment D-II, Core Contract Provisions. Any question whether the vendors were required to use these specific forms was eliminated in the answers to several questions asked by the vendors and published as part of Addendum 2 to the ITN: Question 521: Please provide Attachment E-1 in an editable format such as Microsoft Word or Excel. Answer: The Agency has provided the version of the document which respondents are to utilize. See http.//ahca.myflorida.com/Procurements/index .shtml. * * * Question 526: We have begun documenting the Agency-provided response forms. The formatting appears to create challenges when trying to match the response with the evaluation criteria because the column spacing is not locked. Will the Agency consider alternative submission formats? Answer: No. Little Havana failed to utilize AHCA's prescribed electronic forms to input information as required by Question 67 of the Attachment E-1-A, Submission Requirements and Evaluation Criteria and, instead, created its own altered version of AHCA's prescribed forms. In creating its own forms, Little Havana changed and/or omitted certain portions of the required forms. The forms created by Little Havana did not include AHCA's embedded scoring formulas; thus, Little Havana's forms did not show the number of points that should be awarded and did not assign point totals for the information supplied by Little Havana. Little Havana's forms, which looked similar to AHCA's electronic forms, did not include all of the listed categories. Little Havana omitted some provider categories and doubled up on others. The ITN stated how the responses to Question 67 would be scored: Two (2) points will be awarded per facility/non-facility for having a signed contract, letter of agreement or letter of intent. The evaluator will review all attached documentation, as required above, to ensure the information entered by the Respondent in Exhibits 2 and 3 are accurate. A total of 100 points is possible per county (20 maximum for facility, 80 maximum for non-facility). Overall scores (listed as REGION XX FINAL SCORE on the bottom of Exhibit 3 have been converted to fall between the standard evaluations scores 0 and 5 based on the combined Facility/non- facility raw scores. The points from the combined spreadsheets are converted to the following: No score = 0 Score greater than 0 but less than or equal to 0.20 = 1 Score greater than 0.20 but less than or equal to 0.40 = 2 Score greater than 0.40 but less than or equal to 0.60 = 3 Score greater than 0.60 but less than or equal to 0.80 = 4 Score greater than 0.80 = 5 The final score that represents the combined facility and non-facility provider scores will be used in Attachment E, Part II, Evaluation Criteria. The combined final raw score for the combined facility and non-facility providers was then weighted by 25 for the final scoring. The maximum final scoring for Question 67 was 125 points. Evaluators 1 through 6 evaluated the responses to Question 67. During a meeting of the evaluators and purchasing staff prior to the commencement of the evaluations, Kelly Walsh, Evaluator 4, asked what the evaluators were supposed to do if a vendor listed a service provider on the forms for Question 67 but did not provide the documentation to support the listing of the service provider. She was told to flag the lack of documentation and make a note of it. During the evaluation process, Ms. Walsh told AHCA procurement staff that Little Havana had not filled out the totals on the spreadsheet and asked AHCA procurement staff how she was supposed to evaluate Little Havana's response to Question 67. Ms. Walsh was told to score the response to Question 67 to the best of her ability. Although Ms. Walsh reviewed the supporting documentation of the other vendors for Question 67, she used the score from the spreadsheets without adjusting the score if no supporting documents were provided. Phyllis Davis, Evaluator 3, reviewed Little Havana's response to Question 67 and saw that Little Havana had not used the forms that the ITN required. She understood that the forms were self-scoring, meaning that the form had an embedded formula that would score the data supplied by the vendors on the form and that she was to take the score on the form as the score for the vendor. When she originally evaluated Little Havana's response to Question 67, she had left the score for Little Havana blank because there were no scores listed on the forms. After the evaluation, Ms. Davis was called back and told that she had not scored Question 67. At that time, Ms. Davis manually calculated Little Havana's score, using the instructions in the ITN. Princilla Brown-Jefferson, Evaluator 5, saw that Little Havana's responses to Question 67 did not have the scores tabulated on the forms submitted by Little Havana. During the evaluation, she asked an AHCA procurement staff member whether the vendors' responses on the forms were to be automatically scored based on the information put on the forms by the vendors. She was told that the forms would be self-scoring. Because Little Havana's forms did not have scores, Ms. Brown-Jefferson gave Little Havana a zero for Question 67. Keith Young, Evaluator 1, participated in the development of the ITN. He, along with Cliff Schmidt, developed the forms that would be used by the vendors in responding to Question 67. Mr. Young understood that the forms had an embedded formula which would create the scores for Question 67 based on the information provided by the vendors on the forms. He also understood that if the documentation submitted by the vendors did not support the form-generated score that he would have to manually deduct points and recalculate the score. During the evaluation, Mr. Young saw that Little Havana had not used the forms with the embedded formulas, and when he brought the failure to use the forms to the attention of AHCA procurement staff, he was told to do the best that he could in scoring Little Havana's responses. He returned to his evaluation and reviewed the forms submitted by Little Havana. His review showed that Little Havana had not listed all the provider services that were listed in the ITN forms. He calculated the score for Little Havana using the instructions in the ITN. The other core evaluators gave Little Havana five points for Question 67. Thus, they must have calculated the scores manually. On the financial evaluation criteria, Evaluator 16, Ryan Fitch, who is a certified public accountant (CPA), scored Little Havana as follows: ten points out of 20 available points for Part A, stability; 20 points out of 20 available points for Part B, projections; ten points out of 20 available points for Part C, required accounts; 20 points out of 20 available points for Part D, required accounts; and 20 points out of 20 available points for Part E, required accounts. The ITN provided Part A be scored with a weighted factor of 50 percent; Part B to be scored with a weighted factor of 25 percent; Part C to be scored with a weighted factor of three percent; Part D to be scored with a weighted factor of 15 percent; and Part E to be scored with a weighted factor of seven percent. After applying Evaluator 16's scores to the weighted factors for Parts A through E, Evaluator 16 scored Little Havana's Financial Information Evaluation Criteria a total of 14.7 points out of 20 available points. Little Havana presented the testimony of Ronald Finkelstein as its expert on the financial evaluation. Mr. Finkelstein disagreed with only two aspects of Mr. Fitch's evaluation: the calculation of the operating margin ratio and the start-up fund analysis. Mr. Finkelstein did not state that Mr. Fitch incorrectly performed his analysis, but did state that any differences between his analysis and Mr. Fitch's analysis were reasonable and resulted from the application of subjective professional judgment--wherein two CPA's could reasonably differ on the interpretation of financial statements. The operating margin was one of six financial measures calculated in Part A. Even if that ratio was recalculated in accordance with Mr. Finkelstein's analysis and a score assigned to it, the points that Little Havana received for the Part A evaluation of its financial statements would not have changed. Mr. Finkelstein challenged Mr. Fitch's characterization of Little Havana' ability to fund its start-up fund at Part C of the financial evaluation, as "questionable" rather than "likely." Little Havana's surplus start-up projections identified a total of $1.1 million that would be needed to fund that account for three months: $142,165 in November, 2013, $477,512 in December 2013, and $481,847 in January 2014. These amounts appear on Little Havana's financial pro formas on the line item designated "administrative expenses." The majority of the costs Little Havana would incur in the first three months are for medical expenses of $5.195 million, $13.547 million and $13.655 million, respectively, or a total of over $33 million. Neither Little Havana, in preparing its proposal, or Mr. Finkelstein, in analyzing it, included all of the operating expenses in sizing the start-up fund. Mr. Finkelstein was of the opinion that the failure to include these operating expenses in Little Havana's projections for funding its start-up fund were not fatal, because the contract, if awarded to Little Havana, would generate sufficient revenue, paid in advance at the beginning of each month, to pay all of the operating expenses. However, Mr. Finkelstein overlooked the clear statement in the ITN that the start-up fund must be in the form of cash or liquid assets, excluding the revenues from Medicaid payments. The revenues that Little Havana would receive, if it were awarded a contract, would be Medicaid revenues. Mr. Finkelstein noted that Little Havana had $8.4 million in unrestricted cash available for a start-up fund. However, the $8.4 million would not cover the $33 million Little Havana would need for its start-up fund. Question 1 concerned plan accreditation, was worth a maximum of ten points, and required vendors to "provide documentation of current accreditation by a nationally recognized accrediting body of the Managed Care Plan that will be providing services outlined in this ITN." The ITN specified the following evaluation criteria: For the Managed Care Plan that will provide services under this ITN, whether the respondent has: full accreditation by a nationally recognized accrediting body e.g., accredited by NCQA, full two-(2) year accreditation for URAC, of three (3) accreditation for AAAHCA; or partial/conditional health accreditation (e.g., provisional for NCQA, conditional or provisional for URAC, or one (1) year or six months for AAAHC; or denied accreditation The scoring scale for Question 1 was provided in the ITN: 5 points for full accreditation; 3 points for partial/conditional accreditation; 0 points if accreditation denied or no accreditation; 5 additional points for full accreditation with NCQA. In Addendum 2 of the ITN, a vendor posed this question: "For Respondents who are new entrants into the market, would AHCA award full credit for this question [Question 1] for those Respondents whose affiliated companies have current accreditations?" AHCA answered: "No. Points will be awarded to respondents who are accredited at the time of the submission of the response." Thus, it is clear that points would not be awarded if the parent company rather than the vendor submitting the response. Amerigroup Florida stated in its response to the ITN that it was a wholly-owned subsidiary of Amerigroup Corporation. In its response to Question 1, Amerigroup Florida stated: Amerigroup maintains the following accreditations and certifications: Full 3-year accreditation by Accreditation Association for Ambulatory Health Care (AAAHC)--Amerigroup Florida Full 3-year accreditation by NCQA of 8 Disease Management (DM) Patient and Practitioner Oriented Programs--Amerigroup Corporation Full 3-year certification by CMS for our special needs program (SNP) model of care on recommendation from NCQA--Amerigroup Corporation Amerigroup Florida further stated: Amerigroup earned a second 3-year Patient and Practitioner Oriented NCQA accreditation in 2009 for out national DM programs. In Florida, we currently manage 16,659 Medicaid and Medicare LTC equivalent members in DM (omitting the TANF/CHIP members)[.] Evaluators 1, 2, 5, and 6 awarded Amerigroup Florida the additional five points for having full accreditation with NCQA. Evaluator 1 based his awarding of the five points on Amerigroup Corporation's having achieved a second three-year NCQA accreditation in its disease management program; Amerigroup Corporation, presumably through Amerigroup Florida, currently manages 16,000 Medicare and Medicaid long-term care members in disease management programs in Florida; and his understanding that Amerigroup Florida's enrollees would enjoy the benefits of the NCQA-accredited disease management services. Evaluator 2 awarded the additional five points for full NCQA accreditation because she did not distinguish between Amerigroup Florida and Amerigroup Corporation. She understood that a disease management program is a component of a managed health care plan, and she saw that Amerigroup had a full three- year NCQA accreditation for its disease management program and felt that equated to full accreditation. Evaluator 5 did not know the difference between Amerigroup Florida and Amerigroup Corporation. She thought that the references to the NCQA accreditation referred to Amerigroup Florida. Evaluators 3 and 4 did not award Amerigroup Florida any additional points relating to full accreditation with NCQA. The evaluation of Little Havana's response to Question 1 suffers a similar flaw. Little Havana's response stated: [Little Havana] received its certificate of authority to operate an HMO on April 9, 2012. Therefore, it is has not yet obtained accreditation as a health maintenance organization by a nationally recognized accrediting body. It intends to obtain NCQA accreditation within the time frame required by the Florida Statutes. [Little Havana], however, is currently accredited by the nationally recognized Accreditation Commission for Health Care, Inc. [ACHC] for its home health operations. A copy of the accreditation is attached. ACHC does not accredit managed care plans, including HMOs. The accreditation that Little Havana has from ACHC is for home health services Evaluators 1, 4, and 6 awarded Little Havana zero points for Question 1. Evaluators 2, 3, and 5 awarded Little Havana five points for having a national accreditation. If Little Havana had been awarded a contract, it would have provided the services through its HMO, which did not have a national accreditation. The points awarded to Little Havana for Question 1 were clearly erroneous and contrary to the ITN evaluation criteria. Question 11 was worth a maximum of 15 raw points, and stated: The respondent shall provide information regarding whether it is based in the State of Florida, as defined in s. 409.966(3)(c)3, F.S., are conducted by staff in-house or through contracted arrangements, located in the State of Florida. The evaluation criteria for Question 11 provided that the vendor would receive five points if it had its principal office in Florida and no parent of joint venture organization outside of Florida and five points if all functions were performed in Florida. An additional five points would be awarded if the vendor met both the requirements of having its principal office in Florida and performing all its functions in Florida. Little Havana's response to Question 11 indicated that Little Havana had always been a not-for-profit corporation incorporated in Florida, had it principal office in Florida, and performed all functions in Florida. Evaluator 6 failed to give Little Havana the additional five points for meeting both criteria of a principal office in Florida and performing all functions in Florida. His failure to award the additional five points was contrary to the ITN and clearly erroneous. Question 13 provided: The respondent shall state whether, in the past seven (7) years, it has voluntarily terminated all or part of a contract (other than a provider contract) to provide health care services, has had such a contract partially or fully terminated (with or without cause), has withdrawn from a contracted service area, or has requested a reduction in enrollment levels. The evaluation criteria for Question 13 provided that five points would be awarded for "no voluntary termination of all or part of a contract and no service area withdrawals." Zero points would be awarded "for any voluntary termination/withdrawals." United responded that it had withdrawn its Medicaid presence in two county markets within the past seven years due to available funding, medical trends, and lack of essential hospital or provider services. Evaluators 1 and 2 awarded United five points for the portion of the ITN response dealing with whether there had been any voluntary withdrawals from service areas. The awarding of these points was clearly erroneous and contrary to the evaluation criteria of the ITN. Question 14 provided: The respondent shall state whether there is any pending or recent (within the past seven years) civil criminal or administrative litigation against the respondent (to include respondent's affiliates and subsidiaries and its parent organization and that organization's affiliates and subsidiaries). If there is pending litigation or recent litigation against the respondent, describe the contract that is being litigated (if applicable), the damages being sought or awarded and the extent to which adverse judgment is/would be sought or awarded and the extent to which adverse judgment is/would be covered by insurance or reserves set aside for this purpose. One of the evaluation criteria was the "extent to which actual and anticipated judgments are not covered by insurance or reserves." The vendor would receive five points if there were no litigation; four points if sought or awarded damages covered by insurance or reserves; and zero points if not covered. Another of the evaluation criteria for Question 14 was "[t]he extent to which actual and anticipated litigation involves allegations of criminal misconduct (defined as dereliction of duty; or unlawful or improper behavior) as described in the complaint or other documents filed in the case. The vendor would receive five points if no criminal litigation that resulted in ad [sic] adverse outcome" and zero points would be awarded "if completed litigation involved criminal or intentional misconduct that resulted in an adverse outcome." Question 14 was evaluated by only two evaluators, Evaluators 12 and 13. They each awarded Amerigroup Florida four points for damages, which were covered by insurance or reserves, and five points for having no criminal litigation. Amerigroup Florida stated in its response to the ITN that in the past seven years there had been no criminal litigation against it, its parent corporation, or its affiliates. Amerigroup Florida stated that it had been involved in eight cases in which resolutions had been reached with no admission of liability and that these resolutions had been covered by either insurance of adequate reserve funds. Its response indicated that all pending litigation was covered by either insurance or reserves. Amerigroup Florida did divulge that Amerigroup Corporation had been involved in a qui tam action and stated: In August 2008, Amerigroup settled all claims related to a civil judgment against it in a qui tam action styled as United States of America and the State of Illinois, ex rel. Cleveland A. Tyson v. Amerigroup Illinois, Inc. and Amerigroup Corporation, U.S. District Court for the Northern District of Illinois, Eastern Division, Case No. 02-C-6074 (the "Litigation"). The Litigation, filed in 2002 by Mr. Tyson, a former employee of Amerigroup's former Illinois subsidiary, alleged that Amerigroup and its former Illinois subsidiary submitted false claims under the Medicaid program by discouraging or avoiding the enrollment of pregnant women and other recipients with special needs. The settlement is neither an admission of liability by Amerigroup nor a concession by the United States and State of Illinois that their claims were not well founded. Rather, the agreement states that the parties reached a full and final settlement to avoid the delay, uncertainty, and expense of further litigation. * * * EXTENT THAT JUDGMENTS ARE COVERED BY INSURANCE OR RESERVES. Sufficient insurance and reserves are maintained to cover all actual or anticipated judgments or settlements. In the Tyson case filed in 2002 and described above, existing available and unregulated funds at Amerigroup Corporation and financing proceeds were utilized to pay the settlement. The evaluation criteria in the ITN stated that five points would be awarded if there were no criminal litigation. Amerigroup Florida, its parent company, and affiliates did not have any criminal litigation in the past seven years. Thus, the awarding of five points by each of the evaluators was consistent with the evaluation criteria set forth in the ITN. The evaluation criteria stated that the evaluators were to determine the extent that actual and anticipated judgments were not covered by insurance or reserves and four points would be given if the sought or awarded damages were covered by insurance or reserves. Little Havana argues that because the settlement in United States ex rel Tyson v. Amerigroup Illinois and Amerigroup Corporation, Inc., 488 F. Supp. 2d 719 (N.D. Ill. 2007) was covered in part by financing that Amerigroup Florida should have been awarded zero points. The awarding of four points for this category is not inconsistent with the ITN evaluation criteria. The Tyson case was resolved by settlement rather than by judgment. The opinion in the Tyson was issued on March 13, 2007, and the parties in the Tyson case settled the case in 2008. In the Pre-Hearing Stipulation filed by the parties, Little Havana contends that the following errors were made in the evaluation of Question 15: "Evaluator 12 awarding Amerigroup Florida 3 points on a component of Question 15 and Evaluator 13 awarding United 15 points on Question 15." Little Havana did not address these alleged errors in its proposed recommended order. Question 15 required the following: The respondent shall state whether it is currently or has recently (within the past seven (7) years) been the subject of a criminal or civil investigation by a state or federal agency. If yes, provide an explanation with relevant details and the outcome (if applicable). If the outcome was against the respondent, respondent shall provide the corrective action plan implemented to prevent such future offenses. The respondent shall include information for the respondent as well as the respondent's affiliates and subsidiaries and its parent organization and that organizations' affiliate and subsidiaries. Respondents are not required to include information regarding EEO investigations that did not result in a cause finding, unless those investigations are ongoing. The evaluation criteria for Question 15 provided: [Item] 1. The number of criminal or civil (noncriminal investigations by any governmental agency or component, thereof) investigations of the parent, affiliates, subsidiaries or respondent resulting in an adverse determination to be defined as a civil or administrative sanction, fine, or penalty or criminal conduct or withhold of adjudication following a plea agreement or trial. [Item] 2. The extent to which the investigation of the parent, affiliate, subsidiaries or respondent resulting in an adverse determination. [Item] 3. The extent to which the corrective action plan effectively addressed the issue resulting in an adverse determination. [Item] 4. The extent to which the respondent, subsidiaries, affiliate or parent is currently under investigation by any law enforcement agency, any governmental agency or any component thereof, that will not be resolved prior to the award of the resulting Contract. * * * This section is worth a maximum of 20 raw points with each of the above components being worth a maximum of 5 points each as outlined below. For Item 1: 5 points for none; 4 points for one (1); 3 points for two (2) not involving respondent directly; 2 points for two (2) that included respondent; 0 for any exceeding above limits. For Item 2: 5 points if no investigations or no adverse determinations; 0 points for any other set of circumstances. For Item 3: 5 points for no investigations or corrective action that addressed all deficiencies; 0 points for no or no effective corrective action plan. For Item 4: 5 points for no known, ongoing investigations; 4 points for one (1); 0 points for any more than one (1). In response to Question 15, Amerigroup Florida identified one civil investigation involving it, which was settled, and some investigations involving affiliate companies, two of which involved cause findings by the Equal Employment Opportunity Commission (EEOC) and which were settled. Based on Amerigroup Florida's response to Question 15, Item 1, Evaluator 12 awarded zero points and Evaluator 13 awarded three points. Evaluator 12 conceded error in awarding zero points because the two cause findings by the EEOC did not involve Amerigroup Florida, meaning that Amerigroup Florida should have been awarded three points, the same number of points awarded by Evaluator 13. The awarding of three points by Evaluator 13 was consistent with the ITN evaluation criteria. In its response to Question 15, Amerigroup Florida stated that there was one investigation with a corrective action plan that addressed the deficiency. No evidence was presented that the corrective action plan did not address the deficiency. Based on Amerigroup Florida's response to Question 15, Evaluators 12 and 13 each awarded Amerigroup Florida five points.3/ The award of these points was consistent with the evaluation criteria for Question 15. In scoring United's response, Evaluator 13 awarded five points each for Items 1, 2, and 3, and Evaluator 12 award zero points for those items. Evaluator 13 reasonably concluded that there were no investigations that resulted in adverse determinations based on the wording of the evaluation criteria. There was some civil litigation listed in response to Question 14, but those were not based on investigations by a state or federal agency. Evaluator 13's award of five points for Item 2 was based on his interpretation of adverse determinations not to include settlements. His interpretation was reasonable. For Item 3, Evaluator understood that there were no adverse determinations; thus, there would have been no need for corrective action plans. His award of five points for Item 3 was reasonable. The parties have stipulated that even if all points were deducted from United as argued by Little Havana, United would still be ranked among the top seven vendors. The parties have stipulated that even if all point adjustments sought by Little Havana are made, Sunshine would still be ranked among the top seven vendors. The parties have stipulated that even if all point adjustments sought by Little Havana are made, Coventry would still be ranked among the top seven vendors. Little Havana did not present any evidence that AHCA's decision to award seven contracts instead of eight was contrary to AHCA's rules or policies, the statutes governing AHCA, or the specifications to the ITN.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing Little Havana's petition for failure to demonstrate that it was a responsive and responsible vendor who has standing to bring the protest. DONE AND ENTERED this 15th day of May, 2013, in Tallahassee, Leon County, Florida. S SUSAN BELYEU KIRKLAND 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 May, 2013.
