Findings Of Fact Petitioner holds promissory notes secured by mortgages from Roho, Inc., Dr. and Mrs. Spoont, and Mr. and Mrs. Frank Cole. The note executed by Roho, Inc., is in the principal amount of $300,000 with interest at 9.25 percent payable in equal monthly payments of $3,800.33 for ten years and provides the maker has the right to repay all or any part of the loan at any time without penalty. By this note the makers promise to pay $460,539.60 in 120 equal monthly installments of $3,800.33 commencing September 10, 1975. The note provides the amount of the note includes the proceeds of $300,000 resulting in an amount financed of $300,000 plus a finance charge of $160,539.60 including interest of $156,039.60 at an Annual Percentage Rate of 9.25 percent. The note further provides for date of commencement of payments, charges for late payments, costs of collection, acceleration of note at option of holder if principal installment not paid when due, and describes the security for the note. All of this information is on the same page and over the signature of the maker who acknowledges a copy of same. Similar provisions are contained in the promissory notes executed by the Spoonts and the Coles. In the Spoonts' note the makers promise to pay $78,837.60, payable in 240 equal monthly payments of $322.24 each and every month commencing February 10, 1974. The amount of the note includes the proceeds of $40,000 resulting in an amount financed of $40,000 plus a finance charge of $38,837.60, including interest of $38,837.60 resulting in an Annual Percentage Rate of 7.5 percent. In the Coles' note the makers promise to pay $100,593.70 payable in 240 equal monthly payments of $407.88 commencing February 10, 1975. The amount of the note includes the proceeds of $47,000 resulting in an amount financed of $47,000, plus a finance charge of $53,593.70 including interest of $52,888.70 resulting in an Annual Percentage Rate of 8.75 percent. Petitioner contends that documentary stamps required on the notes should be based upon the amount financed (or loaned) while the Respondent contends that the tax required on the notes are based upon the sum following the promise to pay which includes principal, cost of financing, if any, and unearned interest for the stated term of the note. The issue for resolution is what is the amount of the indebtedness evidenced by said instruments. Stated somewhat differently, does the indebtedness include unearned interest for the purpose of determing [sic] the required amount of documentary tax stamps to be placed on the note.
The Issue Whether Respondent is guilty of fraud, misrepresentation, concealment, false pretenses, false promises, dishonest dealing, culpable negligence, or breach of trust in a business transaction, in violation of Section 475.25(1)(b), Florida Statutes (1993).
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida. Respondent is now and was at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0267809. The last license issued was as a broker trading as “Trendsetter Realty and Mortgage”, 977 Humphrey Boulevard, Deltona, Florida 32738. The Respondent operated as a real estate broker during the relevant time period of approximately June 1993 through July 1995. The Respondent is not licensed to practice law in the State of Florida or any state. On or about June 18, 1993, the Respondent prepared certain documents in connection with the sale and purchase of real property located at 1847 North Acadian Drive, Deltona, Volusia County, Florida. Respondent prepared the contract based upon the offer made by the buyer, Juan and Susana C. Veliz, and the counteroffer made by the seller, Jerry and Tammy Maltempi, and in accordance with the wishes of buyer and seller. The subject property was encumbered by a first Mortgage, which secured a Note held by J.I. Kislak Mortgage Corporation and guaranteed by the federal Department of Veterans Affairs. The mortgage and note contained a “due on sale” clause and clearly stated on its face that “[t]his loan is not assumable without the approval of the Department of Veterans Affairs or its authorized agent.” The Buyers and the Sellers were aware of this restriction at the time of the transfer of possession. The Buyers executed an initial, handwritten, offer that specifically stated in bold, capitalized print that "if not fully understood, seek the advice of an attorney prior to signing.” The Buyers then received a typed counteroffer, as opposed to the handwritten original offer, which also stated the same admonition to seek advice of an attorney. The counteroffer was mailed to the Buyers for review and execution by Mr. Veliz and his wife. The Buyers read the numbers, but not the fine print, prior to signing the contract. The sale document was executed by the Buyers and Sellers on or about June 18, 1993 and was denominated a Contract for Deed with a sale price of $85,000. The contract provided for a $1,000 initial deposit, followed by a second deposit of $8,783.50 which was due upon acceptance by the Sellers. The transfer of title was to occur on or before July 6, 1995. Upon payment of the full deposit, the Sellers would transfer possession to the Buyers and the escrowed funds (except for $1,200) would be disbursed. Buyers would assume the responsibility of repair and maintenance of the property upon taking possession. On or about July 3, 1993, Buyers tendered the sum of $9,783.50 to the Respondent and assumed possession of the property. Respondent explained to the Buyers about the agency relationship and her representation of the Sellers; that she owed a duty of fair dealing and honesty to the Buyers; the risks associated with an agreement for deed; the foreclosure status of the property the Buyer’s were purchasing; and the fact that the deposits were non-refundable after occupancy of the premises. Respondent disclosed the nature of her agency relationship, both orally and in writing, to both the Buyers and the Sellers in the transaction at issue. Respondent disclosed, in writing, to the Buyers that deposits being made by the buyer were non-refundable upon occupancy of the premises. At the hearing, Mr. Veliz demonstrated his ability to speak, read and understand the English language. The Buyers had ample opportunity to seek independent representation, either through a realtor or through an attorney prior to signing the contract and prior to taking possession of the premises. The Buyers chose not to do so. Prior to Buyers taking possession of the home, Respondent, via telephone conversation, described this transaction to J.I. Kislak Mortgage Corporation, the holder of the note and mortgage on the property, and advised them that a sale was pending and the past due mortgage payments would be brought up to date. Between July 9 and 12, 1993, with the consent of the parties, the Respondent disbursed: $2,962 to herself, as a real estate commission; $2,857.12 to the sellers; and $2,759.38 to J. I. Kislak Mortgage Corporation for payment on the mortgage. Respondent retained $1,200 in escrow for future closing costs. As a service to the parties, Respondent collected the monthly mortgage payment from the Buyer and forwarded it directly to the mortgage holder for several months. Buyers paid the agreed upon amount of $657.00 per month from August 1993 until May or June 1994. In June 1994, J.I. Kislak Mortgage Corporation refused to accept any additional payments toward the mortgage until an adjustment was made in the escrow account for the payment of insurance premiums on the property. The mortgage company called for an upward adjustment in the approximate amount of two hundred dollars per month. Neither the Buyers nor the Sellers were willing or able to pay the additional premium amount. The mortgage corporation subsequently foreclosed and took possession of the property during the last half of 1994. Buyers lost their equity in the house including approximately eight thousand dollars in improvements to the property. Following the foreclosure, Respondent disbursed the balance remaining in her company’s escrow account to the Buyers, in the amount of $1,205, on or about September 22, 1995. Respondent prepared an agreement or contract for deed which a broker is not authorized to prepare. Respondent failed to anticipate a possible increase in the mortgage payment escrow for taxes and insurance at the time the original contract was prepared. The failure of the transaction to close, and the losses suffered by the parties, were not due to a calling of the loan by the mortgage company pursuant to the due on transfer clause of the mortgage. The failure of the transaction to close was not due to the non-refundability of the deposits made by the Buyers. There was no intent on the part of Respondent to commit fraud, misrepresentation, concealment, false promise, false pretense, dishonest dealing or breach of trust in this matter. Respondent is guilty of culpable negligence in this matter.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Florida Real Estate Commission, enter a final order finding Respondent Not guilty of fraud, misrepresentation, concealment, false pretenses, dishonest dealing or breach of trust in a business transaction. Guilty of culpable negligence, in violation of Section 475.25(1)(b) Florida Statutes, and impose an administrative fine in the amount of $1,000 and suspend Respondent’s license for a period of three months. RECOMMENDED this 30th day of January, 1997, at Tallahassee, Florida. DANIEL M. KILBRIDE 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 30th day of January, 1997. COPIES FURNISHED: Steven D. Fieldman Chief Attorney, Real Estate Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street Orlando, Florida 32808 Wade F. Johnson, Jr. Esquire Wade F. Johnson, Jr., P.A. 118 East Jefferson Street Orlando, Florida 32801 Henry M. Solares Division Director Department of Business and Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The issue in this case is whether Respondent used a rating system in conjunction with certain professional liability insurance policies issued between 1982 and 1987 which violated Sections 624.418, 626.9541, 627.062, and 626.371, Florida Statutes, as alleged by Petitioner in its Order to Show Cause.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background In this disciplinary proceeding, Petitioner, Department of Insurance and Treasurer (Department), generally alleges that Respondent, St. Paul Fire and Marine Insurance Company (St. Paul), failed to apply a premium discount on certain primary and excess coverage policies St. Paul issued between 1982 and 1987. St. Paul is a foreign insurance company authorized to do business in the State of Florida and is subject to the regulatory jurisdiction of the Department. Between 1982 and June 30, 1987, St. Paul issued professional liability coverage for the University Hospital Academic Fund, later known as the Jacksonville Faculty Practice Association (Association). St. Paul ceased writing this type of coverage in the State of Florida in July 1987. The members of the Association, who are all physicians, served as faculty at University Memorial Hospital in Jacksonville, Florida. All members were employed by the University of Florida College of Medicine and ultimately by the State Board of Regents as full- time professors. Besides teaching, each of the doctors was engaged in the direct delivery of medical services to patients, and they were accordingly subject to suit for malpractice. The pricing of the policies was in accordance with a rate manual filed by St. Paul with the Department, which was the result of an actuarial process undertaken by the insurer. The rate manual specified premium rates to be charged practicing physicians and surgeons for professional liability coverage. Among other things, the rate manual contained a discount table entitled "Interns, Residents and Full-Time Teaching Physicians and Surgeons Guide (a) Rates." This discount rate provided up to a fifty percent discount for teaching physicians off the full manual rate charged practicing physicians. The amount of the discount was dependent on the amount of time each teaching physician spent in patient contact, and ranged from twenty percent to fifty percent off the manual rate. The discount only applied, however, if all of the teaching doctors from the same hospital or medical school were insured under the policy. St. Paul did not apply the discount rate to any of the premiums charged the Association during the years in question. St. Paul had also filed a "rule" with the Department in 1980, entitled "Rule For (A) Rating Sizeable Risks," which allowed it to specially rate a policy using risk, economies of scale, and competitive considerations if the account generated more than $100,000.00 per year in premiums. The use of this rule is known as "a" rating a risk. The parties agree that the Association policy generated more than $100,000.00 per year in premiums. If a policy is "a" rated, the manual rates do not apply. St. Paul asserts that pursuant to this rule, it "a" rated the policies in question and thus the manual rates, including the discount, did not apply. Between 1988 and 1995, the Association and State Board of Regents filed at least two actions against St. Paul in circuit court claiming, among other things, unjust enrichment, a lack of insurable interest being protected by St. Paul, fraud, and promissory estoppel. Those suits were unsuccessful. Sometime during the course of that litigation, but no later than 1991 or 1992, the Association discovered the discount table contained in St. Paul's rate manual and advised the Department of this fact. On January 5, 1995, the Association made a formal written request to St. Paul that the insurer apply the discount rate to the premiums previously paid and that it refund the overcharges to the Association. After St. Paul refused to refund, the Association filed a complaint with the Department, as authorized by Section 627.371, Florida Statutes. On the theory that St. Paul had not "a" rated the policies, and it failed to give the Association the premium discount required under the rate manual, the Department issued an Order to Show Cause on November 27, 1997. It seeks to have St. Paul recalculate the premiums based on the filed manual rates, including the appropriate discount, and to refund the difference, with interest, which now allegedly totals almost $5 million. St. Paul denies the allegation, contends that it properly "a" rated the policies during each year, and has demanded a formal hearing to contest the Department's proposed action. Were the Policies "A" Rated? St. Paul provided primary and excess coverage policies for the Association for the years from 1982 through June 30, 1987. During those years, St. Paul had on file with the Department a Sizeable Risk Rule for "a" rating which provided as follows: Risks developing $100,000 or more annual manual $100,000/$300,000 limits premium for Physicians and Surgeons Professional Liability may be (a) rated. "A" rating is an industry term for individually rated risk, and is authorized by Section 627.062(3), Florida Statutes. Individually rated risks are exceptions to filed rates, and the filed manual rates do not govern the rates charged for that risk. Therefore, if a policy generated more than $100,000.00 in annual premiums, the rule allowed St. Paul to individually rate a particular risk and to deviate from the premiums approved in its rate manual. As discussed in greater detail below, if St. Paul "a" rated a risk, beginning in 1984, it was required by statute to file with the Department notification that a policy had been priced in that manner. The premiums charged for each year deviated from the manually generated premium. In 1982 and 1983, the premium represented a twenty percent downward deviation. In 1984 and 1985, the premium was thirty percent less than the standard manual rates. In 1986, the premium was ten percent below the standard manual rates while in 1987 it was ten percent above the standard manual rates. Therefore, the premiums charged did not appear to have been derived from any manual rate and discount combination. This is consistent with testimony by a St. Paul witness that the policies would have been "a" rated as a matter of course because they qualified for that type of rating. It was also consistent with St. Paul's policy to always use the sizeable risk rating rule first versus the manual discount rate since it gave St. Paul a greater amount of flexibility in dealing with an account. All of the policies in question were underwritten through the Florida Service Office that St. Paul maintained in Orlando, Florida. That service office was closed in 1994, or long before this case began, and many of its underwriting files were routinely destroyed while others were misplaced. As a part of this proceeding, St. Paul requested a search for any documents from the service center relating to these policies; no documents were located. Further, the underwriters who had personal knowledge of these policies are no longer employed by St. Paul. The Department conceded that, with the exception of a few documents obtained from the files of the circuit court litigation, pursuant to its record retention policy, it had destroyed all records for the years 1982-1987, and thus it could not prove that St. Paul had never filed documents showing that the policies had been "a" rated. Even so, it seeks to prove that such filings were not made, and that the rate manual (and discount) should have applied, principally through inferences drawn from St. Paul's inability to now locate records from that time period, some of which date back 17 years. The years 1982 and 1983 Prior to 1984, there was no statute or agency rule which required that St. Paul file its "a" rates with the Department or notify the Department that a risk had been individually rated. Therefore, for the years 1982 and 1983, St. Paul had no legal obligation to file with the Department its "a" rates or notification that the risk had been individually rated. Indeed, there is no evidence that the Department even had a mechanism for approval of any such filing. Given the fact that the rates charged by St. Paul were not derived from any manual rate and discount combination, that St. Paul had a policy of always using its sizeable risk rating rule when annual premiums exceeded $100,000.00, and that the Department has no records to show the absence or presence of the filings, the more persuasive evidence supports a finding that St. Paul "a" rated the policies during 1982 and 1983. Stated differently, there is insufficient clear and convincing evidence that St. Paul failed to properly calculate the Association's rates in those years, as alleged in the Notice to Show Cause. In making the above finding, the undersigned has considered the Department's contention that during 1982 and 1983, St. Paul was a subscriber of the Insurance Service Organization (ISO), an organization which made rate filings on behalf of its insurance company members. ISO had a requirement that any company issuing a policy in Florida which was "a" rated had to file that "a" rating with the Department. Because St. Paul now has no documentation to show that the filings were made pursuant to that requirement, the Department contends that an inference may be drawn that the policies were not "a" rated. The ISO filing requirements are "internal" in nature rather than a regulatory requirement imposed by state law. Moreover, the evidence shows that St. Paul could be an ISO subscriber for some lines of insurance, but not for other lines. In other words, if St. Paul independently filed its own rate manual for a particular line of insurance, then it would not be subject to the ISO requirement that it file an "a" rating with the Department for that line of business. It can be reasonably inferred from the record that St. Paul made an independent filing for physicians and surgeons. The Department also points out that effective December 3, 1979, an internal manual required St. Paul to submit directly to the State the rate charged for any risk that was "a" rated. It goes on to argue that if the policies were actually "a" rated, St. Paul would have documentary evidence that it filed those rates with the State. Again, however, this was an internal as opposed to a mandatory regulatory requirement, and St. Paul is not charged with violating its own internal policy. The Department also points out that in 1982 and 1983, St. Paul had an internal document retention procedure in effect which required that underwriting files of the company be retained for a period of two years after expiration of the policy unless the policy had a Reporting Endorsement attached to it, in which event the entire underwriting file was to be retained for a period of ten years. In 1982, but not 1983, the policy had a Reporting Endorsement attached. This meant that under company internal procedures, the 1982 policy files would be retained until 1992. Testimony established, however, that this internal procedure was not always followed. Even assuming that the procedure was followed for the 1982 file, the time for routine destruction of that file would have occurred at least five years before this proceeding began. The years 1984 and 1985 Beginning in 1984 and continuing through 1987, Florida law required that the rates charged to individually rated risks ("a" rated risks) be filed with the Department no later than 90 days after the policy for that risk was assumed. Department Exhibits 7 and 11 are individual risk rate filings submitted by St. Paul to the Department for the years 1984 and 1985. They convincingly undercut the Department's contention that St. Paul did not "a" rate the policies, and that it must have charged an inappropriate premium during those years. Even so, the Department questioned whether the policies were "a" rated because of certain forms attached to these filings. On those forms, which appear to be data entry forms, the letter "N" had been written in a column headed "A rate." Without any evidentiary support, a Department witness opined that the letter "N" must have stood for the word "No," thus indicating that St. Paul did not intend to "a" rate the policies. But the same witness conceded that the forms were attached to a document which was intended to be an individual risk filing, and the letters to which the forms were attached identified the filing as an individual risk filing pursuant to the rule for "a" rating sizeable risks published by the Department. In addition, at the time the forms were received by the Department in 1984 and 1985, they were accepted as being adequate to fulfill the statutory requirements for filing individual risk rate filings. This was confirmed by witness Vogel, a former Department employee in 1984 and 1985 who supervised the individual with whom the letters were filed. Therefore, it is found that Department Exhibits 7 and 11 constitute individual risk rate filings for the policies issued in 1984 and 1985, and that St. Paul did not charge an excessive or inappropriate rate, as alleged in the Notice to Show Cause. The years 1986 and 1987 For the years 1986 and 1987, neither party was able to produce a copy of the filing. Because its records have been destroyed, the Department has no documentation from that period which would show the absence or the presence of the filings in question. In 1986, St. Paul had a policy of making all required filings, including individual risk ratings. In addition, Respondent's Exhibit 7 is a "Processing List" for the 1986 policy. This was a checklist used by some St. Paul offices to ensure that each policy was properly prepared and that the regulatory requirements were met. On that document, which was not credibly challenged, there is an indication by the underwriting supervisor that the "a" rate filing was prepared. This evidence is the most persuasive on the issue, and it is found that St. Paul "a" rated the 1986 policy. In 1987, St. Paul continued its policy of making all required filings, including individual risk ratings. The Department did not credibly dispute this contention, and it has been accepted as being dispositive on this issue. While the Department established that a Reporting Endorsement was attached to the 1987 policy which required St. Paul, for internal purposes only, to retain that document in the underwriting files until 1997, the evidence also shows that this procedure was not always followed. Moreover, the inability of St. Paul to now produce that document does not clearly and convincingly establish that it did not exist, or that it was never filed with the Department. Indeed, St. Paul is not charged with failing to make a required filing, and even if such an omission for that year could arguably be inferred, this would not mean that St. Paul automatically forfeited it right to "a" rate the policy, as the Department suggested at hearing. Accordingly, it is found that St. Paul "a" rated the 1987 policy, and that it charged the Association an appropriate rate. Should the Discount Have Applied? Although the foregoing findings resolve this dispute in St. Paul's favor, the Order to Show Cause alleged that St. Paul charged an illegal rate because it failed to apply the Guide (a) Rate (discount table) for "certain physicians and surgeons, who qualified for the credit/discounts." In making this allegation, the Department did not specify the names of the individuals and the amount of the discount to which each was entitled. For the purpose of resolving this issue as well, the following findings are made. As noted earlier, the Guide (a) Rate provided a rate discount for full-time teaching physicians and surgeons based on the amount of time the full-time teaching physician spent in patient contact. It was to be applied, however, "only when all Interns, Residents and/or Full-Time Teaching Physicians and Surgeons from the same Medical School or Hospital are insured in the same policy." The discount was intended to reflect the lower risk exposure of teaching physicians who spend less time in patient contact than do practicing physicians. Typically, it would be applied in academic settings where the practice of medicine was incidental to the teaching duties of the faculty. The discount rate was only applicable when: (a) the entire group being underwritten qualified for the discount, that is, they were full- time teaching physicians, residents, or interns, and (b) the entire group was covered under the same policy. If all of the covered individuals were not entitled to a discount, or if all the individuals entitled to the discount were not covered under the same policy, the discount rate would not apply. The parties agree that the insurer, St. Paul, was entitled to make this determination. The Department estimated that at least 100 physicians were covered by the policies each year. Because of the passage of time, except for 14 physicians, there is no documentation available regarding the amount of time each covered individual spent on patient contact during the years in question. As to those 14, whose questionnaires were provided by St. Paul, none claimed to have less than fifty percent patient contact, and 4 claimed to have spent all of their time in patient contact. One covered physician even claimed to be part-time rather than a full-time teaching physician, and there is indicia that some, but not all, residents may have been covered by the policies. Indeed, since no independent study of the records had been made, the Department witness could not affirmatively represent that only full-time teaching physicians were insured under the policies. It is fair to infer from the evidence that some of the covered individuals could not have been "full-time" teaching physicians, and thus they would not have qualified for any discount. Notwithstanding the foregoing documentation, a Department witness estimated that the covered individuals only had "direct, personal responsibility for the clinical course of the patient" twenty-five percent of the time. This estimate was derived from the witness' knowledge of the professional liability questionnaire currently administered to teaching physicians covered by the Board of Regents self-insured fund. That questionnaire does not, however, ask the doctors what percentage of time each spends in patient contact. Rather, they are asked to identify the percentage of time spent in clinical activities, including supervising residents. The witness then extrapolated the responses received in the current years back to the policy periods in question to arrive at the twenty-five percent figure. The estimate was not based on the witness' recollection of conditions or circumstances relating to the specific covered individuals for those specific policy periods. Moreover, there was no attempt to gather documentation concerning the individuals covered under the policies. Given these evidentiary shortcomings, there is less than clear and convincing evidence to support a finding in the Department's favor that even if the policies were not "a" rated, the Association was entitled to the Guide (a) Rate. Refund of Overcharges Given the foregoing findings, a partial refund of premiums is clearly inappropriate. Even so, the Department has provided various calculations for a refund, which warrant a brief discussion. Under one scenario, all members of the Association would be entitled to a fifty percent discount from the manual premium (yielding a $5 million plus refund, including interest) based on the assumption that every physician had no more than twenty-five percent patient contact. For the reasons stated in Findings of Fact 31 and 32, this assumption has been discredited. Under another scenario, a discount level of thirty-five percent has been arbitrarily picked, without any investigation of the status or practice of the individuals covered under these policies. A final calculation is made in the Department's proposed order again using a uniform discount rate of fifty percent for all covered individuals, less a volume discount credit, which results in premium overcharges of $1,849,116.00. After a statutory interest rate of twelve percent is added to this amount, the total overcharge, including interest, is claimed to be $4,835,702.00. Like the first calculation, there is insufficient evidence to support the fifty percent discount, even assuming that the manual rate applied. Laches St. Paul has raised the defense of laches, contending that the Department had knowledge of the issues raised in this proceeding and, to St. Paul's detriment, delayed bringing this action. In 1988, the Department undertook a Market Conduct Study of St. Paul, looking back over the prior three years. In the report relating to physicians and surgeons liability policies written, which includes the Association policies, the Department found no errors of any type. The Association's grievance which forms the basis for this proceeding was brought to the attention of the Department, but not St. Paul, in 1991 or 1992. On July 10, 1992, a former counsel for St. Paul sent a letter to a Department attorney requesting a copy of any complaint that may have been filed against it by the Association. The letter indicates that the documents which would have proved whether the individual risk rate filings had been made were then in existence. There is no evidence that a copy of the Association's complaint was ever provided to St. Paul prior to the initiation of this action. The Order to Show Cause was not issued by the Department until November 24, 1997, or more than five years later. During that five-year period, St. Paul closed its Florida Service Center, its employees scattered, and documents were misplaced or destroyed. In this respect, St. Paul was prejudiced by the delay of the Department in prosecuting the complaint. The Department also destroyed its records for the years 1982-1987 pursuant to its five-year document retention policy. Because this matter was first brought to the attention of the Department no later than 1992, at a minimum, the records from 1987 should still have been in the Department's files at that time. The absence of these records further hampers the ability of St. Paul to present an adequate defense to the charges.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Insurance and Treasurer issue a final order dismissing the Order to Show Cause, with prejudice. DONE AND ENTERED this 9th day of February, 1999, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 9th day of February, 1999. COPIES FURNISHED: Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Virginia B. Townes, Esquire Post Office Box 231 Orlando, Florida 32802-0231 P. Bruce Culpepper, Esquire Post Office Box 10555 Tallahassee, Florida 32302 Michael H. Davidson, Esquire John L. Swyers, Esquire Department of Insurance and Treasurer 612 Larson Building Tallahassee, Florida 32399-0333 Daniel Y. Sumner, General Counsel Department of Insurance and Treasurer The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
The Issue Whether Respondent, First Commerce Credit Union (“First Commerce”), discriminated against Petitioner, Ian H. Williams, in violation of the Florida Human Rights Act; and, if so, what penalty should be imposed?
Findings Of Fact Mr. Williams is a 29-year-old, African-American male who contends he was discriminated against by First Commerce when he applied for a position as a teller at that institution. First Commerce is a credit union doing business in Tallahassee, Florida. It has more than 15 employees. On December 2, 2016, Mr. Williams submitted an employment application with First Commerce. He was seeking a part-time position as a teller, identified internally by First Commerce by Job ID No. 10201603. In his application, Mr. Williams indicated that he had received a bachelor’s degree from the University of Colorado, but that he had no experience as a teller in a bank or credit union. He also answered a question in the application about his experience handling cash; he indicated he had “None.” However, in his resume attached to the application, Mr. Williams noted that he had “Adept skill in infrastructure of cash operations.” The resume did not provide any explanation as to what that skill may have entailed. Ms. Sorne reviewed about 170 applications for the part- time teller position. Her initial review was done to determine which applicants met the minimum requirements for the job, i.e., whether the applicant had teller experience and/or experience handling cash. Ms. Sorne did not know the age, race, or gender of the applicants at that point in time. From her review of Mr. Williams’ application, Ms. Sorne determined that Mr. Williams did not meet the minimum qualifications. That is, she did not interpret the statement concerning “infrastructure of cash operations” as meeting the “cash handling” requirement. Ms. Sorne sent letters by way of email to all applicants who did not meet the minimum requirements. Unfortunately, when she sent the email to Mr. Williams, she selected the wrong “form letter” from her computer drop-down selections. The letter in the email to Mr. Williams stated: “Thank you for taking time to interview for our Teller position at First Commerce Credit Union. It was a pleasure meeting you. Although your credentials are impressive, we have chosen to pursue other candidates that better align with the needs of our company.” In fact, Mr. Williams had not been afforded an interview and had never met Ms. Sorne. He apparently believed the emailed letter was therefore indicative of some discriminatory animus by First Commerce. How he made the connection between the erroneously-selected letter and discrimination was not made clear from the evidence presented at final hearing. Nonetheless, he replied to Ms. Sorne’s email, stating, “I did not interview with you people.” Upon receiving Mr. Williams’ email response, Ms. Sorne called him to explain her mistake in sending the erroneous “form letter” concerning rejection of his application. During the telephone conversation, Mr. Williams simply advised Ms. Sorne that he would be filing a complaint with the FCHR and that he would see her in court within the year. He did not attempt to correct his erroneous application, i.e., he offered no other information concerning his experience handling cash. True to his word, Mr. Williams filed a complaint with FCHR. First Commerce, meanwhile, hired two people to fill the part-time teller position it had advertised. Both of the hired individuals were African-American; one was male and the other was female. At final hearing, Mr. Williams pointed out that the two applicants hired for the teller position may have had less education or experience than he had. He noted that he was a graduate of the University of Colorado (although his application says that he attended there for less than one year), while the two hired applicants attended Florida A & M University. He did not explain why that fact may have contributed to the discrimination against him by First Commerce. However, both of the other applicants had indicated on their application forms that they had teller experience and cash-handling experience. That is, each of them met the minimum requirements for the position. That was enough to get them a job interview. Inasmuch as Mr. Williams’ application said he did not have that experience, he was not chosen for an interview. Mr. Williams presented no evidence whatsoever that he was treated differently from any other applicant based on his race (black, African-American) or his gender (male). At final hearing he raised the issue of discrimination based on age, apparently because one of the competing applicants erroneously indicated on her application that she was “under the age of 18.” That disclosure was later determined to have been a mistake. Age was not a consideration for the part-time teller position anyway. Mr. Williams failed to establish even a prima facie case of discrimination. It is, in fact, difficult to make any connection between the way he was treated and discriminatory practices in general. Mr. Williams appears to have been treated equally with all applicants; there is no evidence that he was discriminated against for any reason.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the Complaint filed by Ian H. Williams. DONE AND ENTERED this 29th day of August, 2017, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 29th day of August, 2017. COPIES FURNISHED: Tammy S. Barton, Agency Clerk Florida Commission on Human Relations Room 110 4075 Esplanade Way Tallahassee, Florida 32399 (eServed) Ian H. Williams Apartment 311C 2315 Jackson Bluff Road Tallahassee, Florida 32304 Jason Curtis Taylor, Esquire McConnaughhay, Duffy, Coonrod, Pope and Weaver, P.A. Suite 200 1709 Hermitage Boulevard Tallahassee, Florida 32308 (eServed) Donna Carson Utecht First Commerce Credit Union Post Office Box 6416 Tallahassee, Florida 32314 Cheyanne Costilla, General Counsel Florida Commission on Human Relations 4075 Esplanade Way, Room 110 Tallahassee, Florida 32399 (eServed)
The Issue The central issues in these cases are the Petitioners' challenges to proposed rules of the Department of Insurance (Department).
Findings Of Fact The Department is the state agency charged with the responsibility to promulgate and enforce rules pursuant to Chapters 624 through 651, Florida Statutes. The Petitioner, FAUA, is an association of automobile insurers whose interests would be substantially affected by the proposed rules, if adopted, as the subject matter of the proposed rules is within the FAUA's general scope of interest and activities. The other Petitioners are premium finance companies licensed pursuant to Chapter 627, Florida Statutes whose interests will also be substantially affected by the proposed rules, if adopted. Mary Russo is a financial examiner/analyst coordinator employed by the Department whose duties involve the regulation of premium finance companies. She has been so employed for approximately six years. Ms. Russo prepared or aided in the preparation of the economic impact statement and the detailed written statement of facts and circumstances drafted in connection with the proposed rules at issue in this proceeding. In pertinent part, the economic impact statement provided: An estimate of the cost or the economic benefit to all persons directly affected by the proposed action. It is anticipated that there will be a minimal increase in cost to a few of the entities regu- lated as some of them will probably need to seek accounting advice and/or computer programming advice to insure that its operations are in compliance with the rule. However, since most entities regulated already comply with this rule, only a few should be affected. RE: Proposed Rule 4-196.002 "Notice of Intent to Cancel to Be Mailed": Estimated cost to the agency-None. Estimated cost or economic benefit to all persons directly affected-cost will depend upon method of providing the required proof of mailing; however, as a matter of sound business practice as well as providing evidence of compliance with the requirements of Section 627.848, F.S., this should (sic) practice should already be in place. This will benefit the insured in assuring compliance with Florida Statutes in the cancellation of financed policies and will benefit the premium finance company in providing a defense in the event an insured brings action for wrongful cancellation of the financed policy alleging that the proper notice was not sent. Estimated impact of proposed action on competition and the open market for employment-none. Analysis of impact on small business-none. * * * Detailed statement of the data and methodology used in making the estimates required by this paragraph-Recent final decision reached by the Supreme Court of Florida in the case of "Insurance Company of North America, Petitioner, vs. Bobby Cooke, etc." wherein the Insurance Company was held liable for wrongfully cancelling an insured's policy. The Court held that "where an insured denies receipt of the notice of intent to cancel required by Section 627.848(1), an insurer who raises the defense of cancellation under Section 627.848 must prove that the premium finance company complied with the provisions of the statute in order to avoid liability under a contract of insurance." * * * The following rules have no cost or benefit to anyone directly affected by the rule, no negative impact on competition, employment, or small business, and no cost or benefit of adopting these rules other than as indicated above: Proposed Rule 4-196.001 "Standard Cancellation Notice" Proposed Rule 4-196.003 "Requirement of Net Worth of Premium Finance Companies" Proposed Rule 4-196.006 "Filing Other Acceptable Collateral in Lieu of Net Worth" * * * 7. Proposed Rule 4-196.010 "Refunds" * * * Proposed Rule 4-196.028 "Right to Cancel for Non-payment of Premium" Proposed Rule 4-196.030 "Definitions" Proposed Rule 4-196.038 "Limit on Additional $20 Service Charge" Proposed Rule 4-196.040 "Assignment of Premium Finance Contracts Permitted for Existing Business or Collateral for Extension of Credit Only" It is the Department's contention that the proposed rules have no economic impact (which the Department defines to mean no additional or new expenses to anyone) because the rules merely clarify and formally implement the Department's policy as it has existed for several years, at least since 1988. Therefore, the Department reasons, if someone has been complying in the past, there should be no changes in operations or new expenses for that entity. Proposed Rule 4-196.001, Florida Administrative Code, seeks to specify that all copies of the standard cancellation notice be printed on pink paper. The insurer only recognizes a cancellation notice if printed on pink paper, therefore, having all copies of the notice in pink will assure that the insurer receives the correct copy. Currently, the insured and the insurer receive pink copies of the notice but the rule has not specified that the premium finance company copy must also be on pink paper. Pink cancellation notices are the industry practice and standard. Proposed Rule 4-196.002, Florida Administrative Code, requires that the proof of mailing for the notice of intent to cancel must be retained in the files so that the Department may verify compliance with Section 627.848, Florida Statutes. This rule makes the retention of the proof specific whereas in the past the Department has merely suggested that the documentation be retained. Proposed Rule 4-196.003, Florida Administrative Code, requires premium finance companies to meet net worth criteria such that even if the standard is met by a means other than a net worth of $35,000, that the company must also be in sound financial condition with a "positive statutory net worth." The Department seeks to assure that premium finance companies are financially sound and maintains that the criteria are necessary and reasonable to meet that goal. Proposed Rule 4-196.006, Florida Administrative Code, identifies the types of collateral the Department will accept for purposes of establishing net worth. Proposed Rule 4-196.009, Florida Administrative Code, seeks to establish guidelines and methods through which the Department will determine whether an entity is eligible for licensure and whether a premium finance company is in an unsound financial condition. Proposed Rule 4-196.010, Florida Administrative Code, seeks to clarify the requirement that refunds must be made within the statutory time limit and that premium finance companies may not charge interest on the balance due under the contract beyond the statutory limit. Proposed Rule 4-196.028, Florida Administrative Code, specifies that an insured's policy may be cancelled for the nonpayment of premium but may not be cancelled for the nonpayment of miscellaneous fees or charges owed to the premium finance company. Proposed Rule 4-196.030, Florida Administrative Code, seeks to clarify the definitions of the following words: "affiliate," "gross amount available," "inducement," "rebates," and "statutory net worth." Proposed Rule 4-196.038, Florida Administrative Code, limits the service charge amount which may be charged for a twelve month period to one $20.00 assessment. Most premium finance contracts are for a period less than twelve months. Premium finance contracts charge a "set up" fee of $20.00 for each finance contract. For purposes of this rule, the "set up" fee would be limited to one $20.00 assessment per customer per twelve month period. Under the proposed rule, "customer" means per individual not per contract. Proposed Rule 4-196.040, Florida Administrative Code, seeks to clarify provisions allowing the assignment of premium finance contracts so that such procedure is not used to circumvent the statute prohibiting rebates to agents. A public hearing on the proposed rules was conducted by the Department on October 11, 1994. The record of the public hearing is set forth in the Department's composite exhibit 1. All changes in the proposed rules have been published by the Department. Section 288.703, Florida Statutes, defines "small business" to be: "Small business" means an independently owned and operated business concern that employs 50 or fewer permanent full-time employees and that has a net worth of not more than $1 million. As applicable to sole proprietorships, the $1 million net worth requirement shall include both personal and business investments. Based upon the record, none of the Petitioners in this cause is a "small business." Based upon the record of this case, together with the record of the public hearing conducted on October 11, 1994, the Department adhered to the procedure for preparation of the economic statement and considered information submitted to the agency regarding specific concerns about the economic impact of the proposed rules. Rule 4-196.001, Florida Administrative Code, as it now exists requires that the premium finance company furnish cancellation notices to the insured and insurer in a designated format, and printed "on a color paper of a shade of pink." The Petitioners have not challenged the existing language of the rule. The Department uses generally accepted accounting principles to determine whether a premium finance company has a net worth of $35,000. The unearned premium serves as the collateral in the premium finance contract. Premium is earned on a pro rated basis. The amount of the premium is divided by the length of time of the term to reach the daily pro rated amount. Unearned interest is refunded based upon the rule of 78s. For an eight month contract, a premium finance company earns 8/36 of the interest the first month, 7/36 of the interest the second month, and so on until all interest is paid. The failure to refund monies due an insured in accordance with the statute constitutes a business practice that would be hazardous to the insurance-buying public.
The Issue The issue presented is whether Petitioner should receive additional credit for his answers to certain questions on the October 1991 Certified General Contractor Examination.
Findings Of Fact Petitioner failed to achieve the minimum passing score on Part I of the Certified General Contractor Examination administered in October 1991. He filed a challenge to nine of the questions contained in Part I. Petitioner challenged questions numbered 2, 3, 4, 6, 9, 10, 14, 25, and 34. During the final hearing, Petitioner agreed that the Department's chosen answers to questions numbered 2, 3, 6, 10, 25, and 34 were the correct answers to those questions. During the final hearing, the Department agreed that Petitioner's chosen answer to question numbered 4 was correct and that Petitioner should be given additional credit for his correct answer. The Department thereupon re- computed Petitioner's score and determined that, with the additional credit for that answer, Petitioner's score on the examination is now 68, still less than the required minimum passing score. Petitioner chose answer "D" to question numbered 9. The Department's chosen answer of "A" is the only correct answer to that question. The question itself is neither vague nor ambiguous. Petitioner chose answer "C" to question numbered 14. The Department's chosen answer of "B" is the only correct answer to that question. The question itself is neither vague nor ambiguous.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding that Petitioner failed to achieve a passing score on Part I of the October 1991 Certified General Contractor Examination. DONE and ENTERED this 7th day of August, 1992, at Tallahassee, Florida. LINDA M. RIGOT 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 7th day of August, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's six unnumbered paragraphs in his post-hearing submittal have been rejected as not constituting findings of fact, but rather as constituting argument. Respondent's proposed findings of fact numbered 1 and 4-7 have been adopted in substance in this Recommended Order. Respondent's proposed findings of fact numbered 2 and 3 have been rejected as not being supported by any competent evidence in this cause. Copies furnished: Vytas J. Urba, Assistant General Counsel Department of Professional Regulation Suite 60 1940 North Monroe Street Tallahassee, FL 32399-0792 Mr. James George Suite 201 17325 Northwest 27th Avenue Miami, Florida 33056 Daniel O'Brien Executive Director Construction Industry Licensing Board Post Office Box 2 Jacksonville, Florida 32202 Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792
The Issue Whether the application of the Respondent Melvin Haber for a mortgage broker's license should be approved or denied.
Findings Of Fact Respondent Melvin Haber applied for registration as a mortgage broker by filing an application for registration as a mortgage broker on December 20, 1976. On January 14, 1977, Petitioner issued to Respondent its Notice of Intent to Deny Respondent's Application for registration as a mortgage broker. The reasons for such denial were set forth in an accompanying document entitled "Administrative Charges and Complaint." Petitioner Division of Finance had determined that Respondent Melvin Haber did not meet the proper qualifications necessary to be licensed as a mortgage broker and that he had, through Guardian Mortgage and Investment Corporation, charged and received fees and commissions in excess of the maximum allowable fees or commissions provided by the Florida Statutes; and although he had stated otherwise on his application, Respondent in fact had been charged in a pending lawsuit with fraudulent and dishonest dealings; and had demonstrated a course of conduct which was negligent and or incompetent in the performance of acts for which he was required to hold a license. By letter dated January 19, 1977, to Mr. Joseph Ehrlich of the Comptroller's Office, Tallahassee, Florida, Petitioner received a request from the Respondent Melvin J. Haber in which he acknowledged receipt of his rejection for mortgage broker's license and stated, "I received notice today of my rejection for my mortgage broker's license. I would, therefore, withdraw my application and re- quest return of $75.00 as I will not answer the rejection as I can't afford an attorney at this time." A Special Appearance to Dismiss Complaint was entered on February 11, 1977. The grounds are as follows: "1. The Department of Banking and Finance does not have jurisdiction over this Respondent. There is no jurisdiction in any administrative proceeding over this Respondent. There is no pending application for any mortgage broker's license by this Respondent. The application originally filed for the mortgage broker's license was withdrawn on January 19, 1977. A copy of the letter withdrawing application is attached hereto as Exhibit A. The proceedings are moot and would serve no useful purpose. Permitting this tribunal to proceed on a non-existent request for broker's license would deny to the Respondent due process of law, equal protection of the law, and his rights under the State and Federal Constitutions applicable thereto." On March 4, 1977, the Division of Administrative Hearings received a letter from Eugene J. Cella, Assistant General Counsel, Office of the Comptroller, State of Florida, requesting a hearing in this cause be set at the earliest practical date, and enclosed in the letter requesting a hearing was a copy of the Division of Finance's Administrative Complaint and a copy of the Respondent's Special Appearance to Dismiss the Complaint. A hearing was set for April 22, 1977, by notice of hearing dated March 30, 1977. A letter was sent by Irwin J. Block, Esquire, informing the attorney for the Petitioner that the Respondent "intends to permit the matter to proceed solely upon the written Special Appearance to Dismiss Complaint heretofore filed." Evidence was submitted to show that between May 29, 1973 and continuing through November 25, 1976, Guardian Mortgage and Investment Corporation and Melvin Haber as Secretary/Treasurer charged and received fees and commissions in excess of the maximum allowed fees or commissions in violation of the Florida Statutes and the Florida Administrative Code. Respondent's application for registration as a mortgage broker indicated that Petitioner was not named in a pending lawsuit that charged him with any fraudulent or dishonest dealings. However, on August 5, 1976, a suit was filed in Dade County, Florida, which charged the Petitioner and others with fraud in violation of the Florida Securities Law. The application was filed by Respondent, was processed by Petitioner and a Notice of Intent to Deny Respondent's Application for Registration was filed together with Administrative Charges and Complaint. The Division of Administrative Hearings has jurisdiction upon request of a party for a hearing once an application has been received and the Division has investigated and fully considered the application and issued its Notice of Intent to Deny and filed a Complaint on the applicant. In this cause the question of whether the applicant is entitled to a refund of fees also must be resolved. An orderly procedure to finalize the resolution of the issues is desirable and necessary. The Proposed Order filed by the Petitioner has been examined and considered by the Hearing Officer in the preparation of this order.
Recommendation Deny the application of applicant Melvin Haber for a mortgage broker's license. Refund the Seventy-Five Dollar ($75.00) fee Respondent paid upon filing the application. DONE and ORDERED this 31st day of May, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Irwin J. Block, Esquire Fine, Jacobson, Block, Goldberg & Semet, P.A. 2401 Douglas Road Miami, Florida 33145
The Issue The issue in this case is whether credit underwriting reports associated with applications for funding submitted by the developer of an apartment complex in Brevard County, Florida, met applicable requirements, and whether acceptance and approval of such reports by the Respondent, Florida Housing Finance Corporation (FHFC), was appropriate.
Findings Of Fact The FHFC is a public corporation organized under Chapter 420, Florida Statutes (2008), to administer a state program through which, insofar as is relevant to this proceeding, developers obtain funding for construction of rental apartments to provide housing to persons of low, moderate, and middle income. The funding is provided through various mechanisms, including the State Apartment Incentive Loan (SAIL) program. The Petitioner owns and operates Madalyn Landing, a 304-unit, affordable housing complex in Palm Bay, Brevard County, Florida, located approximately one-half mile from the Malabar Cove apartment complex. Madalyn Landing was constructed in 2000. The Petitioner has consistently asserted that the Malabar Cove apartment complex will negatively impact the Petitioner’s ability to obtain and retain tenants for Madalyn Landing and has objected to the receipt by Malabar Cove of financial assistance available through local and state programs for affordable rental housing construction developers. To participate in the programs administered by the FHFC, developers submit applications for project funding during an annual process identified as the "universal cycle." Each application is evaluated, scored, and competitively ranked against other applications filed during the same cycle. Applicants are provided with an opportunity to review and comment on the evaluation and scoring of all proposals. Defects in application may be cured during this initial review process. After the period for comment ends, the FHFC issues a revised competitive ranking of the proposals. Developers may challenge the second ranking through an administrative hearing. After the second ranking process is final, developers achieving an acceptable score receive a preliminary funding commitment and proceed through an evaluation process performed by an independent credit underwriter. The underwriter reviews each proposal according to the provisions of Florida Administrative Code Rule 67-48.0072. The credit underwriting reports are eventually submitted to the FHFC Board for approval. The developer of Malabar Cove is Atlantic Housing Partners (AHP), which develops and operates affordable housing projects in Florida, including others within Brevard County. Malabar Cove is a multifamily apartment complex located in Palm Bay, Florida, which was proposed by AHP in two phases. Phase I of the project included 76 three-bedroom, two-bath apartment units. Phase II of the project included 72 additional units designated as follows: eight three-bedroom, two-bath units; 32 two-bedroom, one-bath units; and 32 four-bedroom, three-bath units. The Malabar Cove units are designated for tenants earning 60 percent or less of the Area Median Income (AMI) as determined by the U.S. Department of Housing and Urban Development. Madalyn Landing Apartments are likewise designated for tenants earning 60 percent or less of the AMI. AHP applied for approximately $4 million in SAIL funds and $680,000 in supplemental loan funds for Malabar Cove Phase I during the 2007 universal cycle. The project received a preliminary funding commitment letter during the 2007 cycle and proceeded into the credit underwriting process. AHP applied for approximately $2 million in SAIL funds and $680,000 in supplemental loan funds for Malabar Cove Phase II during the 2008 universal cycle. The project received a preliminary funding commitment letter during the 2008 cycle and proceeded into the credit underwriting process. Malabar Cove obtained tax-exempt bond financing from the Brevard County Housing Authority (BCHA). Madalyn Landing was constructed with $14 million in tax-exempt bond financing from the FHFC. Developers constructing affordable housing projects with tax-exempt bond financing are eligible to receive low- income housing tax credits. The credits are approximately 4 percent of the development costs for a period of ten years. Such tax credits are typically sold to institutional investors and generate equity for the developer. The tax credits obtained by the Petitioner for Madalyn Landing and by AHP for Malabar Cove were sold to generate equity for construction of the properties. Construction of the Malabar Cove project commenced prior to this litigation and was projected to be complete as of April 2009. The receipt of funding from the BCHA obligates Malabar Cove to provide the affordable rental housing as identified herein. Because the Malabar Cove project includes supplemental loan funds from the FHFC, 10 percent of the units must be held for tenants making 33 percent or less of the AMI, assuming that the FHFC ultimately approves the Malabar Cove request. There is no evidence that Madalyn Landing or any other competing affordable housing apartment complex is required to, or has, set aside units for tenants making 33 percent or less of the AMI. The credit underwriting reports for both phases of Malabar Cove were prepared by the Seltzer Management Group, Inc. (SMG), and were submitted to the FHFC Board in December 2008. SMG retained a certified public accounting firm, Novogradac & Company, LLP (Novogradac), to prepare the market studies referenced in the credit underwriting reports. References herein to the Novogradac market study are as reported by SMG in the credit underwriting report. The Novogradac market study determined that construction of the Malabar Cove development would have a negative impact on Madalyn Landing, as well as on a second affordable housing rental complex not at issue in this proceeding. According to the SMG report, Novogradac determined that "there are ample eligible renters in the sub-market," but noted that Malabar Cove, a newer housing complex, would have "a competitive advantage as it relates to age, condition, amenities, and unit size." The report stated that Malabar Cove's competitive advantage could result in occupancy at competing apartment complexes "at below break even levels once the market stabilizes." As reflected in the SMG report, the Novogradac study included a projection of affordable housing demand in the market area through analysis of a "capture rate,” a projection of the percentage of tenants an affordable housing project must achieve from the pool of appropriately-qualified tenants in order to be financially feasible. A capture rate of 10 percent or less is regarded as a positive indicator of financial feasibility. The Malabar Cove capture rate was projected to be between about 3 and 6 percent, depending on the type of rental unit. Accordingly, the Malabar Cove project is regarded as financially feasible. According to the SMG report, Novogradac noted that the relevant housing market had experienced declining occupancy rates in the last few years, while the number of available affordable rental units had remained stable. Novogradac attributed the situation to the general economic downturn and "to the decline in the single family home market specifically" as unoccupied single-family residences have become available at rental rates competitive with affordable housing units. The SMG credit underwriting report states as follows: Novogradac believes the current situation to be temporary and that single family home values will recover in the future. As home values recover, single family homes will revert to home ownership and no longer be available to the rental market or rents for the single family homes will rise to historical levels and no longer directly compete with the traditional affordable housing apartment units. Novogradac concludes that when the supply of competing single family homes is reduced to normal levels, affordable housing occupancy levels will increase to levels just below . . . those experienced between 2004 and 2006. Neither the credit underwriting report nor the market study established a time frame during which single-family housing values were expected to improve. Although testimony was offered at the hearing as to what the phrase "in the future" was intended to signify, the testimony on this point reflected little more than speculation (albeit informed), and none of the testimony was persuasive. The credit underwriting report included a substantive review of the Malabar Cove financing package and the ability of the developer to proceed through the construction process to the point of project completion and unit occupancy. The referenced information in the credit underwriting report on this issue was not credibly contradicted. The credit underwriting report adequately and accurately determined that the developer could proceed with the project through completion. The credit underwriting report recommended that the FHFC Board approve the Malabar Cove applications for funding. On December 12, 2008, the FHFC Board unanimously voted to accept the credit underwriting reports for the relevant phases of Malabar Cove and to approve the applications for funding. It is unnecessary to include herein a detailed recitation of the discussion during the Board's meeting on December 12, 2008. Review of the meeting transcript establishes that the Board's decision followed discussions with representatives of the Malabar Cove project and the Madalyn Landing apartment complex as well as the credit underwriter. The Board was aware of the affordable housing market conditions in Brevard County and elsewhere in the state. The Board was clearly aware that the construction of the Malabar Cove project would likely have an impact on competing affordable housing providers, specifically Madalyn Landing, and there was reference to the fact that such competition could potentially reduce housing costs for the populations being served by the FHFC programs. The Board additionally considered the present and future availability of state funds. There is no evidence that the Board acted inappropriately or unreasonably in approving the credit underwriting reports for the Malabar Cove project and proceeding to commit the funds at issue in this proceeding, or that the decision was an abuse of the Board’s discretion. The Petitioner has asserted that the Board's recent decision in the “Pine Grove” project (wherein the Board declined to follow the credit underwriter's recommendation for approval of an affordable housing project located in Duval County) requires that the Petitioner's project be denied, particularly because the perceived viability of the Pine Grove project was regarded as superior to that of Malabar Cove. The FHFC Board's denial of the Pine Grove application is the subject of a separate administrative proceeding, and this Recommended Order sets forth no findings of fact applicable to the Pine Grove project or the Board’s decisions related to the Pine grove application. The evidence establishes that the Board discussed the Pine Grove decision during their consideration of the Malabar Cove applications. Prior to the Board's denial of the Pine Grove application, the FHFC Board had apparently never rejected a credit underwriter's recommendation for approval. However, there was uncontradicted testimony that, because the Board's rules provides an opportunity for both the FHFC and an applicant to review a draft credit underwriting report prior to the issuance of the final report, underwriting problems are routinely resolved prior to the issuance of the report and that, where a problem cannot be sufficiently resolved for the credit underwriter to recommend approval, developers routinely withdraw applications rather than attempt to seek Board approval for projects over the negative evaluation by the credit underwriter. There was consideration at the December 12 Board meeting about the relevance of the Pine Grove application denial (over the credit underwriter’s recommendation) to the Board’s presumable intention to approve the Malabar Cove applications; however, the evidence fails to establish that the Board’s decision on the Pine Grove application has any relevance to the instant case. The Board was advised that the affordable housing markets in Duval County and Brevard County, although currently troubled, are not similar, with the Duval County market for affordable housing being described as historically weak and the Brevard County market weakness attributed to the recent economic downturn. Additionally, the Board was aware that, in the Pine Grove application, the FHFC has obligated itself to satisfy the mortgage of an affordable housing development competing with Pine Grove through a "Guarantee Fund" program. Simply stated, if the developer of the FHFC-guaranteed project defaults on payment, the FHFC is essentially “on the hook” for the debt, and the Board was apparently sufficiently concerned of the default prospect to include such consideration in rendering a decision on the Pine Grove application. The FHFC has no similar obligation to any competitor of the Malabar Cove apartment complex. Not insignificantly, the Board’s consideration of the Malabar Cove project included the fact that construction of the Malabar Cove apartment complex had commenced and was projected to be complete by April 2009, while construction of the Pine Grove project had not commenced. There is no credible evidence that the Board's decision to accept the credit underwriter's recommendation to approve the Malabar Cove applications was improper or inappropriate for any reason related to the Pine Grove decision.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a final order dismissing the petition for hearing filed in this case. DONE AND ENTERED this 2nd day of June, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 2nd day of June, 2009. COPIES FURNISHED: Hugh R. Brown, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 M. Christopher Bryant, Esquire Oertel, Fernandez, Cole & Bryant, P.A. 301 South Bronough Street, Fifth Floor Post Office Box 1110 Tallahassee, Florida 32302-1110 Donna E. Blanton, Esquire Elizabeth McArthur, Esquire Radey, Thomas, Yon & Clark, P.A. 301 South Bronough Street, Suite 200 Post Office Box 10967 Tallahassee, Florida 32301 Wellington Meffert, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Sherry Green, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329
The Issue The issue is whether Interamerican Financial Corporation is guilty of six types of violations of the Florida Retail Installment Sales Act alleged in the Department's Administrative Complaint of June 23, 1992, and, if so, what penalty should be imposed.
Findings Of Fact Interamerican Financial Corporation (Interamerican) is a Florida corporation with its sole place of business at 2600 S.W. 3rd Avenue, Suite 730, Miami, Florida. Interamerican is registered with the Department as a Retail Installment Seller, under license number HI-0004299/SF-592236293 000. The Department is authorized by the Florida Retail Installment Sales Act (Chapter 520, Florida Statutes) to examine licensees engaged in the retail installment financing business. Interamerican is in the business of financing automobile loans. Most of its loans are ones banks will not make because of the age of the automobile or because of the borrower's lack of a credit history. Borrowers are often first time retail installment purchasers. The purchase price of the vehicles financed ranges from about $2,000.00 to $5,000.00. Interamerican is owned by Raul Lopez and his wife. Mr. Lopez is President of the corporation. Its affairs are conducted on a day to day basis by Ms. Iris Hernandorena, who has been an employee of Interamerican since its inception twelve years ago in December 1980. There are 3 employees other than Ms. Hernandorena, two of whom are full time employees. Interamerican has flexible criteria for reviewing applications when deciding whether to make loans. Interamerican weighs the length of the applicant's employment, the length of residence at the applicant's present address, personal references, and the applicant's salary. Applicants often speak little or no English. They depend on Ms. Hernandorena to explain each element of the transaction to them. They are highly dependent on the good faith of Ms. Hernandorena, and their limited fluency in English leaves most of them ill-equipped to protect their own interests in the financing transaction. The Department conducted an examination of Interamerican on February 10 and February 27, 1992. This examination covered the period from November 1, 1990, through January 31, 1992. The examining officer examined 7.6 percent of Interamerican's 314 financing contracts for the examination period. Ms. Iris Hernandorena is a single mother with three children, is a naturalized American citizen and a native of Argentina. As a practical matter, Ms. Hernandorena runs the affairs of Interamerican for Mr. Lopez with little supervision. Ms. Hernandorena reviews and approves applications for credit using the criteria set out in Finding 4, pays the automobile dealers when an application has been approved, and handles face-to-face dealings with the borrowers. Before the time period covered by the examination, Interamerican was an authorized agent for Bankers Insurance Group to issue credit life insurance certificates to Interamerican borrowers who elected to purchase credit life insurance. It was Interamerican's practice to include credit life insurance on the retail installment contracts at the time they were initially presented for a borrower's consideration. Credit life insurance was always explained to the customer by Ms. Hernandorena. Whenever a borrower requested it, the credit life insurance and the premiums were deleted from the retail installment contract. Fewer than 4% of Interamerican's borrowers declined credit life insurance. When the loan documents were signed, the borrowers signed Franchise Creditor Insurance Certificate applications which disclosed credit life insurance premiums. These premiums were also disclosed on the face of the retail installment contracts. If a borrower elected credit life insurance, a certificate of insurance was issued and Interamerican forwarded one half of the premium disclosed on the financing contract to Bankers Insurance Group. Because the premium was included in the total amount financed by borrowers, this payment to Bankers was an additional cash outlay by Interamerican. Over the life of the loan, the borrower repaid the full amount financed and Interamerican recovered pro rata in each payment its cash outlay to Bankers (the first 1/2 of the insurance premium financed), and its commission (the second 1/2 of the premium financed). During its examination, the Department made its random sampling of 314 Interamerican customer files. It found four which contain the following information concerning charges for credit life insurance: Bankers Credit Life Amount of Credit Insur. Account Buyer's Date of Life Insurance Certif. Number Name Contract Premium Charged Number TA 388 Maria E. Arias 12-24-91 $60.22 FLO 44341 VE 165 Juan A. DelVilla 11-25-91 $74.38 FLO 43482 BEN 603 Julio C. Figueroa 05-06-91 $32.52 FLO 43378 HON 178 Darryl D. Pride 02-27-91 $70.38 FLO 43018 (Administrative Complaint, Paragraph 6) The monies received from these customers for credit life insurance policies were never remitted to Bankers Insurance Group. Bankers Insurance Group had no record of franchise creditor insurance certificates issued on behalf of these borrowers, or of any payments from Interamerican to Bankers for the period January 1, 1991, to February 26, 1992. Franchise credit life insurance certificates on the borrowers were not submitted to Bankers Insurance Group, nor do any of the certificate numbers match any series of numbers issued by Bankers during the past five years. The standard credit life insurance policies which had been issued through Bankers Insurance Group before the credit period had provided that Interamerican was named as beneficiary in the event of the borrower's death. The amount of the insurance coverage automatically reduced during the life of the loan so that the benefits due under the policy in the event of the death of the borrower equaled the amount of the loan balance at all times. Before the period covered by the Department's examination, Interamerican had two occasions when a borrower died and Interamerican had to make application to Bankers Insurance Group for payment of the proceeds due on the credit life insurance the borrower had purchased. In both instances, Interamerican had a difficult time collecting the remaining portion of the loan from Bankers Insurance Group. As a result of these experiences, before the audit period at issue here, Ms. Hernandorena decided on her own that Interamerican should become "self-insured," rather than send Bankers Insurance Group fifty percent of the credit life insurance premium financed by the borrower at the signing of the retail installment contract. After Interamerican ceased sending credit life insurance premiums to Bankers Insurance Group, it was the intention of Ms. Hernandorena to use the funds collected for credit life insurance premiums as a sort of reserve for bad debts out of which to pay the uncollected loan balances of borrowers who died, after having paid for credit life on their retail installment contracts. No specific escrow or reserve account was established with the funds, however. Because so few borrowers decline credit life insurance (see Finding 7), for about 96% of the 314 financing contracts entered into during the credit period, borrowers were charged for credit life insurance which was never put in force. Ms. Hernandorena reasoned that borrowers were not harmed by this arrangement. Borrowers never would have received any payment from Bankers Insurance Group if the credit life insurance became payable--Interamerican was the only beneficiary of the insurance, which would pay only the outstanding loan balance. They received a substitute of equal value in her eyes, the waiver by Interamerican of any claim for the remaining balance due on the loan if the borrower died after having paid for what appeared to be "credit life" insurance issued through Bankers Insurance Group. The Department examined the following four Interamerican customers' files which disclosed that these customers were charged premiums for credit life insurance on their retail installment contracts apparently placed with Bankers Insurance Group after August 31, 1991 in excess of the uniform rate permitted by the Department of Insurance for credit life insurance contracts: Credit Life Uniform Account Buyer's Date of Insurance Rate Amount of Number Name Contract Premm Chrgd Permitted Ovrchrge VE 163 Early H. Wims 11-21-91 $57.66 $48.05 $ 9.61 TA 395 Reyna I. Boyd 01-27-92 $64.60 $53.84 $10.76 HON 236 A. Sarrantos 01-08-92 $58.93 $49.10 $ 9.83 TA 388 Maria E. Arias 12-24-92 $60.22 $50.19 $10.03 & Mario F. Carrion (Administrative Complaint, Paragraph 7) How these overcharges came about were not explained at the hearing. The Department submitted no evidence that these overcharges were part of a scheme to intentionally overcharge customers. There was no evidence that these four instances of overcharge in the sample of contracts audited equate to any specific likely percentage of overcharges in contracts not selected for audit. Contrast Finding 13, above. Interamerican failed to journal payment for and to affix documentary stamps to the following three customer contracts: Interamerican Account Buyer's Number Name Date of Charge Amount of Documentary Stamps Charged on Contract TA 395 Reyna I. Boyd 01-27-92 $6.15 TA 388 Maria E. Arias 12-24-91 $5.70 VE 159 Maria A. Reyes 10-25-91 $8.40 (Administrative Complaint, Paragraph 8) Interamerican did purchase the requisite amount of documentary stamps from the Florida Department of Revenue. The explanation given for the error in not affixing the stamps was that stamps of small denomination were not always on hand. Since the examination was in February 1992, this reason is not persuasive. Two of the contracts involved were ones from October and December of 1991. There had been adequate time to exchange larger stamps for smaller ones or to purchase more small denomination stamps. The amount involved, however, is trivial ($20.25). Interamerican negligently failed to maintain credit insurance acknowledgment forms, since it was not actually placing credit life insurance in force. See Findings 13 through 14, above. Contrary to the allegations of Paragraph 9 of the Administrative Complaint, Interamerican did not charge finance charges in excess of the legal maximum permitted by law. The contracts for the borrowers set forth below contained an "amount charged" on the face of the contract which is slightly in excess of the legal maximum charge. This came about because the machine used to calculate the amount placed on the contact had a limited number of decimal places. Each of these borrowers was later furnished with a payment coupon book by Interamerican which contained an amount charged within the maximum rate. These payment books were prepared with computer programs using more decimal places, and the payment books are what borrowers used in repaying their loans. No additional notification was given to the borrowers calling attention to the small differences, indicating that the payment books, rather than the contracts, stated the correct amount due. The payment books served as a notice of correction to the borrowers. No Interamerican customer has paid any finance charges in excess of the legal maximum (Tr. 23). The customer contracts examined contained the following information: Account Number Buyer's Name Total Amount Charged Per Contract Legal Maximum Differences VE 178 Sonia E. Vanturyl $2,152.86 $2,147.84 $5.02 VE 173 Monique D. Jordan $1,715.13 $1,711.16 $3.97 VE 165 Juan A. Delvilla $1,481.37 $1,477.99 $3.38 VE 152 Edward Mantilla $1,712,56 $1,708.56 $4.40 Jannette S. Williams $1,347.97 $1,344.84 $3.13 The Department conducts an examination of Interamerican and other retail installment sellers on a periodic basis. The prior examinations by the Department revealed no violations by Interamerican before the examination that is the subject of this proceeding. Throughout this examination by the Department, Interamerican furnished the Department with all the information and documents requested, made no attempt to conceal anything from the examiner, and was cooperative throughout the examination. This is consistent with Ms. Hernandorena's belief that on the credit life insurance charges, Interamerican had done nothing wrong.
Recommendation A final order should be entered finding Interamerican guilty of violations of Sections 520.995(1)(a), (b) and (c) and 520.07(4), Florida Statutes (1990 Supp.) as alleged in Paragraphs 11 and 12 of the Administrative Complaint, and dismissing the charges made in Paragraphs 13, 14 and 15 of the Administrative Complaint. The Department has suggested that the appropriate penalty in this case is to find Interamerican guilty of all allegations made in the Administrative Complaint and impose a cease and desist order enjoining Interamerican from future violations of the Retail Installment Sales Act, and to impose an administrative fine of $1,000 for each violation. It is difficult to determine whether the Department suggest a fine of $6,000.00, one for each paragraph in the Conclusions of Law in its Administrative Complaint (Paragraphs 11-15), or whether a separate fine of $1,000.00 is meant to be imposed for each violation alleged in each contract containing a violation, which would be a fine of approximately $16,000.00. Based on the belief that Interamerican was guilty of all the violations alleged, the Department also recommended that the retail installment sellers license of Interamerican be revoked. It seems pointless to enter an order that Interamerican desist from future violations of the act, and at the same time revoke its authority to engage in business under the act. The penalty of revocation is too draconian. Revocation is certainly a penalty available under the statute, but revocation is appropriate where there is a pattern of misconduct which indicates that the licensee will not conform to applicable rules and statutes in the future, or that the misconduct is so egregious that, without consideration of the likelihood of future misconduct, severe discipline is warranted. This is not such a case. Moving from the less serious to more serious charges, the three instances of failure to attach documentary stamps to contracts is only proof of lack of attention to detail, since a sufficient supply of stamps had been purchased from the Department of Revenue. There was no violation of the disclosure requirements of Section 520.07(3)(e), Florida Statutes (1990 Supp.). With respect to charging, in four instances, credit life insurance premiums in excess of those permitted by the uniform rates filed with the Department of Insurance, in those four cases the amount of each overcharge was approximately $10.00. Interamerican should be required to refund the excess amounts due to the borrowers, with interest at the legal rate from the date of the contract. Due to the small amounts involved, for each instance Interamerican also should be assessed a fine of $250.00, for a total fine of $1,000.00 for that class of violations. No penalty can be imposed on the allegation that Interamerican charged excess finance charges, because it did not do so. Neither can a penalty be imposed for failure to maintain credit insurance acknowledgment forms, since no insurance was placed to be acknowledged by an insurer. Although it is true that those forms were not maintained, the real violation, which is the most serious violation, is the failure to have purchased the insurance at all. The Administrative Complaint alleges in Paragraph 7 four instances where charges were made for credit life insurance where no insurance was actually purchased. Ms. Hernandorena had mistakenly decided that by charging the amount permitted for credit life insurance, without purchasing it, and waiving the right of Interamerican to obtain payment from any borrower who died after paying for credit life insurance, the borrowers were receiving what they paid for. In a rough sense, this was true, but the transaction documents simply were not structured that way. Had the evidence been convincing that borrowers were being charged for credit life insurance as a ruse to obtain additional money from them, when they were receiving nothing in return, I would not hesitate to recommend that the Department revoke the license of Interamerican, especially when the evidence demonstrates that the overcharge occurred not only in the four cases alleged, but in 96% of all contracts Interamerican entered into. On the other hand, Interamerican's evidence was persuasive that the borrowers were receiving something of value for the credit life insurance premiums, even though the insurance was never purchased. The testimony of Ms. Hernandorena was sincere, and I simply do not believe that her explanation of what was done was an after-the-fact justification concocted in an attempt to excuse Interamerican's misconduct. Ms. Hernandorena made a serious error in doing what she did, but she did not engage in a scheme to defraud borrowers. On this charge, Interamerican should be required to repay the amount of credit life insurance premiums plus interest at the legal rate to the four borrowers listed in Paragraph 6 of the Administrative Complaint, and to review its records and make similar refunds to all borrowers who paid for credit life insurance, plus interest at the legal rate from the date of each contract. An administrative fine in the amount of $4,000.00 should also be imposed, the maximum fine for the four instances of overcharge alleged and proven. Had the Department undertaken to allege and prove additional instances of overcharges, the fine would be larger, but that is not how the complaint was drafted. Although the conduct proven does not rise to the level of an intentional scheme to defraud, the misconduct is sufficiently serious that a significant penalty, less severe than revocation, ought to be imposed. That Interamerican has otherwise conducted its affairs over the years in conformity with the law weighs in its favor. The appropriate penalty here is to suspend the licensure of Interamerican for 30 days, to place its licensure on probation for the following 11 months, and to restrict its licensure to prohibit the "waiver of liability" plan created by Ms. Hernandorena and to require submission of all credit life insurance premiums to an appropriate insurer. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 21st day of December, 1992. WILLIAM R. DORSEY, JR. 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 21st day of December, 1992. APPENDIX TO RECOMMENDED ORDER IN DOAH CASE NO. 92-4404 The following are my rulings on findings proposed by the parties: Findings proposed by the Department: 1.-4. Adopted in Findings of Fact (FOF)1. 5. Adopted in FOF 5. 6.-7. Rejected as unnecessary. 8.-9. Adopted in FOF 5. 10.-11. Rejected as recitations of testimony, not findings of fact. Adopted in FOF 6. Implicit in FOF 6. Adopted in FOF 3. Adopted in FOF 6. Rejected as unnecessary. Adopted in FOF 4. Adopted in FOF 8. Adopted in FOF 13 and 14. Adopted in FOF 7. Adopted in FOF 4. Adopted in FOF 13. Rejected as unnecessary-Interamerican never contended it was an insurance company. Findings proposed by Respondent: Adopted in FOF 1. Adopted in FOF 2 and 4. Adopted in FOF 5. Adopted in FOF 3, 4 and 6. Adopted in FOF 7. Adopted in FOF 9. Adopted in FOF 10. Adopted in FOF 12. Adopted in FOF 13 and 14. The Borrower was the insured, Interamerican was the beneficiary. Adopted in FOF 11. Adopted in FOF 13. Adopted in FOF 15. Adopted in FOF 16. Adopted in FOF 17. Adopted in FOF 18. Adopted in FOF 19. COPIES FURNISHED: Steven R. Walker, Esquire Office of Comptroller Suite 708-N 401 N.W. 2nd Avenue Miami, Florida 33128 Ted Bartlestone, Esquire Suite 1550, 1 Biscayne Tower 2 South Biscayne Boulevard Miami, Florida 33131 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350
The Issue The issue is whether petitioner's average final compensation and retirement service credit were properly calculated.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Dr. Michael Kasha, is a former professor in the School of Arts and Sciences at Florida State University. His most recent stint of employment occurred during school year 1995-96 when he was employed in the Institute of Molecular Biophysics. He retired at the end of December 1995, and counting several years of out-of-state service, he had a total of 50.58 years of creditable service. In November 1995, petitioner contacted respondent, Division of Retirement (DOR), for the purpose of determining his Average Final Compensation (AFC) for retirement purposes. That agency has the statutory responsibility of performing all retirement related calculations. In making its calculations, DOR determined petitioner's service credit for his last fiscal year of service (1995-96) by using a nine-month work year divided by six months of actual service (July-December 1995), or a .67 service credit. When this factor was applied to his compensation received for the six months of service, it produced a much lower annualized salary for ranking purposes than petitioner expected. Contending that a twelve-month work year should have been used, rather than the nine months used by DOR, petitioner filed a request for a hearing to contest DOR's action. During petitioner's last fiscal year of service, he was contracted to work from July 1 to July 28, 1995, by a Summer Supplemental Employment Contract. In addition, he was employed under a Nine Month Employment Contract from August 8, 1995, to May 6, 1996. On January 23, 1996, however, this contract was mutually revised by the parties to provide that petitioner's employment would terminate on December 29, 1995. Between July 1, 1995, and December 29, 1995, the parties agree that petitioner received $67,290.22 in total compensation from the university. To determine a member's appropriate service credit, DOR rule 60S- 2.002(4)(a) provides that if a member earns service credit for fewer months than comprise his work year, he shall receive a fraction of a year of service credit, such fraction to be determined by dividing the number of months and fractions thereof of service earned by the number of months in the approved work year. Since petitioner worked only six months during his last work year, the rule requires that this period of time be divided by "the number of months in the approved work year" to calculate his appropriate service credit. Members of the retirement system are employed for either nine, ten or twelve months each fiscal year, depending on the nature of their jobs. As to university instructional/academic members, such as petitioner, DOR rule 60S- 2.002(4)(b) defines the work year to be the number of months in the full contract year or nine months, whichever is greater, as specified by the contract between the employee and the school system. Because university faculty members normally work under a nine-month contract, DOR used that time period to establish petitioner's work year. In doing so, DOR excluded petitioner's Supplemental Summer School Contract on the theory it was "supplemental to (his) regular 9 month contract." That is to say, petitioner earned a maximum full year of creditable service during the nine months, and the three months in the supplemental contract would not add any additional creditable service. This determination is in conformity with the rule. Since petitioner's actual service credit for fiscal year 1995-96 was six months, that is, he worked full-time from July 1 through December 29, 1995, the computation under rule 60S-2.002(4)(a) produced a service credit of .67. Petitioner's compensation of $67,290.22 was then divided by the .67 factor and resulted in an annualized salary for ranking purposes of $100,433.16. Since the salary was not one of petitioner's highest fiscal years of salary, it was excluded from his AFC. Petitioner contends, however, that his work year is actually twelve months, rather than nine, if his Supplemental Summer School Contract is included. He points out that the university has always required that he and other science professors be on campus twelve months a year, unlike most other faculty members. Despite this requirement, the university has never used a twelve-month contract for this group of professors. Instead, it has relied on a combination of regular and supplemental contracts. If a twelve month work year had been used for petitioner's last fiscal year, this would have produced a service credit of .50, which if applied to his compensation, would have produced an annualized salary for ranking purposes of $134,580.44. This in turn would increase petitioner's retirement benefits by more than $1,200 per year. There is no provision in the DOR's rules which permits the use of a twelve-month work year in calculating the service credit for any person who is employed under a nine-month contract. While this may be unfair to members who find themselves in petitioner's circumstances, until the rule is changed, it must be uniformly applied. Therefore, the request should be denied.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Retirement enter a final order denying petitioner's request to have his retirement benefit calculated using a twelve- month work year for his last fiscal year of employment. DONE AND ENTERED this 22nd day of January, 1997, in Tallahassee, Florida. DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1997. COPIES FURNISHED: Dr. Michael Kasha 3260 Longleaf Road Tallahassee, Florida 32310 Stanley M. Danek, Esquire Division of Retirement 2639-C North Monroe Street Tallahassee, Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560
