The Issue Whether Respondent's insurance agent licenses should be disciplined because selling a commercial note to an unqualified elderly person on February 11, 1999, demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, in violation of Sections 626.611(7), Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for regulating and licensing the sale of insurance in Florida, in accordance with the provisions of Chapter 626, Florida Statutes. Respondent, Kevin Ira Frye, is currently eligible for licensure and licensed in the this state as a health insurance agent, life insurance agent, life and health insurance agent, and life, including variable annuity agent, pursuant to licensure number A090874, and was so licensed at all times relevant to these proceedings. In the fall of 1998, Juanita Crouch of Spring Hill, Florida, expressed an interest in purchasing a long-term care insurance policy by responding to a solicitation she received in the mail from Respondent's agency. In response to her inquiry, Respondent came out to her home to discuss the insurance. Ms. Crouch at this time was a 75-year-old retired homemaker and widow. Her only income was $1,100 a month stipend from her deceased husband's social security and her interest income from two Certificates of Deposit (CDs). She did not graduate from high school. She had never worked outside of the home, being a homemaker all of her life; her husband handled all of the family finances prior to his death. She does not own any stocks, bonds or any other investments. Mrs. Crouch resides in a home purchased for her by her daughter, Linda Bruno-Lagos, and placed in her name through a recorded Articles of Agreement. Mrs. Crouch could not be considered a sophisticated investor. In addition, her health was poor, and her memory was some-what impaired. Mrs. Crouch possessed $25,000 deposited in two bank CDs that were coming due during the relevant time period. Mrs. Crouch was looking for a investment with a reasonable rate of interest so that she could deposit the funds in order to augment her small income. This $25,000 represented her only savings. Respondent, at this time, became aware that the CDs were coming due and during their next appointment, solicited Mrs. Crouch to take her $25,000 in savings and purchase a commercial promissory note to be issued by First American Capital Trust (FACT). FACT uses the proceeds from the issuance of the notes to fund the medium credit purchases of vehicle loans secured by perfected liens on new and used automobiles and light trucks. Respondent represented to Mrs. Crouch that, by purchasing the FACT note, she would be investing in a guaranteed financial instrument similar to a bank Certificate of Deposit. Mrs. Crouch would enjoy a 9.75 percent guaranteed interest rate on her investment over a nine-month period. Respondent gave Mrs. Crouch various brochures, including a document entitled "Disclosure Statement." The brochures purported to show that the investment was fully insured and guaranteed. No provision of this disclosure statement was ever explained by Respondent to Mrs. Crouch, including the disclosure warning by FACT that this investment was "inherently risky." Mrs. Crouch testified that she did not understand the information and was relying on Respondent's representations. This testimony is credible. Respondent testified that he purposely avoided explaining any provision of the disclosure statement. Respondent believed that it was Mrs. Crouch's sole responsibility to read the brochures and understand the details of the investment. In fact, Respondent testified that telling potential investors that they could lose all of their money was something he didn't discuss, as it might discourage sales. Respondent left the brochures explaining the investment with Mrs. Crouch to read and review, which she did not do. Respondent was aware, or should of been aware, that Mrs. Crouch, given her age and financial circumstances as a retiree, desired to place her funds only in safe, low risk, investments. Mrs. Crouch did not meet the suitability standards to purchase the FACT note, as set forth in the disclosure statement prepared by FACT. FACT required potential investors to have either a net worth of $1,000,000, or an annual income in excess of $200,000 a year, or in the alternative, no more that 20 percent of an individuals total assets could be invested. The application submitted by Respondent lists her net worth as between $150,000 and $250,000. Mrs. Crouch's actual net worth is significantly less than this sum. Respondent prepared the application, which Mrs. Crouch signed, and he determined the estimate of Mrs. Crouch's net worth. Respondent was either aware or should have been aware that Mrs. Crouch did not have such a net worth as was listed on her application, and, therefore, did not meet FACT's eligibility requirements. She should not have been sold the note. Mrs. Crouch elected to invest her $25,000 with FACT to purchase the note. On February 11, 1999, she gave the funds to Respondent, which was promptly remitted to FACT. On March 8, 1999, FACT issued a Certificate of Commercial Note, at the full redemption value of $26,961.35 in the name of Juanita Crouch, with a maturity date nine months from the date of the note. In December of 1999, Mrs. Crouch received a letter from FACT informing her that FACT had filed for bankruptcy protection on September 30, 1999. A receiver has been appointed who is attempting to recover assets. Mrs. Crouch never received any return on her purchase of the FACT note. She filed a claim in the U.S. Bankruptcy Court, but with the exception of two small payments from the receiver, she has never received any payments on the note. She has apparently suffered a loss of most, if not all, of her principal of $25,000. Mrs. Crouch, relying on Respondent's representations, thought she was purchasing a note that would pay a fixed yield with very low risk. What she unknowingly purchased was a commercial note that carried a warning from FACT that "extending credits to retail buyers with medium credit ratings is inherently risky." Mrs. Crouch was clearly unaware of this risk and Respondent made no attempt to make her aware. Despite the representations made to Mrs. Crouch by Respondent, at no time was her investment insured or guaranteed by the Federal Deposit Insurance Corporation, or any insurance company, nor any other entity. In fact, the Disclosure Statement states that the private insurance covers the vehicle loans only and not the notes directly. Respondent failed to disclose to Mrs. Crouch that her note and investment was not insured, even though he testified that he was aware of and understood that the note itself was not insured at the time of the sale. Respondent has been a licensed insurance agent since December 9, 1997, and was employed by Senior American Insurance and Financial Services. Respondent has not previously been disciplined by Petitioner.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED as follows: Respondent, Kevin Ira Frye, be found guilty of violating Section 626.611(7), Florida Statutes. Pursuant to Rule 4-231.080, Florida Administrative Code, Respondent's licenses and eligibility for licensure be SUSPENDED for a period of six months, followed by a two-year period of probation upon such reasonable conditions as the Department may require. DONE AND ENTERED this 6th day of February, 2003, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of February, 2003. COPIES FURNISHED: James A. Bossart, Esquire Department of Financial Services 200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0333 Sidney Werner, Esquire Piper, Ludian, Howie & Werner, P.A. 5720 Central Avenue St. Petersburg, Florida 33707 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Respondent committed the acts alleged in Petitioner’s ten-count Second Amended Administrative Complaint, and, if so, what penalty, if any, should be imposed upon Robert Gordon DeWald’s (Respondent) insurance agent licenses.
Findings Of Fact Respondent is currently licensed in Florida as a resident Life Including Variable Annuity (2-14), Life Including Variable Annuity & Health (2-15), Life (2016), and Life & Health (2-18) insurance agent. At all times pertinent to the dates and occurrences referred to herein, Respondent was licensed in this state as an insurance agent and has been a licensed insurance agent in Florida for over 21 years. Prior to being licensed in Florida, Respondent was a licensed insurance agent in the state of New York. Petitioner has jurisdiction over Respondent’s insurance agent licenses and appointments, pursuant to Chapter 626, Florida Statutes (2008).1 National Foundation of America The National Foundation of America (NFOA) is a registered Tennessee corporation that was formed on January 27, 2006, and headquartered in Franklin, Tennessee. NFOA Corporate Resolution, dated April 19, 2006, provides for the corporate authority to “liquidate stocks, bonds, and annuities . . . in connection with charitable contributions or transactions. ” This same resolution also provides for the corporate ability to “enter into and execute planned giving or charitable contribution transactions with donors, including executing any and all documentation related to the acceptance or acquisition of a donation, . . . given in exchange for a charitable gift annuity. ” On September 18, 2006, the State of Washington Office of Insurance Commissioner issued an Order to Cease and Desist: In the Matter of: National Foundation of America, Richard K. Olive, and Susan L. Olive, Order No. D06-245. The Order, among other things, was based on NFOA doing business in the state and not having been granted a certificate of authority as an insurer in the state of Washington and not having been granted tax exempt status under Section 501(c)(3) of the IRC. On April 13, 2007, the Florida Office of Insurance Regulation (OIR) issued an Immediate Final Order (IFO) In the Matter of: National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, and Robert G. DeWald, Case No. 89911-07, finding that the activities of NFOA, et al., constituted an immediate danger to the public health, safety or welfare of Florida consumers. OIR further found that, in concert, NFOA, et al., were “soliciting, misleading, coercing and enticing elderly Florida consumers to transfer and convey legitimate income tax deferred annuities for the benefit of themselves and their heirs to NFOA in exchange for charitable term-certain annuities”; and that NFOA, et al., had violated provisions of the Florida Insurance Code, including Sections 624.401 and 626.901, Florida Statutes. NFOA has never held a license or Certificate of Authority to transact insurance or annuity contracts in Florida, nor has NFOA ever been registered, pursuant to Section 627.481, Florida Statutes, for purposes of donor annuity agreements. NFOA was never a registered corporation with the Florida Department of State, Division of Corporations. On May 11, 2007, NFOA appealed OIR’s IFO to the First District Court of Appeal of Florida (1st DCA). The 1st DCA dismissed NFOA’s appeal on July 24, 2007. Therefore, NFOA operated an as unauthorized insurer in Florida. On May 17, 2007, the IRS sent a letter to the Texas Department of Insurance stating that NFOA was not classified as an organization exempt from Federal Income Tax as an organization described in Section 501(c)(3) of the IRC. On May 23, 2007, the DCI filed a Verified Petition for Appointment of Receiver for Purposes of Liquidation of National Foundation of America; Immediate and Permanent Injunctive Relief; Request for Expedited Hearing, in the matter of Newman v. National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, Kenny M. Marks, and Hunter Daniel, Chancery Court of the State of Tennessee (Chancery Court), Twentieth Judicial District, Davidson County, Case No. 07-1163-IV. The Verified Petition states, at paragraph 30: NFOA’s contracts reflect an express written term that is recognized by the IRS as a charitable non-profit organization under Section 501(c)(3) of the Internal Revenue Code (Prosser, attachment 4), and the NFOA represents in multiple statements and materials that the contract will entitle the customers to potential generous tax deductions related to that status. The IRS states that it has granted NFOA no such designation. The deceptive underpinning related to NFOA’s supposed tax favored treatment of its contracts permeates its entire business model and sales pitch. This misrepresentation has materially and irreparably harmed and has the potential to harm financially all its customers and the intended beneficiaries of the contracts. These harms are as varied in nature and degree as the circumstances of all those individual’s tax conditions, the assets turned into NFOA, and the extent to which they have entrusted their money and keyed their tax status and consequences to reliance on such an organization. On August 2, 2007, the Commissioner for the Tennessee DCI, having determined that NFOA was insolvent with a financial deficiency of at least $4,300,000, filed a Verified Petition to Convert Rehabilitation by Entry of Final Order of Liquidation, Finding of Insolvency, and Injunction, in the matter of Newman v. National Foundation of America, et al. On September 11, 2007, pursuant to a Final Order of Liquidation and Injunction entered in the matter of Newman v. National Foundation of America et al., the Chancery Court placed NFOA into receivership after finding that the continued rehabilitation of NFOA would be hazardous, financially and otherwise, and would present increased risk of loss to the company’s creditors, policy holders, and the general public. On February 6, 2008, the IRS sent a letter to the court appointed Tennessee DCI Receiver (Receiver) for NFOA stating that NFOA does not qualify for exemption from Federal income tax as an organization described in Section 501(c)(3) of the IRC. The IRS, in determining that NFOA did not qualify for tax exempt status, stated that the sale of NFOA annuity plans has a “distinctive commercial hue”, and concluded that NFOA was primarily involved in the sale of annuity plans that “constitute a trade or business without a charitable program commensurate in scope with the business of selling these plans.” The IRS letter also provides that consumers may not take deductions on their income tax returns for contributions made to NFOA. Insurance Agent’s Duties An insurance agent has a fiduciary duty to his clients to ensure that an insurer is authorized or otherwise approved as an insurer in Florida by OIR prior to the insurance agent selling the insurer’s product to his clients. There are several methods by which an insurance agent could verify whether or not an insurer was authorized or otherwise approved (hereinafter: “authorized”) as an insurer in Florida by OIR. It is insufficient for an insurance agent to depend on the assurances of his insurance business peers as to whether an insurer needs to be authorized in Florida. Due to the importance of income tax considerations in a consumer’s decision making process as to whether or not to purchase an insurance product, an insurance agent has a fiduciary duty to his clients to verify the validity of any representations that an insurer’s product has an IRS 501(c)(3) tax exempt status, prior to the insurance agent selling the product to his clients. There are several methods by which an insurance agent could verify whether or not an insurer has an IRS 501(c)(3) tax exempt status. Respondent admitted, in his testimony, that he had depended on the assurances of others and assumed that NFOA did not need to be authorized as an insurer in Florida. Respondent testified it was his understanding that only insurance companies sell annuities; that NFOA was not an insurer; and therefore, NFOA did not need to be licensed as a Florida insurer. Respondent did not inquire of the Florida OIR whether or not NFOA was authorized to do business in the State of Florida. However, Respondent admitted that the NOFA product he sold “mirrored” an annuity product. Respondent testified that he had verified (by phone, in writing, and the Internet) with the IRS that NFOA had applied for 501(c)(3) tax exempt status. However, Respondent was aware that the tax exempt status had not been granted to NFOA. Respondent knew income tax considerations were materially important to his clients. However, none of the NFOA materials or any Florida consumer contracts signed by Respondent and his clients contain any disclaimer language informing consumers that the 501(c)(3) tax exempt status had been applied for but had yet to be granted by the IRS. Respondent testified that he made use of the Internet to obtain information. However, Respondent failed to use the Internet to find out that the State of Washington Office of Insurance Commissioner entered an Order of Cease and Desist on September 18, 2006, against NFOA based on NFOA not having a certificate of authority as an insurer and because NFOA did not have a 501(c)(3) tax exemption. As is noted below, the filing date of the Washington Order to Cease and Desist, preceded in time all but two of Respondent’s NFOA sales to Florida consumers. Respondent received commissions totaling $171,328.18 for selling NFOA annuities to Florida consumers. Respondent failed to disgorge any of these commissions to the Receiver for NFOA in the state of Tennessee. Re: Count I: Consumer – Yvette Potvin On November 30, 2006, Respondent solicited and induced Yvette Potvin of Casselberry, Florida, then age 81, to transfer or otherwise surrender ownership of her existing annuity contract with Allianz Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Potvin that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew that NFOA had not been approved for tax exempt status by the IRS. Based upon Respondent’s transaction of insurance, Ms. Potvin transferred to NFOA and is anticipated to lose approximately $10,410.42. This amount includes a surrender penalty incurred for transferring her original Allianz annuity to NFOA, and after receiving partial refunds by the Receiver. Based upon Respondent’s transaction of insurance with Ms. Potvin, Respondent was paid a commission of $3,682.89 by NFOA. Re: Count II: Consumer – Edna Bishop On January 18, 2007, Respondent solicited and induced Edna Bishop of Orlando, Florida, then aged 89, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Bishop that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bishop, Respondent was paid a commission of $8,185.35 by NFOA, even though the transaction was not completed. Re: Count III: Consumer – Genevieve McCann On December 14, 2006, Respondent solicited and induced Genevieve McCann of Fern Park, Florida, then aged 85, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. McCann that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. McCann is anticipated to lose approximately $6,100.23. The loss consists of $20,933.04, the amount transferred to NFOA, less $1,742.85 (installment payments made by NFOA to Ms. McCann); $12,473.62 (the first payment sent by Receiver); and $2,686.63 (the second payment sent by Receiver). Ms. McCann lost $2,070.29 through surrender charges incurred for transferring her original American Equity annuity to NFOA. If the surrender penalty is excluded from the calculation, Ms. McCann’s loss is $4,029.94. Based upon Respondent’s transaction of insurance with Ms. McCann, Respondent was paid a commission of $1,879.52 by NFOA. Re: Count IV: Consumer – Lenora Bricker On or about November 30, 2006, Respondent solicited and induced Lenora Bricker of Winter Haven, Florida, then aged 87, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Bricker that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bricker, Respondent was paid a commission of $1,085.17 by NFOA, even though the transaction was not completed. Re: Count V: Consumer – Louise Blevins On or about November 30, 2006, Respondent solicited and induced Louise Blevins of Longwood, Florida, then aged 81, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Blevins that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bricker, Respondent was paid a commission of $5,469.09 by NFOA, even though the transaction did not close. Re: Count VI: Consumer – Audrey Piel On December 14, 2006, Respondent solicited and induced Audrey Piel of Maitland, Florida, then aged 81, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Piel that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. Piel is anticipated to lose approximately $5,594.24. The loss consists of $21,089.17, the amount transferred to NFOA; less $996.35 (installment payments made by NFOA to Ms. Piel); $13.645.33 (the first payment sent by Receiver); and $2,938.99, (the second payment sent by Receiver). Ms. Piel lost $2,085.74 through surrender charges incurred for transferring her original American Equity annuity to NFOA. If the surrender penalty is excluded from the calculation, Ms. Piel’s loss is $3,508.50. Based upon Respondent’s transaction of insurance with Ms. Piel, Respondent was paid a commission of $1,839.54 by NFOA. Re: Count VII: Consumer – John Bartlett On February 13, 2007, Respondent solicited and induced John Bartlett of Orlando, Florida, then age 75, to transfer or otherwise surrender ownership of his existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Mr. Bartlett that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Mr. Bartlett, Respondent was paid a commission of approximately $16,385.56 by NFOA, even though the transaction was not completed. Re: Count VIII: Consumer – Lilla Dama On January 18, Respondent solicited and induced Lilla Dama of Orlando, Florida, then aged 86, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Dama that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Dama, Respondent was paid a commission of approximately $2,757.52 by NFOA, even though the transaction was not completed. Re: Count IX: Consumer – Agnes Burns On February 28, 2007, and April 2, 2007, Respondent solicited and induced Agnes Burns of Orlando, Florida, then aged 87, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company and New York Life Insurance and Annuity Company, respectively, in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Burns that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. Burns is anticipated to lose approximately $77,509.17. The loss consists of $335,070.29, the amount transferred to NFOA; less $18,363.66 (installment payments sent by NFOA to Ms. Burns); $205,859.31 (the first payment sent by Receiver); and $44,338.93 (the second payment sent by Receiver). A surrender penalty of $11,000.78 was incurred by Ms Burns for transferring her original annuities to NFOA. If the surrender penalty is excluded from the calculation, Ms. Burns’ loss is $66,508.39. Based upon Respondent’s transaction of insurance with Ms. Burns, Respondent was paid a commission of $30,080.00 by NFOA. Re: Count X: Consumers – Ms. Buchanan; Ms. Golus, and Mr. Owens Respondent solicited and induced Elizabeth Buchanan, aged 42, of Bradenton, Florida; Nancy Golus, aged 59, of Palmetto, Florida; and Herbert Owens, aged 86, of St. Petersburg, Florida, to transfer or otherwise surrender ownership of their existing annuity contracts in return for an NFOA annuities. As to the the NFOA agreement that Mr. Owens entered into, and which was signed by Respondent, the date of the agreement is subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. The NFOA agreements that Ms. Buchanan and Ms. Golus entered into were dated prior to the State of Washington’s Order to Cease and Desist. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Based upon Respondent’s transactions of insurance, Ms. Buchanan is anticipated to lose approximately $89,031.12. The loss consists of $162,445.60, the amount transferred to NFOA; less $20,000.00 (installment payments sent by NFOA to Ms. Buchanan); $92,589.64 (the first payment sent by Receiver); and $19,942.38 (the second payment sent by Receiver). Ms. Buchanan suffered $59,117.54 in losses from surrender charges incurred. Even after partial refunds by the DCI Receiver and the surrender penalty are excluded from the calculation, Ms. Buchanan’s loss is still $29,913.58. Ms. Golus is anticipated to lose approximately $146,027.18, the amount transferred to NFOA. Ms. Golus received $94,917.67 (the first payment by Receiver) and $20,443.81 (the second payment by Receiver). However, Ms. Golus suffered $53,152.47 in surrender charges incurred. Even after partial refunds by the Receiver and the surrender penalty are excluded from the calculation, Ms. Golus’ loss is $30,665.67. Mr. Owens is anticipated to lose approximately $10,976.33. The loss consists of $54,743.52, the amount transferred to NFOA; less $5,108.40 (installment payments sent by NFOA to Mr. Owens); $32,262.83 (the first payment by Receiver); and, $6,948.92 (the second payment sent by Receiver). Mr. Owens incurred $552.96 in surrender charges. Even after partial refunds by the Receiver and the surrender penalty are excluded from the calculation, Mr. Owens’ loss is still $10,423.37. In each and every count, Petitioner proved by clear and convincing evidence that: Respondent directly or indirectly represented or aided an unauthorized insurer to do business in Florida. Respondent knew or reasonably should have known that the annuity contracts he contracted with clients were with an unauthorized insurer. Respondent knowingly placed before the public a statement, assertion, or representation with respect to the business of insurance that was untrue, deceptive or misleading. Respondent knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public a false material statement. Respondent demonstrated a lack of fitness and trustworthiness to engage in the business of insurance. Respondent engaged in unfair and deceptive practices or showed himself to be a source of injury or loss to the public.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Chief Financial Officer enter a final order finding that: Respondent violated Subsections 626.901(1), 626.901(2), 626.9541(1)(b)4., 626.9541(1)(e)1.e., 626.611(7), 626.621(2), and 626.621(6), Florida Statutes, as charged in Counts I-X of the Second Amended Administrative Complaint; Revoking each and every one of Respondent’s licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; and Providing that if Respondent, subsequent to revocation, makes application to Petitioner for any licensure, a new license will not be granted if Respondent fails to prove that he has otherwise satisfied the financial losses of his NFOA clients, or if Respondent otherwise fails to establish that he is eligible for licensure. DONE AND ENTERED this 10th day of December, 2009, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2009.
Findings Of Fact Parties Respondent, Department of Insurance (DOI) and Intervenor, Department of Banking and Finance (DBF) are state agencies charged with the regulation of insurance and banking activities, respectively. Great Northern Insured Annuity Corporation (GNA) is an insurance company and agency operating in Florida and elsewhere in space leased in financial institution lobbies, customer service areas and atriums. From its approximately eighty-four locations in Florida it markets annuities, securities and whole life insurance products. Approximately one-third of its 1992 sales of $130 million was in annuities. GNA's principal profits in Florida are derived from its sale of annuities, which it directly underwrites and services. First Nationwide Bank (FNB) leases space in its lobbies and other common areas to insurance agencies and companies, including Vista Financial Group, (Vista). In 1992 Vista sold approximately $13.5 million in annuities from the locations it leases from FNB. First Union Mortgage Corporation (FUMC) is a financial institution with "grandfathered" insurance activities pursuant to section 626.988(5), F.S. It has also been granted a certificate of authority by DOI as a Third Party Administrator pursuant to section 626.88, F.S. Florida Bankers Association (FBA) is a trade association of the banking industry in Florida. It represents its financial institution members. The Association of Banks in Insurance Inc. (ABI) is a trade association of financial institutions and insurance companies. The Florida Association of Life Underwriters (FALU) is a professional association of life, health and direct writer multi-line insurance agents with approximately 8,900 members. James Mitchell and Co. and its subsidiary, JMC Insurance Services Corporation (JMC) are California corporations involved in marketing financial products, including annuities in Florida. Florida Central Credit Union, Railroad and Industrial Federal Credit Union and GTE Federal Credit Union are state or federally chartered credit unions authorized to do business in Florida. Credit Union Services, Inc., a wholly owned subsidiary of GTE Federal Credit Union, sells insurance to credit union members. The Florida Association of Insurance Agents (FAIA) is a trade association representing independent insurance agents in Florida. Barnett Banks Trust Company, N.A. is a trustee for annuities issued by James Mitchell and Company. Barnett Banks Insurance, Inc. is a Florida licensed insurance company providing credit insurance of various types for credit extended by Barnett Banks throughout Florida. BTI Services, Inc. a subsidiary of Barnett, provides records administration services for insurers. Marketing One, Inc., Liberty Securities Corporation and Compulife, Inc. market annuities to existing and prospective customers of financial institutions. Those marketing activities are conducted from lobbies, atriums or other central areas of the premises of the financial institutions. The Financial Institutions Insurance Association is a California non- profit association of financial institutions and insurance companies with members in Florida who lease space to insurance agency tenants. California Federal Bank is a federal savings bank operating branches in the State of Florida and leasing space to a company selling insurance in that space in bank branch offices. The Statute Although other sections of statutes are cited as "law implemented" in proposed Chapter 4-223, its undeniable focus is section 626.988, F.S., as described in the first rule of the proposed chapter: 4-223.001 Purpose. The purpose of these rules is to implement the provisions of Section 626.988, Florida Statutes, and to ensure that customers of financial institutions conduct their business in an atmosphere free from direct or indirect coercion, unfair competition, and unfair or deceptive trade practices, and to implement those statutory provisions which prohibit insurance agents and solicitors who are directly or indirectly associated with, under contract with, or controlled by a financial institution from engaging in insurance agency activities as an employee agent, principal, or agent of a financial institution agency. These rules establish procedures and standards for insurance companies, agencies, agents and solicitors in their relationships and business arrangements with financial institutions. Embodied in Florida's insurance code, a code described as more lengthy than the New Testament, Section 626.988 F.S. enacted in 1974, ". . . generally prohibits banking institutions from engaging in insurance agency activities. . . ." Florida Association of Insurance Agents, Inc. v. Board of Governors, 591 F.2d 334 (U.S. 5th Cir. 1979). The prohibition is accomplished indirectly by forbidding licensed insurance agents or solicitors from engaging in insurance agency activities under certain relationships with financial institutions. There are exceptions to the blanket prohibition, including an amendment in 1990 to permit state chartered banks to sell annuities in the event that federal law permits federal banks to sell annuities. After almost twenty years of attempted enforcement, DOI has described section 626.988, F.S. as "a vague statute with imprecise standards". (Notice of proposed rule, Florida Administrative Weekly, June 26, 1992) The Rules DOI's experience with interpretation and enforcement of Section 626.988, F.S. commenced in earnest in the early 1980's, when insurance companies began to market annuities in the lobbies or public access areas of financial institutions. Many of these companies consulted with the department and obtained guidance as to the applicability of the law to their varied circumstances. In 1985, American Pioneer Life Insurance Company, through its counsel, Edward Kutter, Esquire, inquired of Commissioner Gunter concerning the effect of the law on its operations. American Pioneer Life Insurance Company was a wholly owned subsidiary of American Pioneer Savings Bank. Donald Dowdell, General Counsel of the department, responded by letter dated November 18, 1985. He analyzed the relationships among the insurer, the financial institution, and the insurance agents and determined that there was no significant probability of the financial institution exercising control over the agents: . . . In view of the fact that American Pioneer Savings Bank is the ultimate parent of American Pioneer Life Insurance Company, the specific issue which must be resolved in responding to your inquiry is whether an independent agent appointed by American Pioneer Life is directly or indirectly associated with, or retained, controlled, or employed by American Pioneer Savings Bank. Absent such a relationship, Section 626.988 does not prevent American Pioneer Life and its agents from marketing insurance in this state. . . . These corporate relationships in and of themselves do not create a prohibited relationship between American Pioneer Savings Bank and independent insurance agents appointed by American Pioneer Life. . . . It is recognized that as the corporate parent, American Pioneer Savings Bank may influence or control various corporate activities of its subsidiaries which would not entail control of the solicitation, effectuation and servicing of coverage by insurance agents. If, in fact, American Pioneer Savings Bank does not directly or indirectly control the conduct of insurance activities by American Pioneer Life agents but, instead, the agents sell insurance free of influence from the financial institution, the prohibitions of the statute are inapplicable. (GNA Exhibit No. 8) (emphasis added) Thus, in 1985, the department limited the prohibitions of section 626.988, F.S. to the financial institution's control of, and authority over, an agent's insurance activities. By 1986, other aspects of an association became a concern of the department. Letters responding to inquiries outlined requirements that leased space and insurance sales literature be physically or visually separated from the functions of the financial institution. (GNA Exhibits No. 10, 13 and 16) As a result of the body of opinions being circulated in the form of incipient policy, the department proposed rules implementing section 626.988. These proposed rules were later withdrawn before adoption, but the department continued to use them as guidelines. During this period, DOI received a handful of complaints, mostly from agents. Douglas Shropshire, director of Agent and Agency Services during the relevant period, testified that he could not recall a single consumer complaint with respect to financial institutions engaging in the distribution of insurance products. Gail Connell, identified by Mr. Shropshire as "the Department's person most intimately familiar with field investigation of .988 issues" (Tr. at 760), agreed. (FUMC Exhibit No. 35, at 184-85 See also. FUMC Exhibit No. 36 at 347-50, 353) In 1991, in anticipation of the rule-making mandate of section 120.535, the department reviewed its guidelines. As a part of that review, representatives of the agents' associations, FALU, FAIA and others, were consulted as to the desirability of the rules. In January, 1992, DOI published proposed rules that were substantially similar to the guidelines. Donald Dowdell stated that the proposed rules published at that time represented the department's determination of a reasonable interpretation of the statute, adding, "[T]he line was drawn with the realization of what was happening in the real world today. We could have -- I think the statute prohibits an association, and as I indicated yesterday, if we had wanted to be Draconian about it and make life easier on ourselves, we could have attempted to prohibit any kind of association and see how that would have flown." (FUMC Exhibit No. 36 at 260-261) The rules published in January of 1992 were withdrawn in order to permit the department to correct some perceived inadequacies in the economic impact statement. The rules were presented at a workshop and were republished in June, 1992. The rules were virtually the same as those published in January. A public hearing was held July 12, 1992. On October 6, 1992, DOI published a Notice of Change which materially altered Rules 4-223.003, .004, and .005. According to the Notice of Change, the change was in response to comments received at the public hearing held July 12. More specifically, the amendments were the result of the department's adoption of FALU's position in its petition challenging the June version of the rules. The amendments most significantly provided a definition of "associated" or "associate" and forbade insurance agents from occupying space virtually anywhere within the confines of a financial institution. Mr. Shropshire drafted the amendment to Rules 4-223.003-.005. His source for the definition of "associate" was Webster's Dictionary. Mr. Shropshire testified that the modified proposal resulted from "explosive changes" in the number of banks involved in insurance in this state (Tr. at 793) and information which had come to his knowledge which indicated a need for a more restrictive rule. The two sources of information regarding insurance activities in Florida identified by Mr. Shropshire were the report prepared by investigator Ernest Ulrich in support of the economic impact statement and an ongoing investigation and prosecution of JMC for its marketing of annuities. Both sources predate or were contemporaneous to the June publication of the rules. Mr. Shropshire's reason for the October change was the anticipated difficulty DOI faced in enforcing its rules as originally published. He stated, "So it was getting plain to us that we were going to have to very vigorously and closely and labor-intensively enforce the rule, if it was passed as it was promulgated in June of '92." (tr. at 808) As described by Mr. Shropshire and others, the agency was concerned that insurance activities in financial institutions were not being conducted behind partitions, or even behind planters or other visual separations; and that bank agents were making referrals, taking telephone messages, and setting appointments for insurance agents who covered multiple bank branches on a "circuit-rider" system. Banks leasing space to agents also commonly paid bank employees a bonus for making appointments and referrals of customers to the agents. DOI determined that these leasing arrangements established a strong connection between the bank and the agent, in effect wrapping the insurance program in the bank's colors and presenting it as another bank product. This, to DOI, justified the previously characterized "Draconian" measures. The banks' and other witnesses freely described the economic advantage to a financial institution of having insurance services available at the same location for its customers. Additional amendments to the proposed rules were published in December 1992. Those amendments acknowledge or track the statutory exceptions to the section 626.988(2), F.S. prohibitions. The rules therefore do not apply to mortgage insurance business, credit unions, banks located in cities having a population of less than 5,000, and the sale of annuities when national banks have been authorized to sell such annuities. During the course of the formal hearing, the agency proposed a final change to the rules at issue, clarifying that Chapter 4-223 does not apply to credit life and disability insurance and credit unemployment insurance. (American Banking Insurance Co. Exhibit No. 1) The Economic Impact Dr. Tim Lynch, Director for the Center for Economic Policy Analysis for Florida State University, conducted surveys, collected data and analyzed the economic impact of the June 1992 version of the proposed rules. He prepared the economic impact statement for DOI. Dr. Lynch was consulted by the department about the October changes to the proposed rules and did additional analysis on the impact of the proposed changes. The economic impact statement prepared for the June publication was not amended, but Dr. Lynch's observations are found in his notes, or what he terms a "work in progress". He discussed those observations with department staff and considers the economic impact of prohibiting leases to be at least in the $ millions. The agency did not republish an economic impact statement after the October changes, but plainly considered the impact of those changes as articulated by its consultant, Dr. Lynch. Prohibiting the sale of annuities on bank premises would have a devastating effect on companies engaged in that activity. Banks, also, would be affected, as they recognize a substantial benefit of providing their customers the convenience of an in-house service. Although annuities are defined in Florida law as "life insurance" (See Section 364.602(1), F.S.) they are generally considered investments for future security rather than a cushion against loss. On March 20, 1990, the Office of the Comptroller of the Currency (OCC) issued a formal approval letter stating, among other things, that under controlling Federal banking law, annuities are primarily financial investment instruments that national banks are permitted and authorized to sell. (GNA Exhibit No. 41) A follow-up letter to J. Thomas Caldwell as representative of the Florida Bankers Association specifically concluded that federally chartered banks in Florida were authorized to sell annuities. (GNA Exhibit No. 42) The OCC conclusion with regard to the authority of national banks was upheld in the Variable Annuity Life Insurance Co. v. Robert Clarke, et. al., (VALIC) on November 22, 1991, by the U.S. District Court for the Southern District of Texas, Civil Action No. H-91-1016, 786 F. Supp. 639. The case is pending on appeal before the U.S. Court of Appeals for the Fifth Circuit. (Variable Annuity Life Insurance Company v. Clarke, Case No. 92-2010) In the meantime, the OCC continues to issue opinion letters consistent with its earlier opinion. (See 5/10/93 letter filed as supplemental authority on 6/18/93) National banks are presently selling annuities, and the impact of the October 1992 absolute prohibitions is nullified as to annuity products by the December 1992 amendments addressed in paragraph 30, above.
Findings Of Fact Respondent, Mahmooud Hassan Salame, is currently eligible for licensure and is licensed as a life and variable annuity contract salesman; life, health and variable annuity contract salesman; and life and health insurance agent during times relevant herein. During times material, Respondent was an officer and a director of Florida Health Insurance Services, Inc., an incorporated insurance agency doing business in Largo, Florida. During times material, Respondent was a duly appointed agent representing Life and Health Insurance Company of America. On October 1, 1991, Respondent solicited and sold to Francis Bluhm of Punta Gorda, Florida, a health insurance policy. At the time, Respondent received a check from Bluhm in the amount of $1,613.00 in payment of the premium. The check was endorsed by Respondent and deposited in his business bank account at Sun Bank. At the time, Respondent used a general agent, CFA, for processing the Bluhm application and the premium payment was submitted to CFA. For some unexplained reason, the check from Respondent, which represented the premium payment, was not cashed by CFA and the policy was never issued. The funds received by Respondent from Bluhm remained in his possession for more than one (1) year. At no time pertinent herein did Life and Health Insurance Company receive Mrs. Bluhm's premium payment or an application for health insurance from either Respondent or CFA, nor was a policy issued to Mrs. Bluhm. Several months later, in February 1992, Respondent's accountant, Richard Rosseau, prepared Respondent's monthly financial statements for the months of October, November and December 1991. Those financial statements disclosed that the checks sent to CFA by Respondent, which were intended for the Bluhm premium payment, were outstanding. The financial statements were provided to Respondent by Rosseau. During times material, Life and Health Insurance Company of America had a policy whereby upon issuance of a policy, the issued policy was sent to the agent for delivery to the insured. Conversely, if the policy application was rejected and the policy was not issued, it was their practice to notify the agent who would inform the insured so that the agent could adjust his accounts concerning premiums and commissions. During the spring of 1992, Respondent received inquiries from Mrs. Bluhm's daughter regarding the policy which she (Bluhm) had applied for. Mrs. Bluhm advised Respondent that based on conversations with her daughter, she no longer wanted the policy that she applied for and requested a refund of the premiums she tendered. Respondent knew, or should have known, that the insurer did not receive the premium funds and that the Bluhm policy had not been issued as his own financial statements showed that the check in question had not been negotiated and he neither received the policy for delivery to Mrs. Bluhm nor did he notify her that the policy would not to be issued. Additionally, a review of Respondent's monthly agent's statement (received from the company) detailed all monthly transactions which would have divulged that no policy was issued for Mrs. Bluhm. During the summer of 1992, Petitioner made inquiries of Respondent concerning the Bluhm policy and the premium that he received. Respondent responded to the inquiry but did not account for Mrs. Bluhm's money or ascertain whether the policy which she applied for, had been issued. It was not until December 1992 that Respondent finally refunded Mrs. Bluhm's premium payment. Although Respondent maintained that the Bluhm mistake came about based on a snafu with the general agent, CFA's accounting procedures, Respondent's own records indicate that the Bluhm policy was never issued; that the company did not receive the application, and that Mrs. Bluhm should have been allowed to cancel her policy based on the company's 30 day "free look" policy wherein an insured is free to cancel a policy once issued within 30 days. In such instances, the applicant receives a full refund of monies tendered without payment of any commission to the agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent's licenses and eligibility for licensure issued by Petitioner be suspended for a period of six (6) months. DONE AND ENTERED this 24th day of November, 1993, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 24th day of November, 1993. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 612 Larson Building Tallahassee, Florida 32399-0333 Mahmooud Hassan Salame 2056 Diane Avenue Palm Harbor, Florida 34683 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue Whether Respondent, a licensed insurance agent, committed the offenses alleged in the Amended Administrative Complaint and, if so, the penalties that should be imposed.
Findings Of Fact Petitioner is a licensing and regulatory agency of the State of Florida charged with the responsibility and duty to enforce the provisions of the Florida Insurance Code, which consists of Chapters 624-632, 634, 635, 641, 642, 648, and 651, Florida Statutes. See Section 624.307(1), Florida Statutes. Respondent has been continuously licensed in the State of Florida as a life insurance agent (a 2-16 license) and a general license agent (a 2-20 license) since March 1974, and continuously as a RPCJUA insurance agent (a 00-17 license) since March 1993. On November 4, 1996, Respondent was charged with possession of cocaine in violation of Section 893.13(6)(a), Florida Statutes. This charge, filed in Palm Beach County Circuit Court and assigned Case Number 96-12206 CFA02, is a third degree felony. On May 14, 1997, Respondent entered a plea of nolo contendere to the charge of possession of cocaine, which was accepted. Adjudication of guilt was withheld and Respondent was placed on probation for a period of 18 months. The terms and conditions of Respondent's probation included working at a lawful occupation, intensive drug and alcohol evaluation, successful completion of any recommended treatment, payment of a fine in the amount of $250.00 and court costs in the amount of $461.00, performance of 100 hours of community service, random testing for the use of alcohol and drugs, six months' suspension of driver's license, and DUI school. Respondent successfully completed his probation on November 13, 1998. Respondent continued to work as an insurance agent during the term of his probation. Respondent voluntarily reported the incident to State Farm shortly after its occurrence. As a result, State Farm placed Respondent on probation and conducted a series of random alcohol and drug tests, which Respondent satisfactorily completed. Section 626.621(11), Florida Statutes, provides that the following constitutes grounds for the discretionary discipline of an agent's licensure: (11) Failure to inform the department in writing within 30 days after pleading guilty or nolo contendere to, or being convicted or found guilty of, any felony or a crime punishable by imprisonment of 1 year or more under the law of the United States or of any state thereof, or under the law of any other country without regard to whether a judgment of conviction has been entered by the court having jurisdiction of the case. Respondent failed to report to Petitioner within 30 days of doing so that he entered a plea of nolo contendere to a third degree felony charge of possession of cocaine in Case Number 96-12206 CFA02 on May 14, 1997. On or about March 18, 1998, Respondent applied for licensure as a Variable Annuity Insurance Agent (a 2-19 license). That application contained Question 18, which provides as follows and to which Respondent answered "yes": Have you ever been convicted, found guilty, or pleaded guilty or nolo contendere (no contest) to a felony under the laws of any municipality, county, state, territory or country, whether or not a judgment of conviction has been entered. As a result of his answer to Question 18, Petitioner started an investigation, with which Respondent fully cooperated. As a result of that investigation, Petitioner learned the details of Respondent's plea in the criminal proceeding. Respondent testified, credibly, that he did not timely report the entry of his plea in the criminal proceeding because he did not know he was required to do so. 1/ Respondent has continuously worked as an insurance agent licensed by Petitioner in the State of Florida since March 1974. Respondent has been continuously appointed by State Farm and has built up a successful insurance business. This proceeding is the first disciplinary proceeding brought against Respondent's insurance licenses. There have been no other complaints filed by anyone in this state against Respondent's insurance licenses. Respondent's insurance licenses have not been previously disciplined in the State of Florida. The testimony of Respondent's witnesses established that he enjoys a good reputation for honesty, trustworthiness, truthfulness, and integrity in his community. He has engaged in charitable works, including work with the food bank, the Guardian Ad Litem Program, and Brazilian Indians. Respondent's witnesses also established that they had been pleased with their business dealings with Respondent, and that he has the ability and trustworthiness to successfully engage in the business of insurance. Respondent testified that State Farm will terminate his appointment as an agent if his license is suspended. Respondent testified that he will lose his business and his employees will lose their employment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent guilty of violating Section 626.621(8), Florida Statutes, as alleged in Count I of the Amended Administrative Complaint, and guilty of violating Section 626.621(11), Florida Statutes, as alleged in Count II of the Amended Administrative Complaint. It is further recommended that Respondent's licensure as an insurance agent be suspended for two months for the violation of Count I and for three months for the violation of Count II, to run concurrently. DONE AND ENTERED this 30th day of June, 2000, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 30th day of June, 2000.
Findings Of Fact On June 30, 1983, Petitioner, Timothy Bond Taber, entered a plea of nolo contendere to the charge of sale, delivery, or possession of cannabis with intent to sell, which is defined as a third degree felony by Section 893.13, Florida Statutes, in the Circuit Court for Leon County, Florida. On the basis of his plea, he was found guilty as charged and, inter alia, placed on probation for three years. However, on August 29, 1983, upon Motion by Mr. Taber, the judge entered an Order deleting the adjudication of guilt and withholding adjudication. The probation and other aspects of the prior action were not disturbed. Petitioner explained the facts and circumstances leading up to his arrest which took place in Tallahassee on, January 28, 1983. At that time, Petitioner, who was a 19 year old high school graduate who had lived in Tallahassee for seven years, was working for U-Haul. His co-defendant in the criminal case was his U-Haul supervisor who, at the time, was on a work release program from the Leon County Jail. He was also engaged in repeated sales of marijuana and convinced Petitioner to allow him to store his stock of marijuana in Petitioner's car and to hold the money from the sales. Petitioner admits to being engaged in this activity but denies any sales himself. He now knows his actions were a big mistake and he deeply regrets his participation in them. He has no other criminal history. In addition to the probation, Petitioner was sentenced to community service the term of which was subsequently reduced due to his good behavior. There is some indication his probation officer will recommend termination of his probation one year early due to his good behavior. After leaving U-Haul, where he had worked for five years, Petitioner went to work as a trainee for Mr. Hudgins, District Manager in Tallahassee for Family Life Insurance Co. Mr. Hodgins observed Petitioner carefully during the training period. He found Petitioner epitomized the good qualities looked for by his company to represent it in insurance sales. Integrity is a watchword in the insurance industry and Mr. Hudgins does not see anything in Petitioner's past which would show he does not have this requisite integrity. In fact, Mr. Hudgins sees traits in Petitioner, such as honesty, drive, and a desire to help, which would lead to success in the field. When Petitioner made his application for employment with Mr. Hudgins' company, he answered "no" to the question regarding any prior convictions, since the question does not relate to arrests. Even knowing of Petitioner's misconduct, Mr. Hudgins does not consider Petitioner is disqualified. In his opinion, because Petitioner was young when he made a mistake he should not be perpetually tarred because of it. These sentiments are echoed in the statement of a co- worker of Petitioner's at U-Haul who has know him for six years and who has recently hired him to work at Ryder Truck Rental. Mr. Earlywine has had many compliments from customers and co- workers about Petitioner's outstanding work and business ethics. These qualities were also recognized by Joan O'Steen, a Deputy Sheriff in Hillsborough County, who is convinced that Petitioner is a strong and morally superior individual. On the basis of the above, it would appear, therefore, that Petitioner is neither unfit nor untrustworthy at this time. On June 28, 1985, Petitioner submitted to Respondent an application for filing for examination as an ordinary life, including health, agent. At question 11, he properly indicated he had been charged with a felony but not convicted. On the basis of his plea, however, on August 30, 1985, the chief, Bureau of Licensing for Respondent, denied Petitioner's application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that Petitioner's application to sit the examination for licensing as an ordinary life, including health, agent be denied. RECOMMENDED in Tallahassee, Florida, this 21st day of January, 1986. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of January, 1986. COPIES FURNISHED: Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301j Bernard F. Daley, Jr., Esquire P. O. Box 1177 Tallahassee, Florida 32302 David G. Poucher, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301
