The Issue The issue in this proceeding is whether Petitioner's lottery prize should be withheld and used to pay an outstanding debt for child support.
Findings Of Fact The Petitioner did not appear and no evidence was presented.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order dismissing the Petitioners request for a formal hearing, and transferring Petitioner's lottery prize to the Department of Revenue in partial satisfaction of Petitioner's debt for past public assistance obligation. DONE and ENTERED this 20th day of October, 1995, at Tallahassee, Florida. STEPHEN F. DEAN, 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 20th day of October, 1995. COPIES FURNISHED: James Merriweather 1333 7th Street West Jacksonville, FL 32209 Chriss Walker, Esquire Child Support Enforcement Department of Revenue P. O. Box 8030 Tallahassee, FL 32314-8030 Louisa Warren, Esquire Department of the Lottery 250 Marriott Drive Tallahassee, FL 32399 Stephen S. Godwin, Esquire Office of the Comptroller Suite 1302, The Capitol Tallahassee, FL 32399-0350 Hon. Robert F. Milligan, Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, FL 32399-0350 Harry Hooper, Esquire Department of Banking and Finance The Capitol - Room 1302 Tallahassee, FL 32399-0350
The Issue The issue in this case is whether Willie Mae Miles is entitled to retirement credit for the period beginning March 1952 through August 1976 when she was employed at the Jackson Memorial Hospital in Miami, Florida (the "Hospital"). There is no dispute that Willie Mae Miles was employed at the Hospital during that time period. However, the Department of Administration (the "Department") contends that Ms. Miles received a refund of her employee retirement contributions of $5,475.39 in May 1977. Therefore, the Department contends that Respondent is not entitled to credit for that period of service. Ms. Miles claims that she did not apply for or receive a refund of retirement contributions. She also claims that she would only have accepted a lump sum refund if it included her contributions and the county and state contributions with interest. Since no such sum was received, she claims she is entitled to retirement credit for her employment at the hospital.
Findings Of Fact While Mrs. Miles has handled her case up to and including the hearing since she dispensed with the services of her attorney, her testimony and the nature of the exhibits indicate that she did not fully comprehend the meaning and intent of the documents that she signed requesting a refund of her retirement contributions and mistakenly believed that she still had funds in the Retirement Trust Fund from which a retirement benefit would be paid later upon her retirement. Her belief was erroneous. Under the State and County Officers and Employees' Retirement System (SCOERS), an employee and the employing agency each paid retirement contributions into the Retirement Trust Fund, and these contributions were credited to the employee's retirement account. Eventually, when the employee retired, the retirement benefit was paid from the total contributions paid into the Trust Fund, including investment earnings of the Fund. However, if the employee terminated employment before retirement, he could legally receive only a return of his personal contributions paid in and not the retirement contributions paid in by his employing agency. Mrs. Miles believed she was due and had a right to her own paid-in contributions, as well as the contributions paid in for her by her employing agency, and since she had received a refund of only a portion (her portion) of her retirement contributions, there were monies (retirement contributions made by her employer) still on deposit with the Division of Retirement that would provide for her retirement. Mrs. Miles did not understand that the return of her personal contributions would end any entitlement or vested right on her part to a future retirement benefit under the SCOERS. It is also evident from her testimony that no one with her employing agency advised her of this fact and that none of the information received from the Division of Retirement made this clear to her. The "Request for Refund" card stated the effect of a refund of personal contributions, but Mrs. Miles did not understand the instructions on the refund card. In April, 1989, the Division received an inquiry from Mrs. Miles advising that she was applying for her retirement benefits. This is further evidence that she believed she still had an active retirement account with the State of Florida. It is concluded that Mrs. Miles never had any actual intent to relinquish her right to apply for and receive a retirement benefit under the SCOERS.
Recommendation It is RECOMMENDED that the Petitioner not be credited with any creditable service under the provisions of Chapter 121, Florida Statutes, for the period from March 1952 to May 1977. DONE and ORDERED this 30 day of March 1990, in Tallahassee, Florida. J. STEPHEN MENTON 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 30 day of March 1990. APPENDIX TO RECOMMENDED ORDER 89-4834 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes on all of the proposed findings of fact submitted by the Respondent in this case. Petitioner's submittal was a mixture of argument, conclusions and facts which have been carefully considered in the preparation of this Recommended Order. However, specific ruling on proposed findings of fact by the Petitioner is not possible given the format of her proposal. Rulings on Respondent's Findings of Fact Adopted in substance in Findings of Fact 1. Adopted in substance in Findings of Fact 3. The first sentence is adopted in substance in Findings of Fact 5. The remainder of the proposal is rejected as unnecessary. Subordinate to Findings of Fact 7. Adopted in substance in Findings of Fact 8 and 10. Adopted in substance in Findings of Fact 11 and 12. Adopted in substance in Findings of Fact 14 and 16. COPIES FURNISHED: Willie Mae Miles 10220 S.W. 170th Terrace Miami, Florida 33157 Larry Scott, Esquire Division Attorney Office of General Counsel Department of Administration Room 440 Carlton Building Tallahassee, Florida 32399-1550 Stanley M. Danek, Esquire Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Aletta Shutes, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 =================================================================
The Issue The issue in the case is whether supplemental payments made to the Petitioner by Brevard Community College constitute creditable compensation for purposes of determining retirement benefits under the Florida Retirement System.
Findings Of Fact From 1970 until his retirement in June 1998, Brevard Community College employed Stephen J. Megregian at an executive level. The State of Florida, Division of Retirement, manages and oversees operation of the Florida Retirement System (FRS) in which Brevard Community College (BCC) participates. In June 1990, the college adopted an Employee Benefit Plan for BCC Executive Employees. The provisions of the plan covered Mr. Megregian, an executive employee. In fact, Mr. Megregian drafted the plan, which was adopted by the college's Board of Trustees. The executive benefit plan included a severance pay benefit for plan participants. The severance benefit was calculated according to a formula using the employee's daily base pay as multiplied by the sum of "benefit days." Benefit days were earned according to employment longevity. A "severance day" calculation determined the amount of severance pay a departing employee would receive. Apparently, at some point in 1994, participants in the FRS learned that the Division of Retirement would exclude some types of compensation, including severance pay, from the "creditable compensation" used to determine retirement benefits. In June 1995, the college amended the plan to provide a severance pay "opt-out" provision to plan participants. The provision entitled plan participants who were within five years of eligibility for FRS retirement benefits to "opt-out" of the severance package and instead immediately begin to receive supplemental payments. Mr. Megregian drafted the "opt-out" provision, which was adopted by the college board. The decision to "opt-out" was irrevocable. A plan participant could not change his or her mind and take the severance package once the "opt-out" decision was made. The supplemental payments were calculated based upon the "severance days" that the employee would have otherwise earned during the year. The payments were made along with the employee's salary payment. The "opt-out" plan did not require a participant to retire after the fifth year of receiving the supplemental payment. The Petitioner asserts that the creation of the "opt- out" provision was in accordance with information provided by the Division of Retirement. There is no evidence that the Division of Retirement provided any information suggesting that the "opt-out" provision would result in an increase in creditable compensation for purposes of determining FRS benefits, or that the "opt-out" provision was an acceptable method of avoiding the severance pay exclusion. There is no evidence that, prior to March of 1998, the college specifically sought any direction or advice from the Division of Retirement as to the supplemental payments made to employees under the "opt-out" provision. The evidence as to why the college did not simply increase base salaries for employees to whom supplemental payments were being made is unclear. There was testimony that the plan was designed to avoid unidentified tax consequences. There was also testimony that the supplemental plan was designed to avoid increasing some employees base salaries beyond the percentage increases awarded to other employees. There was apparently some concern as to the impact the supplemental payments would have on other college employees who were not receiving the additional funds. There is no evidence that the Petitioner performed any additional duties on the college's behalf in exchange for the supplemental payments. The Petitioner was eligible to participate in the "opt- out" plan beginning in the college's 1995-1996 fiscal year, and he elected to do so. As a result of his election, supplemental payments were made in amounts as follows: Fiscal Year 1995-1996, $7,938.46. Fiscal Year 1996-1997, $8,147.13. Fiscal Year 1997-1998, $8,395.40. On March 21, 1998, Brevard Community College requested clarification from the Division of Retirement as to how the supplemental payments would affect a plan participant's benefit. On April 30, 1998, the Division of Retirement notified the college that the supplemental payments would not be included within the calculation of creditable compensation. The Petitioner retired from his employment at Brevard Community College on June 30, 1998. The Petitioner is presently entitled to retirement benefits under the FRS. The Division calculates FRS retirement benefits based on "creditable compensation" paid to an employee during the five years in which an employee's compensation is highest. Some or all of the three years during which the Petitioner received supplemental payments are included in the calculation of his creditable compensation. The evidence fails to establish that the supplemental payments made to the Petitioner should be included within the creditable compensation upon which FRS benefits are calculated. Under the statutes and rules governing FRS benefit determinations, the supplemental payments made to the Petitioner are "bonuses" and are excluded from the "creditable compensation" calculation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the State of Florida, Division of Retirement, enter a final order finding that supplemental payments made to Stephen J. Megregian are bonus payments and are excluded from calculation of creditable compensation for FRS benefit purposes. DONE AND ENTERED this 2nd day of December, 1999, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 2nd day of December, 1999. COPIES FURNISHED: David A. Pearson, Esquire Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A. Post Office Box 2346 Orlando, Florida 32802-2346 Robert B. Button, Esquire Division of Retirement Cedars Executive Center Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue Whether the Petitioner is entitled to either a refund of employee contributions to the Florida State and County Officers' and Employees' Retirement System ("SCOERS") made from August 26, 1966, through June 3, 1974, or service credit toward retirement for this period of time.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for the administration of the Florida Retirement System ("FRS"). § 121.025, Fla. Stat. (2004). Ms. Johnson has been employed by Jackson Memorial Hospital since February 1985, and she is an active member of the FRS. Ms. Johnson was also employed by Jackson Memorial Hospital from August 26, 1966, through June 3, 1974, and was a member of the SCOERS during that time. Under the SCOERS, both members and employers paid contributions into the system. Members of the SCOERS could request a refund of employee contributions into the system upon termination of employment.2 When Ms. Johnson terminated her employment at Jackson Memorial Hospital in June 1974, she completed a Division of Retirement Request for Refund card, in which she requested a refund of her contributions to the SCOERS. Ms. Johnson signed the Request for Refund Card, which directs that the refund be sent to the 17th Floor of the Dade County Courthouse, which was the address for the Miami-Dade County Finance Department. Ms. Johnson was an employee of Miami-Dade County when she worked for Jackson Memorial Hospital from 1966 until 1974. At the time Ms. Johnson terminated her employment in 1974, refund checks for employees of Miami-Dade County were sent to Miami-Dade County rather than to the employee, and all Request for Refund cards completed by Miami-Dade County employees had typed on the cards the Dade County Courthouse address of Miami- Dade County's Finance Department. Included on the Request for Refund card signed by Ms. Johnson was a statement that, by requesting a refund of contributions to the SCOERS, she waived the right to any retirement service credit for the time period covered by the refund. The normal business practice of the Division of Retirement is, and was at the times material to these proceedings, to notify the Comptroller's office to send the refund requested by a SCOERS member to the address indicated on the Request for Refund card. The normal business practice of the Division of Retirement is, and was at the times material to these proceedings, to affix to the Request for Refund card labels provided by the Comptroller's office confirming that refund checks were mailed to the member requesting the refund. The labels attached to Ms. Johnson's Request for Refund card indicate that two refund payments were sent by the Comptroller on Ms. Johnson's behalf to the address shown on the Request for Refund card: One, in the amount of $2,150.29, was sent on July 19, 1974, and one, in the amount of $242.18, was sent on January 31, 1975.3 Although Ms. Johnson claims that she did not receive any refund of her employee contributions to the SCOERS, she did not contact the Division of Retirement regarding the refund until August 2003, when she telephoned the Division of Retirement and stated that she had never received the 1974 refund. Because Ms. Johnson is an active member of the FRS, she is entitled to purchase the retirement service credit she accumulated between 1966 and 1974.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services enter a final order dismissing the request of Delores F. Johnson for a formal administrative hearing. DONE AND ENTERED this 22nd day of September, 2004, in Tallahassee, Leon County, Florida. S PATRICIA HART MALONO 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 22nd day of September, 2004.
The Issue The issue is whether the correct retirement date was established for Petitioner.
Findings Of Fact Ms. Scurlock was employed as a secretary by the Public Defender of the 14th Judicial Circuit for 12 to 13 years, in Panama City, Florida. As such, and after becoming vested in the Florida Retirement System (FRS), she accrued certain rights under the FRS. The Division has over 900 employees and administers benefits for more than 700,000 members. The Division is charged with administering the FRS. Ms. Scurlock's performance while employed by the Public Defender deteriorated in 2004. As a result, she was discharged on October 27, 2004. She had been diagnosed as having multiple sclerosis prior to her discharge. She is currently medically unable to engage in gainful employment. Ms. Scurlock does not recall if the Public Defender provided her with information concerning retirement at the time of her discharge. Nevertheless, she was aware of the availability of disability retirement, and during February 2005 she completed Form FR-13, Application for Disability Retirement. She stated in the application that her disability was the result of multiple sclerosis, among other maladies. Ms. Scurlock was assisted in seeking disability retirement by her sister. Ms. Scurlock signed the FR-13 application, and it was sworn before a notary public on February 18, 2005. Ms. Scurlock believes her sister mailed the form. The FR-13 may have been addressed to the Florida Department of Health, but in any event, it was not received by the Division in 2005. Assisted by her sister, Ms. Scurlock telephonically contacted the Division on April 11, 2006, to inquire about her application for disability retirement. At that time, she avowed that the FR-13 had been sent in January 2005 to the Department of Health. Upon being advised that she needed to submit a new form in order to obtain benefits, she did so. An FR-13 was received by the Division on May 24, 2006. Attached to the application was a copy of the application sworn before the notary public on February 18, 2005. The Division found the FR-13 submitted on May 24, 2006, to be complete and sufficient to establish that Ms. Scurlock should be paid disability retirement benefits beginning June 1, 2006. Although Ms. Scurlock may have suffered some cognitive impairment as a result of being afflicted with multiple sclerosis, she was aided by her sister, who apparently has no cognitive impairment, when she first attempted to file in early 2005. Moreover, Ms. Scurlock adequately presented her case at the hearing, and to the extent that cognitive impairment might influence the outcome of this case, it is found that she is not so impaired that she could not timely file an application for disability retirement. For the reasons set forth below, whether she was physically or mentally able to file a FR-13, or whether the state or one of its agents failed to inform her of her rights, has no bearing on the outcome of this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services enter a final order affirming the establishment of June 1, 2006, as the beginning date of entitlement to disability retirement pay in the case of Marilyn Scurlock. DONE AND ENTERED this 18th day of December, 2007, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 COPIES FURNISHED: Marilyn Scurlock 3936 Scurlock Lane Panama City, Florida 32409 Filed with the Clerk of the Division of Administrative Hearings this 18th day of December, 2007. Larry D. Scott, Esquire Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950 Sarabeth Snuggs, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The issue in this case is who is entitled to payment of remaining retirement benefits due to James E. Brandon, deceased.
Findings Of Fact James E. Brandon was employed by the Hillsborough County Parks and Recreation Department and was a participant in the Florida Retirement System (FRS). Mr. Brandon had a long standing relationship with Dennis A. Barga. In February 1995, James E. Brandon applied for FRS disability benefits due to a medical condition. On the application for disability benefits, James E. Brandon designated Dennis A. Barga as his primary beneficiary. The application for disability benefits was approved in June 1995, with an effective retirement date of March 1, 1995. James E. Brandon elected to receive benefits under "Option 2" of the FRS, which provides for a lifetime benefit to the covered employee. Option 2 also provides that, if the covered employee does not survive for the ten years following retirement, payment is made to a designated beneficiary for the remainder of the ten year period. James E. Brandon died on August 28, 1995, of the condition which resulted in his disability. James E. Brandon did not personally receive any of his disability benefits. By letter dated September 29, 1995, the Division notified Mr. Barga that he was entitled to receive the remaining benefit payments for the ten year period. At the end of September, the Division sent two checks to the home of James E. Brandon. One check covered the initial benefits period from March 1995 through August 1995. The second check was for the September 1995 benefit. The checks were not returned to the Division and apparently were cashed or deposited. On October 10, 1995, the Division was notified by William Brandon that his brother, James E. Brandon, had completed a form amending his designation of beneficiary and that the form had been filed with the Division. The Division searched its files and located a form, FRS M-10, which was apparently filed on July 25, 1995, by James E. Brandon, and which amends his prior designation to identify sequential beneficiaries. The amended beneficiaries, in order, are William W. Brandon, III, Daniel A. Brandon, and Victoria Weaver Stevens. The Brandons are family members of the deceased. Ms. Stevens is a long-time family friend and was also employed by the Hillsborough County Parks and Recreation Department. FRS Form M-10 is the form adopted by the Division for use by a non-retired FRS participant in designating a beneficiary. Form M-10 does not require execution before a notary public. FRS Form FST-12 is the form adopted by the Division for use by a retired participant in designating a beneficiary. Form FST-12 requires execution before a notary public. The amendment of the beneficiaries should have been executed on a Form FST-12. The Form M-10, which was filed on July 25, 1995, was provided to James E. Brandon by the human resources office of the Hillsborough County Parks and Recreation Department. The form was obtained by Victoria Weaver Stevens apparently at the request of the deceased. The filing of the improper form was through no fault of James E. Brandon. The Petitioner suggests that the signature on the Form M-10 is a forgery. There is no credible evidence to support the assertion. The evidence establishes that the deceased sometimes included his middle initial in his signature, and other times did not. The Petitioner suggests that during the last weeks of the deceased's life, he was overmedicated, was often unaware of his surroundings, and was likely manipulated into changing the designated beneficiaries. There is no credible evidence that James E. Brandon was mentally incapacitated and unable to understand the import of his decisions at the time the amendment was filed with the Division.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Division of Retirement enter a Final Order dismissing the Petition of Dennis A. Barga. DONE AND ORDERED this 31st day of December, 1997, in Tallahassee, Leon County, Florida. _ WILLIAM F. QUATTLEBAUM 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 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1997. COPIES FURNISHED: A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 David T. Weisbrod, Esquire 601 North Franklin Street Tampa, Florida 33602 Stanley N. Danek, Esquire Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Thomas Frost, Esquire 7901 Fourth Street North Suite 315 St. Petersburg, Florida 33702
The Issue Whether the Florida Department of Financial Services, Division of Workers’ Compensation (Respondent) should enter a final order dismissing the Petition for Resolution of Reimbursement (Petition for Resolution) filed by Martin Memorial Health Systems (Petitioner). If the Petition for Resolution should not be dismissed, whether Guarantee Insurance Company (the Carrier) improperly disallowed reimbursement owed to Petitioner for services Petitioner rendered to an injured employee/claimant and the amount thereof.
Findings Of Fact Paragraphs 1–38 of the Agreed Facts and Conclusions of Law set forth in the Joint Pre-Hearing Statement and Filing of Exhibits are hereby incorporated by reference. The Notice of Deficiency issued by Respondent should not have been issued because the Petition for Reimbursement was complete when filed. Respondent has no basis to dismiss the Petition for Reimbursement. Petitioner provided medical services to an employee that had workers' compensation insurance coverage from the Carrier. The usual and customary charges for the services at issue in this proceeding totaled $61,111.09. The Carrier paid Petitioner the sum of $9,135.52 based on the Carrier’s determination that the charges should be based on inpatient treatment on a per diem basis. The greater weight of the evidence establishes that the services to the injured employee should be billed under the category “outpatient surgery” pursuant to the pre-admission authorization provided to Petitioner. Respondent has duly adopted rules that govern billing limitations. The parties agree that outpatient surgery, such as the services at issue in this proceeding should be reimbursed at 60 percent of the usual and customary charges. Petitioner is entitled to reimbursement from the Carrier in the amount of $36,666.65, which is 60 percent of $61,111.09. The Carrier should be credited with having paid the sum of $9,135.52, so the additional amount of the reimbursement due to Petitioner from the Carrier is $27,531.13 ($36,666.65 less $9,135.52) plus any applicable interest.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services enter a final order ordering the Carrier to reimburse Petitioner, Martin Memorial Hospital, in the additional amount of $27,531.13 plus any applicable interest. DONE AND ENTERED this 20th day of May, 2010, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of May, 2010. COPIES FURNISHED: Karen Kennedy Martin Memorial Health Systems Post Office Box 9010 Stuart, Florida 34995 Mari H. McCully, Esquire Department of Financial Services Division of Workers` Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Brian F. LaBovick, Esquire LaBovick & LaBovick, P.A. 5220 Hood Road, Second Floor Palm Beach Gardens, Florida 33418 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue is whether disciplinary action should be taken against Respondents’ licenses based on the allegations set forth in Petitioner’s Administrative Complaint.
Findings Of Fact Background on Annuities In general, annuities are contracts in which the purchaser, usually an individual, makes one or more premium payments to the seller, usually an insurance company, in return for a series of payments that continue for a fixed period of time or for the life of the purchaser or a designated beneficiary. In re May, 478 B.R. 431, 433 (Bankr. D. Colo. 2012); Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 104 (2d Cir. 2001). “For traditional or ‘fixed annuities,’ the stream of payments begins immediately or soon after the contract is purchased. The contract will specify the amount of interest that will be credited to the [buyer]’s account as well as the amount of payments to be received under the contract.” Lander, 251 F.3d at 104. Fixed annuities are similar to certificates of deposit in that the seller of a fixed annuity guarantees that the purchaser will earn a minimum rate of interest over time. Am. Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166, 168 (D.C. Cir. 2009). In other words, fixed annuities do not lose money. Fixed annuities are typically thought of as insurance products because the purchaser receives a guaranteed stream of income for life, and the seller assumes “mortality risk.” The seller’s risk arises from the possibility that the purchaser will live longer than expected, thereby receiving benefits that exceed the amount paid to the seller. Id. In re May, 478 B.R. at 434 (noting that “a person typically purchases an annuity to avoid the risk associated with living an unexpectedly long life and running short of financial resources.”). A fixed annuity is appropriate for someone who desires a guaranteed interest rate without incurring the risk associated with the stock market. Because there is little to no risk, the returns on fixed annuities tend to be lower than the types of annuities discussed below. In contrast to a fixed annuity, the stream of payments associated with a variable annuity does not start upon purchase of the contract. Instead, the purchaser makes a single payment or a series of payments that are invested in securities of the purchaser’s choosing. Those securities are typically mutual funds or other types of investments that reflect the purchaser’s investment objectives. Lander, 251 F.3d at 104-05. From the time that a variable annuity is purchased to the time it begins to pay out, the annuity’s value will fluctuate depending on the performance of the underlying securities in which the purchaser’s principal is invested. Id. at 105. After a defined number of years, the variable annuity will mature and begin paying benefits to the purchaser. The purchaser is not guaranteed a particular payout. Instead, the payout will vary depending on the value of the portfolio at the annuity’s maturity and the purchaser’s life expectancy. Id. A variable annuity has characteristics that make it like an insurance product. By providing periodic payments that continue for the purchaser’s life, a variable annuity provides a hedge against the possibility that the purchaser will outlive his or her assets after retirement. Id. However, a variable annuity is also like a stock mutual fund in that the amount of benefits paid to the purchaser depends on the performance of the investment portfolio. As a result, many purchasers use variable annuities to accumulate greater retirement funds through market speculation. See In re May, 478 B.R. at 434 (explaining that “[m]any annuities are now ‘variable’ rather than fixed, and contemplate that the premiums collected will be invested in stocks or other equities, and that benefit payments to the annuitant will vary with the success of the annuity’s investment policy. In other words, the annuitant is not guaranteed a fixed level of benefits, rather the payment amount will vary depending upon the value of the stock portfolio upon maturity. Such variable annuities are considered akin to an investment contract, because they place all the investment risk on the [purchaser] and guarantee nothing to the annuitant except an interest in a portfolio of common stocks or other equities . . . .”)(internal citations omitted). A fixed index annuity is a hybrid financial product that combines some of the benefits of fixed annuities with the earning potential associated with a security. Am. Equity Inv. Life Ins. Co., 613 F.3d at 168. Like fixed annuities, fixed index annuities provide downside protection through a minimum guaranteed rate of return. However, the seller of the annuity “credits the purchaser with a return that is based on the performance of a securities index, such as the Dow Jones Industrial Average, Nasdaq 100 Index, or [the] Standard & Poor’s 500 Index.” Id. Therefore, depending on the index’s performance, the return on a fixed index annuity might be much higher than the guaranteed return. Id. The fixed index annuity may have a participation rate that limits the buyer’s upside. For example, if a particular fixed index annuity has an 80 percent participation rate and is tied to the Standard and Poor’s 500, then that annuity would return 8 percent if the Standard and Poor’s 500 rose 10 percent that year. In short, a fixed index annuity provides principal protection in a down stock market. While the potential return is less than what one would expect from a variable annuity, it is greater than what one would expect from a certificate of deposit or a fixed annuity. Therefore, a fixed index annuity appeals to someone who desires an opportunity to experience gains in a good market while also receiving protection from market downturns. For an additional fee, a purchaser can customize an annuity through the addition of “riders.” For example, an annuity with a guaranteed income rider provides a guaranteed amount of income for the annuity owner’s life. That income stream continues even if declines in the stock market cause the principal to dissipate. That guaranteed income stream does not start until it is activated by the annuity owner. Until activation, the money associated with the rider grows at a guaranteed rate of return, known as the “roll-up rate,” so long as the annuity owner does not activate the income stream. That guaranteed income stream can be destroyed if the annuity owner takes a withdrawal from the annuity’s principal. Surrender charges are another annuity feature and provide that the buyer will be penalized if he or she withdraws money from the annuity. Surrender charges usually apply during the first five to ten years after the annuity’s purchase and gradually decline over time. For example, an annuity could have a 10 percent surrender charge if the owner withdraws money during the first three years after purchase. During the next three-year period, that surrender charge may decrease to 7 percent. By the tenth year after purchase, the surrender charge could have decreased to 3 percent. Before a sale is completed, Florida law requires that insurance agents ensure that an annuity is “suitable” for the client. For example, section 627.4554(4)(a), Florida Statutes (2012), imposed the following duty on insurers and insurance agents: In recommending to a senior consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, an insurance agent, or an insurer if no insurance agent is involved, shall have reasonable grounds for believing that the recommendation is suitable for the senior consumer on the basis of the facts disclosed by the senior consumer as to his or her investments and other insurance products and as to his or her financial situation and needs. The current version of section 627.4554 does not limit the suitability analysis to senior consumers and sets forth additional detail about the content of a suitability analysis: When recommending the purchase or exchange of an annuity to a consumer which results in an insurance transaction or series of insurance transactions, the agent, or the insurer where no agent is involved, must have reasonable grounds for believing that the recommendation is suitable for the consumer, based on the consumer’s suitability information, and that there is a reasonable basis to believe all of the following: The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge; potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity; mortality and expense fees; investment advisory fees; potential charges for and features of riders; limitations on interest returns; insurance and investment components; and market risk. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or the death or living benefit. The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable; and, in the case of an exchange or replacement, the transaction as a whole is suitable for the particular consumer based on his or her suitability information. In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable after considering whether the consumer: Will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements; Would benefit from product enhancements and improvements; and Has had another annuity exchange or replacement, including an exchange or replacement within the preceding 36 months. § 627.4554(5)(a), Fla. Stat. (2018). Despite section 627.4554, the suitability analysis tends to be subjective in nature. Extreme circumstances notwithstanding, it is fair to say that reasonable people could reach different conclusions about what annuity would be best for a certain person. The Parties The Department is the state agency responsible for regulating and licensing insurance agents and agencies. That responsibility includes disciplining licensed agents and agencies for violations of the statutes and rules governing their profession. At all times relevant to the instant case, Ms. Dorrell was a Florida-licensed insurance agent selling fixed annuities and fixed index annuities. She owns SFS, a licensed insurance agency located in The Villages, Florida. Ms. Dorrell is not licensed to conduct securities business. Count I – Frederic Gilpin Frederic Gilpin was born in 1940 and worked in the automobile industry, primarily as a service manager in dealerships, for 44 years before retiring in 2006. Mr. Gilpin purchased a Prudential variable annuity in 2006 through Bryan Harris, an investment advisor in Maryland, for $260,851.14. By September 30, 2007, the value of Mr. Gilpin’s Prudential variable annuity had increased to $326,557.31. On December 31, 2007, its value had fallen to $319,877.84. On December 31, 2008, Mr. Gilpin’s Prudential variable annuity was worth only $200,989.32. By March 31, 2009, its value had fallen to $183,217.37. The decrease in the annuity’s underlying value coincided with the precipitous declines experienced by the stock market in 2008 and 2009. On May 1, 2009, Mr. Gilpin exercised a rider in the Prudential annuity contract that guaranteed a yearly income of $15,625. That annual income would continue for the rest of his life regardless of the stock market’s performance. The guaranteed income stream would only be destroyed if Mr. Gilpin withdrew from the annuity’s principal. Mr. Gilpin and his wife met with Ms. Dorrell in 2012 to discuss their financial situation. Mr. Gilpin reported that he was very concerned with income, preservation of assets, and maximizing growth. According to Ms. Dorrell, Mr. Gilpin “did express to me that he was concerned about a downturn [in the stock market] because he had already gone through one in [2007 and 2008] and lost quite a bit of money in the annuity.” Mr. Gilpin also told her that he and his wife had committed “financial suicide” because “he had taken excess withdrawals from his variable annuity when they went to buy [their home in Florida] and that they were constantly invading their investments to help their children and they needed to stop that.” As recommended by Ms. Dorrell, Mr. Gilpin surrendered the Prudential annuity and used the proceeds to purchase a fixed index Security Benefit annuity. The purchase price of approximately $205,000 for the Security Benefit annuity was allocated between two accounts whose performance was tied to the Standard and Poor’s 500. Mr. Gilpin filled out a Department form titled “Annuity Suitability Questionnaire” on September 26, 2012, and reported that he was purchasing the Security Benefit annuity for “safety of principal + guarantee.” He also reported that he planned to keep the Security Benefit annuity for 10 years. At the time of this transaction, the Prudential annuity had four more years of surrender charges, and Mr. Gilpin started a new 10-year period of surrender charges associated with the Security Benefit annuity.4/ Mr. Gilpin incurred a surrender charge of $13,077.56 for surrendering the Prudential annuity. The surrender charge was more than offset by the 8 percent bonus (i.e., $16,000) he earned by purchasing the Security Benefit annuity. However, the 8 percent bonus was subject to recapture for the first six years. With the Security Benefit annuity, Mr. Gilpin could withdraw 10 percent of the money without penalty after the first year. If Mr. Gilpin waited until 2016 to take income from the Security Benefit annuity, then he would be getting over $17,000 a year in guaranteed income for his lifetime. If he died, then the guaranteed income stream would continue for his wife’s lifetime. Mr. Gilpin had no pressing need for income in 2012 because he had used the sale from his home in Maryland to acquire a home in Florida, and he had $50,000 left over. The Prudential annuity did not have a home healthcare doubler, and the Security Benefit annuity did. That feature increases the annuity purchaser’s income stream if he or she becomes disabled. The Security Benefit annuity had a 100-percent participation rate, and a 7-percent roll up rate. In contrast the Prudential annuity only offered a 5-percent roll up rate. In retrospect, Mr. Gilpin considers the move from the Prudential annuity to the Security Benefit annuity to be unwise. In recent years, Mr. Gilpin and his wife have experienced significant health issues. By purchasing the Security Benefit annuity and extending the amount of time that their funds were committed to relatively illiquid annuities, the Gilpins would likely have incurred substantial penalties if they had needed to use those funds to finance their medical treatment. Fortunately, the Gilpins are well-insured and were not compelled to take such drastic measures. Mr. Gilpin is also critical of Ms. Dorrell for recommending that he move his money from a variable annuity to a fixed index annuity. As a result, his holdings did not appreciate as much when the stock market rebounded from the lows of the most recent recession. Given that the Prudential annuity guaranteed him annual income of $15,625 regardless of valuations in the stock market, Mr. Gilpin stated “[t]here’s no way in the world [the Security Benefit annuity] could have been better for me, especially since the stock market has gone up.” This criticism is unfounded. It is exceedingly difficult to predict whether the stock market will go up or down, and Mr. Gilpen’s testimony enjoys the benefit of “20/20 hindsight.” A strongly contested point between the Department and Ms. Dorrell concerns whether Mr. Gilpin destroyed his guaranteed income stream by taking an excess withdrawal from the Prudential annuity. If he had, then it would be more difficult for the Department to argue that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. In that regard, there is evidence suggesting that Mr. Gilpin took an excess withdrawal in 2010 and/or 2011. For example, Mr. Gilpin appeared to acknowledge during his testimony that he had taken an excess withdrawal from the Prudential policy in order to assist his daughter with purchasing a condominium.5/ Mr. and Mrs. Gilpin’s income tax return for 2010 indicates that they received $44,423.00 from “pensions and annuities.” That amount is listed separately from $15,626 attributed to “IRA distributions.” The Gilpin’s 2011 income tax return indicates they received $32,005.00 from “IRA distributions” and $43,778.00 from “pensions and annuities.” The evidence indicating that Mr. Gilpin may have taken an excess withdrawal corresponds with when the Gilpins moved to Florida and bought a house in 2011. According to Ms. Dorrell, Mr. Gilpin stated during a meeting with her on September 21, 2012, that “he had made an excess withdrawal to buy the house in Florida, because when they were down here, they found something and they didn’t want to lose out, so they took extra money out.” Also, Ms. Dorrell testified that she called Prudential and confirmed that he took an excess withdrawal in 2011. However, even if Mr. Gilpin had not destroyed the guaranteed income from the Prudential annuity, the evidence does not clearly and convincingly establish that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. In sum, the Department failed to prove by clear and convincing evidence that Ms. Dorrell or SFS violated any statutes or rules in conducting business with Mr. Gilpin. Count IV – Deborah Gartner’s Annuities Deborah Gartner is a 71-year old widow who met Ms. Dorrell at an SFS seminar in 2007. Ms. Gartner filled out an SFS form indicating that her net worth was between $500,000 and $1 million. In January of 2008, Ms. Gartner met with Ms. Dorrell in order to seek financial advice. Ms. Gartner had $201,344.14 in a Guardian Trust account and $195,182.44 in a Guardian Trust IRA. In addition, Ms. Gartner owned an $80,000 certificate of deposit. On a monthly basis, Ms. Gartner was receiving $1,381 from social security, $786.15 from a pension, and $4,500 from investment withdrawals. The latter came from depleting principal rather than interest. Ms. Gartner also earned income from teaching one to three Zumba classes a week. One hundred people would attend those classes and pay $10 a person. At the time of the January 2008 meeting, the stock market was declining, and Ms. Gartner was adamant about getting out of equities. Ms. Dorrell told Ms. Gartner that annuities would be appropriate if she was interested in principal protection and guaranteed income. Because she lacked a securities license, Ms. Dorrell could not legally recommend or instruct Ms. Gartner to liquidate her equity investments, and Ms. Dorrell credibly denies doing so. Ms. Gartner was able to liquidate her Guardian Trust accounts without incurring any fees. The funds from the Guardian Trust accounts were used to purchase two Allianz and two American Equity annuities on February 1, 2008. The Department criticizes Ms. Dorrell for directing Ms. Gartner’s funds into four annuities rather than just two. Ms. Dorrell explained that this was intended to increase Ms. Gartner’s income: Q: Now, Mr. Davis this morning was explaining the reason for having multiple annuities. And if I understood him, it was that if you have multiple annuities and you want to either take a withdrawal or whatever other thing, you have to do it at a specific amount based upon the amount of the annuity; is that correct? A: Yes, that’s correct. It’s - - - Q: Well, for example, if you’re going to take a 10 percent penalty-free withdrawal, if you have a $75,000 annuity, you take $7,500. A: Right. Q: If you had a $150,000 annuity, you’re stuck at 15,000. A. Right. Q: But if you’ve got two $75,000 annuities, you could take it from one and leave the other one without being reduced? A: Yeah, some of the companies – some of the companies only allow a penalty-free withdrawal after the first year, but then once somebody makes a penalty-free withdrawal, some of the companies make them wait around another 12 months before they could make another one. So if she only needed $7,500 and she had 15,000 available, but then she needed the rest of it before the 12 months went by, she might have a problem. So that’s the reason I staggered the accounts for her and for many clients that are taking income. Q: In your opinion, was this suitable for Ms. Gartner at that time? A: Yes, it was. Q: Did you believe it was in her best interest? A: Yes. In March of 2008, Ms. Gartner used the $80,000 from her certificate of deposit to purchase a Reliance Standard fixed index annuity. At that time, the certificate of deposit was coming due and had been paying 3.9 percent. The Reliance Standard annuity offered 4.5 percent along with an additional 1 percent for the first year. The minimum guaranteed rate was 3 percent. As for why she recommended that Ms. Gartner purchase the Reliance Standard annuity, Ms. Dorrell testified as follows: Deborah was very sensitive to creditor protection. Due to what her husband had done for a living, he often told her about making sure your assets are creditor-protected. She had a son that had a problem with being – having assets seized. I believe it was in a divorce or some sort of lawsuit. And so one of her things that she liked about the annuities is that they gave her creditor protection. So she still had the CD at the bank that was at risk if for some reason something happened and she needed her assets protected. It wasn’t paying as much. She wanted to get more income, and she wanted principal protection and safety. By January of 2011, Ms. Gartner wanted more income, and Ms. Dorrell recommended that the Reliance Standard annuity be split into two annuities. Surrendering the Reliance Standard annuity caused Ms. Gartner to incur a $5,132.56 surrender charge and left her with $72,496.03 from the initial $80,000 purchase. She used $43,815 of the $72,496.03 to purchase an American Equity annuity that offered a guaranteed minimum interest rate of 3 percent. However, the American Equity annuity also had 16 years of surrender charges, and the surrender charge for the first year was 20 percent. Ms. Gartner used $26,185 of the $72,496.03 to purchase a North American annuity. As for the reasoning behind recommending the surrender of the Reliance Standard annuity, Ms. Dorrell testified as follows: A: I recommended, because she wanted more income, and my concern was she was getting to the point where she might be having to live on her IRA monies, which would be a taxable event. So I made a recommendation that we do a split annuity with the money that was in the Reliance to give her more income and less taxes. Q: Can you explain how that’s done? A: Yes. So, a split annuity is like a bucket concept. In her case we use two buckets. One was going to be the immediate annuitization in the North American that would then give her $150 more a month in income with much less taxation. Only a small portion of that payment would be taxable. And then on the other side was the American Equity which was purchased for accumulation over that same 5-year time frame that the North American would be paid out, so when the North American balance went to zero, she’d have the same amount of money in her American Equity policy as she started with when she bought both of them. Q: So how long a period of time would this provide the same income for her? * * * A: For the rest of her life. That was the reason for buying the American Equity, because it would remain – when we used the rider on that side, it would give her guaranteed income for as long as she lived and she was concerned about that because her parents were both in their nineties. Q: In your opinion, were these purchases suitable for her? A: Yes, they were. Q: And the surrender of the Reliance Standard, was that suitable? A: Yes. Q: Because that was a source of the funds to obtain the other two annuities; is that right? A: Yes. Ms. Dorrell also addressed the Department’s allegation that it was ill-advised to incur a $5,132.56 charge for surrendering the Reliance Standard annuity: Q: It’s been alleged that the liquidation of the Reliance Standard annuity cost Ms. Gartner $5,132.56 and, apparently, that it shouldn’t have cost her or that it was a bad idea to surrender the policy. Does that take into account what’s known as the market value adjustment? A: No. So many just straight fixed annuities and some fixed index annuities, in particular we’re speaking of the Reliance Standard fixed annuity, they come with what’s called a market value adjustment. It’s really something that an insurance company determines if they’re going to give them a positive market value adjustment or a negative value adjustment. So a negative market value adjustment could make a higher surrender charge and a positive market value adjustment could make a lower surrender charge, and they’re sort of driven by interest rates. So at that time, if you remember, you know, 2011 interest rates were, you know, still very low. But it was a good time, if you had an annuity with a market value adjustment, it was a good time to consider changing it because they would still have positive market value adjustments, which by the next year, the next six months later, exactly what I knew would happen is all those market value adjustments went negative. So not only would it have cost her the percentage rate on the surrender penalty to get out, she would have paid an additional negative market value adjustment. And this way it was timed to better her annuity anyway and she ended up in the positive. Q: Was there a positive market value adjustment? A: Yes. Q: $1,700? A: Correct. Q: And was there also a bonus on the American Equity? A: Yes. Q: And do you know what the bonus was? A: 10 percent. Q: And what was that, about $3,000? A: I think she put 43,000 in there, so it was about $4,300. Q: So after the surrender, taking into account the market value adjustment, taking into account the bonus on the American Equity, in fact, wasn’t she $1,000 ahead? A: Yes. The Department argues that Ms. Dorrell gave investing advice to Ms. Gartner and that Ms. Dorrell’s actions led to a depletion of Ms. Gartner’s assets. Ms. Dorrell addressed those allegations as follows: Q: It’s alleged in the administrative complaint that Ms. Gartner’s assets were depleted by the exchange of policies and also that you gave securities advice. First of all, were her assets in any way depleted? A: No. Q: She takes at the beginning $300,000 cash. She buys $300,000 worth of annuities. And the annuity companies add 10 percent, so initially she takes $300,000, truly liquid asset[s], but earning very little, and now she’s got $330,000 in the annuities; is that right? A: Yes. Q: Is there any depletion of her assets there? A: No. Q: Two months later, March of 2008, she takes an $80,000 CD and buys an $80,000 Reliance Standard annuity. Is there any depletion of assets there? A: No. Q: Later on she takes the $80,000 Reliance Standard annuity and converts it to a total of almost $80,000 in American Equity and National American? A: North American, yes. Q: North American? Is there any depletion of assets there? A: No. Q: Do all of these annuities actually earn income? A: Yes. Q: Did the principal balance of any of these assets decline? A: No. Q: In comparison to the stock market where there’s volatility up and down and your account may vary, did Ms. Gartner’s accounts ever vary or get lower? A: No. Q: Do you know the difference between giving advice on insurance and on securities? A: Yes. Q: Now, honestly, I’m not quite sure what is advice on securities, but I assume it is sell this one and buy another one? A: Right. Q: Did you make any recommendation that she sell a particular security? A: No, I did not. Q: Did you make a recommendation that she buy a particular stock? A: No, I did not. Q: Other than advising her that she needs to get the source of some funds to buy the annuities, and they would have to come from her accounts, is that the only advice you gave her? A: Yes. In sum, the Department failed to prove by clear and convincing evidence that Ms. Dorrell or SFS violated any statutes or rules in conducting business with Ms. Gartner. Count V – Gartner’s Real Estate Ms. Gartner and Ms. Dorrell became friends, and Ms. Gartner sought Ms. Dorrell’s advice in 2012 about selling her home in Summerfield, Florida. At that time, Ms. Gartner wanted to acquire a smaller home in The Villages, Florida. However, Ms. Gartner was having difficulty selling the Summerfield home. Along with referring Ms. Gartner to a real estate agent, Ms. Dorrell allegedly advised her to stop paying the mortgage on her Summerfield home and to do a short sale.6/ Ms. Dorrell denies making either recommendation. Ms. Dorrell spent $3,100 on “staging” the Summerfield home in order to make it appear more attractive to potential buyers. Ms. Gartner and Ms. Dorrell informally agreed that Ms. Gartner would select a house in The Villages, Ms. Dorrell would purchase it, and Ms. Gartner would then buy the house from her. Ms. Dorrell made the initial purchase because Ms. Gartner lacked funds and/or a good credit rating following the short sale. Ms. Gartner and Ms. Dorrell discussed Ms. Gartner purchasing the villa from Ms. Dorrell, but they never reached a formal agreement on terms. Because a short sale would have a negative impact on her credit rating, Ms. Dorrell allegedly advised Ms. Gartner to buy a new car prior to executing the short sale. Ms. Gartner sold her 2003 Mazda Tribute to Ms. Dorrell for $10,000, and Ms. Gartner purchased a new car. Ms. Dorrell then gave the Mazda Tribute to Diana Johnson, an SFS employee. Ms. Dorrell deemed the car to be income, and Ms. Johnson declared it on her tax return. Ms. Gartner selected a villa in The Villages, and Ms. Dorrell purchased it for $229.310.78 on November 1, 2012. Of the aforementioned amount, Ms. Gartner paid $10,000, and Ms. Dorrell paid the remaining $219,310.78. At this point in time, Ms. Dorrell was the legal owner of the villa. Ms. Gartner could not move into the villa immediately after the sale because it was being rented, and the tenants’ lease extended through April of 2013. Ms. Dorrell received the rental payments of $1,800 per month and paid the expenses associated with the villa between November of 2012 and April of 2013. Those expenses included items such as home insurance, cable television, lawn maintenance, and utilities. By May of 2013, Ms. Gartner had completed a short sale of her Summerfield home. She received a short sale benefit of $36,775.00 and a seller assistance payment of $3,000.00. Ms. Gartner moved into the villa in May of 2013. At that point in time, there was no formal agreement between Ms. Gartner and Ms. Dorrell about when Ms. Dorrell would sell the villa to Ms. Gartner or how Ms. Gartner would pay Dorrell for it. Ms. Gartner paid no rent to Ms. Dorrell from May of 2013 through April of 2014. In November of 2014, Ms. Dorrell sold the villa to Ms. Gartner for approximately $219,000, the same price that Ms. Dorrell paid for it. In order to finance the sale, Ms. Gartner executed a promissory note that would pay Ms. Dorrell $100,000 with 4-percent interest. Ms. Dorrell did not record that promissory note.7/ In order to finance the remainder of the purchase price, Ms. Gartner obtained a reverse mortgage. Ms. Dorrell allegedly pressured Ms. Garter to obtain the reverse mortgage, but Ms. Dorrell denied having any discussions with Ms. Gartner about a reverse mortgage. There is a substantial amount of disagreement between Ms. Gartner and Ms. Dorrell as to who was entitled to receive the rental payments. They also disagree about the expenses associated with maintaining the villa prior to Ms. Gartner moving in. This is not surprising given the lack of a written agreement between them. The Department’s Exhibit 185J purports to be an accounting of the rental income and expenses associated with the villa prior to Ms. Gartner moving in, and it suggests that Ms. Gartner should have received or been credited for an additional $17,950.51. Ms. Dorrell had Diana Johnson prepare Exhibit 185J, but there is substantial reason to question Ms. Johnson’s credibility about the interpretation of Exhibit 185J.8/ Ms. Gartner ultimately sold the villa for $285,000. Ms. Dorrell filed a mortgage foreclosure action against Ms. Gartner in order to recover the balance of the money Ms. Gartner owed her. Part of that litigation involved a reconciliation of expenses associated with the villa prior to Ms. Gartner moving in. Following a mediation conference on June 6, 2017, Ms. Gartner agreed to pay $97,500 to Ms. Dorrell in settlement of the foreclosure action. In the Administrative Complaint, the Department alleges that Ms. Dorrell acted “wrongfully” through the following actions: (a) advising Ms. Gartner to stop making mortgage payments on the Summerfield home; (b) advising Ms. Gartner to buy a new car and purchasing Ms. Gartner’s used car; (c) arranging for the purchase of the villa and accepting a $10,000 deposit from Ms. Gartner without giving her credit for it; (d) not crediting Ms. Gartner for paying expenses associated with taking possession of the villa; (e) directing Ms. Gartner to sign a $100,000 promissory note; (f) making Ms. Gartner responsible for all of the property taxes owed for the villa in 2014; pressuring Ms. Gartner to procure a reverse mortgage; and arranging for Ms. Gartner to use funds from an IRA account to pay off the promissory note. Ms. Dorrell’s failure to have a written agreement governing her acquisition and subsequent sale of the villa to Ms. Gartner was foolhardy. Without such an agreement, conflicts regarding the villa were inevitable. However, the evidence does not clearly and convincingly establish that Ms. Dorrell violated any statutes or rules in her dealings with Ms. Gartner. Count VI – Earl Doughman Earl Doughman was born on December 6, 1934. After completing a two-year stint of military service in 1958, Mr. Doughman spent the next 40 years managing a company’s inventory. At some point after his retirement, Mr. Doughman and his wife moved from Cincinnati, Ohio to The Villages. On August 4, 2008, Mr. Doughman purchased a Midland National Deferred Annuity (“the Midland annuity”) from Ms. Dorrell. That annuity provided a 5.25-percent guaranteed interest rate for five years. The annuity did not have an income rider or a home healthcare doubler. In 2013, Mr. Doughman visited SFS to inquire about purchasing another annuity. According to Mr. Doughman, he dealt exclusively with Diana Johnson and never met with Ms. Dorrell about his finances.9/ Ms. Johnson allegedly advised Mr. Doughman to utilize 10-percent penalty free withdrawals from the Midland annuity and a Fidelity and Guaranty annuity to fund the acquisition of a Security Benefit annuity for $29,492. The Department asserts that the Security Benefit annuity was not a suitable replacement for the Midland annuity. The Midland annuity was a fixed annuity and the Security Benefit was a fixed index annuity. The Midland annuity had five more years of surrender charges, and the surrender charge for each year was 10 percent. The purchase of the Security Benefit annuity resulted in Mr. Doughman beginning a new 10-year term of surrender charges. Those surrender charges were 10 percent for the first five years, but gradually declined to 0 percent by year 10. As noted above, Mr. Doughman could withdraw 10 percent a year from the Midland annuity without incurring a penalty. With the Security Benefit annuity, he would incur a 10 percent surrender charge after the first year. The Midland annuity provided a minimum guaranteed interest rate of 1 percent, and the Security Benefit Annuity had no minimum guarantee. However, the Security Benefit annuity came with a 9-percent bonus based on the premium amount. As a result, Mr. Doughman received approximately $2,654.28 upon purchasing the Security Benefit annuity. The Midland annuity had a 5.25-percent interest rate cap for the first year. By 2013, the Midland annuity was paying 3 percent. The participation rate in both annuities was 100 percent. The Security Benefit annuity had a home healthcare doubler, and the Midland annuity did not.10/ However, the Midland annuity had a death benefit and a terminal illness rider that would result in the waiver of surrender penalties if they were activated. Ms. Dorrell testified as follows as to why the Security Benefit annuity was more suitable for Mr. Doughman than the Midland annuity: Q: Why is the Security Benefit [annuity] a better product for Doughman? A: Because it has the home healthcare doubler that he desperately needed. It has the income rider. It has the upside potential in the stock market with not any downside potential whatsoever. It has a fixed account inside of it that would have paid close to the same amount that the Midland had renewed out at 3 percent. So why wouldn’t he buy something that he can get a bonus on, not lose anything from the Midland, and have the ability to make more money than what he was going to make if he stayed at Midland? It makes perfect sense to move that. Mr. Doughman was concerned about whether he was actually earning 4 percent on the annuity contract amount as had allegedly been represented to him. Therefore, Mr. Doughman asked Don Geist, an insurance agent with Financial Solutions Group of Florida, to review the terms of this Security Benefit annuity. Mr. Geist is a competitor of Ms. Dorrell’s and determined that the 4-percent interest rate applied only to the annuity’s income rider.11/ With Mr. Geist’s assistance, Mr. Doughman wrote a letter to Security Benefit on April 14, 2014, seeking the termination of the Security Benefit annuity and a refund of the $29,492.30 he paid to acquire that annuity.12/ Security Benefit refunded the money that Mr. Doughman had paid to acquire the Security Benefit annuity. Ms. Dorrell learned of Mr. Doughman’s complaint in April of 2014. In response, she had Ms. Johnson use SFS’s records to prepare a chronology and description of Mr. Doughman’s meetings with SFS. Ms. Johnson then transmitted the following e-mail to Ms. Dorrell’s attorney on April 29, 2014, indicating that Ms. Johnson did not sell an annuity to Mr. Doughman: Hi Jed, Here is a timeline of when the Doughmans came to our office and who they met with: July 17, 2012 attended Seminar, which Jean was the speaker. July 31, 2012, met with Goldie, who was a licensed agent and discussed annuities. August 28, 2013, met with Jean for a review and purchased annuity. August 29, 2013, brought in beneficiary information and gave to Diana. October 3, 2013, met with Jean for policy delivery. February 21, 2014, met with Diana and the Doughmans expressed concern re: a salesman that came to their door inquiring about their finances and dropped off card from Don & Tim Geist from Financial Solutions. The Department alleges that Ms. Dorrell committed wrongdoing by having unlicensed agency personnel (i.e., Diana Johnson): (a) perform prohibited sales activities with respect to Mr. Doughman’s transactions of insurance; (b) unreasonably recommend the partial surrender of senior consumer Doughman’s existing annuities to fund the purchase of the Security Benefit annuity; (c) misrepresent the percentage return on the Security Benefit policy by including a costly rider to the policy; and (d) advising Mr. Doughman that the cap on the indexed Security Benefit policy was two points lower than the cap on his indexed Midland annuity. The evidence does not clearly and convincingly establish that Ms. Dorrell or SFS violated any statutes or rules in dealing with Mr. Doughman. Count VII – Margaret Dial Margaret Dial was born in 1950 and earned a high school diploma. She was married for 42 years. During her marriage, she worked as a bookkeeper until she took an early retirement to care for her mother. Ms. Dial receives income from a pension and social security. Ms. Dial met Ms. Dorrell in July of 2007 and purchased multiple annuities from her. One of those annuities was an Old Mutual annuity that she purchased on November 11, 2007. In 2013, Ms. Dorrell advised Ms. Dial to surrender the Old Mutual annuity and use the proceeds to purchase a Security Benefit annuity. After incurring $16,560.39 in surrender charges, Ms. Dial received $129,901.21 in the form of a check mailed to her home. Ms. Dial then wrote a check for $130,000 to purchase a Security Benefit annuity. The difference between the purchase price of the Security Benefit annuity and the proceeds from the surrender of the Old Mutual annuity was $98.79. On March 12, 2013, Ms. Dial signed an application to purchase the Security Benefit annuity recommended by Ms. Dorrell for $130,000. The application associated with the Security Benefit annuity was incorrect because it did not show that it was a replacement for the Old Mutual annuity. The Department asserts in its proposed recommended order that: [t]he manner in which [the Old Mutual annuity] was replaced shows that it was a smokescreen to avoid Old Mutual conservation efforts and to make the new purchase look like it was accomplished by fresh money. By replacing her own business, Dorrell sold the same money twice, making commissions each time, while Ms. Dial incurred a $16,000 surrender penalty. Instead of encouraging the sale, Dorrell should have conserved the Old Mutual business. “Conservation” is the term used to describe an insurance company’s effort to retain existing business. As for why it was problematic that the Security Benefit annuity was not identified as a replacement, Mr. Spinelli testified as follows: A: Because this case – the first contract, [Old Mutual], was written by Dorrell, and she’s replacing her own business to move it to – having the check sent to the client’s house to avoid a conservation effort because it’s saying that she’s surrendering the policy for cash. A proper replacement, if it was a legitimate replacement, would have been a 1035 exchange from one company to another, therefore, avoiding any taxable events. If it was gains in this policy, which there might have been, by surrendering it, it could have created a tax event. And it also avoided the conservation effort that [Old Mutual] was trying to perform. And then adding $99 created a different amount that was surrendered. So that’s a big smokescreen to the company that it was a different amount than was surrendered. Q: So it looks like fresh money, so to speak? A: Correct. And there was [a] $16,604 surrender charge when that transaction was done. The – that’s the case of that money being sold twice. Dorrell sold that money twice there. She sold it with [Old Mutual} and then she turned around and sold it again with Security Benefit. She made commission twice on that. Q: If that were – if, in fact, that had been indicated as a replacement, how do companies look upon – do they look upon these kinds of replacements with a jaundiced eye, so to speak? I’m talking about where the real facts are set forth. A: The company I work for, they do. They take conservation very seriously, especially in a situation like this where the money’s being sent to somebody’s home. Q: And so isn’t the reason for the comparison sheet between the two annuities, to try to point out to the underwriting people that, if the facts are true, then they may or may not allow for issuance of the annuity, the replacement annuity; correct? A: Well, they have to eventually comply with the client’s wishes. If the client insists on surrendering that and making a terrible mistake and paying $16,000 surrender charges, there’s nothing the company can do to stop it. But they can have the agent try to conserve the business. Q: And that’s what the agent should be doing? A: Correct. ALJ: I’ve heard the term conserve. I have a pretty good idea – think I know what it means, but no one’s actually defined it for me. Could you formally define what conserve is? A: Yeah. Conserve, conservation, you’re conserving the business on the books for that company for your clients. You should be conserving the business for your clients. Why are they leaving? You know, quality companies have a high retention rate in their business. It’s because of conservation efforts. ALJ: Okay. Thank you. A: If you have more business leaving the company, your ratings are going to go down. It’s going to be detrimental to the company. Not just the company, but to the clients they serve. Ms. Dorrell acknowledged during her direct testimony that she failed to make the proper notation on the application form. However, she disputed Mr. Spinelli’s assertion that her failure prevented Old Mutual from initiating conservation efforts: Q: Now, on that third page with respect to the question, “Does this proposed contract replace or change any existing annuity or life insurance policy,” the answer is no. Is that incorrect? A: It’s incorrect, yes. Q: Did you notice that when the application was completed and was shown to Margaret Dial? A: I did not. Q: Were you with Margaret Dial when the application was shown to her? A: Yes. * * * Q: At some point did you discover that there was an error on the application before the administrative complaint was filed? A: No. Q: Okay. Now, what impact would that incorrect answer have in regard to the transaction? * * * A: Well, it’s a replacement. I should have checked yes. I mean, that was an error on my part. Q: Did you do that intentionally? A: No. Q: Okay. So, again, did this have an impact on Margaret Dial, financial impact? A: No. Simply because we had discussed that she would pay a surrender charge, and she knew that she was paying it, and she knew what the bonus was as presented in my illustration to her on the Security Benefit annuity. It showed her the bonus. It showed her how her money grew at 7 percent each year, what the value would be, so she knew it took about a year to get back to where she was, and she was willing to pay that surrender penalty because of all the other benefits she was getting. Q: I understand. Mr. Spinelli testified though that if an application is not marked that it is a replacement, that there might not be the conservation letter sent to the policy holder. A: No, there’s a conservation letter sent regardless of that. No insurance company wants to lose business so they – as far as I know, all the companies I work with, they send conservation letters out to the client because they don’t want to lose the business, so they want to make sure that they’re informing the client what they may be giving up. Q: So in other words, the Old Mutual that was being surrendered, whether it was being replaced or just being surrendered and Ms. Dial was taking the money, Old Mutual would still send her a conservation letter. A: Yes. Q: Because she was cancelling the policy. A: Yes, and they didn’t want to lose the business. Q: And it’s irrelevant, really, whether it’s being replaced or whether it’s just being cashed out. A: Right. They send it regardless. * * * Q: And this conservation letter that went to Ms. Dial advises her of the surrender charge, doesn’t it? A: Yes. Q: $16,560.39? A: Yes. The evidence does not clearly and convincingly demonstrate that Ms. Dorrell or SFS violated any statutes or rules in the dealings with Ms. Dial. Count VIII - Unlicensed Activities The Department alleges under Count VIII of the Administrative Complaint that Ms. Dorrell and/or SFS employees performed work without having the proper licensure. Specifically, the Department alleges that SFS employees wrote Lady Bird deeds and wills without being licensed attorneys. A Lady Bird deed enables a person to designate a child or some other beneficiary as the person who will take possession of the designator’s property after death. The Department also alleges that Ms. Dorrell and/or SFS employees encouraged clients to liquidate security holdings without being licensed investment professionals. The Department’s case largely depends on two former SFS employees with questionable credibility. Laura Wipperman began working for SFS in July of 2010, providing support to Ms. Dorrell as an administrative assistant. Ms. Wipperman did not have an insurance license. Ms. Wipperman left SFS in March of 2013, supposedly because of Ms. Dorrell’s harsh treatment of her employees. Nevertheless, Ms. Wipperman later returned to SFS as a receptionist. Ms. Wipperman separated from SFS a second time in June of 2014. Ms. Dorrell was upset that Ms. Wipperman failed to timely prepare a file. After Ms. Dorrell had a tense confrontation with Ms. Wipperman, she told Diana Johnson to fire her. Because Ms. Wipperman and Ms. Johnson were friends, Ms. Dorrell’s direction probably led to tension between Ms. Dorrell and Ms. Johnson. In approximately June of 2014, Ms. Dorrell fired Ms. Johnson for stealing money from SFS’s petty cash fund. Ms. Wipperman and Ms. Johnson filed a complaint a few weeks later with the Department alleging that Ms. Dorrell had engaged in improper conduct. Ms. Johnson also joined Ms. Gartner in reporting improper conduct by Ms. Dorrell to an organization called Seniors Versus Crime. Ms. Johnson unsuccessfully pursued a claim alleging that Ms. Dorrell did not pay her what she was owed after the firing. Ms. Johnson acquired an insurance license and began working for an SFS competitor in December of 2014. Ms. Johnson and Ms. Wipperman had obvious reasons to hold a grudge against Ms. Dorrell, and that cast a great deal of doubt on the credibility of their testimony. In addition, the undersigned found their testimony to be unpersuasive and unsupportive of the allegations made in Count VIII. Ms. Dorrell credibly testified that SFS refers clients needing wills and/or deeds to attorneys. Also, there was no sufficiently credible testimony to clearly and convincingly demonstrate that Ms. Dorrell instructed clients to liquidate their securities holdings. In sum, the Department failed to prove its allegations under Count VIII by clear and convincing evidence. Count IX - SFS Employees Performing Unlicensed Insurance Activites The Department’s allegations under Count IX also substantially rely on the testimony of Ms. Wipperman and Ms. Johnson. They testified that they performed activities that should have been handled by someone with an insurance license. Those alleged activities included tasks such as selling insurance, reviewing products with clients, and encouraging clients to use penalty-free withdrawal money to acquire new annuities. As found above, the undersigned does not find the testimony provided by Ms. Wipperman or Ms. Johnson to be credible or persuasive. In sum, the Department failed to prove any of its allegations under Count IX by clear and convincing evidence.
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 dismissing the Administrative Complaint. DONE AND ENTERED this 5th day of November, 2018, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of November, 2018.
The Issue The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration (Respondent or AHCA), for medical expenses paid on behalf of Petitioners, Devyn Jeffries (Devyn) and Makayla Jeffries (Makayla), minors, by and through their parents and natural guardians, Theresa Jeffries and Christopher Jeffries, (collectively Petitioners), from settlement proceeds received by Petitioners from third parties.
Findings Of Fact On January 24, 2010, Devyn and Makayla were born via emergency C-Section at 27 weeks gestation. During the birthing process, both children suffered severe and permanent brain damage. As a result, Devyn suffers from Cerebral Palsy with spastic paralysis and cognitive developmental disabilities, and Makayla suffers from Cerebral Palsy, failure to thrive, feeding difficulties, and cognitive deficits. Devyn and Makayla’s medical care related to their birth injuries was paid by Medicaid in the following amounts: 1 Respondent’s Proposed Final Order was served by email and received by DOAH at 9:50 p.m. on October 21, 2020. It was, therefore, “filed” at 8:00 a.m. on October 22, 2020, in accordance with Florida Administrative Code Rule 28-106.104(3). However, it is accepted and considered as though timely filed. In regard to Devyn, Medicaid, through AHCA, provided $108,068.58 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $25,087.08 in benefits. The sum of these Medicaid benefits, $133,155.66, constituted Devyn’s entire claim for past medical expenses. In regard to Makayla, Medicaid, through AHCA, provided $107,912.33 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $13,915.84 in benefits. The sum of these Medicaid benefits, $121,828.17, constituted Makayla’s entire claim for past medical expenses. Devyn and Makayla’s parents and natural guardians, Theresa and Christopher Jeffries, pursued a medical malpractice lawsuit against the medical providers responsible for Devyn and Makayla’s care (“Defendants”) to recover all of Devyn and Makayla’s damages, as well as their own individual damages associated with their children’s injuries. The medical malpractice action settled through a series of confidential settlements, which were approved by the court on February 21, 2020. During the pendency of the medical malpractice action, AHCA was notified of the action and AHCA asserted a $108,068.58 Medicaid lien associated with Devyn’s cause of action and settlement of that action and a $107,912.33 Medicaid lien associated with Makayla’s cause of action and settlement of that action. AHCA did not commence a civil action to enforce its rights under section 409.910, nor did it intervene or join in the medical malpractice action against the Defendants. By letter, AHCA was notified of the settlement. AHCA has not filed a motion to set aside, void, or otherwise dispute the settlement. The Medicaid program through AHCA spent $108,068.58 on behalf of Devyn and $107,912.33 on behalf of Makayla, all of which represents expenditures paid for past medical expenses. No portion of the $215,980.91 paid by AHCA through the Medicaid program on behalf of Petitioners represented expenditures for future medical expenses. The $215,980.91 combined total in Medicaid funds paid towards the care of Devyn and Makayla by AHCA is the maximum amount that may be recovered by AHCA. In addition to the foregoing, Simply Health spent $39,002.92 on Petitioners’ medical expenses. Thus, the total amount of past medical expenses incurred by Petitioners is $254,983.83. The taxable costs incurred in securing the settlement totaled $109,701.62. Application of the formula at section 409.910(11)(f) to the settlement requires payment to AHCA of the full $108,068.58 Medicaid lien associated with Devyn and the full $107,912.33 Medicaid lien associated with Makayla. Petitioners have deposited the full Medicaid lien amounts in interest- bearing accounts for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). This case is somewhat unique in that it involves two petitioners, with separate injuries and separate Medicaid expenditures. However, the incident causing the injuries was singular, and resulted in a total settlement of all claims asserted by Devyn, Makayla, and their parents of $2,650,000. Therefore, for purpose of determining the appropriate amount of reimbursement for the Medicaid lien, it is reasonable and appropriate to aggregate the amounts paid in past medical expenses on behalf of Devyn and Makayla, and the economic and non-economic damages suffered by them. There was no suggestion that the monetary figure agreed upon by the parties represented anything other than a reasonable settlement. The evidence firmly established that the total of Devyn’s and Makayla’s economic damages, consisting of lost future earnings, past medical expenses, and future medical expenses were, at the conservative low end, roughly $4,400,000 for Devyn and $2,400,000 for Makayla, for a sum of $6,800,000 in economic damages.2 Based on the experience of the testifying experts, and taking into account jury verdicts in comparable cases, Petitioners established that non- economic damages would reasonably be in the range of $10,000,000 to $15,000,000 for each of the children. Based on the forgoing, it is found that $15,000,000, as a full measure of Petitioners’ combined damages, is very conservative, and is a fair and appropriate figure against which to calculate any lesser portion of the total recovery that should be allocated as reimbursement for the Medicaid lien for past medical expenses. The $2,650,000 settlement is 17.67 percent of the $15,000,000 conservative value of the claim.3
