The Issue The issue in this case is whether Respondent discriminated against Petitioner based on Petitioner's disability.
Findings Of Fact Mr. McMahon was a member of Suncoast beginning in approximately 1986. In 2008 and 2009, Mr. McMahon had a checking account, a VISA card, a savings account, and a loan with Suncoast. Mr. McMahon claims that he is disabled and that he suffers from personality disorders, post-traumatic stress, passive aggression, and obsessive compulsive disorder. No medical evidence was presented to substantiate his claims. He has been receiving benefits from the Social Security Administration based on a personality disorder since approximately 1996. Suncoast perceived Mr. McMahon as having a disability, based on his repeated assertions that he was disabled. In November 2008, Mr. McMahon filed a complaint with the Better Business Bureau of West Florida, Inc. (BBB), alleging that Suncoast was discriminating against him by not accommodating his communication disability. The BBB investigated and found that Suncoast had blocked access to Mr. McMahon's accounts because he was delinquent on a loan. The BBB contacted Suncoast concerning the complaint, and Suncoast provided Mr. McMahon a three-month payment due date extension on the loan, lowered his monthly payments, and unblocked his account. In January 2009, Mr. McMahon was delinquent on his loan. Again Suncoast tried to help Mr. McMahon with his delinquent account. At some point, Mr. McMahon's loan payments were put on automatic payments in order to reduce his delinquencies. Money would automatically be taken out of his account to make the monthly loan payments. Mr. McMahon had a direct deposit for his Social Security benefits payments. After the loan payments began being deducted automatically, Mr. McMahon canceled his direct deposits into the account from which his payments were automatically being deducted. Thus, there was no money in the account to make the monthly payments on his loan, and Mr. McMahon ceased making payments on the loan and again became delinquent on his loan. When one of Suncoast's members becomes overdrawn with regards to either a checking or savings account or credit card, or is delinquent in making payments on any credit card or loan obligation, that member loses access to his or her services, including use of all internet services, ATM cards, ATM machines, credit cards, and debit cards. The member would also be unable to access his or her account balance or make deposits into overdrawn accounts if the member attempted to make a deposit via ATM, as those services are suspended. These restrictions are typically automatically placed upon the accounts of any member with a delinquent loan account after 60 days of delinquency, and within 30 days of any overdrawn share draft account. Any member with a delinquent or overdrawn account, where services were suspended would be prevented from applying for a mortgage loan. If the member contacted Suncoast staff to apply for a mortgage loan or to utilize any other services, the member would be directed to the loss mitigation section of Suncoast, and loss mitigation would attempt to collect the debt or rectify the delinquency. Because Mr. McMahon again became delinquent on his loan payments after stopping the direct deposits, his accounts were restricted, meaning that he could not access the accounts. Mr. McMahon began a campaign of making repeated calls to Suncoast, screaming and yelling at Suncoast representatives, talking over the representatives, making vulgar statements, and using profanity. Mr. McMahon attributes his behavior to his communication disability and requested on numerous occasions that Suncoast accommodate his disability with "patience and understanding." A note was placed in the loss mitigation's note system and in Suncoast's host system, so that all employees of Suncoast who were working with Mr. McMahon could see and accommodate his request for patience and understanding. Suncoast representatives did provide Mr. McMahon with an abundance of patience and understanding. However, nothing seemed to appease Mr. McMahon, and his repeated calls were unproductive. Because of the repeated nature of Mr. McMahon's calls and his behavior during the telephone calls, there were numerous complaints by Suncoast's representatives to management. Jacqueline Gilbert (Ms. Gilbert), vice president of loss mitigation, determined that in order to protect Suncoast's representatives from Mr. McMahon's harassing behavior that all calls should be directed to her; Linda Fales (Ms. Fales), vice president of risk management, cardholder disputes, and DSA compliance for Suncoast; or Ben Felder (Mr. Felder), Suncoast's general counsel. Suncoast's representatives were advised that Mr. McMahon's calls should be transferred to Ms. Gilbert, Ms. Fales, or Mr. Felder. When the representatives would tell Mr. McMahon that they could not help him and that his call would have to be transferred, Mr. McMahon was verbally abusive to the representatives. Many times, if Mr. McMahon was going to be transferred, he would hang up and call right back to speak with a different representative. Sometimes, Mr. McMahon would call and hang up when a representative answered the call. At different times, Ms. Gilbert, Ms. Fales, and Mr. Felder talked with Mr. McMahon to attempt to discuss the reasons that his account was restricted. However, they had little success in communicating with Mr. McMahon because of his behavior. Although Mr. Felder was not able to service Mr. McMahon's account, he decided to handle all Mr. McMahon's requests and assign any work to be done to the appropriate employee because Mr. McMahon's behavior toward Ms. Gilbert and other Suncoast employees was unacceptable. Mr. McMahon did not make any loan payments between May 2009 and August 2009. During this same time period, Mr. McMahon's VISA credit card was well overdrawn. Carolyn Stepp (Ms. Stepp) had cosigned on Mr. McMahon's loan. On or about September 4, 2009, Suncoast exercised its "right of offset" and used funds in both Mr. McMahon's and Ms. Stepp's accounts to pay off the loan. There was still an outstanding balance of $1,046.86 on his VISA credit card. On September 10 and 14, 2009, Mr. McMahon asked to apply for a mortgage loan by telephone. He was not sure that Suncoast would give him a loan because of his delinquent accounts, but he felt that he should have the opportunity to apply because the loan had been satisfied when Suncoast exercised its right of offset. Although the loan was satisfied, Mr. McMahon still had an outstanding balance on his VISA credit card, which he had not been able to use for several months because his accounts had been restricted. He was advised that he would have to contact Mr. Felder to discuss the status of his account. On September 11, 2009, Mr. Felder and Mr. McMahon discussed his account. Part of the discussion concerned Suncoast's writing off Mr. McMahon's loan and VISA credit card balance, returning the offset amounts to Mr. McMahon's and Ms. Stepp's accounts, disbursing the remaining amounts in Mr. McMahon's account to him, and closing Mr. McMahon's accounts. At the conclusion of the conversation, Mr. Felder understood that Mr. McMahon was in favor of this solution and began to take steps to accomplish the tasks. Mr. Felder advised Mr. McMahon by telephone on September 17, 2009, that the tasks had been completed and that Mr. McMahon's accounts with Suncoast were closed, meaning that services at Suncoast were terminated and that Mr. McMahon's access to information was no longer available. Mr. Felder followed up the telephone conversation with a letter dated September 17, 2009, confirming the telephone conversation. Individuals who are not members of Suncoast are not qualified to apply for a mortgage loan with Suncoast. At the time that Mr. McMahon applied for a mortgage loan on September 14, 2009, his accounts at Suncoast were in the process of being closed. Mr. McMahon's requests to apply for a mortgage with Suncoast were not denied because Mr. McMahon was disabled. They were denied because Mr. McMahon had various account delinquencies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Suncoast did not commit an unlawful housing practice and dismissing Mr. McMahon's Petition. DONE AND ENTERED this 27th day of April, 2011, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 2011.
Findings Of Fact Cruises Unlimited Travel/Tours, Inc. (Petitioner), is a "seller of travel", as that term is defined by Section 559.927(1)(2), Florida Statutes. 2/ Elaine Scola is Petitioner's owner. As of 1988, sellers of travel were required to register with the Department of Agriculture and Consumer Services, Division of Consumer Services (Respondent), and it was a violation of Section 559.927, Florida Statutes, for any person to conduct business as a seller of travel without registering annually with Respondent. Any such violation subjected the offending party to civil and criminal penalties. Petitioner did not register with respondent and, in or around November 1993, Respondent notified Petitioner of its (Petitioner's) obligation to register with Respondent. Around or on February 23, 1994, Petitioner, by and through Ms. Scola, made application for registration as a seller of travel and requested Respondent to waive the annual performance bond requirement. Petitioner included with the application, among other things, a registration fee and a 1993 unaudited financial statement. Around or on March 16, 1994, Respondent requested additional information: an audited financial statement or latest income tax return, and documentation showing five or more consecutive years of business ownership experience as a seller of travel in Florida (occupational license or tax returns). Around or on March 21, 1994, Petitioner provided Respondent a copy of its occupational licenses for the past seven years and a copy of its 1992 income tax return. Petitioner indicated that its 1993 tax return was not, as yet, completed. Petitioner's occupational licenses dated back to 1986. For a brief period from September 30, 1988, to March 29, 1989, Petitioner did not have an occupational license. Around or on April 7, 1994, Respondent denied Petitioner's request for a waiver of the bond requirement, contending that Petitioner had failed to satisfy the waiver requirements of Section 559.925(10)(b), Florida Statutes, on two grounds. One was that Petitioner had failed to submit an audited financial statement. The second was that Petitioner had failed to show that it had "five or more consecutive years of experience as a seller of travel in Florida, while in compliance with the law." The second reason presented by Respondent is based upon its interpretation of Section 559.927(10)(b)5, Florida Statutes, to require that the "five or more consecutive years of experience as a seller of travel" must have been lawful, i.e. that it have occurred while the person was duly registered with Respondent, with appropriate security. By waiving the requirement for an annual performance bond, Respondent contends the statute was designed to reward sellers of travel who have complied with the registration and bond requirements. Respondent has not promulgated any rule evidencing its interpretation. However, it has begun the rulemaking process. Prior to Petitioner making application for registration as a seller of travel, it had never registered with Respondent as a seller of travel or posted a performance bond.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order DENYING Cruises Unlimited Travel/Tours, Inc.'s, request for a performance bond waiver. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 31st day of October 1994. ERROL H. POWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October 1994.
The Issue The issue proposed in the Department's "Recommended Order" is: Whether the Department was substantially justified in bringing this action, or that special circumstances exist which would make an award of attorney's fees unjust, pursuant to Section 57.111, Florida Statutes (1983). As Respondent, the Department has not contested Ms. Fieber's allegations of standing as a "prevailing small business party" nor the reasonableness of the fees and costs claimed by Ms. Fieber.
Findings Of Fact Kimberlee M. Fieber is a licensed mortgage solicitor, having been issued license number HK 0008319 by the Department of Banking and Finance ("Department"). Ms. Fieber was employed by State Capital Corporation in the capacity of a mortgage solicitor commencing in 1983 and ending in August 1984. (Stipulation Agreement filed February 17, 1987; R 53, 132.) The Department began investigating State Capital Corporation in 1982, and in July of that year filed suit against the corporation, its directors, officers and certain named employees (not Kimberlee Fieber), charging eleven counts of securities and mortgage brokerage act offenses. (R 1-24, 160-161) The parties executed stipulations for final judgment, and judgment was entered on April 11, 1983, restraining the defendants from making certain representations to investors and from other specific violations of Chapters 494 and 517 F.S.. 25-28) Anthony Bernardo lives in Ft. Myers, Florida. Sometime in early 1983 he saw a State Capital Corporation advertisement regarding investment opportunities. He contacted the company and on June 27, 1983, Kimberlee Fieber came to his house to answer his questions. After about one hour Mr. Bernardo gave Ms. Fieber a check for $5,000.00 to invest as a loan yielding 18 percent interest, secured by a mortgage on commercial property. (R 30-32, 68-80) This was the first and only contact he had with Ms. Fieber. (R 74) Approximately two weeks later, the Bernardos received the papers related to their investment, including a Mortgage Deed, described in boldfaced print on the first page as a first mortgage of equal dignity with other first mortgages to be given in the total amount of $260,000.00, on a motel in Ft. Lauderdale. (R 32, 73) The Bernardos began receiving their $75.00 per month interest payments; in November 1983, they exercised an option to continue the investment for an additional twelve months at the same interest rate. (R 38) After reading some adverse articles about State Capital Corporation in the newspaper, Anthony Bernardo decided not to continue his loan beyond the term ending December 31, 1984. He informed the company in writing. (R 50, 83-85) When he did not receive his $5,000.00, he began calling the company on January 7, 1985. (R 84) He sent a letter dated January 16, 1985, to Gary Allen at State Capital Corporation demanding the return of his $5,000.00 with interest from January 1, 1985. He sent a copy of that letter to Gerald Lewis, State Comptroller. (R 50) On January 31, 1985, John Willard, an investigator for the Office of the Comptroller, interviewed Anthony Bernardo by telephone. The investigator's notes of that interview reflect the facts described in paragraphs 3 and 4, above, but also note that during Ms. Fieber's explanation of the investment, she did not explain to the Bernardos what equal dignity mortgages were, nor did she disclose that the Comptroller's Office had taken action against State Capital Corporation. The investigator noted that Bernardo told him that Ms. Fieber suggested he call the Comptroller's Office as a reference. (R 51-52) On February 14, 1985, Anthony Bernardo received his $5,000.00 from State Capital Corporation along with full interest. (R 85-86) John Willard never interviewed nor contacted Anthony Bernardo again, nor did he ever interview Ms. Fieber or anyone else regarding the Fieber case. He conducted interviews with other investors. He had some general discussion with an attorney in the Comptroller's Office about solicitors who had been employed by State Capital Corporation who may have committed misrepresentations regarding the sale of equal dignity mortgages. (R 170-173) He told the attorney, John Root, that the only thing they had in the file on Ms. Fieber was the memorandum of his interview with Anthony Bernardo. (R 174) Nothing in the record suggests that any other investigation of Ms. Fieber was done. On April 2, 1986, the Department served Kimberlee M. Fieber, as individual Respondent, a Notice of Intention to Suspend and Administrative Charges and Complaint which provided, in pertinent part: * * * STATEMENT OF FACTS Under the Provisions of Chapter 494, Florida Statutes (1983), the Department is charged with the responsibility and duty of administering and enforcing the provisions of the ACT, which includes the duty to suspend the licenses of those persons registered under the ACT for violations of the terms therein, as set forth in Section 494.05, Florida Statutes (1983). Kimberlee M. Fieber is a mortgage solicitor, who has been issued license number HK 0008319 by the DEPARTMENT. Formerly, Respondent was a mortgage solicitor for State Capital Corporation. As authorized by Section 494.071(1), Florida Statutes (1983), the DEPARTMENT conducted an investigation of the affairs of State Capital Corporation under the ACT. During that investigation, the DEPARTMENT took a statement from A. G. Bernardo. Mr. Bernardo stated that he had first heard of State Capital Corporation through its advertisements in the newspaper, to which he responded. After Mr. Bernardo contacted State Capital in answer to the advertisements, Respondent went to his home to attempt to persuade him to invest. During her sales talk, Respondent failed and neglected to explain the concept of equal dignity mortgages to Mr. Bernardo. Respondent also failed and neglected to disclose to Mr. Bernardo that the DEPARTMENT had taken legal action against State Capital and, in fact, suggested that Mr. Bernardo call the Department as a reference. Based on Respondent's representations, Mr. Bernardo invested $5,000.00 with State Capital Corporation. In return for his investment, Mr. Bernardo received an equal dignity first mortgage on a small motel. Mr. Bernardo's note became due after six months, and he renewed his investment for another period, this time of a year. When the one year renewal period had expired, Mr. Bernardo had decided not to renew his investment because of newspaper articles telling of State Capital's financial difficulties, and he notified State Capital of his decision and made demand on it for the return of his investment. Said mortgage note was due to be paid in December, 1984. However, payment was not made to Mr. Bernardo at that time, nor within a reasonable time thereafter.
The Issue Whether Respondents, Zuma Engineering Company, Inc., ("Zuma") and Michael J. Gruttadauria, sold securities in Florida in violation of Sections 517.07 and 517.12, Florida Statutes? Whether Respondents, in connection with the offer and sale to Florida investors of Zuma promissory notes, (whether the notes constituted securities or not) violated the anti-fraud provisions of Section 517.301(1)(a), Florida Statutes? Whether Mr. Gruttadauria, as President of Zuma, may be held responsible for Zuma's corporate acts even if Mr. Gruttadauria did not have direct knowledge of them?
Findings Of Fact The Parties The Department Petitioner, the Department of Banking and Finance, Division of Securities and Investor Protection, is the state agency mandated by the Florida Securities and Investor Protection Act, Chapter 517, Florida Statutes, to "administer and provide for the enforcement of all the provisions of [Chapter 517]." Section 517.03, Florida Statutes. Zuma Respondent Zuma Engineering Co., Inc., is a Florida corporation that has ceased operating and is no longer in business. Its last known address was 11700 Belcher Road South, Largo, Florida 34643. In the early part of this decade, Zuma's business operation was to consist primarily of the recycling of scrap rubber tires through a manufacturing process that produced crumb rubber to be used in the construction of roads. Zuma had other revenue components planned as well: picking up tires from used tire dealers, shipping used tires to overseas dealers, collecting factory on-site dump fees for used tires, and pursuing the manufacture of rubber mulch to be used in playgrounds. Michael Gruttadauria Mr. Gruttadauria is the President of Zuma. Mr. Gruttadauria has been the President of Zuma since its inception, that is, since the day Zuma was incorporated. Former Respondents Jeffrey George Turino was Zuma's Chief Financial Officer. He had been a licensed securities dealer at some time prior to 1990 but his license lapsed. Mr. Gruttadauria relied on Mr. Turino for the raising of capital for Zuma through the sale of promissory notes. The other former respondents were selling agents for Zuma. Several of them were insurance salesmen who benefited from pre-existing relationships with insurance business clients to sell them promissory notes as investments in Zuma. For example, former Respondent Darren Carlson was Nancy Lechner's mother's insurance agent. Carlson sold Ms. Lechner's mother nursing home insurance. In the course of their business relationship, both Ms. Lechner and her mother learned that Mr. Carlson also sold annuities and offered other investments. Ms. Lechner, a nurse, and her mother, "were looking for . . . investments that paid a little more interest than what the banks would pay, and he mentioned Zuma to us." (Vol. 1, Tr. 118.) Mr. Carlson told Ms. Lechner it was "a recycling company. They had very unique equipment that made tires into mulch and rubber that went back into the roads, . . . I had heard of recycling on the TV and how fantastic it's doing. So we invested in it." (Vol. 1, Tr. 119). Mr. Carlson did not give Ms. Lechner and her mother a business plan, an offering circular or a prospectus, but after hearing of their concerns over whether the investment was safe or not, "he told us that if anything were to happen to the company that there is always the equipment, which was worth a lot of money, that we would get our money back." (Vol. 1, Tr. 120.) Ms. Lechner and her mother invested $47,000 in Zuma in 1995. In return, they received promissory notes. At the time of the investment, they did not understand that they had loaned the money to Zuma. They were not told that the equipment, which supposedly ensured the safety of the investment, was pledged, collateralized or leased. Had they known Zuma did not own the equipment, they would not have made the loan. Importantly, too, they were not told that there were approximately $2,000,000 in outstanding promissory notes at the time they invested. Mr. Carlson also failed to tell Ms. Lechner and her mother that Zuma had applied for but not yet received a state permit necessary to carry out its operation of producing crumb rubber. Had Ms. Lechner known about the lack of a permit, she would not have invested in Zuma. After the investment was made, Ms. Lechner and her mother did not receive any interest payments as required by the notes. Nor have she or her mother ever received re-payment of any of the principal. Their $47,000 has been lost. The only contact initiated by the company after the investment was a newsletter claiming that 1995 had been an explosive year for Zuma with a major tire company considering investment in Zuma and entry into a joint venture research agreement with the University of South Florida's College of Chemistry. Bad Business From the Start Zuma was undercapitalized from the beginning. Zuma did not have the millions of dollars necessary to conduct a successful crumb rubber factory. It did not own its equipment nor did it own the property on which the business was sited. Zuma's business never turned a profit either. In fact, its revenue never came close to approaching what was necessary just to break even. From 1990 through 1993, it had significant losses. For these four years, tax returns show revenue of only $37,000. Total expenses for the four years amounted to $572,000. Of these expenses, commissions paid to agents who obtained capital by selling promissory notes executed by Zuma amounted to $248,000. During the same time period, Zuma paid out over $117,000 in interest. Zuma's financial picture was portrayed at hearing in bleak terms by Mary M. Delano, the Department's financial investigator who had reviewed Zuma's financial records: [T]he business was operating at a large loss and . . . the revenues were far below what was necessary to maintain the operations of the business. . . . with a commissions and interest expense of that significance . . . the borrowings of the company were significant and . . . the cost of those borrowed funds were significant, also. Vol. 1, Tr. 80. Zuma's financial picture did not improve after 1994. But Zuma continued to obtain loans through promissory notes mainly from elderly people like Ms. Lechner's mother. Loans evidenced by promissory notes for the period of time from 1991 through 1995 totaled nearly three million dollars. Promissory Notes Because it did not have adequate capitalization, Zuma, through its principals, employees, associates and agents offered to sell and did sell promissory notes to finance its operation. Most had a maturity date in excess of nine months. The face value of the notes ranged from $25,000 to $170,0000. They were sold to Florida investors. Typical of these investors was Carlyle H. Charles' mother. She invested over $105,000 in Zuma for which she received a promissory note. The note was executed on June 5, 1997, the day after her 91st birthday. The funds in the case of Mr. Charles' mother came from surrender of two annuities. Even with interest which should have been paid, Mr. Charles' mother would have lost over $6,000 the first year of the life of the loan because of surrender penalties imposed by the annuity companies. Had Mr. Charles' mother understood that she would have lost so much money the first year from surrender penalties, there is "no way" (Vol. 1, Tr. 103,) that she would have loaned or invested the money in Zuma. The surrender penalty was not explained to Mr. Charles' mother by the insurance agent who had established the annuities for her. Nor was it explained by Darren Carlson who actually sold the promissory note to Mr. Charles' mother. She did not realize, moreover, the nature of the investment in Zuma. After discussion with Carlson, she thought that she had either entered new annuities or had the old ones adjusted to improve her payments. Mr. Charles' mother has never received any interest payments on the promissory note or repayment of any of the principal. Any possibility of re-payment has dimmed to the point of hopelessness now that Zuma is out of business. All told, Zuma sold more than seventy notes to more than forty investors. Most of these were elderly people, retirees and widows, in their seventies and eighties, who did not understand the full import of the investments in Zuma. None of Zuma investors were provided with an offering circular, a prospectus or a financial statement about Zuma. While these investors lost all of their investments, Mr. Carlson and Zuma's other selling agents were paid handsome commissions for the sale of Zuma promissory notes, usually between 10 percent and 15 percent of the face value of the notes. Registration with the Department Zuma's promissory notes were not registered as securities with the Department pursuant to Chapter 517, Florida Statutes. Neither Zuma nor Mr. Gruttadauria have ever been registered with the Department to sell securities. Mr. Gruttadauria's involvement Mr. Gruttadauria relied on Mr. Jeffrey Turino, Zuma's Chief Financial Officer, with regard to the sale of the promissory notes. Prior to an investment being made, Mr. Gruttadauria never met or talked with an investor except for Jack Wheeler. In Mr. Wheeler's case, Mr. Gruttadauria met with Mr. Wheeler and Mr. Turino before the promissory note was executed and, at Mr. Wheeler's insistence, Mr. Gruttadauria signed the note both on behalf of Zuma and personally. Mr. Gruttadauria also signed every promissory note on behalf of the corporation. Many of these notes were signed long after Zuma's financial condition had become desperate. During this time, Mr. Gruttadauria saw the selling agents as often as once or twice a week. He did not ask them who the investors were or what their interest in investing in Zuma might be. Mr. Gruttadauria wanted to know as little as possible about the people who were investing large sums of money in his failing business. Nonetheless, Mr Gruttadauria recognized his responsibility for the financial affairs of Zuma in October of 1995 when he sent out the newsletter received by Ms. Lechner. In the closing paragraphs of a 5-page letter trumpeting Zuma's environmental achievements and advances in the areas of the market place, personnel, finance, and research the following appears: The reason this newsletter is so long, is that Michael G., [Mr. Gruttadauria], thought others had been sent out since last October, and it turns out I was misinformed on this and other matters, by an employee no longer with the firm. [T]he bottom line is that I have the ultimate responsibility of everything that has or has not now returned to a "hands on" mode in regard to the financial aspects of Zuma. * * * My attitude is that without you, Michael G., and Zuma would not only be where they are "today", but would never be able to get where we going "tomorrow". You have every right to receive accurate, truthful answers to any and all of your questions regarding Zuma. Thank you for "Today" and thank you again for "Tomorrow". Zuma Engineering Co., Inc. Michael J. Gruttadauria President/Founder Petitioner's Exhibit No. 18, (emphasis added) To this day, with minor exceptions, all the promissory notes signed by Mr. Gruttadauria are in default.
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 ordering Zuma Engineering Co., Inc., and Michael J. Gruttadauria to cease and desist from all present and future violations of Chapter 517, Florida Statutes, and fining them the maximum amount allowable by law: $5,000 for each violation of the provisions of Chapter 517, Florida Statutes, found above; that is, $5,000 for failure to register Zuma as a dealer in securities and $10,000 times the number of promissory notes introduced into evidence in this proceeding ($5,000 for failure to register each and every note as a security with the department plus $5,000 for the fraud connected with each and every note.) DONE AND ORDERED this 5th day of November, 1997, 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 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of November, 1997. COPIES FURNISHED: Josephine A. Schultz, Esquire Division of Securities and Investor Protection Department of Banking and Finance 526 Fletcher Building 101 East Gaines Street Tallahassee, Florida 32399-0350 Michael J. Gruttadauria 1908 Downing Place Palm Harbor, Florida 34683 Harry Hooper, General Counsel Department of Banking and Finance Room 1302, The Capitol 01 Tallahassee, Florida 32399-0350 Honorable Robert F. Milligan Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
Findings Of Fact Respondent was issued Mortgage Broker License No. 3082 on September 3, 1974 by Petitioner. Respondent conducted certain transactions under its Mortgage Broker License during the period from September, 1973 until April, 1974. Respondent found client investors who had funds which they wished to invest in mortgages which would pay a greater return in interest than the average land mortgage. The transactions involved the purchase of a promissory note from a land development corporation secured by a mortgage deed on land ostensibly owned by the developer, in which the latter reserved the right and was authorized to convey the premises to a purchaser under an installment land contract subject to the lien of the mortgage. The deed further provided that the developer would deliver to a bank as an escrow agent a copy of any such agreement for deed and a quitclaim deed which would be held in escrow unless a default was established under the mortgage deed. What the investor would receive in such cases would be the developer's assignment of an agreement for deed collateralized by the mortgage deed. The issuance of these high interest notes were for the purpose of enabling the development company to make certain improvements on the land which they were obligated to do under sales contracts. In the transactions in question, Respondent dealt through Financial Resources Corporation of Ft. Lauderdale, Florida to which he remitted the investors funds, less an amount retained for fees or commissions. The land developer/borrower would then issue the note and mortgage in the face amount of the total investment made by the investor. The detailed procedure was that when an investor inquired concerning such mortgages, Respondent would determine from Financial Resources Corporation if any were available. It was the practice of Respondent's President then to look at the land development, determine if, in fact, the land was in development and had streets and the like, and to read pertinent documents concerning the development. He would then proceed to accept the full sum of the investment from the investor pursuant to an agreement by which the investor, in consideration of the stated sum, would authorize Respondent to use its best efforts to secure collateralized promissory notes at a minimum percentage of interest on the declining balance with principal and interest payable monthly if held to maturity. Respondent would then deposit the investor's check, usually on the same day as received, and then in several days send a notice to Financial Resources Corporation authorizing it to prepare and execute a self-amortizing monthly principal and interest promissory note with quitclaim deed in the amount of the investment, together with a check representing the proceeds of the Investment less the Respondent's fee or commission, and a sum for intangible tax on the transaction. Financial would thereafter return to Respondent a copy of the note and mortgage in exchange for the funds remitted. The recorded mortgages would be sent to Respondent within a month or so thereafter. Respondent had no agreements in writing with the land developer, nor with Financial Resources Corporation. Respondent claimed that its fees for services were set by Financial Resources Corporation which usually amounted to about 12 percent of the face amount of the investment, but which was sometimes more and frequently less than that authorized under the applicable statutes and regulations. Respondent did not maintain an escrow bank account and all funds received from investors were deposited into the corporate bank account of the firm. Respondent's agreements with investors set no specific term or period of time in which the secured promissory notes were to be obtained although its president would customarily tell investors that it would take some time for the transaction to be consummated, and that they could not expect to receive the recorded mortgages right away (testimony of Mr. Montague, Petitioner's Exhibits 2-10). Respondent discontinued transactions as described above in April, 1974 because he was dissatisfied with the business. He had been informed that certain lands under some of the mortgages had not been sold until after the mortgage had been executed and that this was in violation of State law. In the fall of that year, he received a memorandum from the State Comptroller on the subject of escrow accounts, dated October 11, 1974, which warned mortgage brokers in the state concerning the practice of remitting investors' funds to land developers in anticipation of receiving a recorded mortgage and note (testimony of Mr. Montague, Respondent's Exhibit 9). In 1975,a financial examiner from Petitioner's office was sent to the office of Respondent to examine his books and records. Pursuant to that examination, it was determined that Respondent had committed various violations of Chapter 494, F.S. on certain transactions. The following findings of fact are made with respect to the transactions in question: Allegation: That Respondent took and received deposits of money from Robert E. Creighton, Hazel R. Hardesty, J. Wilfred Caron, Rose A. Hoadley, Margaret A. Gregory and Willard A. Kotthaus, in the regular course of business, and failed to immediately place such said funds in an escrow or trust account as required by Section 494.05(1) , F.S. As heretofore stated, the Respondent did not maintain an escrow trust account with respect to any of the above-stated transactions. The above- mentioned individuals had authorized Respondent to disburse the funds immediately upon receipt (testimony of Mr. Montague, Supplemented by Exhibits 3- 8). Allegation: Respondent failed to maintain adequate records in violation of Section 494.06(3), F.S., in that its files contained no written agreements on transactions with Della W. Shaw, Lantana Sheet Metal and A.C. Inc., and another transaction with Lantana Sheet Metal. The agreement between Della Shaw and Respondent, although not present in Respondent's file at the time of examination of its records by Petitioner's representative, had been executed on October 15, 1975, and presently is contained in the records of the Respondent. It had been taken out temporarily by one of Respondent's associates who also had Della Shaw as a client. Respondent had entered into two transactions with the trustee of the pension fund and profit sharing plan of Lantana Sheet Metal, one for ten thousand dollars from the pension fund and one for three thousand dollars from the profit sharing plan. At the time of these investments there were written contracts which were executed by the parties. The books and records of both the pension fund and the profit sharing fund were maintained at Respondent's office by a firm which administered both plans. The agreements pertaining to the Lantana transactions were requested and withdrawn from Respondent's files by the trustee of the Lantana funds. Consequently, they did not appear in the records of the corporation at the time of examination by Petitioner's representative (Petitioner's Exhibits 2 and 4; Respondent's Exhibit 10). Allegation: Respondent failed on numerous loan purchase agreements to establish the term for which the agreement was to remain in force before the return of the deposit for nonper- formance could be required by the investor, in violation of Chapter 3-3.06, F.A.C. The transactions in question did not involve applications for mortgage loan, but agreements to purchase secured promissory notes. Respondent's clients were investors/purchasers, not borrowers (testimony of Mr. Montague; Petitioner's Exh. 2-10). Allegation: Respondent charged and accepted fees or commissions in excess of the maximum allowable in violation of Section 494.08(4), F.S., and Chapter 3-3.08(3) and (4), F.A.C., on trans- actions involving Rosa Eichelberger, overcharge of $10.90, Lantana Sheet Metal, overcharge of $62.60; Lantana Sheet Metal, overcharge of $10.91; Rose A. Hoadley, overcharge of $9.10; and Margaret A. Gregory, overcharge of $9.10.
