Findings Of Fact By Stipulated Settlement and Mutual Release executed December 22, 1988, (Ex. 1) signed by Mike Gresham, Director, Division of Administration, Department of Insurance and John Machules, the parties agreed to settle all issues and conclude the litigation and all claims in this case. The Deputy Commissioner approved the agreement on December 28, 1988, making it final with respect to both parties. In consideration of the Department agreeing to pay Machules the salary he would have earned plus compensation for the leave he would have earned between February 1, 1935 and December 31, 1988, in the gross amount of $76,713.33, Machules agreed to: Waive any and all present or future claims against the Department concerning the abandonment action; Waive the right to hearing in this matter and to dismiss with prejudice the case currently pending before the Division of Administrative Hearings; Voluntarily tender his resignation from employment with the Department effective at 5:00 p.m. on December 31, 1988; and Release the Department from all acts or omissions alleged or which could have been alleged in this cause of action or any derivative or collateral action at law or in equity. On December 22, 1988, Machules tendered his resignation effective 5:00 pm. December 31, 1988, (Ex. 1). On December 22, 1988, Machules, in consideration of the sum of $76,71.33 minus standard deductions (Ex. 1) executed a RELEASE releasing the Department from all claims arising from the termination of his employment with the Department. By letter dated December 9, 1988, (Ex. 2) Machules was advised by the Department that all details of the settlement had to be accepted and approved prior to the end of December 1988, that the Department could not credit him with an additional year of credible service (to qualify Machules for retirement) and if this was a condition he insisted upon, the case would proceed to hearing. By letter dated January 4, 1989, (Ex. 3) from the Department to Petitioner's then acting attorney, Machules was advised that the Comptroller's office needed a new W-4 form from Machules and affidavit of his earnings during the period the Department had agreed to pay him. By letter dated February 1, 1989, (Ex. 4) from the Department to Petitioner's attorney, Machules was advised of an IRS levy on Machules' salary and requested documentation that the delinquent taxes had been paid. By letter dated February 27, 1989, (Ex. 4) from the Department to Petitioner's attorney, the attorney was advised that Machules had telephoned the Department lawyer regarding the IRS lien and that he had advised Machules that his attorney should make the contact and further advised Machules that the information on this lien could be obtained from the Comptroller's office. The attorney was also advised that Machules had requested subpoenas for the earlier scheduled March 1, 1989, hearing. By letter dated March 17, 1989, (Ex. 5) the Comptroller's office advised the Department that all issues in the Machules' back pay award had been resolved except for Machules' interim earnings during the back pay period. By letter dated March 21, 1989, (Ex. 6) the Department forwarded a copy of the Comptroller's letter (Ex. 5) to Machules' attorney requesting income tax returns for the years 1986, 1987 and 1988 or W-2 forms for those years, either of which would be acceptable to the Comptroller. By letter dated March 31, 1989, (Ex. 8) the Department forwarded to Machules' attorney a copy of a letter and affidavits received by the Comptroller's office from Machules and advised the attorney that more specific information was required by the Comptroller before Machules' claim could be paid. By letter dated April 3, 1989, (Ex. 9) Machules wrote to Respondent's attorney acknowledging receipt of a copy of Exhibit 8 and stating, among other things, that since he had not received the $76,000.00 by December 31, 1988, "The tentative settlement agreement was NULL and VOID." However, he included a list of one place "employed from 1971 to present" and part-time employment at other places in 1987 and 1988. No specific earnings were provided. By letter dated April 12, 1989, (Ex. 10) the Department replied to Exhibit 9 emphasizing to Machules that it was the Comptroller that needed to be satisfied about Machules' interim earnings before it could pay his claim and he would not be paid until he satisfied the Comptroller on this point. By letter dated April 13, 1989, (Ex. 11) Machules forwarded to the Department copies of 1099-MISC and W-2's for 1987 and 1988. Receipt of this letter which provided the information previously requested was acknowledged by Respondent on April 18, 1989 (Ex. 12). By letter dated April 20, 1989, (Ex. 13) the Department forwarded to Machules' attorney a warrant dated 4/19/89 in the amount of $50,572.33 payable to John J. Machules with a Retroactive Payment Schedule showing a deduction for interim earnings, withholding tax and social security tax. By separate letter dated April 20, 1989, (Ex. 14) the Department advised Machules that the check settling his claim for back pay had been forwarded to Machules' attorney. By letter dated May 11, 1989, (Ex. 15) to Machules' attorney, the Department inquired if Machules had received payment so this case could be closed. By letter dated May 9, 1989, (Ex. 17) Machules was advised by AFSCME that the check being held for him would be returned to the Department if he did not pick it up before May 22, 1989. By letter dated May 13, 1989 (Ex. 17) Machules requested AFSCME to forward the check to him. This was done on May 25, 1989, (Ex. 17). On June 1, 1989, (Ex. 17) Machules acknowledged receipt of the check "as part payment for a future settlement." By letter dated June 23, 1989, (Ex. 16) AFSCME legal counsel advised that the union would not provide legal counsel at an abandonment hearing but would provide a representative to assist him at such a hearing. On the witness stand Petitioner acknowledged signing the settlement agreement and his letter of resignation from the Department; and that he received and cashed a check in the amount of $50,572.33. He also received an accounting of all deductions from the $76,717.33 noted in the stipulated settlement. Petitioner contends that because he didn't receive $76,717.33 in December 1988 the settlement stipulation became void as well as did his resignation. He could point to no line of either document indicating the stipulated settlement was void or voidable if all conditions were not met by December 31, 1988. In fact, Petitioner testified that he really didn't expect to get the check until January 1989, at the earliest. Delays in cutting the warrant and paying Petitioner the funds due under the settlement was due to Petitioner's failure to promptly provide proof to the Comptroller of his other earnings between February 1985 and December 1988. Respondent has fully complied with the terms of the settlement stipulation.
Recommendation It is recommended that all claims of John J. Machules resulting from the charges of abandonment of position in February, 1985, be dismissed. ENTERED this 19th day of July, 1989, in Tallahassee, Leon County, Florida. K. N. AYERS 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 19th day of July, 1989. COPIES FURNISHED: John Zajac AFSCME 1703 Tampa Street, Suite 1 Tampa, Florida 33602 John Hale, Esquire 200 East Gaines Street 4l3-B Larson Building Tallahassee, Florida 32399-0300 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowell, Esquire General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue is whether Proposed Rule 69O-204.040 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Viatical Settlement Act codified in Part X of Chapter 626, Florida Statutes, is one of several statutes that provide for the regulation of viatical settlements in Florida. A viatical settlement is the sale of a life insurance policy by its owner on the secondary market.3/ The parties involved in the transaction are the viator, the viatical settlement broker, the viatical settlement provider, and the investor who purchases the policy. The viator is the owner of the policy being sold. The viator is typically, but not always, the insured under the policy. The viatical settlement broker is the person who solicits bids and negotiates the sale of the policy on behalf of the viator. In order to perform the services of a viatical settlement broker in Florida, a person must be a licensed life insurance agent, self-appoint him/herself with the Department of Financial Services (DFS), and pay the applicable fees to DFS. The viatical settlement provider is the intermediary between the viatical settlement broker and the investor who purchases the policy. The viatical settlement provider presents the policy to potential investors; conveys the investors’ bids to the viatical settlement broker; and, after a bid is accepted by the viator, performs the administrative functions necessary to complete the transaction. Viatical settlement providers are licensed and regulated by OIR. Viatical settlement brokers are licensed and regulated by DFS, not OIR. Petitioner ILS-Florida is a Delaware limited liability company owned by NFP Life Services, LLC (45.5 percent), Genworth Institutional Life Services, Inc. (45.5 percent), and GS Re Holdings, Inc. (nine percent). NFP Life Services, LLC, is a wholly-owned subsidiary of National Financial Partners Corporation (NFP). NFP Brokerage Agency is also a wholly-owned subsidiary of NFP. NFP Brokerage Agency employs licensed viatical settlement brokers in a number of states, including Florida. The viatical settlement brokers working for NFP Brokerage Agency are considered to be “affiliated brokers” of ILS-Florida by virtue of NFP’s ownership interest in both companies. ILS-Florida was formed on September 8, 2008, “specifically for the purpose of doing business as a viatical settlement provider . . . in the State of Florida.” On or about October 29, 2008, ILS-Florida submitted to OIR an application for licensure as a viatical settlement provider. The application was still “pending” as of the date of the final hearing, but on March 20, 2009, OIR approved the application, and ILS-Florida is now a licensed viatical settlement provider, No. 09-800257957. ILS-Florida’s parent companies have another subsidiary -- ILS-Florida’s “sister company” -- that is currently licensed as a viatical settlement provider in a number of states. ILS-Florida intends to use a similar business plan in Florida that its sister company uses in the states where it is licensed. The business plan contemplates using only brokers working for NFP Brokerage Agency for at least the first year of operation, although it is possible that ILS-Florida may use both affiliated and non-affiliated brokers from the outset. ILS-Florida wants to be able to use brokers working for NFP Brokerage Agency because it considers them to be “higher-quality brokers” because they “have already agreed to a higher standard of compliance than is generally seen . . . in the industry.” Also, because NFP Brokerage Agency already has a number of brokers involved in the viatical settlement business in Florida, its brokers represent a significant source of potential business for ILS-Florida. The proposed rule will more likely than not preclude ILS-Florida from using affiliated brokers working for NFP Brokerage Agency because NFP has significant ownership interests in both companies. Petitioner David Matthew Janecek is a resident of Texas. He works for a brokerage in Texas that is owned by NFP Brokerage Agency. Mr. Janecek is licensed in Florida as a non-resident life insurance agent. His license, No. P161957, was issued on September 9, 2008. Mr. Janecek is not, and never has been, a licensed viatical settlement broker in any state. He has not self- appointed himself as a viatical settlement broker with DFS, and he has no present intention of acting as a viatical settlement broker in Florida.4/ Respondent Financial Services Commission (Commission) is the agency head responsible for the promulgation of the proposed rule. The Commission, which is comprised of the Governor and Cabinet, was created within DFS, but it is not subject to the control of DFS and it is effectively a separate agency from DFS. Respondent OIR is an office under the Commission. OIR developed the proposed rule and will be responsible for implementing the rule. Respondents published the proposed rule in the Florida Administrative Weekly (FAW) on September 26, 2008. A notice of change to the proposed rule was published in the FAW on December 24, 2008. The parties stipulated that Respondents met all applicable rulemaking publication and notice requirements, and that the petition challenging the proposed rule was timely filed. The proposed rule is titled “Prohibited Practices and Conflicts of Interest,” and states: With respect to any viatical settlement contract or insurance policy, no viatical settlement provider knowingly may enter into a viatical settlement contract with a viator, if, in connection with such viatical settlement contract, anything of value will be paid to a viatical settlement broker that is controlling, controlled by, or under common control with such viatical settlement provider, financing entity or related provider trust that is involved in such viatical settlement contract. The “specific authority” listed in the FAW notice for the proposed rule is Section 626.9925, Florida Statutes. That statute authorizes the Commission to: adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the reporting of life expectancies, and for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. (Emphasis supplied). The only language in the statute that Respondents are relying on as authorization for the proposed rule is the underlined language. The FAW notice states that the “law implemented” by the proposed rule is Sections 626.9911(9), 626.9916(1), and 626.9916(5), Florida Statutes. Section 626.9911(9), Florida Statutes, defines “viatical settlement broker” for purposes of the Viatical Settlement Act. The definition includes the following language, which is also contained in Section 626.9916(5), Florida Statutes: Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. Section 626.9916(1), Florida Statutes, prohibits any person other than a licensed life agent from performing the functions of a viatical settlement broker. The text of the proposed rule was derived almost verbatim from Section 12.B. of the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners (NAIC). The “model acts” developed by NAIC are intended to be used by state legislatures in drafting statutes. NAIC also develops “model regulations” that are intended to be used by state regulatory agencies in drafting rules to implement the statutes. The proposed rule prohibits a viatical settlement provider from entering into a viatical settlement contract involving a viatical settlement broker over which the provider has direct or indirect control. The determination as to whether the viatical settlement provider has control over a viatical settlement broker will be made on a case-by-case basis applying the definition of “control” contained in Proposed Rule 69O- 204.020(1). According to OIR, the proposed rule is intended to protect the viator by preventing the viatical settlement provider from using its control over the viatical settlement broker to induce or encourage the broker to breach his or her fiduciary duty to the viator. It is undisputed that Florida law does not currently prohibit the practice prescribed by the proposed rule so long as the broker satisfies his or her fiduciary duty to the viator. The proposed rule will prohibit transactions between affiliated viatical settlement providers and brokers, irrespective of whether the broker’s fiduciary duty to the viator has been breached. For example, if a broker recommends that a viator accept a bid for the policy from an affiliated provider that was not the highest bid, such action would constitute both a breach of the broker’s fiduciary duty and a violation of the proposed rule; however, if the bid from the affiliated broker was the highest bid for the policy, the broker’s recommendation to accept the bid would not constitute a violation of the broker’s fiduciary duty, but it would violate the proposed rule. During the rulemaking process, OIR staff considered adding language to the proposed rule that would have allowed affiliated providers and brokers to enter into viatical settlement contracts so long as certain disclosure requirements and other safeguards were met. The record does not reflect why this language was not included in the proposed rule published in the FAW, although it can be inferred from the e-mails received into evidence on this issue that OIR and/or the Commission did not feel compelled to add the language suggested by staff.
The Issue The issues are whether Petitioner has standing to bring this action, and if so, whether portions of proposed Florida Administrative Code Rule 69O-204.030(1)(a), are an invalid exercise of delegated legislative authority in violation of Sections 120.52(8) and 120.56, Florida Statutes (2008).
Findings Of Fact OIR is an agency of the State of Florida, created within the Commission in accordance with Section 20.121(3)(a)1., Florida Statutes (2008). OIR is responsible for the administration of laws concerning insurers and other risk-bearing entities, including, but not limited to, viatical settlements. The Insurance Commissioner is head of OIR except for rulemaking purposes. Pursuant to Sections 20.121(1)(c) and 624.308(1), Florida Statutes (2008), the agency head for rulemaking is the Commission. Petitioner is a trade association that represents 12 of the 13 Florida-licensed viatical settlement providers. As an established trade association in the life settlement industry, Petitioner participates in legislative and regulatory matters in all 50 states. Petitioner is comprised of over 160 member companies nationwide. Florida's Viatical Settlement Act, Part X, Chapter 626, Florida Statutes (2008) (the Act), involves the regulation of viatical settlement providers. The Act regulates both viatical settlements and life settlements. Both types of transactions involve the sale of ownership interest in life insurance policies. A viatical settlement relates to the sale of the ownership interest in a life insurance policy by a person who is expected to live for less than two years. A life settlement involves the sale of the ownership interest in a life insurance policy by a person who is expected to live for longer than two years after the date of sale. Viatical and life settlements are regulated in essentially the same manner. Both are included in the definition of "viatical settlement contract." See § 626.9911(10), Fla. Stat. (2008). In a viatical settlement transaction, the "viatical settlement provider" is the purchaser of the ownership interest in a life insurance policy, including the right to receive the policy proceeds upon the death of the insured. See § 626.9911(12), Fla. Stat. (2008). The "viator" is the owner of an insurance policy who sells the ownership interest in the policy. See § 626.9911(14), Fla. Stat. (2008). The "viatical settlement broker" is the agent of the viator. See § 626.9911(9), Fla. Stat. (2008). The broker owes a fiduciary duty to obtain the best price for the insurance policy and typically, solicits bids from multiple viatical settlement providers on behalf of the viator. Id. This controversy involves a challenge to proposed Florida Administrative Code Rule 690-204.030(1)(a), (the proposed rule) which states as follows: 69O-204.030, Forms Incorporated by Reference. Form OIR-A3-1288, Viatical Settlement Provider Annual Report (REV 11/08). * * * Specific Authority 626.9925 FS. Law Implemented 626.9912(2), 626.9912(3), 626.9913(2), 626.9921(3), 626.9921(4) and 626.9928, FS. History-New Petitioner specifically objects to Schedules B and C attached to Form OIR-A3-1288. Schedule B requests the following information on policies purchased for the most recent five years, beginning with the current reporting year: (a) total number of policies purchased (quantity); (b) total gross amount paid for policies purchased (dollars); and (c) total face value of policies purchased (dollars). The information is not limited to policies purchased in Florida. Schedule C requests information relating to a summary of a licensed provider's business in every state, territory or geographical area. The information sought in Schedule C includes the following: (a) whether the provider is licensed/registered in the state; (b) the total number of policies purchased; (c) total gross amount paid for policies purchased; (d) total commissions/compensation paid for policies purchased; and total face value of policies purchased. Respondent also challenges the portion of Form OIR-A3- 1288 (Rev 11/08) that requires providers to annually file supporting documentation demonstrating any change to the provider's "method of operation as described in [the provider's] most recent plan of operations filed with OIR." The form requests this information in Interrogatory 1.(d) attached to the Annual Report. The challenged portions of the Annual Report, incorporated by reference in the proposed rule, require viatical settlement providers to disclose detailed information regarding their nationwide and international business activities. The information, in a publicly available form, involves transactions not subject to Florida regulation. On September 26, 2008, a Notice of Proposed Rulemaking relative to the Viatical Rule was published in Volume 34, Number 39, Florida Administrative Weekly. The notice indicated that a public hearing would be held on October 29, 2008. On October 29, 2008, as indicated in the Notice of Proposed Rulemaking, a public hearing was held. Written comments from the industry were received both prior to and immediately after the public hearing. Based upon comments from the Joint Administrative Procedures Committee (JAPC) dated October 22, 2008, a Notice of Correction was filed in Volume 34, Number 46, Administrative Law Weekly, on November 14, 2008. The notice reflected that the agency head for rulemaking was the Commission. On December 24, 2008, a Notice of Change was published in Volume 34, Number 52, Florida Administrative Weekly. The notice was based upon comments from JAPC, as well as comments at the October 29, 2008, public hearing. On January 13, 2009, the hearing for final adoption of proposed Florida Administrative Code Rules 69O-204.010, .020, .030, .040 and .050, was held before the Commission. Following some discussion, the Commission approved the proposed rules for final adoption. The Commission met all applicable rulemaking publication and notice requirements, as set forth in Chapter 120, Florida Statutes (2008). Petitioner does not challenge the proposed rule pursuant to Section 120.52(8)(a), Florida Statutes (2008). Petitioner does not challenge the proposed rule as imposing excessive regulatory costs, pursuant to Section 120.52(8)(f), Florida Statutes (2008). The proposed rule imposes requirements on Florida licensed viatical settlement providers. Those requirements do not appear significantly different than those required in a number of other states. Florida licensed viatical settlement providers would be subject to administrative penalties if they did not comply with the proposed rule. See § 626.9913(2), Fla. Stat. (2008).
The Issue The issues in this case are whether Respondents, Donald J. Denton and Strategic Strategies, Inc. (hereinafter "Respondents," "Denton," or "Strategic Strategies"), are guilty of selling or offering for sale securities in Florida that were not registered pursuant to Chapter 517, Florida Statutes, in violation of Section 517.07(1), Florida Statutes; whether Respondents are guilty of acting as unregistered dealers, associated persons, or issuers by having sold or offered for sale any securities from this state, in violation of Section 517.12(1), Florida Statutes; and, if so, what penalties are appropriate and should be imposed. All references to Florida Statutes are for the years 1998 and 1999.
Findings Of Fact Based upon the observation of the witnesses and their demeanor while testifying, the documentary evidence received in evidence, and the entire record complied herein, the following relevant and material facts are found: The Department is the agency charged with the enforcement and administration of the provisions of Chapter 517, Florida Statutes, the "Securities and Investors Protection Act," and the rules promulgated there under (hereinafter the "Securities Act"). As authorized by the Securities Act, the Department conducted an investigation of the activities of Respondents. At no time pertinent, material, and relevant hereto were Respondents, Denton or Strategic Strategies, licensed or registered by the Department pursuant to the provisions of the Securities Act in any capacity. Specifically, Respondents were not licensed or registered in Florida as a broker/dealer, registered representative, or investment advisor. At all times pertinent, material, and relevant hereto, Denton, whose address is 139 East Park Drive, Celebration, Florida 34747-5052, was licensed as a Health Agent under license No. AO666272 issued by the Florida Department of Insurance. At all times pertinent, material and relevant hereto, Strategic Strategies was an Ohio corporation, now dissolved, whose company business address was Post Office Box 341470, Columbus, Ohio 43234. Strategic Strategies was served the Administrative Complaint via its agent in Ohio. The Department was advised by Strategic Strategies' agent that the company would not further respond to the charges. From November 1, 1998, through July 21, 1999, Denton, in Florida as an agent, offered and sold to investors, investment contracts purportedly being interests in viaticated life insurance policies known as settlement agreements with titles such as, "Viatical Insurance Benefits Participation Agreement." The interests in viaticated life insurance policies were represented to be provided by Accelerated Benefits Services (hereinafter ABS). Denton engaged in sales with four Florida investors in four transactions through Strategic Strategies during the period of March 15, 1999, through July 27, 1999. Denton engaged in 26 sales with 26 Florida investors in 26 transactions. On or about January 21, 1999, Dr. Kerry L. Neal, a Florida investor, paid $50,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with a participation of $25,000 in two viaticated insurance settlement agreements as a 14.2 percent fractional interest in the insurance policies' face value. A monthly income program was offered in the participation disclosure materials provided to Dr. Neal by Denton. Dr. Neal was promised a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator (the person insured by the insurance policy) did not die during the 36-month period and the policies had not matured. Of his $50,000 investment, Dr. Neal has only received approximately $8,000 as disbursements from the ABS bankruptcy trustee resulting in Dr. Neal having suffered a present financial loss of $42,000. On or about January 3, 1999, Dr. Theodore F. Hoff, a Florida investor, paid $200,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in eight viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided Dr. Hoff together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $200,000 investment, Dr. Hoff has only received a total of approximately 15 percent in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Hoff of approximately $170,000. On or about March 23, 1999, Dr. Paul Richard Williamson, a Florida investor, paid $50,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided to Dr. Williamson together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $50,000 investment, Dr. Williamson has only received $8,253.68 in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Williamson of approximately $41,746.32. On or about January 4, 1999, Dr. Samuel Preston Martin, a Florida investor, paid $100,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided to Dr. Martin together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices had not matured. Of his $100,000 investment, Dr. Martin has only received $16,000 in disbursements from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Martin of approximately $84,000. On or about November 10, 1999, Dr. Gilbert Principe, a Florida investor, paid $125,000 for an investment sold to him by Denton. The investment was represented as safe, insured by the state of Florida, and consisting of an interest in the ABS trust with fractional interests in two viaticated life insurance settlement agreements. A monthly income program was offered in the participation disclosure materials provided Dr. Principe together with a guaranteed rate of return of 42 percent, with the option of getting the principal back after 36 months with a 15 percent return if the viator did not die during the 36-month period and the polices have not matured. Of his $125,000 investment, Dr. Principe has only received approximately $20,000 (16 percent) in disbursement from the ABS bankruptcy trustee, thereby resulting in a present financial loss to Dr. Principe of $105,000. The above investors, Drs. Neal, Hoff, Williamson, Martin and Principe, were clients of Denton who held himself out as a financial advisor. By special and private invitations from Denton, they were invited twice yearly to attend investment seminars conducted by Denton. Denton directly or indirectly represented that the viatical investment would make money for the above named investors; he represented to each investor that the return could be 9.86 percent per year for three (3) years paid monthly as a income program. The above-named investors lost their money as victims of a Ponzi scheme run by principals of ABS involving the sale of viatical agreements in Florida. Ray Levy was the owner of ABS, a viatical settlement brokerage company that raised funds for the purchase of viatical settlements. Jeffery Pains, Esquire, was the escrow agent for ABS. Levy, Paine and others were convicted in federal court of fraud since approximately 90 percent of the $208 million obtained from thousands of investors solicited nationwide was used for the purchase of real estate and items for personal use.1 ABS offered and sold its viaticals to thousands of investors in Florida and in other states. There were approximately a total of 7,000 ABS transactions. The Department filed charges against ABS and Ray Levy that resulted in a Final Order adopting a stipulated settlement. ABS and Ray Levy agreed to comply with Florida law, stop offering the income program, return $900,000 to certain investors, and pay $60,000 to the Department for costs. Other agents (insurance, financial advisors, etc.) that sold the interests in the ABS viaticals have been charged with violations of the Securities Act by the Department, resulting in cease and desist orders being issued and fines being imposed. Denton offered the following defenses to his conduct: sales were exempt securities; sales were insurance policies; investors were wealthy and experienced; his reliance upon ABS's printed literature absolved him from personal liability; and the Department had an obligation to communicate to him personally any knowledge of problems with business practices of ABS, all of which are without merit. The undisputed evidence of record, clearly and convincingly supports that: First, Respondent, Denton, while not registered in the securities business, intentionally or knowingly, solicited and sold unregistered securities; and second, Respondent, Strategic Strategies, had four sales and Denton has 26 sales.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department of Banking and Finance enter its final order finding Respondents guilty of violations of Sections 517.07(1) and 517.12(1), Florida Statutes; it is further RECOMMENDED that The Department of Banking and Finance order Respondent to cease and desist from engaging in any transaction constituting the sale of securities in Florida; it is further RECOMMENDED that The Department of Banking and Finance order Respondent, Strategic Strategies, Inc., be fined in the amount of $40,000; and, it is finally RECOMMENDED that The Department of Banking and Finance order Respondent, Donald J. Denton, be fined in the amount of $260,000. DONE AND ENTERED this 20th day of November, 2002, in Tallahassee, Leon County, Florida. FRED L. BUCKINE 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 20th day of November, 2002.
The Issue Whether Petitioner has settled this matter and the proceeding should therefore be dismissed.
Findings Of Fact Both parties to the action voluntarily submitted the case to mediation before Jonathan Kroner, a Florida Supreme Court Mediator certified pursuant to Rule 1.760 of the Florida Rules of Civil Procedure. The mediation began around 9:00 a.m. on December 18, 1991, at the office of the Petitioner's former attorney, Mr. Rick Kolodinsky. Both parties and their counsel were present at the mediation. Mr. Kolodinsky's paralegal was also present, as well as Ms. Weaver's daughter. Both parties received an explanation of the purpose of the mediation from the mediator and then gave a brief synopsis of their case. The parties were then placed in separate rooms and the mediator shuttled back and forth between the two rooms reporting and discussing the relative merits and weaknesses of each party's offer as it was made. The parties remained separated throughout the mediation except for a mutual viewing of a video tape which demonstrated that Ms. Weaver was not being completely honest about the extent of the injury to her arm. Additionally, the parties came together at the end of the mediation after settlement had been reached in order to sign the settlement agreement and work out some minor details. The mediation lasted until approximately 5:00 p.m. The first offer of settlement was made by Ms. Weaver and her attorney. The first offer was over $100,000.00. Thereafter, a series of offers and counteroffers were made throughout the day. There is no doubt that each offer made by Ms. Weaver was made with her consent. Eventually, one of the parties offered $35,000.00 dollars. Ms. Weaver agreed to the figure. There was no credible evidence that either the mediator, Southern Bell, Mr. Kolodinsky or his paralegal unduly influenced or coerced Ms. Weaver into agreeing to the $35,000.00 figure during the time of the offer and counteroffer phase of the mediation. After the figure of $35,000.00 was accepted by both parties, the mediator called all of the people present at the mediation into the same room so that the settlement could be reduced to writing utilizing a standard form settlement agreement. The form settlement agreement contained the style of the DOAH case as well as the DOAH case number. The agreement stated in relevant part: Defendant agrees to pay to Plaintiff as full and complete settlement of all matters arising in this cause of action the sum of $35,000. Plaintiff agrees to execute any Release form generally required to be executed in settlements of disputes of this nature. Each party shall bear their respective attorney fees and costs. The figure of $35,000.00 was handwritten in the blank provided in the form. Following the $35,000.00 figure the words "and see attached" were added. The attachment being referred to in the agreement consisted of a legal size paper containing three additional handwritten settlement terms. Page two of the Settlement Agreement states: Attachment to Weaver She will not reapply to S. Bell for employment. S. Bell & K. Weaver will not disclose the terms of this settlement to anyone including Social Security except as required by court order. This is a release/settlement of all claims arising out of any issue involved in case #89-1661 of any handicap/sex or other discrimination or tort claim of Weaver v. S. Bell or any S. Bell employee(s). The attachment was prepared by Mr. Kolodinsky while all parties were present in the same room. Some of the terms were added at the request of Southern Bell and some were added at the request of Ms. Weaver. Prior to signing either page of the settlement agreement, Ms. Weaver's daughter tried to get Ms. Weaver to leave the negotiations and not finalize the agreement being prepared. Ms. Weaver declined to leave and there is no doubt that she signed both pages of the two-page Settlement Agreement and agreed to settle this case. As with the other phases of the mediation, there was no credible evidence that either Southern Bell, the mediator, Mr. Kolodinsky or his paralegal unduly influenced or coerced Ms. Weaver into signing the settlement agreement or settling this case. After all the parties had signed the settlement agreement, Ms. Weaver left Mr. Kolodinsky's office. She indicated to her daughter that she regretted settling the case. Clearly, Ms. Weaver was aware and understood that she had settled her case. On December 20, 1991, two days after the mediation, Ms. Weaver wrote Mr. Kolodinsky, her attorney, and explained to him that she wanted to "repudiate" the agreement because she claimed that she was under "duress", thus providing at her own initiative a rationale for such repudiation. Ms. Weaver's letter stated: I signed those papers under pressure and duress and did not know what I was doing. I want to repudiate the agreement. I will not accept the agreement. One week later, on December 27, 1992, Ms. Weaver continued to demonstrate that she possessed intelligence capacity and, in particular, knowledge of the legal system when she wrote another letter to Mr. Kolodinsky threatening him with legal action: Please let Southern Bell know my intention immediately otherwise I will have no choice but to file a grievance with the Florida Bar Association. On January 6, 1992, Petitioner's attorney, Mr. Kolodinsky, informed the Respondent that the Petitioner had repudiated the Settlement Agreement and that a conflict existed between Petitioner and her attorney. In this case, Ms. Weaver clearly possessed the intelligence and mental capacity to settle her case. Over the years, prior to settlement, Ms. Weaver had hired attorney Edward Hurtz to represent her in a workers' compensation case against Southern Bell. Additionally, Ms. Weaver had represented herself at a fact finding proceeding in 1987 and, in 1988, she hired attorney Cristina Favis to represent her in this FCHR action. Moreover, in 1990, Ms. Weaver hired another attorney, Mr. Briggs, to file a petition for divorce against her husband. In that proceeding she signed an affidavit affirming that the divorce petition was true, and that Mr. Briggs was still representing. Ms. Weaver also testified that in January 1990, she signed a financial affidavit for her divorce and on September 4, 1991, she signed a settlement agreement for her divorce. Furthermore, in the Fall of 1990, Ms. Weaver instigated a lawsuit against William Brittain. The lawsuit involved an automobile accident in Volusia County. In order to pursue the lawsuit, Ms. Weaver hired another attorney, Paul Bernadini, to represent her. Finally, in April, 1991, the Petitioner hired attorney Michael B. Wingo to represent her in a workers' compensation matter. Indeed, as indicated in the pleadings, Ms. Weaver again demonstrated her capacity by employing her current attorney and by signing the Amended Memorandum on February 18, 1992. Such actions are simply inconsistent with the Petitioner's claim that she lacked capacity and did not knowingly sign or settle her case. In fact, the decisions made by Ms. Weaver before the mediation, on the day of the mediation, and after the mediation, are not the type of decisions and reasoning made by a person who is lacking in capacity, or is not sui juris. Moreover, Ms. Weaver clearly possessed sufficient mental capacity and intelligence particularly regarding legal issues. Unlike a person who is subject to undue influence, her mind had not deteriorated to the point where she was completely dependent on Mr. Kolodinsky or anybody else. Although the Petitioner's attorney claimed during the opening statement that Ms. Weaver was taking "psychotropic medications" on the day of the mediation, there was no evidence presented at the hearing that substantiated this claim. Indeed, the Petitioner failed to present at the hearing a scintilla of medical evidence supporting her claim that she lacked capacity. Thus, there was no evidence presented at the hearing showing that Ms. Weaver's mind was weak because of medication or that Mr. Kolodinsky knew she was on medication or even "under extreme duress" and used this knowledge to wrongfully coerce Ms. Weaver to sign the Settlement Agreement. Even Ms. Weaver's own testimony demonstrated that she is not the type of person who is easily subjected to the influences of others including her various attorneys. Ms. Weaver testified that she makes the major decisions in her life. These decisions included hiring numerous attorneys and obtaining a divorce from her husband. The fact that she acknowledged that she "[came] to a decision" is contrary to her allegation that Mr. Kolodinsky used duress to force her to sign against her will. Thus, it is clear, from Ms. Weaver's letter and her conversation with Mr. Kolodinsky, that she knew she was making a "decision" and acted intelligently, understandingly, and voluntarily. At the hearing, Ms. Weaver's reason for why she signed the Settlement Agreement was that at some point prior to time she decided to settle, Mr. Kolodinsky silently "mouthed" the words: "You will take it, or I will leave you." The reason given at the hearing was different than the reason given for repudiating the Settlement Agreement contained in Ms. Weaver's earlier letter. According to Mr. Kolodinsky, Ms. Weaver had a past reputation for authorizing settlement offers one day and repudiating the offers the next day. Mr. Kolodinsky's explanation for Ms. Weaver's action of signing the Settlement Agreement on December 18, 1991, and repudiating the agreement shortly thereafter is supported by the evidence and is the most believable reason for her actions. Such a motivation of regret or remorse by Ms. Weaver, however, is not a motivation caused by undue influence. Nor is it a reason for setting aside a settlement agreement. Furthermore, evidence that Ms. Weaver did not protest when signing the Settlement Agreement strongly supports the position that Ms. Weaver signed the agreement of her own volition and free will. It is clear that at the time Ms. Weaver signed the Settlement Agreement that she made no indication, verbal or non-verbal, that she was forced, coerced, "browbeaten" or under undue influence by Mr. Kolodinsky or anyone else. All the witnesses that attended the mediation testified that Ms. Weaver signed the Settlement Agreement without protest. Most persuasive was the testimony of the mediator, Mr. Jonathan Kroner, who testified that Ms. Weaver verbally agreed to Southern Bell's offer: Q [Mr. Keener] Did Ms. Weaver agree to that offer or demand? A [Mr. Kroner] Yes, she did. Q Did she do that verbally or nonverbally? A Verbally. Q What did she say? A We discussed it for a while, and we were back and forth and back and forth. We discussed it and she said yes. I don't recall her very exact words to say what it was, but it was a clear ascent. I do a lot of mediations where, either because of a language difficulty or capacity problem or something, it's important to be clear. I don't like mistakes happening. The mediator also testified that he saw Ms. Weaver execute the Settlement Agreement and that he had no reason to believe that she was coerced to sign the agreement: Q [Mr. Keener] Did you see her execute the agreement? A [Mr. Kroner] I am just trying to picture what she was wearing and everything that day. Yes, I did because I remember where we were sitting at the table and everything. Q Was she physically forced to sign the agreement? A No, absolutely not. Q Was she coerced to sign the agreement? A Absolutely not. Ms. Weaver's daughter had tried to get her to leave the mediation before signing the agreement. However, Ms. Weaver stayed and signed. Thus, the evidence presented at the hearing shows that Ms. Weaver signed the Settlement Agreement of her own volition and that Mr. Kolodinsky did not apply any undue influence thereby destroying Ms. Weaver's free agency. Rather, it simply appears that the day after signing the Settlement Agreement, Ms. Weaver regretted her decision to settle and came up with different reasons at different times in an attempt to blame Mr. Kolodinsky for allegedly causing her to sign the agreement. Likewise, the evidence presented during the hearing demonstrates that the free agency of Ms. Weaver was not destroyed on the day of the mediation and that the Settlement Agreement was executed of the Petitioner's own volition. Moreover, as noted above, at the hearing Ms. Weaver's story changed when she claimed that the reason she signed the Settlement Agreement was because Mr. Kolodinsky silently told her "You will take it." Such a statement is not sufficient to demonstrate that Ms. Weaver's free agency was destroyed and that she did not sign the Settlement Agreement on her "own volition." Regardless of whether Mr. Kolodinsky made such a statement, Ms. Weaver, in her own letter, admitted that she "[came] to a decision". She did not state in the letter that Mr. Kolodinsky forced or coerced her to enter into the Settlement Agreement. Moreover, even if the statement was made, testimony regarding Ms. Weaver's behavior and lack of protest during the time she was signing the Settlement Agreement provides firm evidence that she was not being forced or coerced into signing the Settlement Agreement. Finally, Ms. Weaver does not dispute that she signed page one of the Settlement Agreement and that all the terms and conditions were included on page one when she signed it. Page one of the Settlement Agreement provides: Defendant agrees to pay to Plaintiff as full and complete settlement of all matters arising in this cause of action the sum of $35,000 and see attached. Plaintiff agrees to execute any Release form generally required to be executed in settlements of disputes of this nature. The case number on page one of the settlement agreement is the Division of Administrative Hearings case number for this matter. Thus, it is clear that all the terms on page one were on the page when Ms. Weaver signed it. With regard to page two of the Settlement Agreement, Ms. Weaver alleges that it was not reduced to writing when she signed it. Contrary to Ms. Weaver's testimony, Southern Bell's EEO manager, Mr. Brown, testified that he signed the Settlement Agreement immediately after Ms. Weaver and that when he signed the Settlement Agreement all the terms and conditions set forth on the page two, as shown in Respondent's Exhibit No. 1, were contained in the document. Mr. Kolodinsky also testified that all the parties signed page two of the Settlement Agreement after the three paragraphs were added. Ms. Weaver's daughter confirmed Mr. Kolodinsky's testimony when she testified that Mr. Kolodinsky was "writing stuff down" on a yellow pad before her mother signed the document. The testimony of Mr. Brown and Mr. Kolodinsky that all three paragraphs on page two of the Settlement Agreement were reduced to writing when Ms. Weaver signed the Agreement and the conflicting statements provided by Ms. Weaver during her deposition and the hearing, prove that when Ms. Weaver signed page two of the Settlement Agreement all the terms and conditions were reduced to writing. Along the same line, during the hearing there was considerable testimony regarding whether the Settlement Agreement was read to Ms. Weaver or whether Ms. Weaver read the Settlement Agreement. In either event, Ms. Weaver had the opportunity to read the agreement or have it explained to her and just as with any other agreement or contract the contract is binding if it is signed. 11 Fla. Jur. Section 14, Merrill Lynch v. Benton, 467 So. 311, 313 (Fla. 5th DCA 1985) (contract held enforceable where customer claimed that although she signed the contract she could not read it because she did not know English) Therefore, Ms. Weaver signed the contract and should be bound by the terms and conditions regardless of whether she read or did not read the contract or whether or not the contract was read to her. Moreover, the evidence was clear that Ms. Weaver understood the terms of the settlement agreement and even suggested a clause which was incorporated in the agreement. In summary, regardless of whether the terms and conditions on page two of the Settlement Agreement were read to Ms. Weaver, whether she read them herself, or whether she just signed the document without reading the conditions, the terms and conditions of the Settlement Agreement are binding. 11 Fla. Jur. Section 14; Merrill, Lynch v. Benton, 467 So. 311, 313 (Fla. 5th DCA 1985).
