The Issue Should discipline be imposed by Petitioner against Respondent's license as a life including variable annuity agent (2-14), life agent (2-16), and health agent (2-40), held pursuant to Chapter 626, Florida Statutes?
Findings Of Fact Respondent's Licenses and Background Pursuant to Chapter 626, Florida Statutes, Respondent is currently licensed in this states as a resident life including variable annuity agent (2-14), life agent (2-16), and health agent (2-40). At all times pertinent to the dates and occurrences referred to herein, Respondent was licensed in this state as a resident life including variable annuity agent (2-14), life agent (2-16) and health agent (2-40). Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services has jurisdiction over Respondent's insurance licenses and appointments. Respondent's formal education includes a bachelors in business management and a masters in science and health service administration. Over time Respondent has worked in the financial services industry. At present Respondent is a supervisor or principal of Capitol City Bank Investments. Securities Registration Respondent also has registration by the Office of Financial Regulation pursuant to Chapter 517, Florida Statutes, the "Florida Securities and Investor Protection Act." His registration is CRD No. 2016997, current as of January 9, 2008. He served as an "associated person" of a "dealer" as early as November 14, 2002. He acted in that capacity for Now Trade, Corp., from the date in November through March 22, 2004. Mutual Benefits Corporation (MBC) The State of Florida, the Department of Insurance (now the Office of Insurance Regulation of the Financial Services Commission, "the Office") licensed MBC as a viatical settlement provider on May 13, 1997, in accordance with Chapter 626, Part X, Florida Statutes, the "Viatical Settlement Act." The Office took action against MBC in Case No. 77358- 04-CO, in accordance with Chapter 626, Part X, Florida Statutes. On March 29, 2005, a Consent Order was entered by the Office. In an agreement between the Office and MBC by and through a court appointed receiver for MBC, the Office revoked MBC's license as a "viatical settlement provider" pursuant to the terms and conditions within the Consent Order. The Consent Order in Case No: 77358-04-CO, before the State of Florida, Department of Financial Services, Office of Insurance Regulation, in the matter of: Mutual Benefits Corporation in pertinent part stated: THIS CAUSE came on for consideration as the result of an agreement between MUTUAL BENEFITS CORPORATION (hereinafter referred to as 'MBC'), by and through its duly court- appointed Receiver, Roberto Martinez ('Receiver'), and the OFFICE OF INSURANCE REGULATION (hereinafter referred as the ('OFFICE'). . . . the OFFICE hereby finds as follows: The OFFICE has jurisdiction over the subject matter of, and parties to, this proceeding. MBC was granted a license by the Department of Insurance (now the Office of Insurance Regulation) on May 13, 1997, to act as a viatical settlement provider pursuant to the provisions of Chapter 626, Part X, Florida Statutes. The OFFICE conducted an examination of the business and affairs of MBC and thereafter issued, on May 3, 2004, an Emergency Cease and Desist Order suspending the license of MBC, effective immediately upon service of the order upon MBC. The Securities Exchange Commission of the United States has instituted an action in United States District Court for the Southern District of Florida, City Action Number 04-60573 (hereinafter 'the SEC Action'), and secured, on an ex parte basis, an Order Appointing Receiver dated May 4, 2004, which order granted the Receiver full and exclusive power, duty, and authority to administer and manage the business affairs, funds, assets, choses in action and any other property of MBC and several entities alleged to be related to it and to take whatever actions are necessary for the protection of investors. The United States District Court for the Southern District of Florida (hereinafter 'the Court'), has held further hearings, including an evidentiary hearing on the application of the SEC to enter a preliminary injunction against MBC. On November 10, 2004, Magistrate Garber recommended that the Motion for Preliminary Injunction be granted. On February 14, 2005, the Court adopted that recommendation. Therefore, the OFFICE and MBC hereby agree and consent to the following terms and conditions: * * * (b) MBC and the OFFICE agree that MBC's viatical provider license shall be revoked by issuance of this Consent Order. * * * (d) In the event that the Receivership in the SEC Action is dissolved and any restraining order issued by the U.S. District Court of the Southern District of Florida is modified to allow MBC to conduct its viatical settlement business or upon the Court issuing any other order allowing MBC to conduct its viatical settlement business, MBC would be free to apply for a license from the state of Florida. * * * The receiver is now responsible for activities involving viatical settlement purchase agreements or contracts, to include those associated with the viatical settlement purchasers in this case, not concluded by the agreement(s) to return on the investment(s) described in the viatical settlement purchase agreements or contract(s). MBC and Respondent Prior to the entry of the Consent Order involving MBC, Respondent, as an employee of First Liberty Group LLC (First Liberty), had sold interests in life insurance policies offered by viators, under terms set forth in a "viatical settlement purchase agreement" offered by MBC as the viatical settlement provider, all within the purview of Chapter 626, Part X, Florida Statutes, the "Viatical Settlement Act." (In addition, Respondent as an employee of First Liberty offered for sell financial products, e.g. annuities and certificates of deposit (CDs).) The relevant time period in relation to employment with First Liberty was the years 2002 and 2003, as more specifically explained in findings of fact that follow. Viatical Settlement Purchase Agreement and Other Information Pertinent features within all viatical settlement purchase agreements entered into between purchasers in this case and MBC, as presented by Respondent in his capacity as agent are as follows: VIATICAL SETTLEMENT PURCHASE AGREEMENT No modifications to this Contract may be made without the written consent of Mutual Benefits Corp. . . . the Viatical Settlement Purchaser (is), hereinafter referred to as 'Purchaser', upon the following terms and conditions. This Agreement covers the purchase of an interest in the death benefit of a life insurance policy or policies insuring the life of persons who are either terminally ill or have an estimated life expectancy of 72 months or less. * * * . . . the Purchaser acknowledges that the economic benefit derived from the transaction(s) contemplated by this Agreement will result solely from the maturity of the life insurance policy(ies) upon the death of the insured(s), and will not be derived from the efforts of any person or entity employed by or associated with Mutual Benefits Corp. , * * * The Purchaser hereby agrees to deposit the sum of $ with American Express Tax and Business Services, Inc., the Escrow Agent, for the purpose of acquiring the death benefit of a life insurance policy(ies) which will be allocated as set forth herein. The only benefit the Purchaser will receive pursuant to this Agreement will be payment of the agreed portion of the death benefit upon the maturity of the life insurance policy(ies). Policies are priced at a discount of the death benefit which depends on the projected life expectancy of each insured. Mutual Benefits Corp. makes no representation or warranty as to the specific date when a policy will mature. The return realized by the Purchaser does not represent an annual return. An annual return cannot be determined until the policy(ies) in which the Purchaser obtains an interest matures. Mutual Benefits Corp. shall assist Purchaser in the purchase of the death benefit of life insurance policies of individuals which comply with the following criteria: * * * All life expectancies of insureds will be determined by either an independent reviewing physician or a medical review company taking into account the insured's age, current medical history, and, where applicable, insurance industry actuarial guidelines. Prior to closing, Purchases will receive from Mutual Benefits Corp. information regarding specific policy(ies) that may be purchased in accordance with the terms of this Agreement to assist the Purchaser in evaluating whether the policy satisfies his/her requirements. * * * 9) . . . and also acknowledges that once the policy closes the funds committed are not liquid and the funds are not available until the policy matures. Purchaser hereby also acknowledges that the life expectancy(ies) provided by the reviewing physicians are only estimates. Mutual Benefits Corp. does not make any warranties regarding the accuracy of these estimates. Purchaser further acknowledges that the policy may mature before or after the projected life expectancy. Purchaser also represents that he/she is able to bear the risk of the purchase of a policy(ies) for an indeterminate period and will only commit himself/herself to a purchase which bears a reasonable relationship to his/her net worth. * * * . . . Viatical Services, Inc.'s agreement to pay any unpaid premiums limited to the exhaustion of the funds in its premium reserve account. * * * f) This Agreement is voidable by the Purchaser at any time within (3) days after the disclosers mandated by Florida Statutes § 626.99236 are received by the Purchaser. * * * 25) Type of Death Benefit(s) to be Purchased Life Estimated Life Dollar Amount Fixed Return on Dollar Expectancy of Purchase Amount of Purchase 12 Months 12% fixed return on purchase price 18 Months 21% fixed return on purchase price 24 Months 28% fixed return on purchase price 36 Months 42% fixed return on purchase price 48 Months 50% fixed return on purchase price 60 Months 72 Months Other Total amount $ 60% fixed return on purchase price 72% fixed return on purchase price 60% fixed return on purchase price to be allocated amongst the above estimated expectancies. * * * X. DISCLOSURE TO VIATICAL SETTLEMENT PURCHASERS Any person considering purchasing any portion of the death benefit of one or more insurance policies should be aware of the following: The returns available on viatical settlement contracts facilitated by Mutual Benefits Corp. directly tied to the projected life expectancy of the insured. The fixed return that a Purchaser may receive under the Viatical Settlement depends upon the price paid for the policy as a discount from its death benefits fixed return is determined by the projected life expectancy of the insured as set forth below. Projected Life Fixed Return on Dollar Expectancy Amount of Purchase 12 Months 12% fixed return on purchase price 18 Months 21% fixed return on purchase price 24 Months 28% fixed return on purchase price 36 Months 42% fixed return on purchase price 48 Months 50% fixed return on purchase price 60 Months 60% fixed return on purchase price 72 Months 72% fixed return on purchase price The above returns are fixed and not annualized returns. * * * . . . Viatical Services, Inc.'s agreement to pay any unpaid premiums limited to the exhaustion of the funds in its premium reserve account. In the event the trust and Viatical Services, Inc.'s respective premium reserve accounts are exhausted, the Purchaser may be responsible for a payment of his/her pro rata share of any unpaid premium. In the event the Purchaser is required to pay premiums, such payments will reduce the fixed refund referenced above. * * * The life expectancy on any particular insured and the rate of return on a viatical settlement contract are only estimates and cannot be guaranteed. The purchase of the death benefit of one or more life insurance policies should not be considered a liquid purchase. While every attempt is made to determine the insured's life expectancy at the time of purchase, it is impossible to predict the exact time of the insured's demise. As a result, the Purchaser's funds will not be available until after the death of the insured. It is entirely possible that the insured could outlive his/her life expectancy, which would delay payment of the death benefits under the Viatical Settlement Purchase Agreement. In the transactions in dispute, in the time MBC received funds from the purchaser for purposes of acquiring the death benefit of the life insurance policy or policies, it would acknowledge receipt of those funds. In writings MBC would send information to the purchaser, described as the client, concerning a specific life insurance policy matching the request made in the purchase agreement. The viator was identified by a number. The estimated life expectancy of the viator was identified. The amount of funds provided toward the purchase was identified. The amount to be paid in relation to the death benefits was identified. Other information was included referred to as "policy detail." That policy detail provided investor information such as the original policy face value, number of investors involved with the policy, the policy number of the insurance policy, the insurance company name, the nature of the plan of the insurance and whether there was a current premium payment obligation, together with an estimated date upon which the investor premium payment obligation, referring to the purchaser's obligation to meet the payments would begin. Some information about the insured was provided concerning HIV status and the last date of contact with the viator/insured. The contact letter concerning the commitment to purchase the interest in a life settlement or viatical settlement, so described by MBC, also set out a opportunity to decline to participate in the purchase where it said: The policy described in the attached disclosure form satisfies the selection criteria that you provided to us. We will deem you to accept this placement UNLESS we receive signed, written notice of your disapproval within five (5) business days after you receive this letter. Beyond the date upon which the purchaser received an MBC letter reference "commitment to purchase an interest in a life settlement or viatical settlement," MBC would send the purchaser additional correspondence referring to the viator number as an insured case file restating the amount of purchase, and enclosing an executed assignment of ownership from the life insurance company over to a new owner and designating a beneficiary in accordance with the purchase agreement. This letter would enclose a certificate of insurance and the review medical and physician's report related to the policy with specific information about the insured being redacted as to patient name, date of birth and social security number. Petitioner's Exhibit numbered 20 is an example of a receipt for funds. Petitioner's Exhibit numbered 24 includes a letter of "commitment to purchase an interest in a Life settlement or viatical settlement," together with a policy detail sheet and the follow-up letter, indicating assignment of ownership of the insurance policy, a certificate of insurance and the review medical and physician's report, among other matters. During 2002 and 2003 none of the MBC viatical settlement purchase agreements (contracts) or agreements in this case were registered as securities in accordance with Chapter 517, Florida Statutes. Respondent's Sales Practices First Liberty was an entity separate and apart from MBC. First Liberty employed Respondent at its offices in Summerfield, Florida. In promoting its investment products, First Liberty advertised CDs; it did not advertise viatical sales products. The sale of viatical settlement purchase agreements constituted roughly 30 percent of the business conducted by Respondent as a First Liberty employee. Annuities were sold at First Liberty as an additional investment product. Contract documents associated with MBC viatical sale purchase agreements were prepared by MBC to be utilized by Respondent. When meeting with the customers, Respondent utilized a graph that was designed to portray the experience in investment returns from the MBC viaticals based upon First Liberty's experience with the product. First Liberty had an in-house attorney whom Respondent relied upon in conducting business. That individual did not indicate that MBC viaticals should not be sold or that the viaticals were securities requiring registration. Respondent's impression of MBC was that MBC provided good service and acted promptly in dealing with its purchasers. Respondent proceeded with a personal belief that the viaticals were insurance products to be regulated as insurance products with the "Florida Department of Insurance." In his belief, this was borne out by an approval affixed from the Florida Department of Insurance to a viatical settlement purchase agreement that Respondent entered into with MBC in the amount of $9,707.00. Respondent's Exhibit numbered 6. Respondent also sold an MBC viatical settlement purchase agreement to his father Fredrick M. Smith in the amount of $20,000.00. Respondent's Exhibit numbered 7. The purchases made by Respondent and his father are now controlled in the receivership associated with MBC. Concerning the MBC contracts entered into by Respondent and his father controlled by the MBC receiver, the receiver is responsible for paying premiums for the viator over a finite period during the viator's life expectancy established by the contract. At the expiration of that period, Respondent and his father would be responsible for paying premiums. This is a similar process when compared to other MBC viatical contracts subject to the receiver's control. The Murrays Douglas B. Murray was born on March 28, 1934. He retired from work in 1994 from a position as a heating and plumbing sales representative for Sears. He became acquainted with Respondent in late summer or early fall 2002. On August 29, 2002, in response to Mr. Murray's inquiry, Respondent wrote him to invite his business with First Liberty. Subsequently Mr. Murray went to Respondent's office in Summerfield with his wife, Veronica Murray. Ms. Murray was in her early 60s at the time. In 2002 she had retired from her job as a secretary. Mr. Murray had lost money in the stock market. With the money he had left from that venture, he decided to reinvest to supplement his income with interest that might be available from $100,000 he held. At the time CDs were returning a low percentage, 2 1/2 to 3 percent. This amount of return was not satisfactory to Mr. Murray. In their discussions, Respondent mentioned other possible investments but explained that the return on the investments for other opportunities would not bring about 5 to 7 percent that Mr. Murray was accustomed to. Ultimately, this led to the viatical settlement purchases with returns in excess of 7 percent. After discussing other possibilities for investment, Respondent had mentioned viaticals as a possible investment. The investment strategy under consideration was the purchase of a short term annuity for a period of three years amounting to $30,000, with an additional $70,000 being placed in viaticals. The arrangement made by Respondent with the Murrays was to purchase the annuity which paid an income for its period pending the maturity of the viaticals, which was dependent upon the viator's demise. The period contemplated for return on the viaticals purchased by Mr. Murray was three years. Respondent explained to the Murrays that the viaticals were in association with people who were very ill and who had to sell their rights to insurance policies to provide income to the insured to pay for medical expenses or to meet other needs. On September 17, 2002, Mr. Murray made application for an annuity through the Lafayette Life Insurance Company, paying $29,550 toward that purchase. In addition Mr. Murray through the Murray Family Trust entered into a viatical settlement purchase agreement. On September 17, 2002, the amount of the viatical purchase was $70,450 paid by check into an escrow account on September 19, 2002. This supported the purchase of five separate viatical transactions. One of the viaticals has paid off in the manner contemplated by the agreement. Four others have not paid. Mr. Murray is paying premiums on those policies. Mr. Murray will continue to meet the premium payments on the four viaticals until he exhausts approximately $19,000 available to meet those premium payments. The viatical that did pay returned approximately $19,750, which he is applying to meet the premium obligations for the four remaining viaticals. Mr. Murray did not expect to have to pay premiums. On this subject, Respondent provided examples where people had received the return on their investment in the viaticals. Mr. Murray acknowledges that the agreement contemplated that in the event that the viatical settlement purchase agreement premium reserve accounts were exhausted, that the Murrays might be responsible for meeting the costs of premiums. Mr. Murray did not read the viatical settlement purchase agreement entered into carefully, even though he was not familiar with this form of investment. He relied upon Respondent and trusted his judgment. The respective pages within the viatical settlement purchase agreement for the Murray Family Trust were initialed by the Murrays, husband and wife, and signed by those purchasers. As the pages were being initialed by the Murrays, Respondent made explanations of the points set forth on those pages. In the discussion Respondent mentioned that the Murrays could receive copies of physicians' reports concerning the health circumstance for the insured persons, the viators. Respondent told the Murrays that none of the policies under consideration related to HIV patients. The explanation was that the persons were elderly, approaching the end of life. Mr. Murray understood that he could rescind his choice to proceed with the viatical purchases but chose not to having confidence that the investment was sound. The Andrades George F. Andrade was born on June 21, 1940. His wife Elizabeth A. Andrade was born on July 8, 1942. Mr. Andrade had been employed as a commercial fisherman and commercial truck driver. He retired in 2002. Mr. Andrade purchased viatical settlements in his own name and a viatical settlement in both his name and his wife's name. Mrs. Andrade also purchased a viatical settlement. All purchases were from MBC with Respondent acting as agent. The Andrades were interested in supplementing their income. They saw an advertisement in the newspaper for CDs offered by First Liberty. They went to the office where Respondent was employed. The Andrades discussed the possible purchase of CDs with Respondent. Among other investment prospects discussed was a viatical settlement agreement. The Andrades had prior experience with viatical agreements but had declined to complete the transaction from another provider whom they dealt with before the meeting with Respondent. Notwithstanding their impression concerning the earlier viatical agreement, Respondent persuaded the Andrades that the viatical agreements he offered were a good investment. In this discussion, he told the Andrades that he had invested in viatical agreements. When Respondent mentioned that he had entered into a viatical settlement purchase agreement, he also mentioned that in his experience the viatical agreements paid off on time and indicated that the frequency of times in which the viatical agreements met the expected timeline for maturity was "pretty high." During their discussions Respondent suggested that the Andrades might wish to contact the Better Business Bureau concerning the practices of MBC. They did and found no cause for alarm. Ultimately, the Andrades purchased eight viatical agreements from Respondent offered by MBC. On March 18, 2003, George and Elizabeth Andrade entered into a viatical settlement purchase agreement for which they paid $33,500. On that date there were two separate viatical settlement purchase agreements entered into by Mr. Andrade alone in an amount of $21,214.66 and $15,696.11 respectively. On April 7, 2003, Mrs. Andrade entered into a viatical settlement purchase agreement in the amount of $21,172.87. Of the eight viatical agreements received pursuant to their purchases, none have provided a return on the investments. In response to six of those viatical agreements, the Andrades have forfeited their rights and lost the investment because they did not feel that they could afford to meet the premium payments due. When executing the viatical settlement purchase agreements, the Andrades did not read those documents. They simply initialed the pages placing their trust in Respondent's explanations concerning the agreements. In his discussion, Respondent reminded the Andrades that if the insured lived longer than the maturity date on the viatical agreement, that the Andrades would be responsible for paying the premiums. The Andrades also purchased an annuity from Respondent as a supplement to their monthly income needs. The annuity that was purchased was for $30,000. The Andrades staggered the due dates for the viatical agreement purchases over two years, three years and four years. The expectation in the investment planning was that the annuity and the viatical agreements be assembled in a manner that the Andrades would receive income over a period of time. They intended to travel with the money derived from the viatical purchase agreements. Respondent told the Andrades that they could accept or decline the viatical agreements based upon the medical history provided related to the insured. The Andrades did not review any of the medical information related to the insureds. They were aware that there was a rescission period associated with the viatical agreements that was supported by the medical information. The Andrades understood that the estimates on life expectancy for the insureds were not guarantees. The Colozzos Daniel Colozzo and Wanda Colozzo are husband and wife. Mr. Colozzo was born on August 11, 1940. Mrs. Colozzo was born on March 2, 1942. Mr. Colozzo had been a construction worker for about 38 years. Mr. Colozzo has been retired since 1996. Mrs. Colozzo had a retail fabric business before selling the business in 2003. Mr. Colozzo saw a written advertisement related to CDs associated with First Liberty. Based upon that information he went to Respondent's office to discuss investments. Once there he noticed an item, which Mr. Colozzo describes as a flag, explaining viaticals with a percentage return based upon the year that the viatical matured. Wanda Colozzo, Mr. Colozzo's wife was with him at the time. The Colozzos discussed the purchase of CDs. They did not find this desirable. Respondent mentioned the prospect of purchasing annuities. The annuities were also discussed. Mrs. Colozzo was interested in a return on investments of approximately $2,000 a month and the annuities did not fit their needs. As an alternative, in discussing viaticals, Respondent explained that they were life insurance policies that people had and the Colozzos would be buying a portion of the policy. In the beginning Mr. Colozzo was not interested because he did not wish to wait for someone to die to get a return on his investment. Respondent replied that the Colozzos would be helping someone because the persons who were insured could use the money to survive, to live on. At this meeting no decision was made to purchase viaticals. The Colozzos met several times with Respondent before deciding to buy viaticals. On June 9, 2003, Daniel and Wanda Colozzo entered into a viatical settlement purchase agreement with MBC in the amount of $60,000, with Respondent acting as the sales agent. The amount was paid by check written by Mrs. Colozzo to an escrow agent and a receipt was provided for the funds. When Mr. Colozzo asked Respondent whether the viatical purchase was a matter about which tax would be owed on the return of investment, Respondent replied that it could be or could not be. Respondent stated that it was not a security, so it was not registered. The nature of the viatical settlement purchase agreement included one viatical agreement for 36 months at $15,000; one viatical agreement for 48 months for $15,000; one viatical agreement at 60 months for $15,000 and one viatical agreement for 72 months at $15,000. On June 9, 2003, a fifth viatical was purchased in the amount of $10,000, as evidenced by a check written by Mrs. Colozzo to the escrow agent. The details of that viatical agreement are not known. On June 27, 2003, the Colozzos purchased a viatical for $15,000, terms unknown. Commencing on July 15, 2003, the Colozzos were provided assignment of ownership in the viaticals purchased on June 9, 2003, with medical information related to the life insurance policy holder, information concerning the estimated life-expectancy, the amount of funds made on the purchase and the statement of payment under the death benefit related to the viatical agreement. On September 9, 2003, the Colozzos returned to Respondent's office and purchased two three-year viaticals from Respondent at $75,000 each. Separate checks were written to the escrow agent for each of the $75,000 purchases made on September 9, 2003. As before, MBC made assignment of ownership in the life insurance policies related to the viatical agreements entered into on September 9, 2003. That notification included assignment, statement of amount to be paid upon under the death benefits, and medical information and was provided commencing with notification on November 6, 2003. All together the Colozzos purchased eight viaticals worth $235,000. On the occasions when the Colozzos met with Respondent and entered into the viatical settlement purchase agreements, the Colozzos looked them over and Respondent explained what was contained page-by-page. Each page was initialed by the Colozzos. The Colozzos did not carefully read those pages. When MBC provided information to the Colozzos concerning the viatical agreements, they were aware of their right to rescind the purchases and declined. Under the terms of the viatical settlement purchase agreements initially entered into, there was a clause allowing rescission. When Respondent explained the nature of the viatical settlement purchase agreements, he told the Colozzos that if the expected life expectancy was exceeded that MBC normally granted another year, which would have been a grace period, after which the Colozzos would be responsible for paying premiums. When describing the life insurance policies pertaining to viators, Respondent told the Colozzos that the life insurance policies were from major companies and were safe because they were life insurance policies. Mr. Colozzo had his accountant in New York review the viatical agreements. That individual indicated that he did not know much about viaticals but did not find anything wrong with them. The accountant in New York told the Colozzos that he had checked the MBC website and did not find anything of concern. Of the eight viaticals purchased two have matured and returned money on the investment. The ones that matured were $15,000 viatical agreements. The Colozzos have forfeited their rights in three viaticals totaling $165,000 and continue to hold the remaining viaticals. In their discussions Respondent told the Colozzos that he himself owned viaticals.
Recommendation Upon consideration of the findings of fact and the conclusions of law, it is RECOMMENDED: That a final order be entered finding Respondent in violation of Subsections 626.611(6) and 626.621(2), Florida Statutes (2002 and 2003), in Counts I through III, dismissing other alleged statutory violations within the Administrative Complaint, as amended, and suspending Respondent's insurance license for a period of six months. DONE AND ENTERED this 8th day of May, 2008, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of May, 2008. COPIES FURNISHED: Robert Allen Fox, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Richard Bisbee, Esquire H. Richard Bisbee, P.A. 1882 Capital Circle, Northeast, Suite 206 Tallahassee, Florida 32308 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Level 11 Tallahassee, Florida 32399-0307
The Issue Whether the Petitioners are entitled to an award of attorneys' fees and costs pursuant to Sections 120.569(2)(e) and 120.595(1), Florida Statutes, and, if so, in what amounts.
Findings Of Fact On October 3, 2001, AHCA served three Administrative Complaints on HHCI, apparently intending to revoke HHCI's licenses to operate nursing homes on the basis of a retroactive application of Section 400.121(3)(d), Florida Statutes (2001). The statute states in pertinent part: (3) The agency shall revoke or deny a nursing home license if the licensee or controlling interest operates a facility in this state that: * * * (d) Is cited for two class I deficiencies arising from separate surveys or investigations within a 30-month period. HHCI filed petitions challenging AHCA's allegations in the Administrative Complaints. On October 12, 2001, HHCI filed a challenge to the non- rule policy of retroactive application (DOAH Case No. 01-3935RU) and a hearing was scheduled for October 23, 2001. The Petitions in the Administrative Complaint cases were forwarded by AHCA to DOAH on October 19, 2001, and were consolidated under DOAH Case No. 01-4124. The Final Order in Case No. 01-3935 RU, declaring AHCA's policy of retroactive application invalid, was issued on October 31, 2001. HHCI filed a Motion for Award of Attorney's fees in DOAH Case No. 01-4124 on November 2, 2001. That motion forms the basis for the instant case. At the time the Administrative Complaints were filed, the three HHCI facilities held standard licenses and were apparently operating in compliance with applicable law, with no unresolved survey violations pending. The day after the Administrative Complaints were served, AHCA issued a press release and scheduled a telephonic "media call-in" to reply to questions from interested press representatives. The result of the media attention was to cause great concern to both HHCI and the residents of their facilities as to the proposed closure of the facilities. AHCA distributed a letter to residents indicating that unless HHCI challenged the action, the facility would be closed in approximately 60 days. The AHCA letter advised residents that if HHCI challenged the proposed action, the proposed action "may be delayed." The AHCA letter did not indicate that any resolution of the dispute other than facility closure was possible. The result of the attention and statements by AHCA's representative was to cause great concern among residents and their families as to what living arrangements would be available for residents of the facilities. AHCA also placed monitors in each facility to discuss the pending action with residents and their families, as well as to observe the facility operations. There is no evidence that the placement of monitors in the facilities offered any level of comfort to residents or families. The monitors also apparently began citing the facilities for alleged additional violations of various regulations. In response, HHCI officials immediately sought legal counsel to address the situation. Counsel at the Washington, D.C., law firm, Proskauer Rose, became involved in representing HHCI. HHCI also retained Counsel in the Tallahassee office of the Broad and Cassel law firm, with whom it had no prior relationship. HHCI directed its legal team to review all possible options to resolving the matter expeditiously. Counsel considered both federal and state court action and filed a request for injunction in state court. HHCI also attempted to resolve the matter informally. On October 8, 2001, HHCI obtained an opinion from the Joint Administrative Procedures Committee (JAPC), a standing committee of the Florida Legislature, which concluded that "a strong legal argument" could be made that the retroactive application of the statute was improper. There is no evidence that AHCA considered the JAPC opinion. In any event, because informal attempts to resolve the matter were unsuccessful, HHCI legal counsel began an intensive effort to defend the company against the AHCA action. The Final Order in Case No. 01-3935RU held that there was an absence of legal authority to apply the new law retroactively. There was no appeal of the Final Order. After the Final Order was issued, AHCA abandoned the Administrative Complaints that sought to revoke HHCI's licenses and close the facilities. In this proceeding, HHCI seeks fees it incurred for the Broad and Cassel and the Proskauer Rose law firms and for presentation of the testimony of Al Clark at the fee hearing. HHCI presented nine invoices from Broad and Cassel that were admitted as HHCI Exhibit 1. The invoices submitted in this case do not duplicate time that was invoiced as part of the rule challenge-related fee case. Invoice #469914 dated November 1, 2001, is for a total of $23,835.87, including fees of $23,565 and costs of $270.87. The majority of the work in these cases was performed in October. The invoice indicates time spent considering several theories of defense to the complaints. Invoice #474211 dated December 1, 2001, is for a total of $2,282.02, including fees of $1,981.50 and costs of $300.52. Invoice #479185 dated January 2, 2002, is for a total of $257.59, including fees of $245 and costs of $12.59. Invoice #491866 dated February 9, 2002, is for a total of $5,463.05, including fees of $5,116.50 and costs of $346.55. Invoice #496833 dated April 3, 2002, is for a total of $161.74, including fees of $147 and costs of $14.74. Invoice #505207 dated June 7, 2002, is for a total of $738.68, including fees of $735 and costs of $3.68. Invoice #507485 dated July 2, 2002, is for a total of $296.17, including fees of $294 and costs of $2.17. Invoice #515997 dated October 2, 2002, is for a total of $1,625.93, including fees of $1586 and costs of $39.93. Invoice #516952 dated October 16, 2002, is for a total of $2,903.35, including fees of $2878 and costs of $25.35. HHCI presented the testimony of Al Clark, who was accepted as an expert on the issue of attorney fees. Mr. Clark testified as to the reasonableness of the fees and costs charged to HHCI by the Broad and Cassel law firm. Mr. Clark's testimony was not contradicted and is credited. The time and labor expended by employees of the Broad and Cassel law firm were reasonable in light of the legal issues presented by the administrative actions proposed by AHCA. The presumed goal of AHCA's action was to revoke the licensure of HHCI's three nursing homes. Broad and Cassel provided the substantial skill and expertise required to supply the necessary legal services. Broad and Cassel billed HHCI at an hourly rate. The hourly rates charged by Broad and Cassel personnel are reasonable. The rates ranged from $245 per hour for lead counsel to $90 per hour for support counsel. There was no prior business relationship between Broad and Cassel and HHCI. Broad and Cassel counsel has significant experience and skill in health care law and provided their services efficiently throughout the dispute. Because the proposed sanction was severe, and because the agency publicized its legal action, HHCI required an immediate legal response resulting in an intense initial amount of work by Broad and Cassel. Broad and Cassel personnel represented HHCI legal interests throughout the administrative proceedings and prevailed in defending against the proposed administrative action. Subsequent to the hearing, HHCI submitted Mr. Clark's invoice for $1,012.50. Mr. Clark's invoice reflects a reasonable effort expended in addressing the costs and fees at issue in this case. At the hearing, Mr. Clark further testified that an amount up to $10,000 would be possible for the resolution of this fee case. At this time, none of this expense has been incurred and is not properly awarded. Based on the foregoing, HHCI has satisfied the factors set forth in Florida Bar Rule 4-1.5(b) related to awards of fees and costs in this case, and is entitled to an award of fees and costs for the Broad and Cassel billing and for Al Clark's invoice. Mr. Clark was not asked for, and did not offer, an opinion about the reasonableness of the Proskauer Rose fees. There is no credible evidence supporting an award of fees for work performed by the Proskauer Rose firm. Based on the testimony presented during the hearing, the evidence fails to establish that the charges by the Proskauer Rose firm as set forth on the exhibit are reasonable. Billing records admitted into evidence as HHCI Exhibit 3 contain references to regulatory matters not directly at issue in the proceedings giving rise to this request for fees. Such additional matters include nursing home surveys performed in October 2001, preparations for informal dispute resolution (IDR) meeting related to survey issues, and regulatory matters occurring in other states. The IDR preparations, although apparently prompted by alleged problems identified by the monitors, were not at issue in the Administrative Complaints that form the basis for this fee request. Although HHCI asserts that an Administrative Law Judge, hearing the Administrative Complaints seeking license revocation, could have considered the alleged problems, such allegations would have required amendment of the pending Administrative Complaints. More likely, the allegations would have been the subject of new Administrative Complaints that would have been litigated separately, and, as such, costs related to IDR preparation are not properly awarded in the instant case. Further, the Proskauer Rose invoices indicate that hours billed on one invoice in "File #84028.0014" for October 12 (description beginning with "review faxed 256") and October 22 (description beginning with "Meeting with S. Davis and C. Schessler re preparation for IDR") were also billed on another invoice in "File #84028.0015." Duplicate billings would not support an award of attorney fees. AHCA'S MOTION FOR SUMMARY JUDGMENT On April 9, 2002, HHCI, a foreign limited partnership operating in the State of Florida, canceled the registration of HHCI Limited Partnership with the Florida Department of State. HHCI Limited Partnership continues to operate in other states and is registered in Massachusetts.
The Issue Whether Petitioner is entitled to attorney’s fees and costs pursuant to section 120.595(4), Florida Statutes (2017).
Findings Of Fact A Final Order was issued on May 11, 2017, finding that the Board of Psychology relied on an unadopted rule when it denied Petitioner’s application for licensure. Petitioner timely filed a Motion for Award of Attorney’s Fees and Costs under section 120.595(4), with the Division of Administrative Hearings. Prior to any hearing on the motion, the parties reached a settlement in the amount of $25,000 to be paid to Petitioner for fees and costs incurred in the underlying action. The parties agreed to have the matter forwarded to the Board of Psychology for consideration of the settlement, and for authority to have the administrative law judge re-open the file upon approval of the settlement for the purpose of having a final order entered in accordance with the terms of section 120.595(4). The administrative law judge entered an Order Closing File in order to allow the parties to present the proposed settlement to the Board of Psychology, without prejudice for the case to be re-opened should the Board approve the terms of the settlement. The Board of Psychology has approved the settlement at issue in this proceeding, and the parties have requested a final order approving that settlement.
Recommendation Based on the foregoing, it is hereby, recommended that the Administrative Complaint dated August 24, 1990, in DPR Case #0169422, be dismissed. RECOMMENDED this 23rd day of January, 1991, in Tallahassee, Leon County, Florida. MARY CLARK 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 23rd day of January, 1991. COPIES FURNISHED: Steven W. Johnson, Esquire DPR - Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Douglas D. Marks, Esquire 700 South Babcock Street Melbourne, Florida 32901 Darlene F. Keller, Executive Director DPR - Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Jack McCray, Esquire General Counsel Department of Professional Regulation Northwood Centre, Suite 60 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The primary issue in this case is whether Respondent misrepresented or failed to disclose material terms and conditions pertaining to annuities that he sold to several senior citizens. If Respondent were found guilty of any disciplinable offense, then the next issue would be whether Petitioner should impose discipline for such violations as Respondent may be found to have committed.
Findings Of Fact At all times relevant to this case, Respondent Peter S. Tust ("Tust") held a valid license to transact business in Florida as a life insurance agent, which authorized him to sell products such as life and health insurance policies and fixed and variable annuities. This case arises from two separate transactions in which Tust sold an insurance product known as an equity index annuity to (a) Dora Indiviglia and (b) Abraham and Elaine Gelch. Petitioner Department of Financial Services ("DFS" or the "Department") is the state agency charged with administering the provisions of the Florida Insurance Code, among other responsibilities. The Department alleges that Tust fraudulently induced Ms. Indiviglia and the Gelchs to purchase annuities that were not suited to their respective financial needs. Because Tust is a licensed insurance agent, he falls within the Department's regulatory and disciplinary jurisdiction. Broadly speaking, an annuity is a contractual arrangement pursuant to which an insurance company, in exchange for a premium (or purchase price), agrees to pay the owner or his beneficiary a specified income for a period of time. Annuities are generally classified as "fixed" or "variable." Under a fixed annuity, the benefit is paid according to a predetermined interest rate. With a variable annuity, the premium is invested on the owner's behalf in, for example, stocks or bonds, and the amount of the benefit, when paid, reflects the performance of that investment, be it positive or negative. Fixed annuities can be either "immediate" or "deferred." An immediate fixed annuity is one under which the insurer begins paying the benefit upon purchase of the annuity. Under a deferred annuity, in contrast, the premium is allowed to grow over time, until the contract "matures" or is "annuitized" and the insurer begins paying the benefit. The equity index annuities which Tust sold to Ms. Indiviglia and the Gelchs are considered fixed deferred annuities. An equity index annuity is a contract under which the insurer agrees to pay a benefit based on a premium that earns interest at a rate determined by the performance of a designated market index such as the S&P 500. The premium is not invested in the market for the owner's account (as would be the case with a variable annuity). Rather, to explain the concept in the simplest terms, the interest rate rises (or falls) in relation to the index's performance, within predetermined limits. (None of the annuities involved in this case permitted the interest to fall below zero; that is, an owner's principal was never at risk of being lost due to the market's performance.) It is undisputed that the equity index annuities which Tust sold to Ms. Indiviglia and the Gelchs were approved for sale to senior investors by the Department. Equity index annuities are typically long-term investments. Owners of such annuities have limited access to the funds invested and accumulating in their accounts, although some equity index annuities permit yearly penalty-free withdrawals at set percentages. The accrued interest is generally not taxed until the funds are withdrawn or the benefit is paid under annuity. Besides taxes, the purchaser may incur substantial surrender penalties for canceling the contract and receiving his funds ahead of a specified date. Some equity index annuities identify a date——often many years in the future——on which the insurer will "annuitize" the contract if it has not done so already at the purchaser's request. This date is sometimes called the "maturity date." The benefit payable under the annuity is determined based on the account's value as of the maturity date, and the payments to the owner or beneficiary of the annuity begin at that time. Under the annuities in question here, the purchaser was not required to keep his or her funds invested until the maturity date. Rather, subject to certain limitations not at issue, the purchaser could elect to "annuitize" his or her contract practically at any time and thereby begin receiving the annuity payments. Therefore, in this case at least, the fact that the maturity date was beyond a purchaser's expected lifespan is not, of itself, compelling proof that the annuity was an unsuitable investment for him or her. The Indiviglia Transaction. In February 2005, Ms. Indiviglia attended one of the luncheon seminars that Tust routinely conducted in restaurants near his place of business in Boca Raton, Florida. At these seminars, Tust provided a meal and a sales presentation to his invitees. Tust made clear to those in attendance that he was selling equity index annuities and would recommend the purchase of this sort of annuity to anyone interested for whom such an investment would be suitable. Ms. Indiviglia was interested and made an appointment to meet with Tust. She was 65 years old at the time. As she told Tust when they met on February 25, 2005, Ms. Indiviglia's annual income was about $41,000, which she received from pensions and Social Security. She had recently sold some property and wanted to invest the proceeds, which amounted to about $150,000. Ms. Indiviglia had made financial investments before meeting Tust. She had invested in the stock market beginning in the late 1970s. Additionally, she had invested in a 401k account when she worked for the investment bank J.P. Morgan, had purchased mutual funds outside of the 401k, and had bought a variable annuity through another broker in 2003 or 2004. Ms. Indiviglia told Tust her goals were safety, growth, and future income. Upon meeting with Tust, Ms. Indiviglia agreed to purchase an equity index annuity from Fidelity and Guaranty Life Insurance Company ("F&G") for a premium of approximately $149,000. By purchasing this particular product, Ms. Indiviglia was eligible for, and received, a bonus of approximately $15,000, which was added to her account. If she surrendered (or canceled) this annuity during the first 14 years, however, Ms. Indiviglia would pay a penalty, starting at 18% for a cancellation during the first year and declining each year thereafter until the fourteenth year, when the surrender penalty would be 1%. The maturity (or annuity) date on Ms. Indiviglia's annuity was April 22, 2030. (Because she would be 90 years old by that time, the chances were good that Ms. Indiviglia would surrender or annuitize the contract before the maturity date.) In applying for the F&G annuity, Ms. Indiviglia executed an Annuity Application, a Confirmation Statement, and a Senior Annuity Suitability Acknowledgement. On page one of the Senior Annuity Suitability Acknowledgement, Ms. Indiviglia declined to answer certain questions related to her financial needs and objectives by placing a check mark beside the following statement: "No, I decline to answer the questions below, but I believe a Fidelity and Guaranty Life or Americom Life and Annuity annuity contract meets my needs for my financial situation." Ms. Indiviglia placed her signature and the date (3/8/2005) beneath this statement. On the second page of the Senior Suitability Acknowledgement, Ms. Indiviglia manifested her understanding of several statements, including the following, which she checked: ? This is not a short-term investment. ? Cash withdrawals from or a complete surrender of the contract are subject to certain limitations and charges as described in the contract. ? Surrender charges/fees may be incurred as a result of liquidating certain existing accounts; however, I believe this transaction to be in my best interest. Ms. Indiviglia placed her signature and the date (3/8/2005) below these statements. Tust delivered the F&G annuity contract to Ms. Indiviglia on May 16, 2005. Ms. Indiviglia executed a Delivery Receipt acknowledging that she had received not only the annuity contract, but also a contract summary. On the "Policy Information" page of the contract, which is Page 1, in boldfaced type, were the following provisions: RIGHT TO CANCEL. If you decide not to keep this policy, return it within 10 days after you receive it. It may be returned to any of our agents or it may be mailed to us.The return of this policy will void it from the beginning. Any premium paid will be refunded within 10 days of our receipt of this policy. YOU HAVE PURCHASED AN ANNUITY POLICY. CAREFULLY REVIEW THIS POLICY FOR LIMITATIONS. CANCELLATION MAY RESULT IN A SUBSTANTIAL PENALTY KNOWN AS A SURRENDER CHARGE. On Page 2 of the contract, the Annuity Date of April 22, 2030, was plainly disclosed, as was the "Surrender Factor" for each policy year from first (18%) to the fourteenth (1%). Three pages later, on Page 5, under the boldfaced heading, "SURRENDERS," appeared the following: Surrender Charge A surrender charge may be imposed on withdrawals and at death. The surrender charge equals the surrender factor for the appropriate policy year, as shown on the policy information page, multiplied by the amount of the account value withdrawn. The account value withdrawn consists of the amount paid upon a surrender request, or applied to an annuity option, and the surrender charge thereon. Waiver of Surrender Charges The surrender charge will not apply to the account value if payments are made under an annuity option. The Policy Information page clearly identified the Riders and Endorsements to the contract, one of which was entitled, "Partial Withdrawals Without Surrender Charges Rider." That Rider, which was attached to the contract, provided as follows: After the first policy anniversary, a portion of the account value withdrawn will not be subject to a surrender charge. The amount, which can be surrendered without a surrender charge, is up to 10% of the premiums paid, less any amounts previously surrendered in the current policy year which were not subject to the surrender charges. Maximum Benefit: the total maximum amount, which can be surrendered without a charge, is 25% of the premiums paid. Once the maximum amount has been surrendered without charges, any additional surrenders will incur a charge, unless additional premium is paid. Ms. Indiviglia held the F&G annuity into the third policy year. In or around July 2007, she made a penalty-free withdrawal of $12,000. Then, about a month later, she elected to surrender the contract, incurring a 16% penalty for the early withdrawal of her account balance. Although the evidence is not clear as to precisely how Ms. Indiviglia fared, financially, in this transaction, it is undisputed that, notwithstanding the surrender penalty, she actually made money on the investment——at least about $2,000 and perhaps as much as $14,000 or so. The provisions of the F&G annuity which DFS alleges Tust misrepresented or failed to disclose to Ms. Indiviglia were clearly stated, unambiguously, in the contract itself. The evidence fails to convince the undersigned to find, without hesitancy, that Tust misrepresented or failed truthfully to disclose to Ms. Indiviglia any of the F&G annuity contract's material terms and conditions, knowingly made other false representations of material fact about the product, or otherwise made any false promises in connection with the investment. Likewise, the evidence is insufficient to convince the undersigned that the F&G annuity was an inappropriate investment for Ms. Indiviglia, taking into account her stated financial needs and goals, age, wealth, and relative sophistication as an investor. To the contrary, viewing the evidence as a whole, the undersigned determines that the F&G annuity fell squarely within the range of reasonable investments for a person having Ms. Indiviglia's investment profile. The Gelch Transaction. In September 2006, Abraham Gelch, 73, and his wife Elaine, 68, attended one of Tust's luncheon seminars. Mr. Gelch was a retired accountant; to that time he had been primarily responsible for his family's financial decisions. Although Mrs. Gelch denied being knowledgeable regarding investments when she testified in this proceeding, she is well-educated, holding a bachelor's degree and a master's degree, and was sufficiently conversant at hearing regarding the subject annuities to persuade the undersigned that she was and is able to comprehend the particulars of the transaction in issue. After the seminar, the Gelchs met with Tust to discuss purchasing equity index annuities. At the time, they were living on Social Security plus the returns on their investments. The Gelchs had, in 2006, financial investments totaling nearly $2 million, most of which wealth was held in a brokerage account at Morgan Stanley. According to their U.S. income tax return, which they gave to Tust, the Gelchs' adjusted gross income for 2005 was approximately $100,000, about $35,000 of which was derived from investments, according to other information the Gelchs provided Tust. At the meeting with Tust, Mr. Gelch completed a "financial goals and needs" form on which he ranked his investment objectives in order of importance. He ranked the items from 1 to 6, with "1" being the most important, as follows: Protecting my assets from losses 1 Growing my assets 2 Generating more income 3 Leaving money to my children/heirs 6 Replacing my pension income for my spouse if I pass first 4 Protecting my assets from taxes at death 5 Mr. Gelch placed his signature and the date (09/27/06) below this enumeration of his priorities as an investor. On the same form, Mr. Gelch expressed his agreement with the statement, "It is important that my investments are 100% safe from this point forward," and he expressed disagreement with the statement, "I am willing to take some risk (and possible losses) with my investments." Mr. Gelch disclosed on the form that he and his wife had suffered investment losses of $300,000 between 2000 and 2002. In completing the statement, "My greatest financial concern is ," Mr. Gelch wrote: "OUTLIVING MY INCOME." Ultimately, Mr. and Mrs. Gelch agreed to purchase six equity index annuities, two issued by Allianz Life Insurance Company of North America ("Allianz"), and four by Midland National Life Insurance Company ("Midland"), for premiums totaling, in the aggregate, approximately $1.4 million. These annuities were similar in concept to the F&G annuity that Ms. Indiviglia had purchased, having interest rates pegged to market indices, surrender charges for early termination, limitations on penalty-free withdrawals, annuity dates some years in the future, and strong protection against loss of principal.1 With the Allianz annuities, surrender penalties declined over ten years, from 15% in the first year down to 2.14% in the tenth policy year. After one year, the Gelchs could withdraw up to 10% of the premium annually without penalty, to a maximum (over the first 10 policy years) of 50% of the premium paid. Under the Allianz annuities, the Gelchs could begin making systematic withdrawals of credits——that is, they could take distributions of interest earned on their accounts—— without penalty after the fifth policy year. The maturity dates for the Allianz annuities were in 2016. The Midland annuities, like the others, provided for surrender penalties, which declined from 18% to 2% over fourteen years. After the first year, the Gelchs could withdraw up to 10% of the "accumulation value" (premiums paid plus interest earned) of each policy annually without penalty, up to the entire value of the respective annuity. The maturity dates for the Midland annuities fell in 2048 and 2053. In connection with the applications for the Allianz annuities, Mr. and Mrs. Gelch each completed the following forms: Application for Annuity, Product Suitability Form, and Statement of Understanding. In the Product Suitability Form, the Gelchs identified a net worth of more than $1 million and confirmed prior investments in certificates of deposit, fixed annuities, variable annuities, and stocks/bonds/mutual funds. In a section entitled, "Accessing your money," the Gelchs indicated that they intended to access the funds in "10 or more years" as a lump sum. Each Allianz Statement of Understanding is a five page document that identifies the terms of the annuities, including the surrender charges and the methods of calculating interest. The Statements of Understanding do not guarantee a 6-9% return, which is what Mrs. Gelch testified Tust had promised the annuities afforded. Instead, for an indexed investment, each document states, "At the end of each contract year, the capped monthly returns are added together to calculate your indexed interest for that year. If this sum is negative, the indexed interest for that year will be zero." In connection with the applications for the Midland annuities, the Gelchs were provided Annuity Disclosure Statements, which identified the liquidity provisions and contained the following declaration: I understand that [this] annuity is a long- term contract with substantial penalties for early surrenders. A surrender charge is assessed, as listed below on any amount withdrawn, whether as a partial withdrawal or full surrender, that is in excess of the penalty-free amount applicable. The surrender charges vary by product option and decline as [shown in the table.] (Emphasis in original; table in original not reproduced here.) Mr. And Mrs. Gelch each signed and dated this declaration, manifesting their understanding of the surrender charges, which charges, as the disclosure form further explained, "allow the company to invest long-term, and in turn, generally credit higher yields." In addition, on the respective disclosure forms that the Gelchs signed, each of them specifically refused (by signing or placing initials next to the word "Decline"), a 7-year surrender charge option offering no bonus; and a 10-year surrender charge option offering a 5% bonus. Instead, Mr. And Mrs. Gelch each separately requested (by signing or placing initials next to the word "Elect"), the 14-year surrender charge option offering a 10% bonus. Mr. Gelch also completed a Deferred Annuity Suitability Form for Midland, which among other things included the following: 4. An annuity is a long-term contract with substantial penalties for early surrenders and/or distributions. In answering the following question, do not include the funds used to purchase this annuity contract, or any funds from annuities already owned. Do you have sufficient available cash, liquid assets or other sources of income for monthly living expenses and emergencies? Yes ? No (Emphasis in original; check mark handwritten on original.) Mr. Gelch affixed his signature to the suitability form, immediately below a declaration stating: I acknowledge that I have read this Deferred Annuity Suitability Form and believe this annuity meets my needs and is suitable. To the best of my knowledge and belief, the information above is true and complete. Mr. and Mrs. Gelch owned the Allianz and Midland annuities for a little more than a year before surrendering them in January of 2008. The surrender penalties for such early terminations, which charges had been fully disclosed to the Gelchs, were steep: 18% on the Midland annuities and 15% on the Allianz annuities. Despite the surrender penalties, which totaled approximately $200,000, the Gelchs' net loss on the investments (owing to their decision to surrender the annuities so soon after purchasing them) was only about $23,000, due to the investment gains and the bonuses. The provisions of the Allianz and Midland annuities which DFS alleges Tust misrepresented or failed to disclose to the Gelchs were clearly stated, unambiguously, in the written disclosures provided to the Gelchs, not to mention in the contracts themselves. The Gelchs, in turn, gave Tust (and through him the issuing insurers) numerous objective manifestations, in writing, of their understanding of these material terms and conditions. The evidence fails, ultimately, to convince the undersigned to find, without hesitancy, that Tust misrepresented or failed truthfully to disclose to the Gelchs any of the annuity contracts' material terms and conditions, knowingly made other false representations of material fact about the products, or otherwise made any false promises in connection with the Gelchs' investments. Likewise, the evidence is insufficient to convince the undersigned that the Allianz and Midland annuities were inappropriate investments for the Gelchs, taking into account their stated financial needs and goals, respective ages, health, wealth, and relative sophistication as investors. To the contrary, viewing the evidence as a whole, the undersigned determines that the annuities fell squarely within the range of reasonable investments for persons having the Gelchs' investment profile. Ultimate Factual Determinations. In view of the historical facts found above, the undersigned has determined, based the appropriate standard of proof (discussed below) as applied to the evidence adduced at hearing, that Tust is not guilty of any of the following offenses with which he was charged: (a) willfully misrepresenting the terms of any annuity contract as proscribed in Section 626.611(5), Florida Statutes; (b) demonstrating a lack of fitness or trustworthiness to engage in the business of insurance, which is punishable under Section 626.611(7), Florida Statutes; (c) engaging in fraudulent or dishonest practices, a disciplinable offense pursuant to Section 626.611(9), Florida Statutes; (d) willfully failing to comply with, or of violating, a provision of law, which is punishable under Section 626.611(13), Florida Statutes; violating any applicable provision of law, which may subject the violator to discipline under Section 626.621(2), Florida Statutes; (e) engaging in unfair methods of competition or deceptive acts, as prohibited in Section 626.9541, Florida Statutes; and (f) failing to present accurately and completely every fact essential to a client's decision, as required under Florida Administrative Code Rule 69B-215.210. Moreover, although Tust did not have the burden to prove his innocence in any respect, the greater weight of the evidence nevertheless persuades the undersigned to determine that he did, in fact, fulfill the obligations he owed to Ms. Indiviglia and the Gelchs under Section 627.4554, Florida Statutes, which governs transactions involving sales of annuities to senior consumers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a Final Order finding Peter S. Tust not guilty of the charges that were brought against him in this proceeding. DONE AND ENTERED this 3rd day of November, 2009, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 3rd day of November, 2009.
The Issue Whether Keith Jackson, Ph.D. (‘Petitioner’) should be required to pay FAMU’s claimed overpayment of salary as calculated in the amount of $29,141.57, for the pay periods between July 11, 2008 and December 12, 2008.
Findings Of Fact 1, On or about July 1, 2005, Petitioner executed an employment contract with FAMU to serve as Vice President for Research. The contract executed by Petitioner provides that Petitioner “is subject to the Constitution and Laws of the State of Florida and the United States and the rules, policies, guidelines and procedures of the Board of Governors and the University as now existing or hereafter promulgated.” 2. On July 11, 2008, Petitioner submitted to the University a letter advising that he was resigning from his administrative position with the University as the Vice President for Research. 3. Petitioner's letter of resignation was accepted by the University effective July 11, 2008. 4. Tenure as a faculty member was granted to Petitioner by the University on May 25, 2007. 12
Conclusions This matter is now before Florida Agricultural and Mechanical University Board of Trustees (“FAMU,” “Respondent,” or the “University”) for final agency action.
Findings Of Fact On or about January 1, 1981, Ms. Leone Jullien entered into a written lease with Respondent for an apartment in the San Salvatore Apartments located at 1917 Lincoln Street, Hollywood, Florida. The term of said lease was one year beginning January 1, 1981. The lease recites that a security deposit fee of $100 was paid by Jullien to Respondent and that Respondent received Jullien's first and last month's rent at $400 per month for the apartment. Prior to July 1, 1981, Jullien verbally informed the Respondent, Basil A. Roberts (a/k/a Bob Beach, the manager of the San Salvatore Apartments) that she would be leaving her apartment before the term of the lease had run. Respondent then told Jullien that if he could rerent the apartment soon enough to prevent loss to himself, he would return to her the $100 security deposit and the last month's rent of $400. On June 30, 1981, Jullien paid the July rent of $400 by check. On July 1, 1981, she sent notice of her intent to terminate rental in July by certified mail to Respondent. Jullien received post office notice of letter delivery prior to her leaving the apartment on July 9, 1981. Thus, Respondent received at least seven days' notice of abandonment of the apartment lease. In August, 1981, Jullien telephoned Respondent and was only then informed that he would return the $100 "security deposit" referred to in the written lease, but not the $400 final month's rent. At no time did the Respondent gave Jullien written or certified mail notice of his intent to retain this $400. It was established from testimony of both Jullien and Roberts that Respondent gave access (i.e., a key) to Jullien's apartment to another renter beginning in July and continuing through August, 1981. It was also established that the incoming tenant used the apartment for storage of furniture during this period as an accommodation. Respondent retained Jullien's $400 to cover rent on this apartment for August since the new tenant would not agree to rental before September 1, 1981. On July 14, 1982, Jullien and Roberts were parties to a small claims court action initiated by Respondent to settle the dispute over his retention of the $400 last month's rent. The small claims court received evidence in that case and rendered judgment that the "cause has been amicably settled by Plaintiff (Respondent here) paying Defendant (Jullien) $100." Jullien now denies that she intended to settle the dispute at that hearing and that her position was misunderstood. She did, however, admit accepting return of the $100 security deposit referred to in the lease agreement as a result of the small claims court judgment.
Recommendation From the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner enter a Final Order fining Respondent $400. DONE and ENTERED this 8th day of October, 1982, in Tallahassee, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1982.
The Issue The issue is whether Petitioners' Motions for Attorney's Fees should be granted, and if so, in what amount.
Findings Of Fact Based upon the stipulation of counsel, the papers filed herein, and the underlying record made a part of this proceeding, the following findings of fact are determined: Background In this attorney's fees dispute, Petitioners, Anderson Columbia Company, Inc. (Anderson Columbia) (Case No. 00-0754F), Panhandle Land & Timber Company, Inc. (Panhandle Land) (Case No. 00-0755F), Support Terminals Operating Partnership, L.P. (Support Terminals) (Case No. 00-0756F), Commodores Point Terminal Corporation (Commodores Point) (Case No. 00-0757F), and Olan B. Ward, Sr., Martha P. Ward, Anthony Taranto, Antoinette Taranto, J.V. Gander Distributors, Inc., J.V. Gander, Jr., and Three Rivers Properties, Inc. (the Ward group) (Case No. 00-0828F), have requested the award of attorney's fees and costs incurred in successfully challenging proposed Rule 18-21.019(1), Florida Administrative Code, a rule administered by Respondent, Board of Trustees of the Internal Improvement Trust Fund (Board). In general terms, the proposed rule essentially authorized the Board, through the use of a qualified disclaimer, to reclaim sovereign submerged lands which had previously been conveyed to the upland owners by virtue of their having filled in, bulkheaded, or permanently improved the submerged lands. The underlying actions were assigned Case Nos. 98- 1764RP, 98-1866RP, 98-2045RP, and 98-2046RP, and an evidentiary hearing on the rule challenge was held on May 21, 1998. That proceeding culminated in the issuance of a Final Order in Support Terminals Operating Partnership, L.P. et al. v. Board of Trustees of the Internal Improvement Trust Fund, 21 F.A.L.R. 3844 (Div. Admin. Hrngs., Aug. 8, 1998), which determined that, except for one challenged provision, the proposed rule was valid. Thereafter, in the case of Anderson Columbia Company, Inc. et al. v. Board of Trustees of the Internal Improvement Trust Fund, 748 So. 2d 1061 (Fla. 1st DCA 1999), the court reversed the order below and determined that the rule was an invalid exercise of delegated legislative authority. Petitioners then filed their motions. Fees and Costs There are eleven Petitioners seeking reimbursement of fees and costs. In its motion, Anderson Columbia seeks reimbursement of attorney's fees "up to the $15,000 cap allowed by statute" while Panhandle Land seeks identical relief. In their similarly worded motions, Support Terminals and Commodores Point each seek fees "up to the $15,000 cap allowed by statute." Finally, the Ward group collectively seeks $9,117.00 in attorney's fees and $139.77 in costs. In the Joint Stipulations of Fact filed by the parties, the Board has agreed that the rate and hours for all Petitioners "were reasonable." As to all Petitioners except the Ward group, the Board has further agreed that each of their costs to challenge the rule exceeded $15,000.00. It has also agreed that even though they were not contained in the motions, requests for costs by Support Terminals, Commodores Point, Anderson Columbia, and Panhandle Land in the amounts of $1,143.22, $1,143.22, $1,933.07, and $1,933.07, respectively, were "reasonable." Finally, the Board has agreed that the request for costs by the Ward group in the amount of $139.77 is "reasonable." Despite the stipulation, and in the event it does not prevail on the merits of these cases, the Board contends that the four claimants in Case Nos. 00-754F, 00-755F, 00-0756F, and 00- 757F should be reimbursed only on a per case basis, and not per client, or $7,500.00 apiece, on the theory that they were sharing counsel, and the discrepancy between the amount of fees requested by the Ward group (made up of seven Petitioners) and the higher fees requested by the other Petitioners "is difficult to understand and justify." If this theory is accepted, it would mean that Support Terminals and Commodores Point would share a single $15,000.00 fee, while Anderson Columbia and Panhandle Land would do the same. Support Terminals and Commodores Point were unrelated clients who happened to choose the same counsel; they were not a "shared venture." Each brought a different perspective to the case since Commodores Point had already received a disclaimer with no reversionary interest while Support Terminals received one with a reversionary interest on June 26, 1997. The latter event ultimately precipitated this matter and led to the proposed rulemaking. Likewise, in the case of Anderson Columbia and Panhandle Land, one was a landowner while the other was a tenant, and they also happened to choose the same attorney to represent them. For the sake of convenience and economy, the underlying cases were consolidated and the matters joined for hearing. Substantial Justification From a factual basis, the Board contends several factors should be taken into account in determining whether it was substantially justified in proposing the challenged rule. First, the Board points out that its members are mainly lay persons, and they relied in good faith on the legal advice of the Board's staff and remarks made by the Attorney General during the course of the meeting at which the Board issued a disclaimer to Support Terminals. Therefore, the Board argues that it should be insulated from liability since it was relying on the advice of counsel. If this were true, though, an agency that relied on legal advice could never be held responsible for a decision which lacked substantial justification. The Board also relies upon the fact that it has a constitutional duty to protect the sovereign lands held in the public trust for the use and benefit of the public. Because lands may be disclaimed under the Butler Act only if they fully meet the requirements of the grant, and these questions involve complex policy considerations, the Board argues that the complexity and difficulty of this task militate against an award of fees. While its mission is indisputably important, however, the Board is no different than other state agencies who likewise are charged with the protection of the health, safety, and welfare of the citizens. The Board further relies on the fact that the rule was never intended to affect title to Petitioners' lands, and all Petitioners had legal recourse to file a suit to quiet title in circuit court. As the appellate court noted, however, the effect of the rule was direct and immediate, and through the issuance of a disclaimer with the objectionable language, it created a reversionary interest in the State and made private lands subject to public use. During the final hearing in the underlying proceedings, the then Director of State Lands vigorously supported the proposed rule as being in the best interests of the State and consistent with the "inalienable" Public Trust. However, he was unaware of any Florida court decision which supported the Board's views, and he could cite no specific statutory guidance for the Board's actions. The Director also acknowledged that the statutory authority for the rule (Section 253.129, Florida Statutes) simply directed the Board to issue disclaimers, and it made no mention of the right of the Board to reclaim submerged lands through the issuance of a qualified disclaimer. In short, while the Board could articulate a theory for its rule, it had very little, if any, basis in Florida statutory or common law or judicial precedent to support that theory. Although Board counsel has ably argued that the law on the Butler Act was archaic, confusing, and conflicting in many respects, the rule challenge case ultimately turned on a single issue, that is, whether the Riparian Rights Act of 1856 and the Butler Act of 1921 granted to upland or riparian owners fee simple title to the adjacent submerged lands which were filled in, bulkheaded, or permanently improved. In other words, the ultimate issue was whether the Board's position was "inconsistent with the . . . the concept of fee simple title." Anderson Columbia at 1066. On this issue, the court held that the State could not through rulemaking "seek to reserve ownership interests by issuing less than an unqualified or unconditional disclaimer to riparian lands which meet the statutory requirements." Id. at 1067. Thus, with no supporting case law or precedent to support its view on that point, there was little room for confusion or doubt on the part of the Board. E. Special Circumstances In terms of special circumstances that would make an award of fees unjust, the Board first contends that the proposed rule was never intended to "harm anyone," and that none of Petitioners were actually harmed. But the substantial interests of each Petitioner were clearly affected by the proposed rules, and the appellate court concluded that the rule would result in an unconstitutional forfeiture of property. The Board also contends that because it must make proprietary decisions affecting the public trust, it should be given wide latitude in rulemaking. It further points out that the Board must engage in the difficult task of balancing the interests of the public with private rights, and that when it infringes on the private rights of others, as it did here, it should not be penalized for erring on the side of the public. As previously noted, however, all state agencies have worthy governmental responsibilities, but this in itself does not insulate an agency from sanctions. As an additional special circumstance, the Board points out that many of the provisions within the proposed rule were not challenged and were therefore valid. In this case, several subsections were admittedly unchallenged, but the offending provisions which form the crux of the rule were invalidated. Finally, the Board reasons that any moneys paid in fees and costs will diminish the amount of money to be spent on public lands. It is unlikely, however, that any state agency has funds set aside for the payment of attorney's fees and costs under Section 120.595(2), Florida Statutes (1999).
