The Issue The issue is whether Respondent Alexander J. Milanick should be required to pay attorney fees and costs in the amount of $4,976.00 to Petitioner Charles Osborne to compensate Petitioner for his defense of an ethics complaint filed with the Florida Commission on Ethics.
Findings Of Fact The Town of Beverly Beach, Florida has a population of about 600 located in Flagler County, Florida. It is about one mile from north to south, and occupies about .4 square miles. It is bounded on the west by the Intracoastal Waterway and on the east by the Atlantic Ocean. U.S. Highway A1A is the main north-south route through the town. Mr. Osborne is an aerospace engineer who served on the Beverly Beach Town Commission from 1997 through March 1999. He was mayor from March 1999 until 2001. He has lived at 2641 Osprey Circle, in Beverly Beach, in a home constructed at that location, since 1995. This residence is closer to the southern boundary of Beverly Beach than to the northern boundary. Dr. Milanick is a dentist who, along with his brother John, and a person named McGee, during times pertinent, owned land immediately north of Beverly Beach. On the property then and currently owned by Dr. Milanick, and east of A1A, is a restaurant named the Shark House. The premises has also been known as Crabby Joe's. In 1995, Dr. Milanick applied to the Town Commission to have his property, and that of his brother, and that of McGee, annexed into the town limits of Beverly Beach. He did this by asking a Mr. Taylor to do what was necessary to cause the annexation to occur. Mr. Taylor thereafter filed a petition with the Town Commission. By Ordinance 95-9-4, the Town Commission, in 1995, assented to the request and it was made effective November 15, 1995. The Ordinance purported to annex the Milanick property into the Town of Beverly Beach and to zone it general commercial. Mr. Osborne was not a member of the Town Commission and was not mayor during this time. The Ordinance, however, was defective in four ways. The Ordinance purported to annex the property into Bunnell, Florida; it was not properly signed by all commissioners; it was not publicly noticed; and it did not provide a legal description of the property. It was not filed with either the Flagler County Clerk of the Court or the Florida Secretary of State. The matter languished until 1997 when Dr. Milanick determined that his property had not in fact been moved within the boundaries of Beverly Beach. Dr. Milanick brought this to the attention of the Town Commission in October 1997. At a Town Commission meeting on December 3, 1997, the Town Attorney stated that he had not had a chance to look into the Milanick and Shark House issue. At a Town Commission meeting on February 4, 1998, Dr. Milanick inquired as to the progress being made on the annexation of his property and was told that the Town Attorney would get with him and discuss the procedure. Subsequently, the Town Attorney, Pat McCormick, suggested that it would be necessary to start the process from the beginning if the land was to be annexed. At a Town Commission meeting on March 4, 1998, Mayor Osborne stated that there was no benefit to the annexation of the Shark House. One member of the Town Commission suggested that they honor past commitments. Dr. Milanick was in attendance at this meeting. At a Town Commission meeting on May 5, 1999, Dr. Milanick and his brother again attended the Town Commission meeting and requested the annexation of their property and discussed the procedure that would be necessary. At a Town Commission meeting on June 2, 1999, a motion was made to go forward with Ordinance 95-9-4 and to amend the official city map and legal description to include the Shark House property. The motion passed but Mayor Osborne vetoed it. During a regular monthly meeting of the Town Commission on July 7, 1999, James Kearn, an attorney retained by Dr. Milanick, who was authorized to act for Dr. Milanick, appeared and requested that the Commission direct the Town Clerk to sign Ordinance 95-9-4 and to forward it to the county and the state in order to determine if the Ordinance was valid. This request was approved by the Town Commission. Mayor Osborne, vetoed the measure. Thereafter, the veto was over-ridden by the Commission. At a Town Commission workshop on July 21, 1999, there was additional discussion regarding the annexation of the Shark House. Mr. Kearn accused Mayor Osborne of discussing the Milanick annexation matter with Sid Crosby, Clerk of the Court of Flagler County. Mayor Osborne denied the charge. The discussion became heated and accusatory and Mayor Osborne threatened to have the sheriff eject Mr. Kearn from the meeting. Subsequent to the action of the Town Commission of July 7, 1999, the Town Clerk, Douglas Courtney, took Ordinance 95-9-4 to Syd Crosby, Clerk of the Court for Flagler County. In a memorandum dated July 26, 1999, Mr. Courtney reported to the Town Commission that Mr. Crosby would not file Ordinance 95-9-4 because it was defective. One of the defects cited was that the instrument purported to annex the land into the City of Bunnell, Florida. No creditable evidence was adduced which indicated that Mayor Osborne visited Syd Crosby for the purpose of preventing the recording of the annexation of Dr. Milanick's property. Mr. Crosby concluded from the beginning that Ordinance 95-9-4 was not recordable. Mayor Osborne suggested some solutions which would permit the annexation, including, re-submission of a proper application. Over a period of time some "glitch" bills were considered which would annex the land. However, none passed. Mr. Kearn attended the Town Commission meeting on February 2, 2000, and the minutes of the meeting noted that he was accompanied by "a person taking notes." Following this meeting, in a February 16, 2000, letter to Dennis Knox Bayer, Town Attorney, Mr. Kearn claimed that Mayor Osborne had a personal vendetta against Dr. Milanick, and that he was exercising dictatorial efforts to prevent citizens to speak at town meetings. He further demanded that ". . . all Town officials, including you as their representative, refrain from saying things that are simply and blatantly false, which only serve to incite Mr. Milanick." At a town meeting on March 1, 2000, Mr. Kearn complained about the annexation not being on the agenda and Mayor Osborne stated that a request for inclusion on the agenda had not been made in writing. Mr. Kearn was permitted to speak for three minutes, he spoke for three minutes, and immediately thereafter Mayor Osborne adjourned the meeting. On or about April 25, 2000, Dr. Milanick and his brother John, filed suit against the Town of Beverly Beach and Mayor Osborne personally, in the Circuit Court of the Seventh Judicial Circuit in and for Flagler County. The suit alleged that the Town of Beverly Beach and Mayor Osborne violated the civil rights of the Milanicks. The suit alleged that Mayor Osborne had a vendetta against Dr. Milanick and should be held personally liable to Dr. Milanick. The Circuit Court dismissed the civil rights count against Mayor Osborne and the town, and this dismissal was affirmed by the Fifth District Court of Appeal. The Circuit Court also dismissed the mandamus action, finding that the 30- day limitations' period for filing a petition for a writ of certiorari applied and that a prima facie case for mandamus had not been established. The Fifth District Court of Appeal, on October 19, 2001, remanded that count to the Circuit Court with directions to grant the petition for mandamus, but upheld the dismissal of the civil rights counts. On January 23, 2003, the Circuit Court entered its Alternative Writ of Mandamus. The Writ incorporated the allegations of Plaintiff's Complaint by reference and ordered that the Defendants take whatever steps necessary to sign and record Ordinance 95-9-4. When this occurred, Mr. Osborne was no longer an elected official of Beverly Beach. The Circuit Court complaint filed by Dr. Milanick recited that the recording of the ordinance did not occur because Mayor Osborne conferred with the Clerk of the Court to block recording of the ordinance. The adoption of the matters recited in the complaint as true, by the appellate court, does not make them proven facts because no evidence was taken in the case. The complaint, moreover, alleges actions, such as being tyrannical and peevish, which could not in any event constitute a violation of a person's civil rights. The complaint does not allege that Mr. Osborne took any action, as mayor, because he wished to obtain a personal advantage and does not allege that the annexation of Dr. Milanick's real property would affect Mr. Osborne's real property in terms of value or otherwise. As of the date of the hearing, Dr. Milanick's property had not been annexed into the corporate limits of Beverly Beach. Mr. Osborne, while serving as mayor, was not helpful in causing the annexation to occur and it is apparent that his relations with Mr. Kearn were not amicable. Mr. Osborne, while serving as mayor was irascible, intimidating, and controlling. Mr. Osborne believed that the annexation would bring no benefit to Beverly Beach and believed it would, "change the town's character." Mr. Osborne gained nothing directly or personally by preventing, or making difficult, the annexation of Dr. Milanick's land. As an elected official, he was permitted to advance his own ideas with regard to what he believed would be best for Beverly Beach and for himself as a citizen and property owner of Beverly Beach. He could act in this regard so long as he did not secure a special privilege, benefit, or exemption for himself, as opposed to a general benefit. A letter signed by Mr. Kearn dated July 18, 2003, accompanied by an affidavit signed by Dr. Milanick, requested that the Commission conduct an investigation into the activities of Mr. Osborne during the period when he was the mayor of Beverly Beach. For reasons which become apparent hereafter, this letter, which had the words "Via Airborne Overnight Mail" stamped on its face, will be hereinafter referred to as the "Airborne" letter. The following statements were contained in the "Airborne" letter: Specifically, while Mayor, Charles Osborne simply refused to sign and record the ordinance duly adopted by the Town, which annexed land into the Town as a general commercial, simply because he personally did not want anymore general commercial land in the Town, which could jeopardize his personal investment in the Town. He also met with the former Clerk of Court for Flagler County, Mr. Syd Crosby, to persuade the Clerk to not record anything regarding the annexation of such land, in order to prevent the completion of the annexation. He thus plainly put his purely personal concerns, ahead of his duties as mayor, and fiduciary duty to the citizens of Beverly Beach. The mayor still refused to oblige the Town's request, or to honor the duly adopted resolution, for his own personal reasons, irrespective of his duties as mayor to the citizens of Beverly Beach.... Even worse, he met with the former Clerk of Circuit Court of Flagler County, Mr. Syd Crosby, to attempt to persuade Mr. Crosby to not record any ordinance presented by the Town, annexing the Milanicks' property. Mayor Osborne repeatedly ignored and defied the will of the Town to complete the annexation, to pursue his own personal agenda, i.e., stopping annexation of land as general commercial. The "Airborne" letter then parroted items that indicated that the Circuit Court had found to be true, as follows: Additionally, Mr. Osborne simply does not allow anyone to speak with whom he disagrees, or to address matter that he does not want addressed. Mayor Osborne has... refused to put the Milanicks' matters or requests on the Town Council agenda; taken action regarding the Milanicks' properties, without any notice to the Milanicks, or without knowledge by the Milanicks that such action was being taken against their property, as required by the Town's own law; refused to allow the Milanicks to speak to matters that affect their personal and property interests, once the Town Council had opened discussion regarding the annexation and zoning of the Milanicks' properties; blatantly and willfully misrepresented the Milanicks' positions, actions, and statements at Town meetings, beyond the scope of the privilege normally attendant to a politician's statements at such meeting, in order to defeat the Milanicks' requests, and to harm the Milanicks; refused to honor Ordinances passed by previous Town councils, as detailed above; refused to follow through with completing the annexation approved by previous council members of the Town; worked to undercut the recording of the completion of the signing of the ordinance, and the recording of the ordinance, to complete the annexation, all as detailed above. The matters in paragraph 25, are misleading because they indicate that the Circuit Court found these items to be true when in fact no evidentiary proceedings with regard to these items occurred in the Circuit Court. Moreover, the Complaint alleged several matters which Dr. Milanick either knew to be untrue, or should have known that it was untrue. Specifically, the Complaint alleged that Mayor Osborne "did not want anymore general commercial land in the Town, which could jeopardize his personal investment in the Town." This allegation implies that he was acting for some personal and specific reason financial reason, as opposed to a general opposition to development. This allegation, had it been true, would have been actionable pursuant to Section 112.313(6) The Complaint also alleged that Mayor Osborne met with Syd Crosby in order to prevent the annexation of the Milanicks' property. This allegation, coupled with the allegation as to a financial interest, bolsters the asserted improper purpose. Based on this Complaint, the Executive Director of the Commission issued a Determination of Investigative Jurisdiction and Order to Investigate, which was filed with the Commission on September 26, 2003, and assigned Complaint Number 03-091. Investigator Travis Wade of the Commission was directed to conduct a preliminary investigation into whether or not there was probable cause to believe a violation of Section 112.313(6), Florida Statutes, had occurred. That section reads as follows: (6) Misuse of public position.--No public officer, employee of an agency, or local government attorney shall corruptly use or attempt to use his or her official position or any property or resource which may be within his or her trust, or perform his or her official duties, to secure a special privilege, benefit, or exemption for himself, herself, or others. This section shall not be construed to conflict with s. 104.31. Mr. Osborne learned of the Determination of Investigative Jurisdiction and Order to Investigate and thereafter retained Robert J. Riggio, of the firm of Riggio & Mitchell, P.A., located in Daytona Beach, as his attorney. Mr. Riggio worked on the case from October 24, 2003, until September 29, 2004. He charged $150 per hour, which is below the customary charge in the Daytona Beach area, and the hourly rate therefore, is reasonable. He expended 33 hours which is reasonable. He expended $180 in costs. These expenditures totaled $4,976 which was billed to Mr. Osborne. He paid the bill. On April 6, 2004, a second letter dated July 18, 2003, was sent to the Commission by Mr. Kearn by facsimile. This will be referred to as the "Fax" letter. This was precipitated by a request to Mr. Kearn from Investigator Wade that he provide a copy of the original letter. The "Fax" letter differed from the "Airborne" letter. In the second paragraph of the "Fax" letter the following sentence appears: "Specifically, while Mayor, Charles Osborne simply refused to sign and record the ordinance duly adopted by the Town, which annexed land just north of Mr. Osborne's manufactured home . . . ." And in the fourth paragraph of the "Fax" letter, the following sentence appears: "The Mayor objected, because it would serve to annex land as general commercial, just north of his own manufactured home." It further stated that his motivation was ". . . stopping land as commercial near him." Mr. Kearn testified under oath that when Investigator Wade was discussing the case with him, that he, Mr. Kearn, realized the "Fax" letter was a draft that had been sent to Investigator Wade in error. Mr. Kearn said that the "Fax" letter was a draft that had subsequently been edited by Dr. Milanick who knew, July 18, 2003, that Mr. Osborne did not live in a manufactured home located immediately south of the property which was sought to be annexed. Mr. Kearn said that it the "Airborne" letter was supposed to be the operative document. He said that he realized that the "Fax" letter was being used by Investigator Wade when he was talking to him on the telephone on June 8, 2004, and that he advised Investigator Wade of the error. He testified that he made it perfectly clear to Investigator Wade that the "Airborne" letter was the operative document. Investigator Wade's Report of Investigation, however, recites that during the telephone interview of Mr. Kearn, that Mr. Kearn advised him that Mr. Osborne resided in a mobile home community immediately south of the Milanick property, while he served as mayor and that Mr. Osborne's interest in stopping the annexation was to use his position for his personal benefit. At the hearing, Investigator Wade stated under oath that Mr. Kearn advised him during their telephone conversation that Mr. Osborne resided in a mobile home community immediately south of the Milanick property while he was serving as mayor. Investigator Wade stated that the issue of whether or not Mr. Osborne lived in the immediate vicinity of the Milanick property was the key element in his investigation because if that were true, stopping the annexation could be a personal benefit to Mr. Osborne. Mr. Wade was a disinterested and credible investigator and witness and his testimony is taken as true and accurate. Mr. Osborne did not live in either a manufactured or mobile home. The type of home he lived in is irrelevant. What is relevant is that Mr. Osborne did not live adjacent to, or in the vicinity of, the Milanick property. In fact, Mr. Osborne did not live near the north side of town. He lived closer to the south side of town and it is unlikely that the annexation of the Milanick property would have an economic effect on Mr. Osborne's property. Mr. Kearn was aware of Mr. Osborne's resident address because he had him served with a civil suit at his residence in 2000. Mr. Kearn knew that Mr. Osborne did not live in a mobile home community, or in a manufactured home near the Milanick property, or anywhere near it. Nevertheless, he asserted that to be true when he talked to Investigator Wade. Mr. Kearn is the attorney and agent of Dr. Milanick. Mr. Kearn is, therefore, the alter ego of Dr. Milanick so that the actions of Mr. Kearn, are the actions of Dr. Milanick. The Commission, found in their Public Report, dated September 8, 2004, that Mr. Osborne's opposition to the annexation was not connected to any desire to secure a benefit for himself. The Commission dismissed the Milanick complaint on a finding of "no probable cause."
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Ethics enter an order requiring Dr. Milanick to pay Mr. Osborne $4,976.00. DONE AND ENTERED this 1st day of July, 2005, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 1st day of July, 2005. COPIES FURNISHED: Kaye Starling, Agency Clerk Commission on Ethics 3600 Maclay Boulevard, South, Suite 201 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 James J. Kearn, Esquire James J. Kearn, P.A. 138 Live Oak Avenue Daytona Beach, Florida 32114-4912 Gary S. Edinger, Esquire 305 Northeast First Street Gainesville, Florida 32601 Martin A. Pedata, Esquire Martin Pedata, P.A. 505 East New York Avenue, Suite 8 DeLand, Florida 32724 Robert J. Riggio, Esquire Riggio & Mitchell, P.A. 400 South Palmetto Avenue Daytona Beach, Florida 32114 Bonnie J. Williams, Executive Director Commission on Ethics 3600 Maclay Boulevard, South, Suite 201 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Phillip C. Claypool, General Counsel Commission on Ethics 3600 Maclay Boulevard, South, Suite 201 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Virlindia Doss, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050
The Issue The issue is whether Respondent, a Florida-licensed yacht salesman, should be disciplined for violation of Rule 61B- 60.006(2), Florida Administrative Code, as alleged in the Administrative Complaint dated May 10, 2000.
Findings Of Fact At all times pertinent to the issues herein, DBPR, through its Division of Florida Land Sales, Condominiums and Mobile Homes (the Division) was the state agency in Florida responsible for the licensing and discipline of yacht salespersons and brokers in this state and the regulation of the yacht-brokering profession. Respondent, Justo Lamar (Lamar), has been licensed as a yacht salesperson since November 1976. Prior to this action, Lamar has never been the subject of disciplinary action arising out of the practice of his profession. This action was precipitated by a yacht owner, Juan A. Galan (Galan), who unsuccessfully attempted to sell his yacht to a client of Lamar's. In July 1998, Galan listed his yacht, the Caliente, for sale through Ardell Yacht and Ship Brokers (Ardell). The listing resulted in negotiations for the purchase of the Caliente by one Larry Griggs (Griggs), a prospective customer represented by Lamar. At all times relevant to this case, Lamar was acting as a sales agent for Allied Marine and its broker, Dwight Tracy (Tracy). As set forth in more detail below, the negotiations between Galan and Griggs took place over a three-month period from October 1998 through December 1998 with no meeting of the minds. On July 12, 1999, some seven months after negotiations between Griggs and Galan terminated, Galan lodged a complaint with DBPR. Although the complaint was ostensibly directed against salesman Lamar and broker Tracy, each and every allegation in the complaint was directed to the broker's conduct, not Lamar's. Galan, who did not testify at final hearing, alleged in his complaint that "Broker presented a contract representing that deposit had been received/deposited (upon acceptance). In fact, broker never deposited check and we wasted our time and money on survey/sea trial as buyer was not (at that time or any time later) financially capable of buying boat @ $1.75 million." Galan provided some, but by no means all, of the documents which revealed the details of the prolonged and ultimately unsuccessful negotiations between Galan and Griggs. In the narrative portion of his complaint, Galan asserted that he lost money on sea trials and implied, without actually stating, that the Caliente had been taken off the market during the pendency of negotiations with Griggs. For reasons which remain unclear, the Division did not focus its investigation on Tracy, who was the obvious target of Galan's complaint. Instead, it targeted Lamar, who was an obvious add-on target of Galan's ire. The exhibits reveal a complex series of offers and counteroffers and jockeying for negotiating advantage, not just between Galan and Griggs as prospective Seller and Buyer of the Caliente, but also between Lamar and the two brokers, all three of whom stood to profit if the transaction were consummated. Negotiations for the Caliente began in late October 1998. On October 30, 1998, Lamar's client Griggs, through a corporation he controlled, issued a $150,000 check for "Deposit, 72' (sic) Caliente Sportfisherman." This check accompanied a Brokerage Purchase and Sale Agreement dated October 29, 1998, offering to purchase the Caliente for $1,500,000. That same day, Galan's representatives faxed Lamar to advise that Griggs' offer was insufficient. Lamar forthwith provided the check to his broker, Tracy. Negotiations between Galan and Griggs continued in November. Galan chose to by-pass his own Broker and negotiate directly with Lamar over lunch on November 18, 1998. Lamar wrote Galan's demands on the back of a restaurant placemat. The primary sticking point was Galan's insistence on a "bottom line" of $1,665,000 to him, after all commissions and other expenses, if any, were paid. Griggs nevertheless persevered in his effort to buy the Caliente for $1,500,000. On November 24, 2000, Griggs executed another Brokerage Purchase and Sale Agreement in which he offered an entity called Majua, Inc., of which Galan was President, the opportunity to sell the Caliente to Griggs for $1,500,000. Galan signed the November 24 agreement, but added an addendum which materially changed the terms. The addendum unilaterally purported to raise the sales prices to Galan's previously stated "bottom line" of $1,665,000. Thanksgiving passed, and negotiations wore on. On December 4, 1998, Griggs executed a third Brokerage Purchase and Sale Agreement, raising his offer to $1,755,000. The new offer expressly stipulated that Griggs' $150,000 earnest money check could be deposited when and if all parties executed this new proposed agreement. Like the October 29 and November 24 brokerage purchase and sale agreements, the December 4 document never ripened into a contract. The December 4 document was a clear and unembarrassed reminder from Griggs that an earnest money check had been written by Griggs, but was not on deposit, and was not going to be on deposit until such time as Galan had signed off on the contract as written by Griggs. Galan nevertheless permitted a sea trial of the Caliente in furtherance of negotiations, now in their fifth week. Also as part of the negotiating process, Galan permitted some, but not all, of the inspections requested by Griggs. Expenses for the sea trial and inspections were borne entirely by Griggs. By Christmas Eve, relations between the parties had deteriorated to the point where Lamar retrieved the check from the Allied Marine corporate files and returned it to Griggs. At no time did negotiations with Lamar's client Griggs preclude or interfere with efforts by Galan to negotiate with and sell the Caliente to any other prospective purchaser.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that DBPR enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 1st day of March, 2001, in Tallahassee, Leon County, Florida. FLORENCE SNYDER RIVAS 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 1st day of March, 2001.
Findings Of Fact At all times material hereto, Gold Coast Mortgage Corporation (hereinafter "Gold Coast") was and is a corporation organized and existing under the laws of the State of Florida and conducting business in this state. At all times material here to, Southlantic Mortgage Corporation (hereinafter " Southlantic") was and is a corporation organized and existing under the laws of the State of Florida and conducting business in this state. At all times material here to, Thomas J. Boylan (hereinafter "Boylan") was and is the principal mortgage broker and president of Gold Coast and of Southlantic. At all times material hereto, Respondents were and are licensed as mortgage brokers by Petitioner and were and are conducting mortgage brokerage business in the State of Florida. For approximately two years, Janice L. DiBella was employed by Gold Coast. Although she became licensed as a broker, she was throughout that time period responsible for the bookkeeping functions at Gold Coast. Although she wrote and posted the company's checks, she was not authorized to sign them. Rather, the checks were required to be signed by Boylan and Sol Klein. Although DiBella believed that Boylan, Sol Klein, and Joel Pinsky each had a one-third interest in the company, Boylan was the head of the company, and DiBella took orders from him and worked only for him. Boylan ran the company on a day-to-day basis, Sol Klein was rarely in the office, and DiBella had only met Pinsky. In late June 1952, DiBella received a telephone call from Boylan, who was at the office of Attorney Pollack. Boylan instructed her to take the checkbook and ledgers to her mother's house, which was located near the office of Gold Coast. DiBella did so. After retaining the books and records of Gold Coast in her possession for approximately two to three hours and after extracting a promise to be paid $1600 in cash before she would return them, DiBella met Boylan and Sol Klein in the parking lot of the Deli Den located across the street from the office of Gold Coast. After Sol Klein handed her $1600 in cash in a white envelope for which she signed a receipt, DiBella watched Boylan and Sol Klein put the books and records she gave them into the trunk of Sol Klein's car. They then asked her to return to the office with them to locate any other important documents they should have, and DiBella did so. DiBella then went to Pan American Bank and removed documents from a bank vault and turned them over to Sol Klein. She made no list of the documents which she removed from the vault. Although none of the checks prepared by Janice DiBella payable to herself ever bounced, on occasion she wrote checks which exceeded the balance in the account at the time and informed Boylan that the amount of the check exceeded the balance in the account. When Alfred E. Klein responded to Gold Coast's ad for mortgage investors, he met Boylan. In his dealings with Gold Coast thereafter, Al Klein dealt with Boylan who acted in his capacity as president of Gold Coast. As a result of that relationship, on behalf of himself and family members Al Klein invested approximately $600,000 to $700,000 with Respondents. He even began acting as an independent broker buying and selling mortgages on behalf of Gold Coast, and discussions began regarding Al Klein becoming an owner of Gold Coast. Those discussions terminated in February 1982. On June 22, 1982, Al Klein went to Gold Coast's office and demanded that Boylan return to him $80,000 which Al Klein had given to Boylan for investment purposes. After a lengthy and heated "discussion" between Al Klein and Boylan, Boylan gave him two checks, one for $60,000 and one for $20,000. Both checks were written on the Gold Coast Mortgage Corp. escrow account, and both were notated that they represented an investment refund. When Boylan handed the checks to Al Klein, he told Klein that there was insufficient money in the escrow account to cover those checks but that if Klein put the checks through in the normal course of banking procedures they would be covered. After Al Klein deposited the checks, they were returned marked "insufficient funds." Those checks have never been subsequently honored, and Al Klein has never received from Gold Coast or from Boylan the money to cover those checks. Al Klein contacted Petitioner, and investigation of Respondents' books and records was authorized. Representatives of Petitioner went to Gold Coast on two different occasions to commence auditing the books and records but could not gain entrance to the office. They contacted complainant Al Klein to advise him of their lack of progress, and Al Klein advised them that he was in possession of the records. Accordingly, Paul Richmond, a financial examiner for Petitioner, went to Al Klein's office in Pompano Beach to conduct his audit. Richmond spent approximately one week in Al Klein's office auditing the books and records and copying various documents. The following week the office files were given to Attorney Pollack; therefore, Richmond followed the books and records and continued his examination in Pollack's office for approximately three or four additional days. At the time of Richmond's audit, the books and records of Gold Coast were totally inadequate for examination to determine compliance with the Mortgage Brokerage Act. However, no evidence was offered as to what documents might remain in the office of Gold Coast, as to what documents went from the bank vault to Sol Klein, or as to what documents went from DiBella's mother's house to Sol Klein's automobile trunk. Further, no evidence was offered as to how the records got from the trunk of Sol Klein's car in the parking lot of the Deli Den to the Pompano Beach office of complainant Al Klein or as to the dates of transfers between persons in the unidentified chain of custody. On June 17, 1951, John H. and Charlotte White executed a mortgage in the amount of $37,000 in favor of Gold Coast. Gold Coast thereafter executed a series of assignments, so that by the end of July 1951 the total amount of the $37,000 mortgage had been assigned by Gold Coast to various investors. On December 10, 1981, Gold Coast again assigned the White mortgage to seven different investors, which documents reflect that the White mortgage was in the amount of $37,700. The original group of investors did not reassign the White mortgage to Gold Coast until April 30, 1982. Boylan executed the assignment documents on behalf of Gold Coast as its president, as he executed the documents on behalf of one of the investors, Cius Corp., as its president. On March 18, 1981, Jean and Nadine Laham executed a mortgage in the amount of $90,000 in favor of Gold Coast. On April 14, 1981, Gold Coast assigned that $90,000 mortgage to four different investors. On December 10, 1981, Gold Coast again assigned that $90,000 mortgage to seven investors. The original group of four investors did not reassign the Laham mortgage to Gold Coast prior to Gold Coast's reassignment. On October 19, 1979, Clifford R. and Eileen Lockwood executed a $50,000 first mortgage in favor of Chase Federal Savings and Loan Association. On April 2, 1982, William L. and Jane C. Hubschmitt executed a $72,000 first mortgage on that same property in favor of Gold Coast. On May 5, 1982, the Lockwoods executed a warranty deed on that property to the Hubschmitts. On June 11, 1982, Gold Coast assigned its $72,000 mortgage to Marvin and Ann Tanner, who immediately reassigned $50,000 worth of that $72,000 mortgage to three investors. The assignment from Cold Coast to the Tanners and the assignments from the Tanners to those three investors are on the same Ramco form, were all witnessed and notarized by DiBella, and were all recorded simultaneously. DiBella also prepared the Hubschmitts' mortgage to Gold Coast, which mortgage instrument reflects it is a first mortgage. Al Klein was one of the investors to whom the Tanners partially assigned the mortgage assigned to them by Gold Coast. At the time, Boylan specifically represented to Al Klein that Klein was investing in a first mortgage. The records of Gold Coast examined by Petitioner's representatives were incomplete in that individual files lacked mortgage loan applications, closing statements, and title insurance policies. Additionally, a portion of the escrow account records have not been located. Petitioner did subpoena the records of Gold Coast's escrow account at Flagship Bank. According to those records, prior to June 17, 1982, that escrow account was overdrawn on 25 different occasions during 1982. From June 17, 1982, until the end of June, five additional overdrafts passed through that account. The balance in that account as of July 1, 1982, reflected that the account was overdrawn by $49,834.49. On June 17, 1952, a $55,000 check written on the Gold Coast Mortgage Corp. trust account at Pan American Bank of Broward was deposited in the Gold Coast Mortgage Corp. escrow account at Flagship Bank and was returned with the notation that the account on which it was written had been closed. On July 7, 1982, Boylan, as president of Gold Coast Mortgage Corp., filed a voluntary petition with the United States Bankruptcy Court for the Southern District of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That a Final Order be entered dismissing with prejudice Counts II, III, IV, V, VI, VII, XI, XII and XV of the Administrative Charges and Complaint; finding Respondents Gold Coast Mortgage Corporation and Thomas J. Boylan guilty of the allegations contained within Counts I, VIII, IX, X, XIII and XIV of the Administrative Charges and Complaint; and revoking all licenses issued to Respondents Gold Coast Mortgage Corporation, Southlantic Mortgage Corporation, and Thomas J. Boylan pursuant to the Mortgage Brokerage Act. DONE and RECOMMENDED this 31st day of October, 1983, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 31st day of October, 1983. COPIES FURNISHED: Brian H. Brody, Esquire Office of the State Comptroller 201 West Broward Boulevard, Suite 510 Fort Lauderdale, Florida 33301-1885 Robert C. Stone, Esquire 2450 Hollywood Boulevard Hollywood, Florida 33020 The Honorable Gerald Lewis Office of the Comptroller The Capitol Tallahassee, Florida 32301
The Issue The issues presented are whether two separate sales of unregistered securities to elderly persons demonstrate a lack of fitness or trustworthiness to engage in the business of insurance in violation of Section 626.611(7), Florida Statutes (2001); and, if so, what penalty, if any, should Petitioner impose against Respondent's license. (All chapter and section references are to Florida Statutes (2001) unless otherwise stated.)
Findings Of Fact Respondent is currently licensed in this state as an insurance agent pursuant to license number A124652. The license authorizes Respondent to perform the duties of an agent for health and life insurance and variable annuity agent. Respondent is not licensed to sell securities. Petitioner is the state agency responsible for regulating the business of insurance in this state. Petitioner is not authorized to regulate the sale of securities. On September 18, 1998, Respondent sold eight shares of unregistered securities in Palm Beach Investment Group, Inc. (Palm Beach) to Mr. and Mrs. Anthony and Lucille Fusco (Fusco) for $40,000. On January 5, 1998, Respondent sold 18 shares of unregistered securities in Palm Beach to Mrs. Gladys Speth (Speth) for $90,000. The Department of Banking has jurisdiction over the sale of unregistered securities by unlicensed individuals. The Department of Banking disciplined Respondent for the sales of unregistered securities to Fusco and Speth. On November 10, l999, Respondent and the Department of Banking entered into a Settlement Stipulation and Final Order whereby Respondent admitted he violated Sections 517.07 and 517.12 by offering for sale or selling unregistered securities while he himself was not authorized to sell securities. Respondent did not dispute these facts at the administrative hearing of this case. The Administrative Complaint alleges that Respondent violated Sections 626.611(7)(9)(13), 626.621(2)(3) and (6), and 626.9541(1)(e)1 when he sold unregistered securities to Fusco and Speth. In Petitioner's PRO, however, Petitioner admits that Respondent could not have violated any statute other than Section 626.611(7) because Respondent did not engage in the business of insurance when he sold securities to Fusco and Speth. In relevant part, Petitioner states: Petitioner concedes that the alleged conduct does not involve insurance transactions and therefore cannot be considered transactions under Respondents [sic] insurance licenses. As a result, no violation of the other enumerated statutes has occurred. Petitioner's PRO at 11, paragraph 5. The only remaining issue that Petitioner asserts is whether Respondent violated Section 626.611(7). A licensee violates Section 626.611(7) if he or she demonstrates a lack of fitness or trustworthiness to engage in the business of insurance. Petitioner asserts that Respondent violated Section 626.611(7) by engaging in a business other than the business of insurance in a manner that demonstrates a lack of fitness or trustworthiness to engage in the business of insurance. Neither Fusco nor Speth are experienced investors. Neither buys or sells stock or securities and neither has any training or education in investing. Mr. and Mrs. Fusco are retirees, as is Speth. Fusco invested $40,000 of their life savings, and Speth invested $90,000 from a personal injury settlement. Mrs. Fusco had never purchased shares of stock before. Her father had lost a great deal of money in the l929 market crash and there was a long-standing family prejudice against stock. Fusco had business experience with Respondent prior to the time that Respondent sold Palm Beach securities to Fusco. That prior experience is relevant to the perspective and understanding that Fusco brought to the Palm Beach transaction. Sometime in l998, while Respondent worked with a previous employer, Respondent solicited Fusco to invest funds in a Certificate of Deposit (CD). Fusco did so and believed they were completing a similar transaction when they later purchased Palm Beach securities from Respondent. After Respondent sold the CD to Fusco, but still in l998, Respondent changed his employment to Evergreen National (Evergreen). Respondent telephoned Fusco and informed them that he had moved to Evergreen and that he was selling a very good security that they might be interested in purchasing. Mrs. Fusco explained to Respondent that they were not interested in securities, but they would be interested in purchasing a CD similar to the one they had previously purchased from Respondent. Fusco made an appointment to visit Respondent at his office. At Respondent's office, Mrs. Fusco stated unequivocally that Fusco desired to purchase only a CD. Fusco wanted no risk to their funds, and they made that clear to Respondent. Respondent represented to Fusco that Respondent was selling a CD that was fully guaranteed and insured against any loss. Respondent represented that Fusco would be investing in a proportionate share of a jumbo CD issued by Palm Beach, that they would enjoy a 14 percent return on their investment, and that their investment was insured by the Federal Deposit Insurance Corporation (FDIC) and the Great American Insurance Company (Great American). Respondent provided Fusco with various brochures about the investment that verified Respondent's representations that the investment was an insured, safe way to earn a high interest rate. Fusco relied on the representations contained in those brochures and those made by Respondent. Fusco was still somewhat hesitant to invest their funds. Respondent then brought into his office Darrin Carlson, the president of Evergreen (Carlson). Carlson reiterated to Fusco that the investment was insured and was completely safe and without risk. Fusco elected to invest $40,000 to purchase a CD. They gave a check to Respondent, and Respondent promptly remitted the check to Palm Beach. On September 18, 1998, Fusco signed a document entitled Subscription Agreement. The terms of the Subscription Agreement state that it is an application for Fusco to purchase shares of stock in Palm Beach. The agreement is clearly not an application to purchase a CD. In fact, no reference is made in the document to any CD or to Fusco's $40,000. Fusco did not understand the terms of the Subscription Agreement. Respondent did not explain the terms of the agreement to them. Fusco relied on the representations made by Respondent. Approximately three weeks later, Fusco received a stock certificate in the mail issued by Palm Beach showing that they owned eight shares of stock in Palm Beach. The certificate makes no reference to any CD or Fusco's $40,000 investment. Fusco was confused and upset. The stock certificate does not document that the Fusco's owned any CD or any share in a CD. Furthermore, Respondent offered no evidence of the use of the funds by Palm Beach. Fusco contacted Respondent. Respondent assured Fusco that this was the "way things were done," and their investment was safe. Fusco trusted Respondent and relied on the representation by Respondent. In May of l999, Fusco received a letter from Palm Beach informing Fusco that they would receive a full refund of their money plus interest as of June 7, l999. Palm Beach did not deliver on its promise. When Fusco did not receive any money from Palm Beach, Fusco contacted Respondent. Respondent assured Fusco that their investment as safe, that they were insured, and that they would soon receive their money. Fusco has never received the original $40,000 or any interest payment from Palm Beach. Palm Beach has never provided an accounting to Fusco showing the value of their investment. Fusco has suffered a loss of $40,000 plus accumulated interest at a fair market value rate. Respondent also sold unregistered securities to Speth. Sometime in January l999, Respondent visited the home of Speth. Speth had recently received $90,000 as a personal injury settlement and was looking for a secure investment. Speth wanted a risk-free investment. She told Respondent that she would purchase a CD, but had no interest in purchasing stock. Respondent suggested that Speth invest in a proportionate share of a jumbo CD to be issued by Palm Beach that would yield a 14 percent return. Respondent represented that the CD would be insured and risk free. Respondent showed Speth various brochures claiming that the investment was fully insured by the FDIC as well as other insurance companies. Respondent did not inform Speth that there was a risk she could lose her entire investment. Speth gave Respondent a check for $90,000 made out to Palm Beach to invest in a CD with a one-year maturity date. Speth subsequently received a stock certificate in the mail from Palm Beach showing that she owned 18 shares of Palm Beach stock. Speth was puzzled, telephoned Respondent, and told him that she thought she had purchased a CD. Respondent represented to Speth that her money was safe and fully insured. Speth has not received either her original investment or any interest on that investment. Palm Beach has not provided Speth with an accounting showing the value of her investment. Speth has suffered a loss of $90,000 plus accumulated interest at a fair market value rate. Respondent sold investments to Fusco and Speth that were not appropriate for their age, skill, and investment objectives. Both Fusco and Speth clearly expressed the maximum aversion to risk. Neither Fusco nor Speth would have invested in Palm Beach if they knew they were investing in stock. Both Fusco and Speth intended to purchase a CD or a proportionate share of a CD that was insured by the FDIC and Great American. At no time were their investments insured by the FDIC or any insurance company. Respondent had actual knowledge of the investment goals and skill of Fusco and Speth. Respondent believed that he was selling an investment vehicle that was appropriate to the knowledge, skill, and goals of Fusco and Speth. Prior to selling any securities in Palm Beach, Respondent undertook several independent inquiries that are fairly characterized as a form of due diligence. Some of Respondent's efforts toward due diligence are relevant to the unauthorized sale of unregistered securities. Other efforts are relevant to the nature of the investment as a secured investment. Palm Beach represented in a letter to Respondent that the securities offered for sale were exempt from registration. Carlson believed the securities were exempt and assured Respondent that Respondent did not need a license to sell the securities. Carlson went on-line to the web site of the Securities and Exchange Commission (SEC) and obtained a letter from private securities attorneys stating that the securities were exempt. Carlson believed that the securities were insured by Great American and obtained a copy of a financial institution bond with a limit of $5 million. Carlson represented to Respondent that any investment in Palm Beach securities was an insured investment. Respondent thought that he had verified the matter by telephoning the office of Great American and obtaining verbal assurances that the Palm Beach investment was insured. Respondent had a good faith belief that the securities he offered to Fusco and Speth, in part, were appropriate to the clients' investment goals because Respondent believed the securities satisfied the risk aversion expressed by Fusco and Speth. Respondent believed the securities were risk-free because he believed they were insured. Respondent knew the Palm Beach securities he offered to Fusco and Speth, in part, were not appropriate to the clients' investment goals because the securities were stock in a company and that neither Fusco nor Speth wanted to invest in securities. The first paragraph of the Securities Agreement clearly states that the investor is purchasing stock in Palm Beach. Respondent had actual knowledge that he was selling securities to Fusco and Speth and that neither wanted to purchase securities. Respondent has demonstrated in two separate transactions a willingness to sell a product to a person that the person did not desire to purchase. Even though the products sold were securities, rather than insurance, and even though Respondent believed the products represented the risk- free investment sought by Fusco and Speth, the willingness to sell securities to persons who have expressly stated that they do not want to purchase that type of product demonstrates a lack of fitness or trustworthiness to engage in the business of insurance within the meaning of Section 626.611(7). Respondent sold a product to Fusco and Speth that, in fact, was not risk-free. Respondent's due diligence prior to the sale did not include an independent attempt to ascertain whether Palm Beach in fact purchased a jumbo CD with the investments made by Fusco and Speth. Respondent did not disclose his omission to Fusco or Speth. After Respondent entered into a stipulation and final order with the Department of Banking, Respondent continued to represent to Fusco and Speth that their money was safe and that they would receive their money. Respondent has no prior discipline against his insurance license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of violating Section 626.611(7) and suspending Respondent's license for nine months. DONE AND ENTERED this 25th day of October, 2002, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL MANRY 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 25th day of October, 2002. COPIES FURNISHED: Elihu H. Berman, Esquire 509 South Greenwood Avenue Post Office Box 6801 Clearwater, Florida 33758 James A. Bossart, Esquire Division of Legal Services Department of Insurance 200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0333 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
Findings Of Fact Application for registration as dealer was filed by the Financial marketing Group, Inc., in the person of M. L. Popkin, President and Milton A. Fried, Secretary for that corporation, on June 30, 1975. This information is reflected in the Petitioners' Exhibit 1, which was accepted into evidence in the course of the hearing. On that same date, Marvin Leo Popkin filed a request for registration as executive officer for the Financial Marketing Group, Inc., and this information is reflected in Petitioners' Exhibit 1(A), which was received into evidence in the course of the hearing. The matters set forth in Petitioners' Exhibits 1 and 1(A) are on file with the Respondent, Department of Banking and Finance, Division of Securities. The principal contention offered by the Respondent in refusing the application of the Financial Marketing Group, Inc., for registration as a dealer in securities, is due to the answers given by Marvin Leo Popkin in completing the Petitioners' Exhibit 1(A). Specifically the basis for denial would refer to question 12, found in Petitioners' Exhibit 1(A). That question is as follows: "12. List on a separate schedule your employment history, giving positions held, dates employed, dates terminated, and reasons for leaving each position so listed. (All times must be accounted for.) To the question 12, Marvin Leo Popkin attached an addendum to the application for registration as dealer and in that addendum question 12 was answered as follows: "12. 6/1/73 - Present - Realty Marketing Group, Inc. - President - 5040 Lakeview Drive, Miami Beach, Florida 33140 7/1/69-6/1/73 - Florida Development & Sales Corp. - President - 1666 Kennedy Causeway, Miami Beach, Florida 10/1/68 - 7/1/69 - Registered Realty Corp. - Salesman 8403 N.E. Second Avenue, Miami, Florida 1/1/68 - 10/1/68 - Miami Beach Vacations, Inc. - Salesman - 3001 Collins Avenue, Miami Beach, Florida" The Respondent felt that this answer to number 12 was insufficient, because on January 22, 1975, Marvin L. Popkin had filed an application for reregistration as a mortgage broker before the Department of Banking and Finance, Division of Finance, in which Marvin L. Popkin signed as Vice President of Financial Resources Corporation. Apparently, the Respondent felt that this affiliation referred to in the application for reregistration as a mortgage broker, which matters are found in Petitioners' Exhibit 2, admitted into evidence, was tantamount to an employment of Marvin Leo Popkin by the Financial Resources Corporation. Consequently, the failure of Marvin Leo Popkin to list this employment with the Financial Resources Corporation in response to question 12 of the request for registration as executive officer for the Financial Marketing Group, Inc., was felt to be a materially false statement. Marvin Leo Popkin, through his testimony in the hearing, indicated that the affiliation with the Financial Resources Corporation was a prospective one and not one in actuality. The background of the affiliation of Marvin Leo Popkin with Financial Resources Corporation, according to Mr. Popkin, was that he was approached in behalf of one Sidney Gilbert and Ronald Schaffer about becoming mortgage broker for Financial Resources Corporation, should a purchase of that company be consummated by Messrs. Gilbert and Schaffer. In fact the purchase was never completed because of certain problems associated with Financial Resources Corporation and Marvin Leo Popkin never became a mortgage broker for that company. Moreover, according to Mr. Popkin the basis for the application which is referred to in Petitioners' Exhibit 2, was premised upon the purchase being made by Mr. Gilbert and Mr. Schaffer and agreement for remuneration being made between Marvin Leo Popkin, and the others. The witness indicated that the purchase not being made, no salary was ever agreed upon and furthermore, the witness never did any work for Financial Resources Corporation, nor for that matter ever went to the office location of Financial Resources Corporation. The witness, Popkin, also indicated that signing the application as vice president was strictly prospective, in that he was not in fact at any time the vice president of Financial Resources Corporation. He stated that this signature was a matter of the necessity of signing as an officer, so that compliance with the Division of Finance requirements could be achieved. The title, vice president, was selected because Mr. Gilbert and Mr. Schaffer had tentatively agreed to identify themselves as the president and secretary, of Financial Resources Corporation, should the purchase be completed. Mr. Popkin indicated that a mortgage brokers license was issued by the office of the comptroller, without his knowledge. Mr. Popkin stated that he wrote a letter dated February 28, 1975, indicating to the office of the state comptroller that he was no longer affiliated with Financial Resources Corporation and therefore did not desire the issuance of a mortgage brokers license, in which a transfer of his mortgage brokers license had been made from the Florida Mortgage Group, Inc. to the Financial Resources Corporation. A copy of this correspondence is Petitioner's Exhibit 3, which was admitted into evidence. It is noted that the character of the correspondence, which is Petitioner's Exhibit 3, indicates that the witness, Marvin Leo Popkin, was at the time of the correspondence, a principal broker for the Financial Resources Corporation; however, testimony was not offered in the course of the hearing which would tend to refute the explanation of the prospective nature of Mr. Popkin's association with the Financial Resources Corporation. Consequently, the unrefuted testimony of the witness, Marvin Leo Popkin, concerning the prospective nature of the affiliation with Financial Resources Corporation stands established. On February 28, 1975, Marvin Leo Popkin also wrote a letter to Financial Resources Corporation in which he tendered his resignation as a mortgage broker with their corporation. A copy of this correspondence is Petitioner's Exhibit 4, admitted into evidence. Again the nature of the correspondence is such that it would seem that Marvin Leo Popkin was formally associated with Financial Resources Corporation and comments made about Petitioner's Exhibit 3 would seem to have application here. The witness's explanation offered in the course of the hearing stands without rebuttal and is established as a fact. Subsequent to the time of writing the letters of February 28, 1975, the witness, Marvin Leo Popkin, received a mortgage brokers license issued to Marvin L. Popkin as vice president of Financial Resources Corporation, and in response wrote a letter to the comptroller's office dated March 19, 1975, in which he enclosed the license which had been issued to him as vice president of Financial Resources Corporation. A copy of this correspondence together with the face sheet of the license referred to, is Petitioner's Exhibit 5, which was admitted into evidence. The Respondent did not offer any evidence by way of testimony or documents, in opposition to the explanation of the events, which was set forth by the witness Marvin Leo Popkin. Therefore, it is assumed that the reasons set forth for denial of the application of Financial Marketing Group, Inc., as a registered dealer in securities and for the denial of Marvin Leo Popkin as executive director of the Financial Marketing Group, Inc., stand upon the matters set forth in Petitioner's Exhibits 1 and 1A and that no other explanation for denial under F.S., Sections 517.16(1)(h), 517.30(3), 517.301(3), 517.301(4) and Florida Administrative Rule 3B-305 is forth coming. Consequently, the denial of the Financial Marketing Group, Inc., application for license as a registered dealer in the State of Florida and the denial of Marvin Leo Popkin's request to be executive officer of the Financial Marketing Group, Inc. rests upon an examination of the documents referred to in Petitioner's Exhibits 1, 1A, and 2, together with testimony offered in explanation of those documents. An examination of the Petitioner's Exhibits 1, 1A, and 2 in light of the testimony of Marvin Leo Popkin would indicate that the witness did not knowingly and willfully falsify, conceal or cover up by any trick, scheme, or device, a material fact in filling out the request for registration as executive officer for the Financial Marketing Group, Inc. as set forth in Petitioner's Exhibit 1A, all in violation of F.S., Section 517.301(3). Moreover, it does not appear that the Financial Marketing Group, Inc. through its applicant to be executive officer, Marvin Leo Popkin, has demonstrated an unworthiness to transact the business of a dealer in securities in the State of Florida.
Recommendation It is recommended that the application of the Financial Marketing Group, Inc. to become a registered dealer in securities in the State of Florida be granted and that the request for registration filed by Marvin Leo Popkin to act as executive officer of the Financial Marketing Group, Inc., an applicant for license to be a registered dealer in securities, be granted. DONE and ENTERED this 2nd day of March, 1976, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Paul J. Levine, Esquire Noriega and Bartel P.A. 2100 First Federal Building One Southeast Third Avenue Miami, Florida 33131
The Issue The issue is whether respondents sold securities in violation of Sections 517.07, 517.12, and 517.301, Florida Statutes, as alleged in the administrative complaint.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Respondent, Sea Pride Industries, Inc. (Sea Pride), is a corporation incorporated in Delaware and registered to do business in the State of Florida. It conducts business at 1198 Gulf Breeze Parkway, Gulf Breeze, Florida. Sea Pride is developing and implementing new methods for the open water mariculture of both shellfish and finfish. Respondent, John D. Ericsson, is one of the founders and the chief operating officer of Sea Pride. Petitioner, Department of Banking and Finance (Department), is a state agency authorized to carry out the provisions of Chapter 517, Florida Statutes, also known as the Securities and Investor Protection Act. As part of its development, Sea Pride made the decision to raise initial development capital by selling shares of stock in Sea Pride Industries, Inc. In doing so, Sea Pride developed a Private Placement Memorandum (Memorandum) which was designed to qualify for an exemption from the requirements of registration with the Securities and Exchange Commission (SEC) and with the Department. Under Florida law, this exemption is contained in Section 517.061(11), Florida Statutes. The exemption has several provisions that Sea Pride included in its Memorandum. In designing its Memorandum, respondents relied upon the advice of counsel to ensure that the language met all requirements for exemption. The Memorandum was issued in November 1993, and among other things, stated several times that this was an offering of a company that should be considered to be a high-risk investment and was available only to accredited investors. It also disclosed the nature of the company, the names of the principals involved, and the rights of the investor to rescission under Florida law. Although not required by law, copies of Sea Pride's financial statements were provided with the Memorandum. All investors signed a statement saying that they were familiar with the investment and had the opportunity to review the Memorandum. The sales were made in person, and each investor had the opportunity to ask for additional information. In 1994, the Department began an investigation of Sea Pride. The basis for the investigation is not of record. In any event, the investigation continued until the spring of 1996, when a staff recommendation was made that a disciplinary action be initiated. On October 29, 1996, the Department issued an administrative complaint charging that respondents violated Sections 517.07, 517.12, and 517.301(1)(a)1.,2.,3. and (c), Florida Statutes, by selling unregistered securities, selling securities without being registered to do so, and employing a scheme to defraud, obtaining money by untrue statements of material fact and omissions of material fact, engaging in transactions which operated as a fraud on persons, and knowingly and willfully making false and fraudulent statements in connection with the sale of stock to Florida residents. While acknowledging that they are not registered dealers in Florida, respondents contend that under the terms of Section 517.061(11), Florida Statutes, they are exempt from registration. They deny all allegations of fraudulent activities. Do Respondents Qualify for an Exemption? Respondents claim that they qualify for an exemption from registration under Section 517.061(11), Florida Statutes. To qualify, the number of purchasers (non-accredited investors) within the state must be "no more than 35" during any twelve- month period, and sales cannot be by "general solicitation or general advertising." Also, prior to each sale, each purchaser must be provided with a "full and fair disclosure of all material information," and no person defined as a dealer may be paid a commission or compensation unless registered as a dealer. Finally, after sales are made to five persons in this state, any sale must be voidable by the purchaser within a specified period of time. Number of investors Sea Pride had a total of 31 Florida investors who have purchased stock, all of whom are accredited investors. Two contractors also received stock in lieu of payment for services and could be considered purchasers. In addition, there are five or six employees and former employees, some of whom are Florida residents, who have received stock. Because they did not pay for their stock with either money or specific services, the employees are not purchasers. Therefore, Sea Pride demonstrated that it did not exceed the limit of 35 non-accredited investors during any twelve-month period. Solicitations and advertising The majority of Sea Pride investors reside in Alabama and Mississippi. As to Florida residents, no general solicitations or general advertising were made by Sea Pride to secure investors. Rather, limited mailings were made to specific areas in Pensacola and Gulf Breeze in an attempt to target affluent residents who were accredited investors and owned waterfront property. Therefore, the second part of the exemption test was satisfied. Disclosure of material information To satisfy the third part of the exemption test, prior to the sale, the issuer must make "full and fair disclosure of all material information." As to this requirement, the Department contends that respondents failed to disclose to investors the fact that Ericsson had been convicted of a misdemeanor in Nevada in 1988; Sea Pride's secretary-treasurer, Yvonne R. Higgins, had been convicted of passing worthless bank checks and fraud; and another employee, Lawrence B. Ackland, had been convicted of a felony. Based on the following circumstances, however, it is found that respondents made a full and fair disclosure of all material information. On December 15, 1987, Ericsson pled guilty to one count of conspiracy to obtain money by false pretenses, a gross misdemeanor, in Washoe County, Nevada. The conviction arose out of acts while Ericsson served as president of Nevada Energy Corporation in 1984. The misdemeanor conviction was not disclosed in the Memorandum, nor did respondents disclose this fact to potential investors. In not doing so, respondents properly relied upon SEC regulations relating to standard instructions for filing registration statements and advice of counsel. Those regulations provide that only "legal proceedings" occurring during the five years immediately preceding the sale of stock be disclosed. Here, Ericsson's misdemeanor conviction occurred more than five years before November 1993. Only two existing investors, Segasser and Cherry, and one former investor, Eisiger, presented testimony regarding their lack of knowledge about Ericsson's background. Cherry stated it would have made a difference had she known about the conviction, while Segasser stated it would not. In June 1995, Eisiger read about the conviction in a local newspaper and promptly requested a refund of her $10,000.00 investment. Sea Pride complied with her request. Yvonne R. Higgins was hired by Sea Pride in June 1994 at a salary of around $12,000 per year. At the time of her hiring, Higgins had previously been convicted of grand theft and worthless checks and was on probation. Higgins was interviewed and hired to fill a "secretarial position" by Patrick Meadows, a former vice- president. Meadows could not recall Higgins disclosing her background to him, and Higgins did not indicate her criminal background on her application form. One of Higgins' recent employers was the Executive Club in Pensacola. At the time she was hired, Ericsson telephoned the Executive Club and was not told of her background. Without knowledge of her criminal history, Higgins was installed as secretary-treasurer of Sea Pride. Her duties, however, were primarily secretarial, and the corporate title was given solely for the purpose of facilitating company correspondence and the signing of certain documents. Higgins was never an executive officer of the company, made no corporate decisions, did not participate in policy discussions of the Board, and had limited check-writing authority. In June 1995, Higgins' background was revealed to respondents by a shareholder. Higgins was immediately removed from the office of secretary-treasurer although she continued to work for Sea Pride as a secretary for a short time thereafter. Because respondents were unaware of Higgins' background until June 1995, and she performed primarily secretarial duties, they had no duty to disclose her background in the Memorandum or to investors. The Department also contends that respondents failed to disclose the fact that Lawrence B. Ackland, a former employee, had a criminal background. When Ackland was hired by Sea Pride on April 28, 1995, he was on parole for a felony conviction "involving something to do with telephones or some sort of telephone device." Ericsson was aware of Ackland's criminal background when he was hired in April 1995. However, Ackland served solely in the capacity of an independent contractor, and his duties were limited to providing public relations services. Contrary to petitioner's assertion, he did not sell stocks. Although the record is not altogether clear as to how long Ackland remained at Sea Pride, it appears he worked there for some two months. Because Ackland was an independent contractor, and not an employee, there was no requirement that respondents disclose his criminal background in the Memorandum and to investors. Payment of compensation or commission for sale of stock Respondents assert that no person defined as a dealer was paid a commission or compensation for the sale of Sea Pride's stock. In response, petitioner contends that two unregistered employees, John Hawk and Peter Baker, were paid a commission for the sale of stock. Hawk and Baker both held the title of vice-president of marketing. They were paid a regular salary, which did not vary based on sales of stock, and they had minor duties in addition to stock sales. For example, they attended meetings with permitting agencies, prepared a newsletter, placed articles in magazines, and arranged for meetings with potential investors. In addition, Baker was involved with the development of a piece of equipment known as the aqua-fence. When Hawk and Baker were initially employed by Sea Pride, stock sales were a substantial part of their responsibilities. They understood, however, that if they remained with Sea Pride after the sale of the initial offering, they would have additional substantial duties with the continuing company. There was no evidence regarding the payment of a bonus or other incentive to Baker in conjunction with stock sales. As to Hawk, who left Sea Pride under adverse circumstances, he "felt" he had worked in a "commission based system." Although he could not remember the amount of the "bonus" or the date he received the money, Hawk claimed that he was paid a single bonus by check for a non-Florida sale early in the program. However, no documentary evidence was offered to support this claim, and respondents denied that it occurred. Given these considerations, Hawk's testimony is not accepted as being credible on this issue. Right of recission On page 6 of the Memorandum is found a lengthy "Notice to Florida Residents" which explains their right to rescission. Among other things, it states that: The availability of the privilege to void sales pursuant to Section 517.061(12) is hereby communicated to each Florida offeree. In view of this, it is found that this portion of the statute has been satisfied. Allegations of Fraud and Misrepresentations Besides the allegations that respondents failed to disclose material information in conjunction with the sale of stock, which have been discussed above, the complaint alleges that respondents falsely represented to investors that they had obtained a $20 million federal loan guarantee from the United States Department of Agriculture. In support of this allegation, petitioner established that even though respondents prepared an application, it was never filed with the lender. Respondents did not represent to investors, or place a representation in the Memorandum, that they had actually obtained a loan guarantee from the federal government. Rather, the Memorandum represented that Sea Pride was eligible for the loan guarantee. This is confirmed by language found on page 10 of the Memorandum which states that Sea Pride was seeking to "establish project eligibility for . . . Federal loan guarantees." In addition, correspondence from the Rural Development Administration to Sea Pride on August 17, 1994, states that Sea Pride "is eligible for a Business and Industry (B&I) loan guarantee under current program guidelines." Therefore, respondents did not falsely represent that they had obtained a federal loan guarantee, as charged in the complaint.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order dismissing the administrative complaint with prejudice. DONE AND ENTERED this 21st day of July, 1997, in Tallahassee, Leon County, Florida. COPIES FURNISHED: DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1997. Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry L. Hooper, III, Esquire Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Clyde C. Caillouet, Jr., Esquire 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 Donald A. Rett, Esquire Carol A. Forthman, Esquire 131 North Gadsden Street Tallahassee, Florida 32301-1507
Findings Of Fact This proceeding results from the filing of an application for a commercial bank charter by Respondent Sunny Isles Bank (proposed) (hereinafter "Sunny Isles Bank") with the Respondent Office of Comptroller (hereinafter "Comptroller") on August 9, 1984. The organizers of the proposed Sunny Isles Bank were originally listed as Sami Behar, Martin Dayton, Arthur Horowitz, Sylvia Lazare, Julius Littman, Christine Mallock, Morris Massry, Robert S. Oller, and Alvin Stern. Thereafter, Sami Behar's name was withdrawn. At no time have any names of proposed officers been advanced. The organizers who are also the proposed directors propose to locate a new bank at 17140 Collins Avenue, Miami Beach, Florida. That proposed location falls within a community commonly known as Sunny Isles. Sunny Isles falls within the primary service area (hereinafter "PSA") designated by the organizers and has an eastern border of the Atlantic Ocean, a western border of the Intracoastal Waterway, a southern reach to Baker's Haulover Cut and a northern boundary at the southern edge of Golden Beach. Additionally, the organizers define their proposed PSA to include, to the west of Sunny Isles, an area called Eastern Shores, which is part of the City of North Miami Beach. The organizers' delineation also includes in their proposed PSA the town of Golden Beach lying north of Sunny Isles. The protestant Petitioner Jefferson National Bank at Sunny Isles (hereinafter "Jefferson") is a commercial bank located within the designated proposed PSA. In the charter application they certified as true and correct, the proposed directors made intentional mis- representations as to stock subscriptions for the proposed Sunny Isles Bank. Completely omitted are approximately a dozen stock subscribers. The application misrepresented the ownership of the stock at the time it was filed with the Comptroller, and the proposed directors have continued to fail to disclose at any subsequent time the facts which had been omitted. The application further misrepresents the shares subscribed to by Morris Massry. The application states that Massry had subscribed to 10,000 shares of the proposed Sunny Isles Bank. In fact, the stock subscription agreements produced by the proposed Sunny Isles Bank show that Massry subscribed to only 5,000 shares of the proposed bank stock. The charter application also misrepresents the number of shares owned by Julius Littman by indicating that Littman owned 10,000 shares as of August 7, 1984, the date the application was filed. However, the subscription agreements reveal that Littman owned only 5,000 shares on that date although he has subsequently purchased 6,000 additional shares. The application falsely represents that, at the time of filing, no relative of a proposed director had subscribed to shares of stock in the proposed Sunny Isles Bank. In fact, Jack Massry, the brother of Morris Massry, had, as of August 7, 1984, subscribed to 5,000 shares of stock in the bank. The applicants have further failed to notify the Comptroller in writing at any subsequent time of this omission. The application also falsely represents that no elected or appointed public official other than Julius Littman was a stock holder at the time of filing the application. In fact, Joseph Moffat, an elected city councilman in North Miami Beach, had subscribed to 2,500 shares before August 7, 1984. Littman is and has been a member of the North Miami Beach city council along with Moffat and, accordingly, knew at the time the application was filed of Moffat's public official status. Again, the applicants have failed to subsequently disclose this misrepresentation to the Comptroller. See Confidential Exhibit "A". See Confidential Exhibit "A". In addition to the above-described misrepresentations contained in the application, various false statements and omissions are found in the organizers' biographical reports. Alvin Stern knowingly withheld the information that numerous complaints had been filed against the Royal Glades Convalescent Home of which Stern was the principal owner for many years. Stern also failed to disclose, as was required in Section ll(C) of his biographical report, the fact that a number of investigations by the Department of Health and Rehabilitative Services had been undertaken with respect to Royal Glades. Stern testified at the final hearing that such investigations were known to him at the time they were undertaken, yet, he offered no explanation for failing to disclose those investigations. See Confidential Exhibit "A". See Confidential Exhibit "A". See Confidential Exhibit "A". There is nothing ambiguous about the disclosure forms the organizers of Sunny Isles Bank failed to complete honestly. Further, there is nothing unclear about the certification each executed. The numerous misrepresentations made by those organizers in the application and supporting biographical reports reveal a lack of honesty for a position of public trust which requires ongoing and truthful disclosure to regulatory authorities. In addition to the misrepresentations made by them, the proposed directors evidence a consistent pattern of indifference to their prospective positions and responsibilities as directors of the Sunny Isles Bank. Christine Mallock not only failed to read the charter application but cannot read English. Yet, she certified the truth and correctness of the application. Although she believes it is "flattering" to be a director of a bank, she does not know what a director or a bank does and has no information regarding the plans for the proposed Sunny Isles Bank. Alvin Stern, another proposed director, is also unfamiliar with banking and the duties of a bank director. He has no knowledge of any plans for the proposed bank including the marketing, deposit mix, or services to be offered. He is further unaware if any of the other proposed directors have any banking experience. Martin Dayton, another proposed director of the bank, has no banking experience except as a bank customer and testified to having no idea what his duties as a director would entail other than attending meetings. Dayton has no knowledge of the proposed bank's services or plans for operation. Dayton became involved with and invested in the proposed bank without doing any investigation as to the soundness of the investment opportunity or the actual functioning of the bank. Robert Oller, another organizer of the proposed bank, has no understanding about the proposed bank or his duties as a director. He does not know what services the bank will offer or what customer base it expects to develop. Moreover, he has not read the charter application, despite his signature on the application certifying that it is true and correct to the best of his knowledge and belief. Arthur Horowitz, another proposed director of the proposed bank, is primarily interested in the bank because he "would like to have been involved in a bank." Horowitz has no idea what his duties as a director would be and assumes that the job would take only a few hours a week. He did not fully read the application before it was submitted, nor did he ever discuss it with Littman. See Confidential Exhibit "A". Massry was selected by Littman to be a director of the proposed bank in the hope that he would bring funds into the bank. Massry resides primarily in Troy, New York, but recently has begun spending approximately one week per month in Broward County where he has acquired certain rental units. Even though Massry is touted as the "money man" for the proposed bank, he has made no agreement with his partners to move any of the funds relating to their Broward County investments to the proposed Sunny Isles Bank in Dade County, let alone into a non-interest- bearing account at that proposed bank. He further testified that he is satisfied with the services he receiyes from the bank in Broward County with which he currently does business. Massry has no current ties to the Sunny Isles area and, if approved as a director, would be expected to have limited participation in the affairs of the Sunny Isles Bank. Julius Littman is the chief organizer of the proposed Sunny Isles Bank. He admitted at the final hearing to having "hand-picked" only his friends and relatives to be proposed directors of the Bank in order that he could control them. It was interesting to note Littman's testimony since he primarily testified in terms of "my bank", "I will", and "I decided." Although Littman's wife, Sherry Littman, has not yet been proposed as a director, Littman testified that he intended to make her a director along with his mother-in-law, Sylvia Lazare. Littman's intention of controlling his friends and relatives at "his bank" explains, most likely, the reason why no proposed director other than Littman knows anything about the other directors; the bank's marketing plans, its proposed services and interest rates, or its proposed customer base. Littman's plan has apparently been successful thus far in that each of the proposed directors signed the application filed with the Comptroller without asking questions and without reading the application to know the contents. Each person appears to have simply signed the paper handed to them with "no questions asked" even though that paper contained a statement that each director was certifying that the application was true and correct. Littman undertook his efforts to create "his bank" while he was a member of the Advisory Board of Jefferson National Bank and while his wife Sherry Littman and his mother- in-law Sylvia Lazare were employees of Jefferson National Bank. Although Littman testified that his wife has had no involvement with his bank, she is the person who wrote to the Comptroller on stationery of Jefferson National Bank regarding the forms necessary to file the application for the proposed Sunny Isles Bank. Littman sees no conflict of interest in he and his wife and his mother-in-law organizing a bank to compete with Jefferson National while he served on Jefferson's Advisory Board and while his wife and his mother-in-law were employed by Jefferson since they began their efforts during a time when it appeared as though Jefferson might be sold. Not only did that fail to take place, but no contract for sale was ever executed. When the talk about Jefferson's alleged sale ceased, however, Littman's efforts did not. While still a member of Jefferson's Advisory Board, Littman approached two of Jefferson's officers (other than his wife and his mother-in-law) in an attempt to interest them in coming to work at the proposed Sunny Isles Bank. During the time that Littman served as an Advisory Board member at Jefferson, he, as subscription agent, was selling stock subscriptions in the proposed Sunny Isles Bank. Although Littman testified that he did not ask any of the proposed directors of the Sunny Isles Bank to keep the bank's organization a secret, the testimony of several of the directors establishes that Littman specifically requested that they not reveal the creation or the plans of the proposed bank. No proposed director of the proposed bank has any direct banking experience as required by law for approval of a bank charter application. The evidence is uncontroverted that only two of the proposed directors are alleged to have the direct banking experience required for any proposed bank: Julius Littman and his mother-in-law Sylvia Lazare. Littman's only banking experience is his membership on the Advisory Board at Jefferson. However, his role on that Advisory Board was honorary, and he served in only a community relations function. His involvement as an Advisory Board member gave him no direct experience in the operation of the bank since Jefferson did not involve its Advisory Board members in any decisions regarding the bank's operation but rather involved them only as reporters of the community's perception of Jefferson National Bank. Sylvia Lazare also lacks the banking experience required by the Comptroller. Although the application represents her to have been an officer at Jefferson National Bank familiar with all phases of banking, the evidence introduced at the final hearing in this cause clearly shows that her employment with Jefferson was as a Community Relations Officer, that is, someone who solicits customers for the bank and who helps existing customers with personal services such as filling out their deposit slips for them. Lazare testified directly opposite to the representation of her experience made in the application filed with the Comptroller. She testified that she is not familiar with the mechanics of loan transactions, nor does she understand such basic banking concepts as acceleration of indebtedness or waiver of acceleration. She has never worked in operations, has never been employed as a teller, has never made loans, and has not worked in the bookkeeping department of a bank. Most significantly, she herself admitted that she is not qualified to do anything as a bank officer or director other than community relations work. Based upon Lazare's own testimony; her inclusion in the application is a sham. She was unaware that she was to be a director of the proposed Sunny Isles Bank, was not even asked by Littman to be one, and is not interested in being a director. Although Lazare signed the charter application for the proposed bank certifying that the application was true and correct to the best of her knowledge, she never read the application and never knew that Littman was proposing her as a director. Although Sunny Isles Bank argues that any deficiency in its proposed board of directors can be cured by simply substituting other proposed directors and does not justify the denial of the application for a charter, that argument overlooks the repeated misrepresentations and complete ignorance and indifference to banking and to a director's responsibility to the public and regulatory authorities so that the substitution suggested would require a substitution of the entire proposed board of directors. Even if an entirely new proposed board of directors were required, such a substitution would not overcome Littman's stated intent of selecting only directors who would be controlled by him, a control which involves conflict of interest and intentional misrepresentations both to a regulatory agency and under oath in the formal proceeding in this cause. A bank's PSA is the small geographical area from which a proposed bank expects to draw approximately seventy-five percent of its deposits. The proposed Sunny Isles Bank improperly delineates its PSA by adding Eastern Shores and Golden Beach to the Sunny Isles community. The correct PSA for the proposed Sunny Isles Bank consists of the traditional Sunny Isles area and is bounded on the east by the Atlantic Ocean, on the south by Baker's Haulover Cut, on the west by the Intracoastal Waterway, and on the north by the southern limits of the town of Golden Beach. By improperly including Eastern Shores and Golden Beach in its PSA, the organizers somewhat improved the demographic and age characteristics of its PSA population. The inclusion of these two residential areas reduces the average age of the population and increases the affluence and size of the population. There is no data base for including the residents of Eastern Shores and Golden Beach in the proposed PSA for the Sunny Isles Bank. Rather, the actual deposit experience of Jefferson, located in Sunny Isles, reveals that it is not realistic to project significant deposit levels from Eastern Shores or Golden Beach. Residents of Eastern Shores are more likely to head toward the mainland and the 163rd Street Shopping Center commercial areas for their shopping and banking needs, while residents of the Golden Beach area are more likely to travel to Aventura Mall across the William Lehman Causeway or north to the Hallandale commercial centers for their shopping and banking needs. There is no basis for the assumption that residents of Eastern Shores and Golden Beach who have not historically shopped and banked in the Sunny Isles area will suddenly do so if a charter is granted to the proposed Sunny Isles Bank. Within the PSA proposed by the Sunny Isles Bank, there are ten offices of financial institutions offering commercial and personal banking services. These financial institutions include savings and loan associations as well as commercial banks. The evidence shows without dispute that services provided in this area by savings and loan associations and commercial banks are essentially similar. Although Jefferson is the only home office commercial bank in the PSA, there is no meaningful distinction between a home office institution and a branch office institution in the Sunny Isles area. Other facts confirm a less than dynamic commercial base for the proposed bank. The population of the service area projected by the proposed Sunny Isles Bank is 24,800. Of this number, approximately fifty-two percent are age 65 or over. The PSA as properly defined has a population of approximately 16,200, of which sixty percent are age 65 or over. Median family income using either the proposed PSA or the properly defined PSA falls below both the state and county average. The Sunny Isles area, in which the proposed bank wishes to locate, attracts tourists and transient residents, and the primary industry in Sunny Isles is tourism. Tourism, however, has declined significantly in the Sunny Isles area. Many hotels and motels have been converted to condominiums which now house transient residents. In fact, the declining economic condition of Sunny Isles is a matter of such grave concern as to prompt a study by a Dade County Task Force which concluded that, among other things, a budget of approximately $15.8 million would be necessary to begin to revitalize the troubled Sunny Isles tourist economy. Elderly residents, such as those in the Sunny Isles area, primarily make use of a bank's deposit services, based upon a tendency of an elderly population to save and not to spend. Therefore, there is less need for the traditional banking services of lending, and financial institutions are primarily recipients in such an area of time deposits rather than demand deposits. No evidence was offered by the proposed Sunny Isles Bank to indicate that the banking needs of the proposed PSA are not being met by the financial institutions presently servicing the area. To the contrary, testimony establishes that the Sunny Isles area is, in fact, highly competitive with respect to the banking business and in particular with respect to loans and lending transactions. The proposed Sunny Isles Bank has not demonstrated any ability to service the Sunny Isles area any differently or any better than the various savings and loan associations and commercial banks already established there. Accordingly, it offers no significant additional services at a substantial advantage or convenience to a significant number of people. Although Sunny Isles expects to have restricted Saturday banking hours, the evidence is not clear that this service is not already available through the other financial institutions in the area or that there is a need for Saturday banking hours in an area populated by tourists and retired persons.. Although the proposed Sunny Isles Bank intends to have a "drive-in" teller area, there is no evidence to suggest that this is a service not already available within the Sunny Isles area or that such a service would cause any residents of Eastern Shores or Golden Beach to begin banking in Sunny Isles where they have not banked previously. Of the 270 businesses in the Sunny Isles area in December, 1984, one-third were vacant. While some new businesses may have opened more recently, there is no evidence that economic conditions have, as of this time, improved significantly. Between 1980 and 1984 twenty-five percent of the motel units in the Sunny Isles area were either converted to condominiums or closed. No new motels have been built since 1980. Further, no new residential development has been completed in the past few years in the Sunny Isles area. Especially in this troubled climate, the proposed Sunny Isles Bank's projection of $7.5 million in deposits after one year is unrealistic and without evidentiary support in the record. The deposits projected by the organizers are far in excess of the actual experience of other banks in the proposed PSA. In fact, the organizers project a growth rate seven times that of Pan American's Sunny Isles bank and four times that of County National in Eastern Shores. The record fails to show a basis for the organizers' projected growth rate or projections in deposit levels or types for the proposed Sunny Isles Bank. Moreover, in the Sunny Isles area demand deposits fell by forty-five percent between December 1979 and December 1983. In view of this clear trend; the proposed Sunny Isles Bank's expected ratio of time to demand deposits is clearly unrealistic. Despite its projections of ratios of 1.5 to 1 in the first year, 1.9 to 1 in the second year and 2.3 to 1 in the third year, the experiences of other banks in the PSA indicate that a proper time to demand deposit ratio is approximately 4 to In fact, the most recent statistics show that the total amount of demand deposits have fallen from September 1983 through September 1984 in the PSA delineated by the organizers. The proposed Sunny Isles Bank has also projected unrealistically its rental expenses with respect to the banking premises it proposes to occupy. The unaccounted-for expenses will require at least an extra $16,000 in rental liabilities, plus an annual cost of living increase. The proposed Sunny Isles Bank also unrealistically projected $40,000 as sufficient for contingency and other expense items. A review of overlooked expenses indicate that attorneys' fees, insurance, accounting fees, real estate taxes and other expenses were not estimated while other anticipated expenses are significantly understated. The proposed Sunny Isles Bank further unrealistically projected that it would be able to immediately sublease 2,600 square feet of space at the proposed site of the banking house. This is a questionable expectation in an area with a significant vacancy rate. The proposed Sunny Isles Bank also failed to include in its budget a large accrued rental which has accumulated from December 1, 1984, according to the terms of the executed lease admitted in evidence herein. That sum is significant. In view of the evidence showing that both deposit levels and deposit mix will fall far short of the figures needed for profitability, and in light of the likelihood that their expenses will be substantially higher than reported by the organizers, there is no basis for concluding that the proposed Sunny Isles Bank will become profitable within three years. Accordingly, the organizers of the proposed Sunny Isles Bank have not shown that local conditions indicate reasonable promise for successful operation. There is no factual basis which would support the granting of the application for a charter for the proposed Sunny Isles Bank since there is no proposed director who has exhibited the necessary qualifications to be a director of a bank in Florida, since the-primary service area was improperly delineated causing many of the figures relied upon in the application to be invalid, since there is no showing that any public convenience and advantage would be served by the establishment of an additional commercial bank in the Sunny Isles area--let alone a substantial convenience and advantage for a significant number of people, and since there does not appear to be a reasonable promise of successful operation for the proposed Sunny Isles Bank. These deficiencies in the application prohibit any amendment to the application that would qualify it for the grant of a charter. DONE and ORDERED this 20th day of November, 1985, at Tallahassee, Florida. LINDA M. RIGOT, 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 20th day of November, 1985. COPIES FURNISHED: Gerald Lewis, Comptroller State of Florida The Capitol Tallahassee, FL 32301 Carl Morstadt, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, FL 32301 Kendall B. Coffey, Esquire Julie K. Oldehoff, Esquire 1401 Brickell Avenue, PH-1 Miami, FL 33131 Shalle Stephen Fine, Esquire 46 S.W. 1st Street Miami, FL 33130 Michael Colodny, Esquire 626 N.E. 124th Street North Miami, FL 33131 APPENDIX The following proposed findings of fact of Jefferson National Bank at Sunny Isles have either been adopted verbatim or have been adopted as modified to conform to the evidence: 2- 5, 11-22, 25, 26, 28, 31-42, 47-51, 53-59, and 61-70 The following proposed findings of fact of Jefferson National Bank at Sunny Isles have been rejected "as not constituting findings of fact but as constituting either argument of counsel or conclusions of law: 1, 6-10, 23, 24, 43- 46, 52, and 60. The following proposed findings of fact of Jefferson National Bank at Sunny Isles have been rejected as not being supported by competent, substantial evidence: 27. The following proposed findings of fact of Jefferson National Bank at Sunny Isles have been rejected as being subordinate: 29 and 30. The following proposed findings of fact of Sunny Isles Bank have been rejected as not constituting findings of fact but as constituting either argument of counsel or conclusions of law: 1-3, 9, and 10. The following proposed findings of fact of Sunny Isles Bank have been rejected as not being supported by competent, substantial evidence: 4-8.
