The Issue The issues presented are (1) whether Respondent properly secured the payment of workers’ compensation insurance coverage and, if not, what penalty is warranted for such failure; and (2) whether Respondent conducted business operations in violation of a stop-work order and, if so, what penalty is warranted for such violation.
Findings Of Fact Respondent is a corporation domiciled in Georgia and engaged in the business of electrical work, which is a construction activity. On July 2, 2004, Petitioner's investigator Katina Johnson visited 6347 Collins Road, Jacksonville, Florida, on a random job site visit. Investigator Johnson inquired of Respondent's superintendent at the job site whether Respondent had secured the payment of workers’ compensation coverage. She was informed that Respondent had done so and was subsequently provided with a Certificate of Liability Insurance from Respondent’s agent in Georgia, the Cowart Insurance Agency, Inc. Investigator Johnson also obtained a copy of Respondent’s workers’ compensation insurance policy which had a policy period of September 23, 2003, to September 23, 2004. The policy and the information contained in the Certificate of Liability Insurance were not consistent. Keith Cowart, Respondent’s insurance underwriter in Georgia, testified in deposition that the certificate of insurance is not correct because it conflicts with Respondent’s workers’ compensation policy, 01-WC-975384-20, which does not have a Florida endorsement. Subsequent to the site visit, Investigator Johnson continued the investigation of Respondent utilizing the Department’s Coverage and Compliance Automated System (“CCAS”) database that contains information to show proof of coverage. She determined that Respondent did not have a Florida workers' compensation insurance policy. Johnson also checked the National Council for Compensation Insurance (“NCCI”) database and further confirmed that Respondent did not have a workers’ compensation insurance policy for the State of Florida. Petitioner also maintains a database of all workers’ compensation exemptions in the State of Florida. In consulting that database, Johnson did not find any current, valid exemptions for Respondent. Florida law requires that an employer who has employees engaged in work in Florida must obtain a Florida workers’ compensation policy or endorsement for such employees utilizing Florida class codes, rates, rules, and manuals to be in compliance. Further, any policy or endorsement used by an employer to prove the fact of workers' compensation coverage for employees engaged in Florida work must be issued by an insurer that holds a valid certificate of authority in the State of Florida. The insurance policy held by Respondent did not satisfy these standards. First, Respondent's policy was written by Cowart Insurance Agency, a Georgia agency which was not authorized to write insurance in Florida. Second, the premium was based on a rate that was less than the Florida premium rate; the policy schedule of operations page shows that Safeco Business Insurance insured Respondent for operations under class codes utilizing Georgia premium rates. On July 6, 2004, Investigator Johnson received a copy of another insurance policy declaration page from the Cowart Insurance Agency for Respondent that still did not have Florida listed as a covered state under Section 3A. In fact, none of Respondent’s workers’ compensation policies had a Florida endorsement with Florida listed in Section 3A. On July 7, 2004, after consulting with her supervisor, Investigator Johnson issued and served on Respondent a stop-work order and order of penalty assessment for failure to comply with the requirements of Chapter 440, Florida Statutes, specifically for failure to secure the payment of workers’ compensation based on Florida class codes, rates, rules and manuals. After the issuance of the stop-work order, Respondent produced a certificate of insurance with a Florida endorsement that would allegedly confer workers’ compensation coverage retroactively for Respondent. Such retroactive coverage does not satisfy Respondent’s obligation. Employers on job sites in Florida are required to maintain business records that enable Petitioner to determine whether the employer is in compliance with the workers' compensation law. Investigator Johnson issued to Respondent a request for the production of business records on July 7, 2004. The request asked the employer to produce, for the preceding three years, documents that reflected payroll and proof of insurance. Respondent produced payroll records for a number of employees. On August 2, 2004, Investigator Johnson issued a second business records request to Respondent because she noticed that the names of the workers that she interviewed during her site visit were not the same as the list of employees submitted by Respondent. Respondent failed to produce the requested records. When an employer fails to provide requested business records which the statute requires it to maintain and to make available to the Department, effective October 1, 2003, the Department is authorized by Section 440.107(7)(e), Florida Statutes, to impute that employer's payroll using the statewide average weekly wage multiplied by l.5. Petitioner therefore imputed Respondent's payroll for the entire period for which the requested business records were not produced. From the payroll records provided by Respondent, and through imputation of payroll from October 1, 2003, the Department calculated a penalty for the time period of July 7, 2001, through July 7, 2004, by assigning a class code to the type of work utilizing the SCOPES Manual. The Amended Order of Penalty Assessment which assessed a penalty of $115,456.14 was served on Respondent through its attorney on September 27, 2004. The Department issued and served on Respondent a second Amended Order of Penalty Assessment on November 10, 2004, with the penalty imputed back three years to July 7, 2001. The Department assessed a penalty of $100 per day for each day prior to October 1, 2003, for a total of $216,794.50. On April 28, 2005, the Department issued to Respondent a third Amended Order of Penalty Assessment with an assessed penalty of $63,871.02. The reduction in the amount of penalty was due to the Department’s determination that it did not have the authority at the time to impute the $100 per day penalty prior to October 1, 2003. On July 7, 2005, Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty and was issued an Order of Conditional Release from Stop-Work Order by the Department. Respondent made a down payment of ten percent of the assessed penalty; provided proof of compliance with Chapter 440, Florida Statutes, by obtaining a Florida endorsement on its workers’ compensation insurance policy; and agreed to pay the remaining penalty in sixty equal monthly payment installments. Respondent has since defaulted on those payments. Section 440.107(7)(c), Florida Statutes, requires the Department to assess a penalty of $1,000 per day for each day that the employer conducts business operations in violation of a stop-work order. Several months after issuing the stop-work order, Investigator Johnson was informed that Respondent was conducting business operations in Miami in violation thereof. She obtained documentation that showed Respondent was performing electrical work as part of a contract it entered into with KVC Constructors, Inc., on August 4, 2004. Investigator Johnson obtained the daily sign-in sheets of KVC Constructors, Inc., that indicated the names of each entity that performed work on the job site for each particular day. She determined from the records that Respondent had worked 187 days in violation of the stop-work order prior to entering into the Payment Agreement Schedule and obtaining the Order of Conditional Release from the Department. On October 7, 2005, the Department issued to Respondent a fourth Amended Order of Penalty Assessment which assessed a penalty of $250,871.02. That amount was comprised of the $63,871.02 from the third Amended Order plus $187,000 for the 187 days of violation of the stop-work order.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order imposing a penalty against Respondent in the amount of $250,871.02 minus the amount of payments previously made by Respondent to the Department. DONE AND ENTERED this 8th day of June, 2006, in Tallahassee, Leon County, Florida. S LINDA M. RIGOT Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of June, 2006. COPIES FURNISHED: Colin M. Roopnarine, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 H.R. Electric, Inc. c/o Mr. Jeremy Hershberger 5512 Main Street Flowery Branch, Georgia 30542 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes (2009), by failing to secure the payment of workers' compensation, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that Florida employers secure the payment of workers' compensation for the benefit of their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation providing pharmacy services. Respondent has business locations at 842 West Plymouth Avenue, Deland, Florida, and 112 East First Avenue, Pierson, Florida. Respondent's Pierson business site sells a small amount of food like bubble gum and other sundries. Activities at the Pierson location include filling prescriptions, compounding and blending drugs, and dispensing drugs or medicine to walk-in customers and patients. The patients are referred from a health care clinic known as Northeast Florida Health Services (NEFHS). The patients are federally qualified as indigent pursuant to a federal poverty calculation. Respondent's Deland location deals solely with prescription drug transactions to indigent patients who are referred by NEFHS. The Deland business site is very small and has no walk-in customers or food or other sundries for sale. At the end of the month, Respondent sends a bill to NEFHS for the prescriptions dispensed by Respondent at both locations. NEFHS than reimburses Respondent for its services. Respondent pays its employees at both locations out of a single checking account. Only one tax identification number is used for both business locations. On October 27, 2009, Hector Beauchamp, one of Petitioner's workers' compensation compliance investigators, received a referral, indicating that Respondent was operating without workers' compensation insurance coverage for its employees. After receiving the referral, Mr. Beauchamp used the website of the Department of State, Division of Corporations, to obtain Respondent's federal employer identification number. The Department of State website showed that Respondent became Pierson Community Pharmacy, Inc., on March 3, 2005. The website also indicated that Respondent had two corporate officers, John Eidt and Hanan Francis. Next, Mr. Beauchamp contacted Samantha Nixon, one of Petitioner’s penalty calculators, to research Respondent's unemployment compensation tax information on the Department of Revenue's website. Ms. Nixon's research revealed that Respondent employed in excess of four employees for each quarter in the past three years. Mr. Beauchamp also consulted Petitioner's Coverage and Compliance Automated System (CCAS) database. The CCAS database lists the workers' compensation insurance policy information for Florida employers together with any workers' compensation exemptions for corporate officers. The CCAS database accurately revealed that Respondent had no workers' compensation insurance policy in place for its employees and no workers' compensation exemptions for either Mr. Eidt or Ms. Francis as corporate officers. This was true from October 29, 2006, through October 28, 2009. Additionally, the CCAS database did not reveal any utilization of employee leasing by Respondent. Mr. Beauchamp also researched the National Council on Compensation Insurance, Inc. (NCCI) on-line database. Using Respondent's name and federal employer identification number, the database showed no record of a Florida workers' compensation insurance policy for Respondent. On October 28, 2009, Mr. Beauchamp visited both of Respondent's business locations. At the Pierson location, Mr. Beauchamp observed five individuals working behind a Plexiglas partition filling prescriptions. Mr. Beauchamp spoke with Mr. and Mrs. Francis. They confirmed that Respondent did not have workers' compensation insurance in place. Mr. Beauchamp then issued and served a Stop-Work Order. He also issued and served a records request. On October 29, 2010, Respondent provided Petitioner with the following records: (a) corporate tax records for 2007 and 2008; (b) a workers' compensation insurance application submitted after the issuance of the Stop-Work Order; and (c) payroll summaries for October 2006 through October 2009. The records confirmed that Respondent had employed more than four employees for the prior three years. On October 30, 2009, Petitioner issued and served the Amended Order of Penalty Assessment. That order was followed by the Second Amended Order of Penalty Assessment on March 15, 2010. Ms. Nixon calculated the gross payroll for Respondent's employees for the relevant time period. The gross payroll amounts for Ms. Francis from January 1, 2008, through December 31, 2008, and April 1, 2009, through June 30, 2009, were limited to the average weekly wage in effect at the time the Stop-Work Order was issued, multiplied by 1.5 for those periods pursuant to Florida Administrative Code Rule 69L- 6.035(2). As a corporate officer, Ms. Francis' actual earnings were in excess of these amounts. However, Florida Administrative Code Rule 69L-6.035(2) limits the amount of a corporate officer's income upon which workers' compensation penalties may be assessed to 1.5 times the average weekly wage in effect at the time a Stop-Work Order is issued or actual earnings, whichever is less. Using the classification codes in the NCCI Scopes® Manual, Petitioner accurately assigned the occupation classification code 8045, which corresponds to "Store: Drug Retail." Classification code 8045 is "applicable to store locations where the employer's books of accounts reflect at least 40 percent gross receipts in prescription sales and less than 50 percent gross receipts in the service of food." Prescription sales intended for the patients of health care facilities are included even though the facility is billed instead of the individual patient. Ms. Nixon then divided the payroll for each year by 100 and multiplied that figure by the approved manual rates adopted by the Florida Office of Insurance Regulation for 2006, 2007, 2008, and 2009 for classification code 8045. That product was then multiplied by 1.5 to find the penalty for the period for the three-year period. The total penalty is $13,996.60.
Recommendation Based on the foregoing Findings of Facts and Conclusion of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop- Work Order and Second Amended order of Penalty Assessment in the amount of $13,996.60. DONE AND ENTERED this 26th day of April, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 2010. COPIES FURNISHED: John C. Eidt Pierson Community Pharmacy Inc. 112 East 1st Avenue Pierson, Florida 32180 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CRP, FP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in the case is whether the State of Florida Employees Group Health Self Insurance Plan Benefit Document provides coverage for a maxillary subperiosteal implant surgical procedure under the circumstances described below.
Findings Of Fact At all material times, Petitioner has been insured under the State of Florida Employees Group Health Self Insurance Plan Benefit Document, effective July 1, 1988 (the "Plan"). Dr. Clark F. Brown, Jr. is a dentist licensed to practice in the State of Florida. His specialty is dental implantology. The subperiosteal implant, which is the subject of this case, is a framework that rests on top of the bone underneath the tissue. Following the insertion of the framework, the tissue reattaches to the jawbone, thereby securing the framework to the bone. The implant procedure takes two days, but can be performed in Dr. Clark's office. On the first day, a direct bone impression is taken. In the process, the gum tissue is cut along the entire remaining ridge and lifted back almost to the base of the eye, floor of the nose, and palate. After the impression is taken, the incision is closed with sutures. On the next day, the stitches are removed, the implant is installed, and the incision again closed with sutures. On July 31, 1987, Petitioner visited Dr. Clark and complained of difficulties wearing his upper denture. Upon examination, Dr. Clark discovered that Petitioner lacked adequate bone to retain an upper denture. Lacking about 90% of the bone in the vicinity of the upper arch, Petitioner's upper denture was highly unstable. By letter dated August 8, 1987, Dr. Clark informed the Plan administrator of Petitioner's condition and proposed a full maxillary subperiosteal procedure for the installation of an orthopedic augmentation appliance. By letter dated December 11, 1987, the Plan administrator informed Dr. Clark that the proposed procedure was not covered under the Plan. The letter explains that dental services are a specific exclusion unless performed "as the result of an accident where a natural tooth has been damaged and the treatment is rendered within 120 days from the date of the accident." On December 17, 1987, Dr. Clark relined the denture that fit Petitioner the best. As he had warned Petitioner in advance, the procedure was unsuccessful. On June 26, 1988, Dr. Clark prepared a new upper denture in preparation for the installation of mucosal implants, which utilize the gum for support. Dr. Clark and Petitioner pursued this treatment largely because it was less expensive that the subperiosteal implant for which the Plan administrator had refused coverage. Dr. Clark later installed these implants, but they were unsuccessful due to the lack of bone. They were removed in November, 1988. At this point, the subperiosteal implant remained the only available treatment for Petitioner. On February 2, 1989, Dr. Thomas Priest, a physician licensed to practice in the State of Florida, examined Petitioner and found that his gums were severely receded, his alveolar ridge was absent, and his lower teeth were in poor shape. Considering the complaints of Petitioner concerning digestive disorders and weight loss, Dr. Priest determined that Petitioner would be a good candidate for, and might benefit from, the maxillary subperiosteal implant. Dr. Priest reached this conclusion based in part on the experience of other patients who had undergone similar procedures. Dr. Clark and the Plan administrator exchanged correspondence through the first half of 1989, at which time the administrator, in response to a threat of litigation, stated that "the preparation of the mouth for dentures is considered to be a dental procedure and non-covered." She then referred Dr. Clark to Respondent. The loss of bone was probably caused by Petitioner wearing loose upper dentures for an extended period of time. However, severe periodontal disease, which cannot be ruled out as a possible cause, could also result in the loss of bone. Another potential cause of the loss of bone is trauma from accidental injuries, such as those typically suffered in an automobile accident. However, this potential cause can be ruled out in Petitioner's case. No accident has necessitated the subject implant procedure, nor has any accident preceded the proposed procedure by 120 days. The Plan contains three coverage sections. Section II describes "Covered Hospital and Other Facility Services." Section III describes "Covered Medical--Surgical Benefits." Section IV describes "Other Covered Services." Section II deals with hospitals primarily and is not applicable to the present case. Subsections III.A. and D. provide coverage for "medically necessary inpatient/outpatient services provided to an insured by a . . . physician for the treatment of the insured as a result of a covered accident or illness." Section IV provides coverage for "medically necessary services when ordered by a physician for the treatment of an insured as a result of a covered accident or illness," including, at Subsection IV.D., "other medical supplies and prostheses . . . determined by the Administrator to be medically necessary for the treatment of an insured's condition." The phrase, "covered accident or illness," which is not defined in the Plan, apparently refers to accidents or illnesses that are not elsewhere excluded, such as in Section VII on Exclusions and Section VIII on Limitations. Section VII.A. excludes "services for cosmetic surgery or treatment unless the result of a covered accident as provided in Subsection VIII.A." However, Subsection VII.A. adds that cosmetic surgery is covered if it is: a medically necessary procedure in the correction of an abnormal bodily function; [or) for reconstruction to an area of the body which has been altered by the treatment of a disease, provided such alteration occurred while the insured was covered under the Plan. Subsection VII.G excludes: Services and supplies in connection with dental work, dental treatment, or dental examinations unless the result of a covered accident as provided in Subsection VIII.B., except that in no case shall orthodontia be covered. Subsection VIII.A. provides the following limitation upon coverage: Cosmetic surgery or treatment necessary for the repair or alleviation of damage to an insured covered by the Plan if such surgery or treatment is the result of an accident sustained while the insured is covered under the Plan and actually performed while the Plan is in force . . Subsection VIII.B. provides the following limitation upon coverage: Any dental work, dental treatment or dental examinations medically necessary for the repair or alleviation of damage to an insured is covered by the Plan only if such work, treatment or examination is (1) the result of an accident sustained while the insured is covered under this Plan and (2) rendered within . . . 120 days of the accident. . Subsection I.AX. defines a physician to include: a licensed dentist who performs specific surgical or non-dental procedures covered by the Plan, or who renders services due to injuries resulting from accidents, provided such procedures or services are within the scope of the dentist's professional license. Subsection I.AM(b). defines "medically necessary" to mean that: in the opinion of the Administrator the service received is required to identify or treat the illness or injury which a physician has diagnosed or reasonably suspects. The service must (1) be consistent with the diagnosis and treatment of the patient's condition (2) be in accordance with standards of good medical practice, and (3) be required for reasons other than convenience of the patient or his/her physician. The fact that a service is prescribed by a physician does not necessarily mean that such service is medically necessary. Subsection I.AE. defines "illness" as: physical sickness or disease, . . . bodily injury, [or] congenital anomaly . .
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Administration Commission enter a Final Order determining that the proposed procedure, under the facts of this case, is covered by the Plan. DONE and ORDERED this 21 day of March, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21 day of March, 1990. COPIES FURNISHED: Augustus D. Aikens, Jr. General Counsel Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550 William F. Lennan 740 Hunan St., N.E. Palm Bay, FL 32907 Aletta Shutes, Secretary Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550
The Issue The issue is whether Petitioner timely filed his request for claim form requesting reimbursement for certain covered expenses under the Florida Flexible Benefits Program--Reimbursement Plan.
Findings Of Fact Petitioner is a member of the faculty of the University of South Florida. He participates in the Florida Flexible Benefits Program--Reimbursement Program (Program). The Plan allows participants to pay certain eligible medical or dependent day care expenses with pretax earnings. Each year, during an open enrollment period, an employee may elect to participate in the Program and select an amount of salary to be deducted from his or her pay. The amount of salary so deducted is not subject to federal income tax, but is available to reimburse the employee for covered expenses. In order for the Program to continue to enjoy preferential treatment under the federal income tax law, Respondent, which administers the Program, must adhere to certain rules. Most relevant to this case is that that the deducted salary must be at risk. Specifically, an employee is not entitled to a refund of all or part of the deduction if he or she does not timely submit sufficient reimbursable expenses to exhaust his or her account. The Program brochure clearly warns participants of this "use it or lose it" rule. The plan year for the Program is the calendar year. In 1997, Petitioner was a participant in the Program. He and his wife chose not to submit claims for covered expenses, as they paid them during the year. Instead, they accumulated the receipts with the intent of submitting a single claim for their account balance at the end of the plan year. The Program sets a claims filing deadline of April 15 for filing claims arising out of the expenses paid in the preceding calendar year. The Program brochure warns that this deadline means all claims for expenses incurred during a plan year must be postmarked by midnight, April 15 of the following year to be considered for processing. Any claims received after this date will be returned to the participant unprocessed, regardless of the account balances. Participants should file claims as soon as the required documentation is obtained. This case involves only one issue: whether Petitioner timely submitted his claims for reimbursement under the Program. There is no issue concerning Petitioner's payment of these expenses or his account balance. There is no issue whether these expenses are eligible for reimbursement. In early March 1998, Petitioner and his wife collected their receipts for covered expenses from 1997. Petitioner completed a reimbursement form and addressed the envelope to Respondent at the correct address. Wanting to make copies of the materials, Petitioner did not immediately mail the package to Respondent. A few days later, prior to copying the materials or mailing the package, Petitioner's father became ill in the Mideast, where he lives. Petitioner and his wife agreed that she would copy the materials and mail the package to Respondent. On March 21, which marks the birthday of Petitioner's wife and a cultural holiday for Petitioner and his wife, Petitioner's wife telephoned her husband, who was still visiting his sick father. In the ensuing discussion, Petitioner learned that she had not yet mailed the package. They discussed the matter and again agreed that she would copy the materials and mail the package without further delay. Without further delay, Petitioner's wife copied the materials and mailed the package to Respondent at the correct address. She placed the package with sufficient postage in a mailbox across from her home. The package consisted of a claims reimbursement form and receipts for eligible expenses. It appears that she may have written an old return address on the envelope. Respondent never received the package. Respondent's procedures are carefully designed and executed to ensure that it will not lose a claim form. Repeated searches for the missing form never uncovered it. The package was lost after its mailing by Petitioner's wife and prior to its delivery to Respondent. Possibly, the incorrect address precluded notification to Petitioner of problems with delivery. Possibly, the package was just lost. Unfortunately, Petitioner learned only after the April 15 deadline that Respondent had never received the package.
Recommendation It is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, enter a final order determining that Petitioner timely submitted the claim and eligible expenses that were the subject of this case. DONE AND ENTERED this 8th day of March, 2000, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of March, 2000. COPIES FURNISHED: Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Mohsen M. Milani 15927 Ellsworth Drive Tampa, Florida 33647 Julia Forrester Assistant General Counsel Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399
The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 5th day of August, 2005.
The Issue The issues are whether Respondent conducted business operations in Florida without obtaining workers’ compensation coverage that met the requirements of Chapter 440, Florida Statutes (2009), for its employees, and if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing Chapter 440, Florida Statutes, which requires employers to secure the payment of workers’ compensation for the benefit of their employees. Respondent is a Louisville, Kentucky-based corporation that is engaged in the construction, maintenance, and painting of elevated water tanks. Respondent has a second fabrication facility located in Newnan, Georgia. Respondent’s work constitutes construction. On March 4, 2010, Petitioner’s investigator, Lawrence F. Eaton, observed Respondent’s employees working on a water tower in Pace, Florida. While visiting the worksite, one of Respondent’s employees stated that he did not have any information regarding if and how the men were covered by workers’ compensation. The employee gave Mr. Eaton a telephone number for Respondent. Next, Mr. Eaton consulted the Kentucky Secretary of State website to find information concerning the corporate status of Respondent. The website indicated that Respondent was incorporated in 1892 and that it had three corporate officers. Mr. Eaton then consulted Petitioner’s Coverage and Compliance Automated System (CCAS) database. CCAS contains workers’ compensation policy information for each employer that has a Florida policy and information relative to workers’ compensation exemptions that have been applied for and issued to individuals by Petitioner. Mr. Eaton was unable to find any indication on CCAS that Respondent had secured workers’ compensation coverage by purchasing a Florida policy. CCAS also provided no evidence that Respondent had entered into an arrangement with an employee leasing company to provide workers’ compensation coverage to its employees. Additionally, CCAS did not show that Respondent had obtained exemptions for its corporate officers. Mr. Eaton subsequently spoke with one of Respondent’s representatives. Mr. Eaton was informed that Respondent was self-insured for workers’ compensation in Kentucky. Mr. Eaton also learned that Respondent had another workers’ compensation policy. Respondent’s representative indicated that she would send Mr. Eaton the policy paperwork. When he received the paperwork from Petitioner, Mr. Eaton determined that the insurance coverage did not comply with the requirements of Florida’s workers’ compensation law. The paperwork included an excess policy of workers’ compensation and a Georgia workers’ compensation policy. On March 5, 2010, Mr. Eaton issued a Stop-Work Order and Order of Penalty Assessment against Respondent. Specifically, the Stop-Work Order states that Respondent was not in compliance with Chapter 440, Florida Statutes, because Respondent failed to obtain workers’ compensation coverage for its employees. On March 5, 2010, Mr. Eaton issued a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. On March 8, 2010, Respondent provided Mr. Eaton with additional workers’ compensation policy information. The information included the declarations page for Chartis Company Policy No. WC 005-73-7942. The Chartis policy is a Workers’ Compensation and Employers Liability Policy. In Item 3A, the policy lists the states that are covered, in Part One of the policy, pursuant to each state’s workers’ compensation law. Georgia is named as a covered state in Item 3A. In Item 3C, the Chartis policy lists the states that are covered, in Part Three of the policy, as "other states insurance." Florida is listed only in Item 3C. Item 4 of the Chartis policy states that "[t]he premium of this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit." In response to the request for business records, Respondent provided Petitioner with payroll information for work it had performed in Florida between September 2007 and February 2010. After receiving this information, Respondent’s Penalty Calculator, Robert McAullife, calculated a penalty. Because Respondent had not provided all of the requested business records, Mr. McAullife imputed Respondent’s payroll for a portion of the relevant time period. In calculating the penalty, Mr. McAullife first sought to determine the amount of premium that Respondent would have paid had it been properly insured for the relevant three-year period. Mr. McAullife assigned a class code for each of Respondent’s employees, reflecting the work they performed. Mr. McAullife then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to each class code. Mr. McAullife then took the previously obtained product and multiplied it by 1.5 to find a penalty in the amount of $122,242.23. This penalty is based on Respondent having $382,146.90 in Florida payroll that would have required $81,494.66 in workers’ compensation premium. There are no errors in Mr. McAullife’s penalty calculation. Mr. Eaton issued an Amended Order of Penalty Assessment on March 23, 2010. On March 24, 2010, Respondent and Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty that required ten percent of the penalty to be paid in advance and the remainder to be paid in 60 interest-free monthly payments. Respondent also produced a policy that provided coverage in compliance with Florida law with an effective date of March 12, 2010. As a result, Petitioner issued an Order of Conditional Release, permitting Respondent to return to work. During the hearing, Respondent presented evidence that it is a registered self-insured company in Kentucky for the first $500,000.00 of workers’ compensation. Additionally, Respondent has excess insurance for any workers’ compensation claims that exceed the $500,000.00 threshold. Because it is self-insured in Kentucky, Respondent must purchase letters of credit on an annual basis. Respondent paid the following for its recent letters of credit: (a) 2007, $26,755.54; (b) 2008, $32,438.48; (c) 2009, $33,626.38; and (d) 2010 to date, $8,931.39. The State of Kentucky assesses qualified self-insureds a six and one half percent tax based on an annual simulated premium. The amount of the simulated premium represents what a qualified self-insured would pay for a "first dollar" policy of workers’ compensation insurance. Respondent’s recent simulated premiums are as follows: (a) 2007, $453.440.00; (b) 2008, $480,637.00; (c) 2009, $623,940.00; and (d) 2010, $1,006,243.00. Respondent also maintains a "high dollar" deductible policy of insurance that provides workers’ compensation coverage for its Georgia employees. Respondent’s Georgia policy, Chartis Company Policy No. WC 005-73-7942, which includes Florida as part of "all other states" in Item 3C of the declarations page, also requires the payment of premiums. Respondent recently paid the following premiums for this insurance: (a) 2007, $124,736.78; (b) 2008, $125,950.08; and (c) 2009, $64,465.28. The premiums paid by Respondent for the Chartis Company Policy No. WC 005-73-7942 are not based on Florida rates. From 2007 to 2010, Respondent provided workers’ compensation benefits for at least four different workers that were injured while performing work for Respondent in Florida. The workers’ compensation benefits paid by Respondent on these claims totaled $147,958.25.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order, finding that Caldwell Tanks, Inc., failed to comply with Chapter 440, Florida Statutes, and imposing a penalty in the amount of $122,224.22. DONE AND ENTERED this 8th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of December, 2010. COPIES FURNISHED: Claude M. Harden, III, Esquire Carr Allison 305 South Gadsden Street Tallahassee, Florida 32301 Jamila Georgette Gooden, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390
The Issue The issue in this case is whether Respondent, Michael Dean Mastin, committed the offenses alleged in an Administrative Complaint issued by Petitioner, the Department of Financial Services, on July 6, 2004, and, if so, what penalty should be imposed.
Findings Of Fact The Parties. Petitioner, the Department of Financial Services (hereinafter referred to as the "Department"), is the agency of the State of Florida charged with the responsibility for, among other things, the investigation and prosecution of complaints against individuals licensed to conduct insurance business in Florida. Ch. 626, Fla. Stat. (2004).1 Respondent, Michael Dean Mastin, is currently, and was at all times pertinent to this matter, licensed in Florida as a Life (2-16) and Life & Health (2-18) Agent. The Department, therefore, had, at all times relevant this matter, jurisdiction over his licenses and appointments. Mr. Mastin's license identification number is A167869. During the times relevant, Mr. Mastin conducted insurance business as a sole proprietor, using the fictitious name "AIT." He also conducted accounting services, including the preparation of Federal income tax returns for individuals (hereinafter referred to as "Tax Returns"). Tax Return Preparations. During the early part of 1998, in response to an advertisement concerning Tax Return preparation and investment advice carried in a local newspaper, Ervin "Augie" Augustine or Rhoda Augustine telephoned Mr. Mastin. At the time of this first contact, Mr. Augustine was approximately 85 or 86 years of age2 and Mrs. Augustine was 71 or 72 years of age.3 Mr. Augustine, who died on August 18, 2000, had been diagnosed with Alzheimer's in 1997. Mr. Augustine continued to handle most of the business affairs of the Augustines until early 2000. Mr. Mastin visited the Augustines at their home after they telephoned him. It was agreed during the meeting that Mr. Mastin would prepare the Augustine's 1997 Tax Return. Mr. Mastin subsequently prepared the Augustine's 1997 Tax Return. See Petitioner's Exhibit 7. That return was filed by the Augustines with the Internal Revenue Service during the spring of 1998. The Augustines, who maintained their important documents in files which they maintained at their home, filed a copy of the 1997 Tax Return prepared by Mr. Mastin. The copy of the 1997 Tax Return maintained by the Augustines did not include a "Schedule A." Schedule A is used by individual Federal income taxpayers to "itemize" deductions which may be taken against taxable income in computing the amount of income tax they must pay. In lieu of itemizing deductions, individual Federal income taxpayers may take the "standard" deduction, a statutorily established deductible amount. For the 1997 tax year, the standard deduction for married taxpayers 65 years of age or older filing a joint return was $8,500.00.4 The 1997 Tax Return prepared by Mr. Mastin and filed by the Augustines claimed a standard deduction of $8,500.00. At the time that Mr. Mastin prepared the Augustines' 1997 Tax Return, Mr. Mastin told them that he would waive his normal fee for the preparation of their 1997 Tax Return if they would purchase insurance-investment products from him. They agreed, and consequently, Mr. Mastin did not charge the Augustines any fee for preparing their 1997 Tax Return in anticipation of their purchase of insurance-investment products from him. Mr. Mastin subsequently gave the Augustines a presentation on insurance-investment products he wished to sell them, but they made no purchase at that time. During the spring of 1999, Mr. Mastin prepared the Augustine's 1998 Tax Return. See Petitioner's Exhibit 8. Again, Mr. Mastin did not charge the Augustines for his services. The Augustines kept a copy of the 1998 Tax Return prepared by Mr. Mastin. Like the 1997 Tax Return, the copy of the 1998 Tax Return maintained by the Augustines did not include a "Schedule A." Again like the 1997 Tax Return, the 1998 Tax Return prepared by Mr. Mastin and filed by the Augustines claimed a standard deduction, this time in the amount of $8,900.00, which was the amount of the standard deduction for married taxpayers 65 years of age or older filing a joint return for the 1998 tax year.5 On or about May 4, 1999, Mr. Mastin sold an annuity contract to the Augustines. The Augustines paid $30,000.00 for the annuity, for which Mr. Mastin earned a commission of $2,160.00. This purchase fulfilled the agreement between Mr. Mastin and the Augustines as to the waiver of his fees for Tax Return preparation. By letter dated June 1, 1999, Mr. Mastin memorialized his agreement with the Augustines concerning the waiver of his fees for Tax Return preparation in exchange for the Augustines purchasing the annuity contract through him. The letter (hereinafter referred to as the "Fee Waiver Letter"), which was signed by Mr. Mastin as "Accountant", and acknowledged by the Augustines, provides the following: This is to represent [sic] that an exchange for the tax return preparation for 1997 and 1998 and the extensive financial planning be in place of the commissions received under the American national [sic] annuity. If the annuity would not be taken [six] then the charge for the tax returns and financial planning will [sic] be the same as the commission and will [sic] be billed. Petitioner's Exhibit 11. This letter, which contains several errors in spelling and punctuation, and is also not worded very professionally, contains the initials "MM/mm" at the bottom of the letter under Mr. Mastin's signature. It is inferred that this refers to Michael Mastin as the author and, either himself or his wife, Mary Mastin, as the typist. The Augustines purchased additional annuity contracts from Mr. Mastin on September 8, 1999, October 8, 1999, and January 19, 2000. Mr. Mastin received commissions of $917.37, $2,160.00 and $10,500.00 respectively for these sales. On February 9, 2001, Mrs. Augustine made an additional payment on one of the previously purchased annuity contracts, for which Mr. Mastin received a commission of $1,350.00. Mr. Mastin prepared the 1999 and 2000 Tax Returns for the Augustines.6 See Petitioner's Exhibits 8 and 9. Again, Mr. Mastin did not charge for his Tax Return preparation services. The Augustines kept a copy of the 1999 Tax Return and Mrs. Augustine kept a copy of the 2000 Tax Return. Like the 1997 and 1998 Tax Returns, the copy of the 1999 and 2000 Tax Returns maintained by the Mrs. Augustine did not include a "Schedule A." Again like the 1997 and 1998 Tax Returns, the 1999 and 2000 Tax Returns prepared by Mr. Mastin claimed the standard deduction. For 1999, the amount of the claimed deduction was $8,900.00, which was the amount of the standard deduction for married taxpayers 65 years of age or older filing a joint return for the 1999 tax year.7 For 2000, the amount of the claimed deduction was $9,050.00, which was the amount of the standard deduction for married taxpayers 65 years of age or older filing a joint return for the 2000 tax year.8 Other than the commissions which Mr. Mastin earned for the annuity contracts he sold to the Augustines, Mr. Mastin, consistent with his initial verbal agreement and subsequently the Fee Waiver Letter, did not bill or charge the Augustines for the preparation of their 1997, 1998, 1999, and 2000 Tax Returns. Nor did they directly pay him for his Tax Return preparation services. Mr. Mastin's Unconvincing Position. Mr. Mastin asserted through his testimony that he charged the Augustines for Tax Return preparation services he provided them and that they did indeed pay him. His testimony is rejected for its lack of credibility. In support of his argument that he was paid for his Tax Return preparation services, Mr. Mastin asserted unconvincingly the following: That he received a check in 1999 in the amount of $100.00 for his preparation of the 1997 and 1998 Tax Returns, $45.00 cash in the spring of 2000 from Mr. Augustine for the 1999 Tax Return, and $50.00 cash in the spring of 2001 from Mrs. Augustine for the 2000 Tax Return; That the Tax Returns he prepared for the Augustines contained a Schedule A and that a deduction for the amount of the tax preparation fees which they paid him was claimed thereon. A copy of the alleged Schedule A's was admitted as Respondent's Exhibits 13 through, and including, 16; That invoices, admitted as Respondent's Exhibit 12, were sent to the Augustines for his Tax Return preparation services; and That he revoked the Fee Waiver Letter the day after he wrote it. Mr. Mastin's testimony and the evidence he offered in support of his assertion that he received three payments for his Tax Return preparation services to the Augustines was unconvincing for a number of reasons: The ultimate facts of this case taken as a whole, do not support Mr. Mastin's testimony; Mrs. Augustine, whose was more credible despite the occasional confusion in her testimony, denied that any payments were ever made to Mr. Mastin for his services; The $100.00 check, Respondent's Exhibit 11, was payable to Mr. Mastin, was signed by Mr. Augustine and was dated October 6, 1999. Although the evidence failed to prove what the check to Mr. Mastin was for, more importantly, the evidence failed to prove it was made in payment for any Tax Return preparations. The check was written during the time when the Augustines had purchased two annuity contracts and immediately prior to their purchase of a third. More importantly, this alleged payment of Tax Return preparation fees is inconsistent with the Fee Waiver Letter prepared by or on behalf of Mr. Mastin and signed by him. Finally, the date of the check is inconsistent with Mr. Mastin's deposition testimony that the Augustines paid him for the 1997 and 1998 Tax Returns when he took the 1998 Tax Return to them to be signed, which was some time during the spring of 1999, not October 1999; Mr. Mastin's assertion that he received cash for the 1999 Tax Return preparation and that the Augustines gave him only $45.00 because that was all the cash they had at the time is inconsistent with the fact that the Augustine's usual custom was to pay for expenses by check so that they would have a record of the transaction. There simply was no reason for them not to have followed this custom in paying for the preparation of their 1999 Tax Return. Additionally, if they had for some unexplained reason paid Mr. Mastin with cash, it is unlikely that the Augustines would not have had sufficient cash to pay the entire fee. There is also no reason, even if it were assumed that the Augustines did not have $50.00 in cash, that they wouldn't have used a check to pay the full amount of the asserted charge; and Mr. Mastin's testimony concerning the 2000 Tax Return fee he asserted Mrs. Augustine paid him is rejected for essentially the same reasons Mr. Mastin's testimony concerning the payment for the 1999 Tax Return has been rejected. Mr. Mastin's testimony and the evidence he offered in support of his assertion that he included a deduction on the Augustine's Tax Returns for the amount of the fee he received from them was unconvincing for a number of reasons: The ultimate facts of this case taken as a whole, do not support Mr. Mastin's testimony; The Schedule A's admitted as part of Respondent's Exhibits 14 through 16, while reflecting a deduction for the $100.00 he testified he received in 1999 and the $45.00 cash he received in 2000, were not included with the copy of the 1997 through 2000 Tax Returns maintained by the Augustines; and The amount of the total itemized deductions listed on the Schedule A's offered in evidence by Mr. Mastin unrealistically and unconvincingly equal the exact amount of the standard deduction reflected by the Augustine's copy of the Tax Returns filed by them for those years. The likelihood that the Augustine's itemized deductions would be exactly the same as the standard deduction four years in a row is ridiculously low.9 Mr. Mastin testified unconvincingly that invoices were provided to the Augustines for his services. The Augustines did not have a copy of those invoices in their files and their existence is inconsistent with the ultimate facts of this case and Mrs. Augustine's testimony that she never received them and had no copy of them in her files. Finally, Mr. Mastin's testified unconvincingly that he spoke to Mrs. Augustine immediately after the Fee Waiver Letter had been executed and mailed a letter the next day, June 2, 1999, to Mrs. Augustine revoking the Fee Waiver Letter. A copy of the June 2, 1999 letter (hereinafter referred to as the "Fee Waiver Revocation Letter), was admitted as Petitioner's Exhibit 26. According to Mr. Mastin, he spoke to Mrs. Augustine and sent the Fee Waiver Revocation Letter because he was concerned that the Fee Waiver Agreement violated the laws governing his conduct as a licensed insurance agent in Florida. The authenticity of the Fee Waiver Revocation Letter and Mr. Mastin's testimony concerning it are rejected for several reasons: The ultimate facts of this case taken as a whole, do not support Mr. Mastin's testimony or the authenticity of the Fee Waiver Revocation Letter; Mrs. Augustine denied ever receiving a telephone call from Mr. Mastin revocating the Fee Waiver Letter and denied receiving the Fee Waiver Revocation Letter. Mrs. Augustine did not have a copy of the Fee Waiver Revocation Letter in her files; The Fee Waiver Revocation Letter was addressed only to Mrs. Augustine. It was not addressed to Mr. Augustine, although he was still alive at the time the letter was alleged to have been written and mailed. Because of the failure to address the letter to both Mr. and Mrs. Augustine, as the Fee Waiver Letter was, it is concluded that the Fee Waiver Revocation Letter was prepared after this dispute arose, which was after Mr. Augustine had died; Although Mr. Mastin had had Mr. and Mrs. Augustine sign the Fee Waiver Letter, he did not take this precaution with the Fee Waiver Revocation Letter which was purportedly written in order for Mr. Mastin to avoid a possible violation of the laws governing his insurance practice; The initials at the bottom of the Fee Waiver Revocation Letter, indicating who had written the letter and who had typed it, are "MM/DEK." "DEK" are the initials of Mr. Mastin's secretary, Deborah Elfast Kelly. Ms. Kelly, however, testified that she did not remember typing the letter,10 that it is her custom to type her initials, not capitalized as the her initials appear on the Fee Waiver Revocation Letter, but in lower case; The spelling and punctuation in the Fee Waiver Revocation Letter, and the unprofessional language thereof, are consistent with other documents which were authored by Mr. Mastin and typed either by him or his wife and not someone employed as a secretary, like Ms. Kelly, who also provides secretarial services to a lawyer; and Finally, the Fee Waiver Revocation Letter was not provided by Mr. Mastin to any of the employees of the Department who initially investigated this matter and requested information concerning Mr. Mastin's business relationship with the Augustines until discovery had commenced. Such a letter could have resolved at least one of the charges Mr. Mastin faces in this case in his favor had he produced it earlier. The fact that it was not produced until this case began in earnest suggests that it is a recent creation. The Agent of Record Letter. Some time prior to 2002, Mrs. Augustine became interested in purchasing an additional annuity contract. After making several unsuccessful attempts to contact Mr. Mastin, she contacted another insurance agent and purchased annuity products from that agent. In early February or late January 2002, Mr. Mastin contacted Mrs. Augustine for the first time since preparing the Augustine's 2000 Tax Return. He telephoned her to determine whether she wished for him to prepare her 2001 Tax Return. During this conversation, in response to an inquiry from Mr. Mastin, Mrs. Augustine informed Mr. Mastin that she had purchased annuity products from another insurance agent. Mr. Mastin became very upset and angry with Mrs. Augustine. Shortly after their telephone conversation, Mrs. Augustine received a letter dated February 14, 2002, from Mr. Mastin. Petitioner's Exhibit 18. Mr. Mastin unreasonably criticized Mrs. Augustine for what he perceived as her lack of loyalty to him after all he thought he had done for her. He also told her that he had had "a chance to review [her] file", and informed her he was enclosing a "copy of an agreement that I found in the file that you signed on February 17, 2000, which should be self explanatory." He went on to state: I remember the exact time and sayings that you and Augie made [sic] that morning. This is a standardized legal document that has been and still is used widely over the country in this area [sic] and has been very successful [sic] in being enforceable. It is not my intend [sic] to get an attorney to handle this matter as I hope we can work this out like honorable adults. If I don’t' hear from you in 30 days, I will assume you will not be willing to honor the agreement. The February 14, 2002, letter contains the initials "MM/mm" under Mr. Mastin's signature. The spelling and punctuation in the letter, and the unprofessional language thereof, are consistent with other documents which were authored by Mr. Mastin and typed either by him or his wife and not someone employed as a secretary. Attached to the February 14, 2002, letter was a copy of what purported to be an agent of record letter. The Augustine's signatures appear at the bottom of the page. Mr. Mastin's signature appears, without any underlining, to the write of the signatures of the Augustines and, under his signature it is "DATED 02/17/00" (hereinafter referred to as the "Agent of Record Letter"). The Agent of Record Letter states the following: This is to certify that the firm Ait/Michael Mastin will be considered agent of record on all life insurance and or annuity products purchased from Ervin Augustine and or Rhoda Augustine. This agreement will begin February 17, 2000 and will terminate on February 17, 2003, unless a new agreement is signed by Ait. If the above products are purchased through another agency or broker, agent or direct [sic] all commissions that would have been paid in full shall be payable to Ait/Michael d. Mastin by either the life Insurance [sic] company, agency, broker, agent or owner or beneficiary of the policy or policies. If this action requires a court action or the hiring of an attorney to reach a settlement the above named persons or company shall be responsible for all attorney fees and court and related costs related to this matter for the execution of this agreement. Mrs. Augustine, who was almost 77 years of age when she received Mr. Mastin's letter and the Agent of Record Letter, became very upset about what she perceived to be the threatening tone of Mr. Mastin's letter and the consequence of having possibly violated the Agent of Record Letter. While she did not recall ever having seen, much less, signed the Agent of Record Letter, she recognized the signatures on the document to be her's and her husband's and, therefore, assumed in her panic that she had indeed signed it. Mrs. Augustine telephoned Mr. Mastin shortly after receiving his letter and the Agent of Record Letter in an unsuccessful effort to resolve the matter. After unsuccessfully attempting to work things out with Mr. Mastin, Mrs. Augustine, who was worried about having to pay Mr. Mastin the commissions earned by the insurance agent she had dealt with in what she afraid was a violation of the Agent of Record Letter, as well as any legal fees incurred by Mr. Mastin, went to the Department's Plantation, Florida, office on March 1, 3002, seeking assistance. Mrs. Augustine met with Debbie Brown, a Senior Manager, Analyst 1, in the Department's Bureau of Outreach, Division of Community Service. Mrs. Augustine completed a Consumer Assistance Report, in which she wrote the following: In the year 2000, the agent, Michael Mastin, had my husband sign the form, Agent of Record letter. My husband was diagnosed with Alzheimers in 1997 and so he signed the form. I was afraid of my husband's outburst & so I also signed. . . . Any life insurance or annuity that was purchased until the year 2003, even though he did not sell the products, I will have to pay him the commissions. Petitioner's Exhibit 17. Mrs. Augustine, having given the Agent of Record Letter more thought, could not remember having signed it, but due to the fact that it was her signature and that of her husband at the bottom of the document Mr. Mastin had sent, she believed that she must have signed it. Questioning why she did not remember signing the Agent of Record Letter and, likely, looking for a justification for not complying with its terms, she suggested that she had done so because Mr. Augustine, during an outburst of anger, had made her. Mrs. Augustine gave a copy of the February 1, 2002, letter and a copy of the Agent of Record Letter Mr. Mastin had sent her to Ms. Brown, who maintained possession and control of both in her office. Ms. Brown gave Mrs. Augustine a receipt for the documents. Although not kept under lock and key, the evidence in this case failed to prove that anyone had any reason to access either document. Shortly after her visit with Ms. Brown, Mrs. Augustine wrote the following letter to Mr. Mastin: Mike; Since I was given a 30day [sic] time limit, I thought I should send you this letter, to confirm the fact that I am responding to you. Some of the things that you wrote in your letter are incorrect, never the less [sic] I contacted the state insurance department, and you will hear from them. I was so stressed out with Augie's condition, I will never understand how you can do this to me. You know he had Alzeimer's [sic] and I signed the form to avoid an outburst from him. You have seen him during one of these episodes. Petitioner's Exhibit 49. Mrs. Augustine again indicated that she had signed the Agent of Record Letter for the same reasons she indicated she signed it in the Consumer Assistance Request she made with the Department. Ms. Brown informed Mr. Mastin of the filing of the Consumer Assistance Request by letter dated March 4, 2002. Mr. Mastin responded to that letter by letter dated March 8, 2002. Not satisfied with his response, Ms. Brown forwarded the matter to the Department's Bureau of Investigation, where it was assigned to Special Investigator Linda L. Grant. As part of her investigation, Ms. Grant met with Mrs. Augustine on April 9, 2002. After fully discussing the matter with Ms. Grant, Mrs. Augustine wrote a nine-page narrative explaining her involvement with Mr. Mastin. Parts of the narrative, such as policy numbers and other specific facts which Mrs. Augustine could not recall, had to be looked up. Ms. Grant assisted Mrs. Augustine by ensuring that information that Mrs. Augustine could not recall but could be found in other sources was obtained and included in the narrative. Ms. Grant also typed Mrs. Augustine's hand-written narrative. Mrs. Augustine was asked by Ms. Grant to read both her hand- written and the typed versions to ensure accuracy, and after she complied, both were sworn to by Mrs. Augustine. With regard to the Agent of Record Letter, Mrs. Augustine swore to the following: I later received a letter dated 2/14/02 from Mastin expressing his anger over the matter and stating he found an agreement in his file that I signed on 2/17/00 that is a legal[sic] enforceable document. He enclosed a copy of the alleged 2/17/00 agent of record letter. I was shocked because I had no recollection of the form and I did not have a copy of the agent of record letter in my files. The signatures on the letter appears [sic] to be mine and that of my late husband. I have no recollection of Mastin discussing the contents of the letter or any agreement regarding future commissions belonging to him through 2/17/03. In most of my purchases from Mastin he filled out all the paperwork and gave me and my husband a stack to sign without reading. We both trusted him. . . . Petitioner's Exhibit 48. Mrs. Augustine gave Ms. Grant the actual copy of the February 14, 2002, letter and the attached Agent of Record Letter which Mr. Mastin had sent to her. Ms. Grant's conduct with Mrs. Augustine during her meeting with her on April 9, 2002, was professional and ethical. The information she obtained in the affidavit completed and signed by Mrs. Augustine was in no way unduly influenced by the assistance, which was intended to ensure that the narrative contained accurate and detailed information, which was given by Ms. Grant to Mrs. Augustine. Between the assignment of the matter to her and September 2002, Ms. Grant spoke with and met with Mr. Mastin on several occasions as part of her investigation. She acted professionally and with due regard for Mr. Mastin's rights throughout her dealings with him. Mr. Mastin wrote two letters to Mrs. Augustine, both dated September 19, 2002. Both letters essentially threaten Mrs. Augustine that he would seek fees from her if she continued to pursue her complaint against him with the Department. See Petitioner's Exhibits 21 and 22. The more Mrs. Augustine thought about the whole matter and with Ms. Grant's reasonable prodding of her memory, the more Mrs. Augustine began to doubt having signed the Agent of Record Letter. Mrs. Augustine eventually concluded that she simply had no memory of having signed the Agent of Record Letter. Consequently, on April 24, 2002, she returned to Ms. Grant's office and completed and signed a hand-written and typed four page supplement to her April 9, 2002, affidavit. In pertinent part, Mrs. Augustine wrote the following in her affidavit supplement: . . . . I have inspected a document dated Feb. 17, 2000 listing Parts I, II & III of a retainer agreement, and I have never seen this document. To my recollection, there was no written retainer agreement between Michael Mastin, myself and my late husband Ervin Augustine. I reaffirm that I never received or had knowledge of any Feb. 17, 2000 Agent of Record letter prior to Michael Mastin sending me a copy in his correspondence dated Feb. 14, 2002. . . . Petitioner's Exhibit 47. Mrs. Augustine goes on in the affidavit supplement to describe what she reasonably considered to be the threatening correspondence she had received from Mr. Mastin since she filed the Consumer Assistance Report with the Department. Again, Ms. Grant's conduct with Mrs. Augustine during her meeting with her on September 24, 2002, was professional and ethical. The information she obtained in the affidavit supplement completed and signed by Mrs. Augustine was in no way unduly influenced by the assistance, intended to ensure that the narrative supplement contained accurate and detailed information, which was given by Ms. Grant to Mrs. Augustine. On September 23, 2002, Ms. Grant and her immediate supervisor, Robert Keegan, met with Mr. Mastin. During this meeting Mr. Mastin gave copies of a number of documents pertaining to this matter to Ms. Grant and Mr. Keegan. One of the documents was a copy of an annuity contract application (hereinafter referred to as the "Application") that had been signed by the Augustines. Petitioner's Exhibit 42. Ms. Grant, who had astutely doubted the authenticity of the Agent of Record Letter due to Mrs. Augustine's confusion about the document, compared the signatures on the Application with the signatures on the Agent of Record Letter. Because of what Ms. Grant concluded were suspicious similarities between the signatures on the Application and Agent of Record Letter, both documents were submitted to the Crime Lab of the Broward County Sheriff's Office for analysis of Mrs. Augustine's signature. Howard Seiden, a forensic document examinter, who was accepted as an expert in this matter, examined Mrs. Augustine's signature on the Application and the Agent of Record Letter. He concluded the following: After examination of the submitted documents, it is the finding of this examiner that, the questioned Rhoda Augustine signature on the [Agent of Record Letter] is a reproduction of the Rhoda Augustine signature found on the [Application]. The most likely mechanism for this, is that the signature on the original document or a copy thereof of in [the Application] was copied, then cut from the copy and placed in position of the original document in [the Agent of Record Letter] and the entire document copied again. An alternate mechanism that may have been utilized is to scan the known signature in [the Application] and using computer software transfer that signature onto a scanned document of [the Agent of Record Letter]. This document could then be printed. After Mr. Mastin wrongfully suggested that the fabricated signature on the Agent of Record Letter provided to Mr. Seiden had been created by Ms. Grant, the copy of the Agent of Record Letter which Mrs. Augustine had provided to Ms. Brown when she first complained to the Department and which had been continuously maintained in the custody of Ms. Brown since Mrs. Augustine had provided it to her, was retrieved by Dennis Adams, a Special Investigator for the Department's Bureau of Investigation, and delivered directly to Mr. Seiden for analysis. At no time did the copy of Agent of Record Letter come into the possession of Ms. Grant. More importantly, no credible evidence was presented in this proceeding to suggest that Ms. Grant or anyone other than Mr. Mastin had anything to do with the fabrication of Mrs. Augustine's signature on the Agent of Record Letter. Mr. Seiden, after analyzing the copy of Agent of Record Letter maintained by Ms. Brown concluded that Mrs. Augustine's signature was an exact copy of the signature which had been reproduced from the Application onto the Agent of Record Letter sent by Mr. Mastin to Mrs. Augustine. Mr. Seiden's expert opinion explains why Mrs. Augustine was so confused when she received the Agent of Record Letter. The signature on it was indeed her signature, as she concluded it was. What she did not realize, however, was that her signature had been placed there, not by her, but by Mr. Mastin. Mr. Seiden's opinion also vindicates Ms. Grant's suspicion concerning the authenticity of the Agent of Record Letter. In summary, Mrs. Augustine did not sign the Agent of Record Letter. Instead, her signature had been cut and pasted from her actual signature on the Application. It is inferred that Mrs. Augustine's signature on the Agent of Record Letter was fabricated by Mr. Mastin or someone under his direction. Mr. Mastin's Unconvincing Position. Mr. Mastin asserted through his testimony and other evidence that he did not fabricate the Agent of Record Letter. In support of his position, while he did not dispute that the Agent of Record Letter had been fabricated, he suggested, unconvincingly, the following: Ms. Grant fabricated the Agent of Record Letter in an effort to bolster her career at the Department; and He has a copy of an agent of record letter with the Augustine's signatures on it which has not been proved to be a fabrication. Mr. Mastin's testimony and the evidence he offered in support of his assertion that he did not fabricate the Agent of Record Letter was unconvincing for a number of reasons: The ultimate facts of this case taken as a whole, do not support Mr. Mastin's testimony; Mrs. Augustine's prior inconsistent statements were adequately explained. She was sent a document by Mr. Mastin which, although it had never been signed by her, did in fact include a copy of her actual signature on it. Seeing her signature, she simply concluded that, although she did not remember signing it, she must have done so. Ultimately, the evidence proved that she did not sign the very document Mr. Mastin sent to her; Mr. Mastin's assertion that the fabricated document was created by Ms. Grant deserves no more discussion. This wrongful and malicious assertion is not supported by any credible evidence; and Finally, Mr. Mastin's assertion that he has a copy of an agent of record letter signed by the Augustines which has not been proved to be a fabrication is not supported by the weight of the evidence. Mr. Mastin' did have admitted an agent of record letter which was not proved to be a fabrication. He argues, therefore, that he had no reason to send a copy of a fabricated document. This argument is rejected. The copy of the agent of record letter admitted by Mr. Mastin could not be shown to be a fabrication without having the document or a copy thereof from which an actual signature would have been transferred to the copy of the document admitted by Mr. Mastin. Given this reasonable explanation for why the document has not been proved to be false, it cannot be concluded that it has not been fabricated. This is especially true in light of the fact that it has been proven that there is a fabricated Agent of Record Letter. This fact sheds sufficient doubt on the authenticity of the copy of the agent of record letter admitted by Mr. Mastin to reject its authenticity also. D. Primary Agent Designation. Mr. Mastin failed to designate himself as the primary agent for AIT, the factitious name he conducted insurance business under.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department finding that Michael Dean Mastin violated the provision of Chapter 626, Florida Statutes, described, supra., and revoking his license. DONE AND ENTERED this 2nd of August, 2005, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN 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 2nd day of August, 2005.
The Issue Whether at the time of his father's death, Armando Martinez, Jr., was a "dependent beneficiary" of his father, a vested member of the Florida Retirement System, so as to be entitled to his father's retirement benefits?
Findings Of Fact Armando Martinez, Jr., was born on February 22, 1974, to Natalie M. Martinez and the late Armando Martinez, Sr. In 1992, when Armando, Jr., was eighteen years old, Mr. and Mrs. Martinez were divorced. The following year, 1993, less than two weeks after Armando, Jr.'s, nineteenth birthday, Armando Martinez, Sr., died. The cause of death was liver cancer, a disease from which Ms. Martinez presently suffers. At the time of his death on March 7, 1993, Mr. Martinez was a vested member of the Florida Retirement System. A municipal employee, he had been a bus operator. At some point close to commencement of his employment, slightly more than ten years prior to his death, Armando Martinez, Sr., had executed a Form M-10. The form named his wife, Natalie, as his primary beneficiary. Armando, Jr., the only child of Armando, Sr., and Natalie Martinez, was named as the sole contingency beneficiary. Following Mr. Martinez, Sr.'s death, Ms. Martinez disclaimed Florida Retirement System benefits. She did so in order for Armando, Jr., as the contingent beneficiary, to be able to receive the benefits. On February 17, 1997, the Division of Retirement denied Armando, Jr., survivor benefits. Had Mr. Martinez, Sr., died one-year and several weeks earlier, that is, prior to Armando, Jr.'s eighteenth birthday, the Division would have approved distribution of survivor benefits to him. But, although he was still a high school student, since he was older than nineteen by a few days at the time of his father's death, the Division required proof that Armando, Jr., had received half of his support from his father at the time of his father's death. No such proof was provided to the Division prior to or at the time of its preliminary denial. In fact, in his 1992 tax return, Mr. Martinez did not claim his son Armando, Jr., as a dependent. In this formal administrative proceeding, however, Armando Martinez, Jr., provided such proof, proof which was lacking until hearing. The year 1992 was very difficult for Armando Martinez, Jr., and his family. His parents separated, Armando, Jr., lived with his mother. Armando, Sr., lived elsewhere. Prior to his death, divorce proceedings were finalized. In the meantime, Ms. Martinez had lost her job. She remained unemployed for the entire year and in early 1993 as well. Armando, Jr., was still in high school at the time of his father's death. During the 1992-93 school year, to support himself and his mother, he obtained work part-time while he remained in school. Ms. Martinez paid the rent for their apartment at a rate of between $370 and $500 per month. The monthly phone bill of Ms. Martinez and Armando, Jr., was approximately $50; utility payments $70; groceries $300; gasoline $10, automobile insurance $100; and school supplies $40. There were other expenses, clothes, for example, that occurred from time-to-time. In addition to minimal government support to Ms. Martinez and Armando, Jr.'s, part-time employment income, Armando, Jr., was supported by cash payments provided by his father. Two or three times a month, Armando's father and a girl friend, Karen Jones, would drive to the front of the house. Because of his illness, Mr. Martinez remained in the car while Ms. Jones brought cash, usually between two and five hundred dollars in an envelope to the front door. On more than one of these occasions, Ms. Jones, the envelope, and the cash were observed by friends of the family at the moment of delivery. Ms. Martinez log of the estimates of these payments totals approximately $8,500, an amount in excess of Mr. Martinez's income reported in his 1992 tax return filed before his death in 1993 to be $6,389.00. But, Mr. Martinez, Sr. had access to other means of support and other monies including proceeds from insurance policies. The $8,500 provided to Armando, Jr., by Armando Martinez, Sr. constituted more than half of Armando, Jr.'s, support for the year 1992 and up until Mr. Martinez, Sr.'s, death in early 1993.
Recommendation Accordingly, it is hereby recommended that the Division of Retirement recognize Armando Martinez, Jr., to have been the dependent beneficiary of Armando Martinez, Sr., at the time of Mr. Martinez, Sr.'s, death, and therefore entitled to retirement benefits. DONE AND ORDERED this 27th day of January, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY 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 Filed with the Clerk of the Division of Administrative Hearings this 27th day of January, 1998. COPIES FURNISHED: Robert B. Button, Esquire Division of Retirement Department of Management Services Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Natalie Martinez Suite 3811 3801 Northgreen Avenue Tampa, Florida 33624 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 A.J. McMullian, III, Director Division of Retirement Department of Management Services Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560
