The Issue The central issue in this case is whether Petitioners' applications for registration should be approved or denied.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: On January 26, 1988, KC Securities, Inc. (KC) filed an application for broker-dealer registration. Ted Casey Kata was identified as the president and principal owner of KC. Question 7E. of the application asked: Has any self-regulatory organization or commodities exchange ever: * * * (2) found the applicant or a control affiliate to have been involved in a violation of its rules? The answer KC gave to question 7E.(2) was "yes". Question 7G. of the KC application asked: Is the applicant or a control affiliate now the subject of any proceeding that could result in a "yes" answer to parts A-F of this item? The answer KC gave to question 7G. was "yes." The "control affiliates" whose conduct caused KC to answer in the affirmative to the questions noted above are Ted C. Kata and Mary S. Kata. KC has not previously been registered as a broker-dealer. Petitioner, Mary S. Kata, filed an application for securities industry registration and requested registration as a general securities principal, financial and operations principal, and municipal securities principal. According to the application, Mary S. Kata has been unemployed since October, 1985. Previously, Mary S. Kata was the financial principal for TK Securities. Prior to working for TK, Mrs. Kata worked for Cooper Investments, Inc. and Southeast Securities of Florida, Inc. Mrs. Kata later amended her request to seek registration as an associate with KC. Petitioner, Ted C. Kata, filed an application requesting registration as a general securities principal and a municipal securities principal. According to the application, Ted C. Kata has been unemployed since October, 1985. Previously, Mr. Kata had owned and been the principal for TK Securities, he had managed Cooper Investments, Inc., and had owned and managed Southeast Securities of Florida, Inc. The National Association of Securities Dealers, Inc. (NASD) is a self- regulatory organization comprised of securities dealers of which Ted C. Kata and Mary S. Kata were members. Ted C. Kata, entered the securities business as a registered associate in 1965. In 1973, he purchased a general securities business known as First Broward Securities, Inc. Later, Mr. Kata changed the name of First Broward to Southeast Securities of Florida, Inc. (Southeast). On March 3, 1976, Ted C. Kata, as registered principal of Southeast, and Southeast were censured and fined by NASD based upon a violation of Article III, Sections 1 and 32 of the NASD Rules of Fair Practice. This violation was based upon Southeast's failure to obtain and maintain a blanket fidelity bond as prescribed by NASD requirements. The amount of the fine assessed against Mr. Kata was $400 plus costs in the amount of $20. Mr. Kata considered this a minor infraction but took steps to correct the situation and did obtain the required bond. On November 17, 1978, the NASD filed a complaint against Southeast and Ted C. Kata, the registered principal. This complaint alleged Southeast and Kata had violated several provisions of Article III of the Rules of Fair Practice which were set forth in six separate causes. After hearing on the issues, NASD entered findings which determined Kata had operated in a deceptive manner, had presented a false accounting of the firm's income and capital, and had taken excessive mark-ups. As a result, Mr. Kata was censured and fined $500 and was required to pay costs totaling $1,636. Mr. Kata paid this fine but felt that the investigators had not understood the true facts of the case. On October 9, 1986, the NASD filed a complaint against TK Securities, In., Ted C. Kata and Ruth Elaine Berry. Mr. Kata was charged as the sole general securities principal for TK. This complaint alleged violations related to a failure to maintain sufficient net capital, failure to make and keep current records, and failure to file a correct FOCUS report. In accepting an offer of settlement, the NASD censured Mr. Kata and fined him in the amount of $1000. Again, Mr. Kata paid the fine as required. In the latter part of 1985, James Stibal sued Ted C. Kata and alleged, among other complaints, that Mr. Kata had represented the Stibals in their stock transactions and that Mr. Kata had made numerous false or misleading statements to induce the Stibals to invest. According to Mr. Kata this case was settled when he agreed to pay approximately $22,000 to the Stibals. On December 14, 1987, the Securities and EXCHANGE Commission (SEC) took action against Mary S. Kata. The SEC had charged that Mrs. Kata had willfully aided and abetted violations of the Securities EXCHANGE Act by failing to make and keep current books and records for a company for which she served as the financial principal. The settlement, offered by Mrs. Kata and accepted by the SEC, suspended Mrs. Kata for a period of six months from association in a proprietary or supervisory capacity with any broker, dealer, municipal securities dealer, investment company or investment advisor. It should be noted that the acts complained of against Mrs. Kata in the SEC action and the acts complained of by the NASD against Mr. Kata and Berry resulted from errors allegedly committed at TK. According to Mr. and Mrs. Kata, TK was sold two months prior to the incidents which gave rise to these complaints. The Katas maintained that the acts complained of occurred while Mrs. Berry was operating TK. However, the record is clear that Mr. Kata remained as the principal for TK and Mrs. Kata remained as the financial principal for TK during all periods in question. In fact, the Katas remained employed at TK despite the change in ownership. Further, Mr. Kata continued to advise Mrs. Berry and the staff from time to time on matters regarding the business. Approximately two months after the sale of TK, the company went into liquidation by the Securities and Investor Protection Corporation (SIPC). During the liquidation period, Mrs. Kata assisted the trustee to locate and process records. Leonard Simons has known Ted C. Kata since 1968. Mr. Kata handled Mr. Simons' investment account for a number of years. Mr. Simons found that his sales and purchases were promptly confirmed, that he was always paid correctly, and that Mr. Kata's brokerage rates were competitive. If given the opportunity, Mr. Simons would trade with Mr. Kata again. Mr. Simons was unaware of the NASD actions against Mr. Kata. George Brown has known Ted C. Kata since 1964. Mr. Brown and Mr. Kata studied to become NASD members at the same time, and Mr. Brown subsequently worked both with and for Mr. Kata. Mr. Brown stated that Mr. Kata has always confirmed trades accurately and promptly, has always been fair and considerate, and brought to the attention of salesmen in his employ the applicable rules and regulations. Mr. Brown intends to register with Mr. Kata again if the applicant is approved and considers Mr. Kata worthy to be in the securities business. Christopher Constable has known Ted C. Kata since 1972. Mr. Constable worked for Mr. Kata as an associate of all of the brokerage firms for which Kata served as principal for the period 1973-1985. Mr. Kata required that Mr. Constable and the other sales associates review all new rules and regulations. Mr. Constable knows of no complaints from customers while he was associated with Mr. Kata. Mr. Constable believes Mrs. Kata to be an excellent bookkeeper and believes both Katas to be worthy to engage in the securities business. Mr. Constable was not aware of the NASD actions against Mr. Kata. Don Saxon is the director of the Division of Securities and Investor Protection. According to Mr. Saxon, the NASD actions against Mr. Kata are the type which would result in revocation of registration since the violations were related to failures in books and records keeping, illegal markups, and since the Katas were principals of the company which went into SIPC liquidation.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Banking and Finance, Division of Securities and Investor Protection, Office of the Comptroller enter a final order denying the registration applications of the Petitioners. DONE and RECOMMENDED this 22nd day of December, 1988, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2493 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY PETITIONERS: Paragraphs 1 through 9 are accepted. With regard to paragraph 10, the first sentence is accepted. The remainder of paragraph 10 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. No conclusion is reached as to whether Mrs. Berry exercised control over TK after the sale since the Katas remained as principals with the company. With regard to paragraph 11, that TK went into liquidation approximately two months after the sale is accepted. All other conclusions reached in paragraph 11 are rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. Paragraphs 12 and 13 are accepted. Paragraph 14 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. The evidence established that at all periods in question, before the sale of TK and until its liquidation, that Mrs. Kata was the financial principal for the company. Paragraph 15 is accepted. Paragraph 16 is accepted. The first two sentences of paragraph 17 are accepted. The third sentence is rejected as contrary to the weight of the evidence. Mr. Kata remained as principal for TK after its sale, he continued to work there, and he advised staff regarding business matters. Whether he or Mrs. Berry exercised final control over the business is immaterial since Mr. Kata was the sole registered principal. There is no conclusion that the shortcomings were committed after the sale. Paragraphs 18-20 are accented. Paragraphs 21-22 are rejected as hearsay or not supported by the record. Paragraphs 23 and 24 are accepted. Paragraphs 25 and 26 are rejected as a recitation of testimony not findings of fact. Mr. Kata may not have agreed with the ultimate findings reached by the NASD; however, the censure was issued as found in the findings of fact. With regard to paragraph 27, see the findings of fact, otherwise rejected as contrary to the weight of the evidence. Paragraphs 28-33 are accepted but are irrelevant or immaterial to the conclusions reached herein. Paragraph 34 is accepted to the extent that it describes the NASD action taken against Kata. Those portions of the paragraph which suggest Kata did not have control over the company after its sale are rejected as contrary to the weight of the evidence, irrelevant or immaterial. Kata remained as principal for the company after the sale and continued to advise the staff. That he might have allowed the new owner to exercise poor judgment does not excuse Kata of all liability. Paragraph 35 is rejected as contrary to the weight of the evidence, irrelevant or immaterial. Paragraph 36 is accepted only to the extent that it describes the penalty Kata agreed to accept. The action was resolved without hearing. Paragraph 37 is rejected as immaterial and irrelevant. The first sentence of paragraph 38 is accepted. The second sentence is rejected since the record is clear that the total of the fines and costs associated with the NASD actions exceeded the amount of the fines alone, consequently, it would be erroneous to consider only the fine portion. To his credit, Mr. Kata paid all amounts owed by him for the various violations. Paragraph 39 is accepted only to the extent that it finds that TK went into liquidation two months after the sale. The rest of the paragraph is rejected as speculation, unsupported by the record, or contrary to the weight of credible evidence presented. Paragraph 40 is accepted. Paragraph 41 is accepted but is irrelevant and immaterial to the conclusions reached herein. Mr. Kata's self-serving testimony both as to the denials of all wrongdoing and the reasons for either agreeing to pay fines or settlements has not been credited. Paragraph 42 is accepted. Paragraph 43 is accepted. Paragraphs 44 and 45 are rejected as self-serving comment, Mr. Kata's testimony having not been credited. Paragraph 46 is accepted but is irrelevant to the conclusions reached herein. Paragraph 47 is accepted to the extent it relates charges against Mrs. Kata; however, it should be noted that Mrs. Kata was the financial principal for her husband during the periods in which he was censured for problems relating to bookkeeping. Paragraph 48 is accepted but is irrelevant and immaterial to the conclusions reached herein; Mrs. Kata's self-serving comments have not been credited. Paragraph 49 is accepted. Paragraph 50 is accepted. Paragraph 51 is accepted. Paragraph 52 is rejected; Mrs. Kata remained as financial principal for the company after its sale. Whether she should have discovered the errors or whether she could have discovered the errors is immaterial. The sale does not excuse the responsibility for the errors of the company. Thus, paragraph 52 is immaterial, irrelevant or contrary to the weight of credible evidence submitted. Paragraph 53 is rejected as speculation but in any event, if true, would be irrelevant or immaterial to the conclusions reached. Paragraph 54 is accepted but, again, is irrelevant or immaterial to the conclusions reached. Paragraph 55 is rejected; see comment to p. 53. Paragraph 56 is rejected as contrary to the weight of the evidence; Mrs. Kata remained as a principal throughout all periods. Paragraphs 57-68 are accepted. Paragraph 69 is accepted to the extent that it expresses one witness' perception. However, that witness' testimony conflicted with another's and was given little weight in light of the self-interest and long-term friendship involved. Paragraphs 70-80 are accepted. Paragraph 81 is rejected as argumentative, irrelevant or immaterial to the issues in this case. Paragraph 82 is rejected as contrary to the record. Paragraph 83, the first sentence is accepted. The remainder of paragraph 83 is rejected as contrary to the record. Paragraphs 84-86 are rejected as contrary to the record. Paragraph 87 is rejected as argumentative, irrelevant or immaterial. Paragraph 88 is rejected as argumentative, irrelevant or immaterial. Paragraph 89 is rejected as contrary to the record in its entirety. Paragraph 90 is rejected as argumentative. Paragraph 91 is rejected as a recitation of testimony, argument, or irrelevant. Paragraphs 92-93 are rejected as argument, irrelevant, or immaterial. Whether the Division may properly rely on a rule which establishes prima facie evidence of unworthiness for registration has not been challenged. Such a challenge would have been pursuant to Section 120.56, Florida Statutes. These Petitioners have challenged the denial of their registration pursuant to 120.57, Florida Statutes, and the rule by which they are governed is presumed valid for purposes of this review. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: 1. Paragraphs 1-26 are accepted. COPIES FURNISHED: Thomas N. Holloway 2101 W. Commercial Boulevard Suite 5300 Fort Lauderdale, Florida 33306 Charles E. Scarlett Assistant General Counsel Office of the Comptroller Department of Banking and Finance Legal Section, The Capitol Tallahassee, Florida 32399 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue Whether Respondents committed the offenses set forth in the Administrative Complaint and, if they did, the penalties, if any, which should be imposed.
Findings Of Fact On May 15, 1989, Petitioner filed an Order to Cease and Desist, Administrative Charges and Complaint with Notice of Rights against several parties including the following Respondents to the instant proceeding: Habersheir Securities, Inc. (Habersheir); Raymond Hayden (Hayden); Sharieff Mustakeem (Mustakeem); and Frank J. Hurt, III (Hurt). By Order Imposing Sanctions entered November 30, 1989, a default pursuant to Rule 1.380(b)(2)(C), Florida Rules of Civil Procedure, was entered against Habersheir, Hayden, and Mustakeem. No appearance was made by Habersheir, Hayden, or Mustakeem at the formal hearing, although Notice of Hearing was served upon them. Habersheir is a corporation whose main office in Atlanta, Georgia, has been registered with Petitioner as a broker/dealer since June 22, 1987. The Florida branch office of Haersheir was located at 100 West Cypress Creek Road, Suite 810, Fort Lauderdale, Florida 33309. The branch office was registered with Petitioner on September 29, 1988. At all times pertinent hereto, Mustakeem was the president of Habersheir and the majority owner of its stock, while Hayden was a vice- president of Habersheir. At the time of the final hearing, neither Mustakeem nor Hayden was registered with Petitioner. At all times pertinent hereto, Hurt was qualified for registration with Petitioner as a principal. Hurt's registration with Petitioner had not, prior to the filing of this matter, been disciplined. The application submitted by Habersheir to Petitioner on September 7, 1988, listed Hurt as the "Designated Manager in Charge Registered as Principal in Florida". Form BD is a form required by Petitioner in the application process. On Schedule E of the Form BD filed by Habersheir on November 14, 1988, Hurt is listed as the "Supervisor" of the Florida Branch. Hurt's name and his registration with Petitioner as a principal were used in connection with the registration of the Florida Habersheir branch to gain a favorable review of the application by Petitioner. Such use was without compensation to Hurt, but was with his knowledge and permission. Hurt was a salesman who had been employed by Habersheir for a short period of time when the application for the Florida branch office was filed. He was not an officer of Habersheir and had no managerial authority. At no time did Hurt intend to serve the Florida branch office of Habersheir in any capacity and at no time did he have any authority to supervise or otherwise manage that office. Representatives of Habersheir transacted business in Florida between September 7, 1988 and September 28, 1988, prior to Habersheir's branch office being registered in Florida with Petitioner on September 29, 1988. Associated persons working for Habersheir sold securities in or from the branch office in Fort Lauderdale, Florida prior to the associated persons being registered with the Petitioner. Habersheir's branch office in Fort Lauderdale, Florida, failed to maintain records and make available for Petitioner's inspection its cash receipt and disbursement blotter, securities received and delivery blotter, order tickets, and customer confirmations on all transactions as required by Section 517.121, Florida Statutes, and by Rule 3E-600.014(4), Florida Administrative Code. Habersheir also failed to maintain copies of its associated persons files as required by Rule 3E- 600.0014 (5)(a), Florida Administrative Code. At all times pertinent to this proceeding, Habersheir was a member of the National Association of Securities Dealers (NASD). Between November 7, 1988, and November 30, 1988, Habersheir's authority to transact business was suspended by NASD. Habersheir failed to notify its Fort Lauderdale, Florida, branch office of its suspension by NASD. Consequently, business was transacted by that branch office while Haersheir's authority to transact business was suspended by NASD.
Recommendation Based on the foregoing findings of facts and conclusions of law, it is RECOMMENDED that the State of Florida, Department of Banking and Finance, Division of Securities, enter a final order which: Revokes all registrations presently held by Habersheir Securities, Inc., and which assesses an administrative fine against Habersheir Securities, Inc. in the amount of $10,000.00 for its violations of Sections 517.12(5), and 517.121(1), Florida Statutes; and Which dismisses the administrative complaint against Sharieff Mustakeem, Raymond Hayden, and Frank J. Hurt, III. DONE AND ENTERED this 27th day of February, 1990, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 22nd day of February, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASE 89-3886 The following rulings are made on the findings of fact submitted by Petitioner: The proposed findings of fact In paragraphs 1-10 are adopted in material part by the Recommended Order. The proposed findings of fact In paragraph 11 are adopted in part by paragraph 1 of the Recommended Order, and are rejected in part as being unnecessary to the findings made. COPIES FURNISHED: Randall L. Rubin, Esquire Assistant General Counsel Office of Comptroller 401 N.W. 2nd Avenue Suite N-708 Miami, Florida 33128 Oliver Lee, Esquire Troutman, Sanders, Lockerman & Ashmore Candler Building, Suite 1400 127 Peachtree Street, N.E. Atlanta, Georgia 30303-1810 Frank J. Hurt, III 6666 Powers Ferry Road Suite 202 Atlanta, Georgia 30339 Preston Spears 91 Farmington Drive Woodstock, Georgia 30188 Rahim Davoudpour 1972 Benthill Drive Marietta, Georgia 33062 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, Florida 32399-0350 =================================================================
Findings Of Fact On November 20, 1985, petitioners, Richard Schulze and Constable Atlantic, Inc., made application with respondent, Department of Banking and Finance, Division of Securities (Divi- sion), for licensure as a principal and broker-dealer, respec- tively. In response to a Division request, petitioners submitted amended applications containing additional information on January 31, 1986. After conducting an investigation of petitioners' backgrounds, the agency issued a proposed final order on February 18, 1986, denying the application on the grounds (a) Schulze had violated the federal Commodity Exchange Act and had been the subject of a final administrative order in the State of Minnesota involving a violation of that state's security laws, and (b) an officer or director of Constable Atlantic, Inc. (Schulze) had been guilty of an act which would be cause for denying or revoking the registration of an individual dealer. The agency action prompted the instant proceeding. Schulze is president of Wyndwood Merchantile Corporation (Wyndwood) and various affiliated organizations. Wyndwood is involved in the sale of precious metals and is currently doing business in the State of Florida and other states. Constable Atlantic, Inc. is a Delaware corporation authorized to do business in the State of Florida. Schulze is Constable's president, his wife Theodora treasurer, and his son Otto secretary. The three are also the directors and shareholders of the corporation. Constable is now registered as a broker and dealer with the federal Securities and Exchange Commission. Just recently, Schulze was licensed as an associated person and a commodity pool operator by the National Futures Association, which is the licensing arm of the Commodities Futures Trading Commission (CFTC), a federal agency in Washington, D.C. Schulze has been involved in selling securities for the last six or seven years. At one time he was also a principal with Atlantic Futures, Inc. (AFI), which was then licensed as a commodity pool operator and trading advisor with the CFTC. AFI and Schulze were both under the regulatory jurisdiction of that agency. On October 2, 1984 the CFTC issued a complaint and notice of hearing alleging that AFI and Schulze had violated various provisions of the federal Commodity Exchange Act and CFTC regulations. More specifically, it alleged that: ...AFI and Schulze, aided and abetted by each other,...cheated and defrauded or attempted to cheat and defraud AFI's pool participants in violation of Section 46(A) of the Commodity Exchange Act, as amended...; that AFI, aided and abetted by Schulze, violated Section 40(1) of the Act and Sections 4.41(a) and 166.3 of the Commission's regulations; and that AFI violated Sections 4.21(a) and 4.21(a)(3) of the Commission's regulations. Thereafter, Schulze and AFI submitted an offer of settlement to the CFTC which was accepted and formalized in a consent decree entered by the CFTC on April 23, 1985. The consent decree made no adjudication of law or fact, or an adjudication on the merits of the case. Rather, it was entered solely for the purposes of accepting the offer of settlement and terminating the proceeding. Under the terms of that decree, which has been received in evidence as respondent's exhibit 2, Schulze and Atlantic paid a $100,000 fine and agreed to cease and desist from any violations. In addition, AFI agreed to a suspension of its registrations for six months and to never apply for any other registrations with the CFTC. Finally, for purposes of the settlement only, the CFTC found Schulze had violated certain portions of the Act and regulations and noted that "these findings may be used only in any other proceedings brought by the Commission." Schulze later made application with the CFTC for licensure as a dealer, and this application was approved on September 11, 1986. On or about July 26, 1984 the State of Minnesota issued an ex parte cease and desist order against Wyndwood, Schulze and others requiring them to stop selling securities in that state without being registered. The order, which has been received in evidence as respondent's exhibit 1, required Schulze to request a hearing within a prescribed time, or the order would become final. Schulze did not timely request a hearing. However, after the prescribed time to request a hearing had expired, he filed a request with the State Commissioner and the order of July 26 was subsequently vacated on September 18, 1986. The outcome of the proceeding is not known. Constable Atlantic, Inc. is a member firm of the National Association of Security Dealers (NASD) and is registered as a broker and dealer with the Securities and Exchange Commission (SEC). In obtaining their registrations, Constable and Schulze furnished the SEC and NASD the same information that was submitted to respondent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications of Constable Atlantic, Inc. and Richard Schulze for registration as a broker- dealer and principal, respectively, be APPROVED. DONE and ORDERED this 26th day of November, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of November, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1065 Petitioners: 1. Covered in finding of fact 4. 2. Covered in finding of fact 4. 3. Covered in finding of fact 4. 4. Covered in finding of fact 3. 5. Covered in finding of fact 3. 6. Covered in finding of fact 3. 7. Covered in finding of fact 3. 8. Covered in finding of fact 3. 9. Covered in finding of fact 3. Covered in finding of fact 3. Covered in finding of fact 2. Covered in finding of fact 2. Rejected as being irrelevant. Covered in finding of fact 5. Respondent: Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 4. Covered in finding of fact 4. Covered in finding of fact 3. Rejected as being irrelevant. Rejected as being irrelevant. COPIES FURNISHED: Edward Brodsky, Esquire Sarah S. Gold, Esquire SPENGLER, CARSON, OUBAR, BRODSKY and FRISCHLING 280 Park Avenue New York, New York 10017 Calianne P. Lantz, Esquire Office of the Comptroller 401 Northwest 2nd Avenue Suite 870 Miami, Florida 33128 Honorable Gerald Lewis, Comptroller The Capitol Tallahassee, Florida 32301-8054 Charles E. Scarlett, Esquire Room 1302, The Capitol Tallahassee, Florida 32301-8054
The Issue Whether Respondents committed the offenses set forth in the administrative complaints and the amended administrative complaint and, if so, what action should be taken.
Findings Of Fact On May 26, 1989, the Department of Professional Regulation (now, the Department of Business and Professional Regulation), Board of Auctioneers (Petitioner) licensed Irwin Sherwin (Respondent Sherwin) as an auctioneer. He was issued license number AU 0000720. However, Respondent Sherwin was initially denied licensure. On December 29, 1986, Respondent Sherwin submitted an application for licensure, without examination, as an auctioneer to the Petitioner. By order dated October 22, 1987, the Petitioner denied Respondent Sherwin's application on the basis that Respondent Sherwin had been charged with grand theft. Respondent Sherwin requested an informal hearing on his denial. By final order dated September 14, 1988, and filed September 19, 1988, the Petitioner granted Respondent Sherwin's application, subject to certain special conditions, including payment of a $10,000 fine, posting of a $300,000 auctioneer bond,3 and imposition of a period of probation after licensure, with Respondent Sherwin, during the probation, practicing under the supervision of an approved auctioneer. Subsequently, through agreement made by Respondent Sherwin at Petitioner's meeting held on February 16, 1989, the Petitioner modified the bond requirement by order dated March 4, 1989, and filed March 9, 1989, to include the following: (a) a $10,000 auctioneer bond and a $25,000 auction business bond, within 30 days of February 16, 1989, to permit licensure; and (b) a $25,000 auctioneer bond and a $50,000 auction business bond, within 30 days of the date of the order, in order for Respondent Sherwin to maintain licensure. On or about October 20, 1989, after Respondent Sherwin was licensed by the Petitioner, Respondent Sherwin obtained a $25,000 auctioneer bond from American Bankers Insurance Company of Florida. On November 6, 1989, Respondent Sherwin posted the bond with the Petitioner. On February 19, 1990, Respondent Beach Auction House, Inc. (Respondent Auction House) was licensed by the Petitioner as an auction business. Respondent Auction House was issued license number 0000531. As a condition of licensure, Respondent Auction House was required to obtain a bond for an auction business. On or about December 1, 1989, Respondent Auction House obtained a $25,000 bond as a auction business from American Bankers Insurance Company of Florida, the same surety for Respondent Sherwin. The president of Respondent Auction House was Respondent Sherwin's son, Louis Sherwin. The address for Respondent Auction House was 2009 Northeast 2nd Street, Deerfield Beach, Florida. On December 1, 1993, Respondent Auction House's license became delinquent for failure to renew its license. Respondent Auction House's license has remained delinquent since December 1, 1993. Case No. 95-3710 In August 1974, the North Carolina Auctioneer Licensing Board (North Carolina Auctioneer Board) licensed Respondent Sherwin as an auctioneer and licensed Blowing Rock Auction Galleries, Inc., his business, as an auction firm. On March 14, 1994, in the General Court of Justice, Superior Court Division, Wake County, North Carolina, Case Nos. 94-CRS-2435, 2441, 2443, 2448, pursuant to a plea agreement, Respondent Sherwin pled guilty to two felony counts of embezzlement of state property and two felony counts of embezzlement of county property. The embezzlement related to unpaid sales tax due the State of North Carolina and one of its counties by Respondent Sherwin's business, Blowing Rock Galleries, Inc., for which Respondent Sherwin was responsible under the law of the State of North Carolina. As part of the plea agreement, among other things, Respondent Sherwin was sentenced to 6 years in North Carolina's state prison, but his sentence was suspended, and he was placed on unsupervised probation for 5 years under certain specific conditions. On advice of counsel, Respondent Sherwin entered into the plea agreement.4 The felony convictions against Respondent Sherwin have not been set-aside or voided by a court of competent jurisdiction. By Consent Order dated December 21, 1994, the North Carolina Auctioneer Board took action against Respondent Sherwin and Blowing Rock Auction Galleries, Inc., related to several improprieties, including the embezzlement felonies, under the laws and rules governing auctioneers in the State of North Carolina. As to the improprieties, Respondent Sherwin, his son, Louis Sherwin and Blowing Rock Auction Galleries, Inc., entered into a settlement agreement in which they agreed, among other things, that their licenses, issued by the North Carolina Auctioneer Board, would be surrendered and that their licenses would be considered permanently revoked. By the Consent Order, the North Carolina Auctioneer Board approved the settlement agreement and pursuant to the settlement agreement, ordered, among other things, the surrender of the licenses of Respondent Sherwin, his son, and Blowing Rock Auction Galleries, Inc., subject to the conditions and limitations of the settlement agreement. Case Nos. 95-5044 and 95-5046 On March 17, 1994, Tanya Braunshteyn and her husband, Michael Braunshteyn, while on vacation, attended an auction at Respondent Auction House. Respondent Sherwin was present at the auction but did not conduct the auction. The Braunshteyns were successful bidders on a picture or framed sculpture, a ring, and a china set at a total cost of $3,483.30. The Braunshteyns did not purchase the merchandise at that time but left a deposit. The following day the Braunshteyns returned to Respondent Auction House to retrieve and pay for their merchandise. They paid $3,250 in cash as partial payment for the merchandise and received the picture or framed sculpture and the ring, together with a receipt, written descriptions of the merchandise received, and certificates of valuation. Respondent Sherwin agreed that the Braunshteyns could pay the balance, $233.30, for the china by check at a later time and that the china would be shipped to them after receipt of the check. On March 26, 1994, Mrs. Braunshteyn mailed a check to Respondent Sherwin in the amount of $233.30 for the balance on the china. On April 11, 1994, the check cleared her bank. However, the Braunshteyns did not receive the china. They made several telephone calls to Respondent Auction House and spoke with Respondent Sherwin several times inquiring about the china. The Braunshteyns received several different and unsatisfactory reasons as to why the china was not sent to them. On March 18, 1995, approximately 11 months after the balance was paid on the china, the Braunshteyns were again vacationing in Florida. They visited the Respondent Auction House with the specific intent of receiving a refund of the money they paid for the china that they never received. At that time, Respondent Sherwin refunded their money in full for the china. Case No. 95-5045 After inquiry from the Petitioner, by letter dated May 19, 1995, American Bankers Insurance Company notified the Petitioner that Respondent Sherwin's surety bond had been cancelled. The Bond Notice of Cancellation, accompanying the letter, indicates that the auctioneer's bond was cancelled effective November 18, 1990, due to an underwriting decision by the surety. Respondent Sherwin does not dispute that a surety bond was not maintained and in force for either him, as an auctioneer, or for Respondent Auction House, as an auction business.5 Case No. 95-5047 In 1989 Louis Carusillo consigned to Jack Beggs approximately 1000 items of merchandise, including furniture, jade, and sculptures, worth between $600,000 and $800,000. Mr. Beggs owned an auction business located in Sarasota, Florida. Sometime in 1990, without Mr. Carusillo's knowledge or consent, Mr. Beggs re-consigned and delivered a substantial portion of Mr. Carusillo's merchandise to Respondent Sherwin in Blowing Rock, North Carolina. Respondent Sherwin received the merchandise in two or three truckloads at his auction gallery, Blowing Rock Auction Galleries, Inc., in Blowing Rock. At the time of delivery, Respondent Sherwin failed to inventory Mr. Carusillo's merchandise. As a result of the failure to inventory, Mr. Carusillo's merchandise was commingled with merchandise belonging to Respondent Sherwin at Blowing Rock Auction Galleries. All of Mr. Carusillo's merchandise were tagged with his initials on them. At some point in time, Respondent Sherwin noticed Mr. Carusillo's initials on the merchandise. Respondent Sherwin recognized Mr. Carusillo's initials, due to a prior business dealing in years past in which Mr. Carusillo had consigned some merchandise to Respondent Sherwin. In the summer of 1990, Respondent Sherwin telephoned Mr. Carusillo regarding Mr. Carusillo's merchandise at Blowing Rock Auction Galleries received from Mr. Beggs. The telephone conversation with Respondent Sherwin was the first time that Mr. Carusillo had knowledge of the merchandise that he had consigned to Mr. Beggs being delivered to Respondent Sherwin. Mr. Carusillo viewed his past transaction with Respondent Sherwin as unsatisfactory and had no intentions of allowing Respondent Sherwin to possess and sell his merchandise. Mr. Carusillo conveyed his position to Respondent Sherwin. Mr. Carusillo refused to consign any of his merchandise to Respondent Sherwin and refused to sign any written agreement authorizing Respondent Sherwin to sell any of the merchandise. Despite knowing of Mr. Carusillo's position and despite having no written agreement authorizing the sale of any of Mr. Carusillo's merchandise, Respondent Sherwin retained Mr. Carusillo's merchandise and sold some of the merchandise at both Blowing Rock Auction Galleries and at Respondent Auction House. (In the winter of 1990, Respondent Sherwin had Mr. Carusillo's merchandise delivered to Respondent Auction House.) In 1991, Mr. Carusillo filed a civil action against, among others, Respondent Sherwin and his son, Louis Sherwin, in the Circuit Court of Broward County, Florida, Seventeenth Judicial Circuit, Case No. 91-03351. Through the law suit, Mr. Carusillo sought, among other things, the return of his merchandise in the possession of Respondent Sherwin, an injunction to stop further sales of his merchandise by Respondent Sherwin, and an accounting of his merchandise from Respondent Sherwin. An Agreed Temporary Injunction was entered by the Court on February 14, 1991, forbidding, among other things, the sale or removal of Mr. Carusillo's merchandise and ordering an accounting of his merchandise. An Agreed Order as to Replevin was entered by the Court on May 9, 1991, allowing, among other things, Mr. Carusillo to remove his merchandise from Respondent Sherwin's possession. Even though Respondent Sherwin rendered an accounting of Mr. Carusillo's merchandise, the accounting was not satisfactory. Furthermore, even after Mr. Carusillo removed what he thought was all of his merchandise, Respondents sold other merchandise belonging to Mr. Carusillo. After protracted litigation, by an Amended Final Judgment dated April 26, 1995, entered nunc pro tunc August 18, 1994, the Court entered judgment against Respondent Sherwin, his son (Louis Sherwin), and Mr. Beggs. As to Respondent Sherwin and his son, the Court found that they were jointly and severally liable and awarded Mr. Carusillo, among other things, the sum of $468,959.74, which included the following: a total pecuniary loss of $113,639.30 (including interest of $12,167.80), pre- judgment interest of $44,347.28, treble damages for civil theft, which brought the total to $473,959.74, and a credit to Respondent Sherwin and his son, which reduced the total to $468,959.74. The Amended Final Judgment was appealed but was upheld by the appellate court. At the hearing in the instant case, Respondents attempted to show that the monetary loss to Mr. Carusillo, as evidenced by the Amended Final Judgment, was incorrect and improper. However, the evidence presented by Petitioner at hearing was clear and convincing that the monetary judgment entered by the Court should not be disturbed. Respondents failed to present evidence to overcome Petitioner's showing. By Order dated September 27, 1996, the Circuit Court of Broward County directed payment to Mr. Carusillo for the judgment from the Auctioneer Recovery Fund in the amount of Mr. Carusillo's "actual and direct losses occurring subsequent to October 1, 1991." Subsequently, Mr. Carusillo made a claim for payment of the judgment from the Auctioneer Recovery Fund. On December 6, 1996, Petitioner considered Mr. Carusillo's claim. On December 31, 1996, Petitioner entered an order on the claim ordering, among other things, that Mr. Carusillo be paid $94,575 from the Auctioneer Recovery Fund and that $47,287.50 of the $94,575 was attributable to Respondent Sherwin. On or about January 15, 1997, a warrant from the State of Florida was issued for $94,575, representing payment to Mr. Carusillo from the Auctioneer Recovery Fund.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Auctioneers enter a final order: Finding that Irwin Sherwin violated Subsection 468.389(1)(l) and (k), Florida Statutes, of Counts I and II, respectively, in Case No. 95-3710. Finding Beach Auction House violated Subsection 468.389(1)(e), Florida Statutes, in Case No. 95-5044. Finding Irwin Sherwin, d/b/a Beach Auction House, Inc., violated: Subsection 468.389(1)(j), Florida Statutes, of Counts I and II in Case No. 95-5045. Subsection 468.389(1)(e), Florida Statutes, in Case No. 95-5046. Subsection 468.389(1)(j), Florida Statutes, of Count I in Case No. 95-5047. Subsection 468.389(1)(e), Florida Statutes, of Count II in Case No. 95-5047.6 Subsection 468.389(1)(h), Florida Statutes, of Count III in Case No. 95-5047. Subsection 468.389(1)(c), Florida Statutes, of Count V in Case No. 95-5047. Imposing a $8,000 administrative fine against Irwin Sherwin. Imposing a $6,000 administrative fine against Beach Auction House, Inc. Revoking the license of Irwin Sherwin. Revoking the license of Beach Auction House, Inc. DONE AND ENTERED this 17th day of February, 1998, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 17th day of February, 1998.
Findings Of Fact In 1981, Barry Kandel, an employee of Allied Publishing Group, Inc., solicited Petitioners to purchase stock in Allied, a Florida Corporation. On May 1, 1981, Petitioners purchased one share of stock in Allied for $13,500. By mid-1982, Allied had gone out of business. Petitioners made unsuccessful demands for the return of their money on Brian E. Walker, the Secretary of Allied; on Thomas W. Kuncl, the President of Allied; and on Kandel. On November 19, 1984, Petitioners filed suit against Kandel, Kuncl, Walker, and Allied. The Civil Complaint filed in Case No. 84-6932 in the Circuit Court of the Fifteenth Judicial Circuit of Florida, in and for Palm Beach County, contained general allegations of fraud. On February 20, 1985, Petitioners obtained a default judgment against Allied only. No evidence was offered in this cause regarding the disposition of the litigation as to the individual defendants. The default judgment contains no factual determinations and does not specify a violation of either section 517.07 or section 517.301, Florida Statutes. Kandel currently resides in Fort Lauderdale, Florida, and Kuncl currently resides in the Gainesville, Florida, area. Kuncl was the last known person to have custody of and control over Allied's books and records. Petitioners filed a claim with Respondent, seeking reimbursement for $10,000 from the Securities Guaranty Fund, pursuant to sections 517.131 and 517.141, Florida Statutes. Their claim was denied by letter dated July 8, 1987, for failure to meet the statutory conditions. Neither Allied nor any individual associated with Allied who dealt with Petitioners was registered or licensed by the State of Florida pursuant to chapter 517, Florida Statutes, in any capacity. Petitioners did not cause a writ of execution to be issued against Allied nor the individuals associated with Allied. Petitioners did not attempt a reasonable search as to whether Allied possessed real or personal property or other assets which may be set off against a proposed claim to the Securities Guarantee Fund. Don Saxon, Director of the Division of Securities and Former Assistant Director, has been the only individual responsible for administering the Securities Guaranty Fund since 1983. The Department's interpretation of section 517.131(2), Florida Statutes, is that it requires a claimant to demonstrate findings of a violation of section 517.07 and/or section 517.301, Florida Statutes, by a licensed dealer, a licensed investment adviser or a licensed associated person. The Department's interpretation of section 517.131(3)(a), Florida Statutes, is that it requires a claimant to provide the Department with a certified copy of a judgment demonstrating a violation of section 517.07 and/or section 517.301, Florida Statutes. The Department's interpretation of section 517.131(3)(b), Florida Statutes, is that it requires a claimant to submit a copy of the writ of execution to the Department. During Saxon's tenure in administering the Securities Guaranty Fund, the Department has not waived any of the statutory requirements for claiming monies from the Fund. Section 517.131 and section 517.141, Florida Statutes, were enacted in 1978 and have remained virtually intact. The legislature did substitute the term "associated person" in place of the term "salesman" in section 517.131(2), Florida Statutes, without comment, although the order of licensed entities in that section was altered. The legislative intent behind the establishment of section 517.131, Florida Statutes, was to eliminate the bonding requirement for "individuals registered to be broker/dealers or investment advisers ... substituting therefor, a 'Security Guaranty Fund' to be funded through an assessment imposed upon them." The legislative intent behind section 517.141, Florida Statutes, was that disbursement from the Securities Guaranty Fund would be made to any person suffering monetary damages as a result of "some violation by a registrant."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered denying Petitioners' claim for payment from the Securities Guaranty Fund. DONE and RECOMMENDED this 25th day of April, 1988, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1988. COPIES FURNISHED: Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 Charles E. Scarlett, Esquire Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Richard O. Breithart, Esquire 818 U.S. Highway One, Suite 8 North Palm Beach, Florida 33408 Charles L. Stutts, Esquire Office of the Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Douglas A. Lemley, was registered as an associated person of National Securities Corporation (NSC) with petitioner, Department of Banking and Finance, Division of Securities and Investor Protection (Division). During the period from October 14, 1986, until October 3, 1987, Lemley conducted securities business for NSC and was branch manager of its Jacksonville, Florida office. He was also registered as a principal of NSC with the National Association of Securities Dealers. Lemley is currently not registered with the Division. During the period between July 2, 1987, and September 11, 1987, Lemley admits that he sold and offered for sale to four individuals in the State of Florida at least 7,400 shares of a security known as Island Mining and Exploration, Limited (Island Mining). That security is not registered with the Division. An unregistered security cannot be sold to a Florida resident unless it is an exempt security or an exempted transaction. In this case, respondent has contended that the transactions are exempt by virtue of two statutory exemptions. The first provides that the sale of an unregistered security is exempt from Division regulation whenever the sale is unsolicited, the sale occurs on an agency basis, and the dealer (as opposed to the salesperson) has claimed an exemption. The second provides that the transaction is exempt if certain financial information concerning the security is published in a "recognized manual of securities for a period of not less than 90 days prior to the transaction." Under the first exemption, the customer must solicit the broker to make a purchase, the sale must be done by the agency itself, and the firm must evidence the fact that the transaction is exempt. This latter evidence consists of a disclosure of the nature of the transaction on the trade ticket or confirmation. To qualify for the second exemption, there must be a publication in a recognized securities manual of the security's most recent balance sheet and the two most recent profit and loss statements. For the reasons cited in the following findings, it is found that these exemptions do not apply. At hearing, Lemley contended that the sales were unsolicited and were therefore exempt. To support this contention, he produced copies of documents entitled "Unsolicited Transaction" signed by the four customers and which carried the printed notation "I acknowledge that these securities were unsolicited." He further contended that the documents were generated from information contained in a log of securities transactions kept in his office. However, the evidence showed that these documents were signed long after the transactions occurred, and at least three of them were signed at Lemley's request in early 1992 in preparation for this hearing. Moreover, the underlying log was not introduced into evidence, testimony by three of the customers at hearing established that respondent had solicited the sales by recommending the stock, and there was no notation on the trade tickets or confirmations indicating that NSC had claimed an exemption. Finally, the record shows that it was not a prevailing practice in 1987 to have a customer sign a statement, and the practice itself did not begin in Florida until 1990 in response to a rule promulgated by the Securities and Exchange Commission. Therefore, respondent's claim for transactional exemption on this ground is found to be without merit. Lemley also contended that because Island Mining was listed in the 1985 Standard and Poor's or Moody's International manuals, the securities were exempt from registration. To claim this exemption, however, Lemley would have to show that the required financial information was published in a recognized manual of securities in 1987, the year in which the transactions occurred. He failed to do this, and although he has the burden of proving entitlement to an exemption, independent research by a Division financial analyst also failed to uncover this information. Therefore, it is found that the sale of Island Mining was not exempt under this statutory provision. In mitigation, it must be noted that none of the four customers who participated in the transactions filed a complaint against respondent. Rather, this proceeding began after another NSC customer filed a complaint against an NSC broker concerning the purchase of a substantial amount of unregistered stocks. During the course of the Division's investigation of that complaint, Lemley's unregistered sales were uncovered. The evidence also shows that Lemley was an extremely knowledgeable securities dealer in mining stocks and was praised by one customer as doing "everything he could to do the right thing and make you happy". He is no longer in the business of selling securities, is now unemployed, and besides claiming innocence, has asked for leniency on the ground he is without funds to pay a monetary fine. Respondent, who is not represented by counsel, was noticed to have his deposition taken by petitioner at 10:30 a.m. on May 13, 1992, at Suite 1302, The Capitol, Tallahassee, Florida. It is undisputed that respondent received a copy of that notice. The parties agree that respondent appeared at the DeSoto Building, 1230 Apalachee Parkway, Tallahassee, Florida, where the Division of Administrative Hearings (DOAH) is located, just prior to the scheduled time of the deposition and was told that the deposition was to be taken at The Capitol and that he should promptly contact petitioner's counsel regarding the deposition. Respondent thereafter telephoned the office where the deposition was to be taken (Suite 1302, The Capitol) and advised a secretary that he had dropped off "the papers" desired by petitioner's counsel at the DeSoto Building but would not speak to her under any circumstances. It may be inferred that the papers filed with DOAH were exhibits to be offered by respondent at final hearing and were to be furnished to counsel at the deposition. No mention of the deposition was made by Lemley or the secretary during the conversation, and he failed to advise the secretary that he would not be attending the deposition. Because Lemley did not attend the deposition, petitioner's counsel, who is based in the agency's Tampa district office, has requested $1,424.86 in attorney's fees and costs. This amount consists of eight hours of attorney's fees at $135 per hour, or $1,080, while the remainder is made up of travel expenses and a court reporter attendance fee. Lemley did not file a response to petitioner's affidavit of fees and costs and gave no viable reason for not attending the deposition. At hearing he contended that a Tallahassee attorney could have attended the deposition in lieu of Tampa counsel and, in any event, Tampa counsel could have performed other work duties while in the Tallahassee office that day. However, the agency practice is for the lead attorney on a case to attend all scheduled depositions, and Tampa counsel did not bring any other work to Tallahassee.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding respondent guilty as charged in the administrative complaint, directing respondent to cease and desist all unlawful activities, and imposing an administrative fine upon respondent in the amount of $1,000. Respondent should also reimburse petitioner $344.86 for costs incurred by its counsel in attending the deposition scheduled on May 13, 1992. DONE and ENTERED this 26th day of June, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 1992.
The Issue The central issue in this case is whether Respondent's yacht and ship salesman's license should be disciplined for the reasons set forth in the notice of intent to revoke license dated June 14, 1994.
Findings Of Fact The Department is the state agency charged with the responsibility to regulate persons pursuant to Chapter 326, Florida Statutes. On April 30, 1993, the Department received an application for a yacht and ship broker or salesman license (the application) submitted by Respondent, Thomas I. Davis, Jr. The application provided, in pertinent part: LICENSES AND CERTIFICATES: Have you now or have you ever been licensed or certified in any other profession such as real estate, insurance, or securities in Florida or any other state? Yes No If you answered yes, please describe: Profession License # First Obtained Status of License (a)Has any license, certification, registration or permit to practice any regulated profession or occupation been revoked, annulled or suspended in this or any other state, or is any proceeding now pending? Yes No (b) Have you ever resigned or withdrawn from, or surrendered any license, registration or permit to practice any regulated profession, occupation or vocation which such charges were pending? Yes No If your answer to questions (a) or (b) is Yes, attach a complete, signed statement giving the name and address of the officer, board, commission, court or governmental agency or department before whom the matter was, or is now, pending and give the nature of the charges and relate the facts. In response to the application questions identified above, Respondent entered the following answers: "No" as to questions 11, 12(a), and 12(b). As a result of the foregoing, Respondent was issued a yacht and ship salesman's license on May 10, 1993. Thereafter, the Department learned that Respondent had been censured by the NASD. In a decision entered by that body accepting Respondent's offer of settlement, Respondent was given a censure, a fine of $20,000.00, and a suspension in all capacities from association with any member for a period of two (2) years with the requirement that at the conclusion of such suspension that he requalify by examination for any and all licenses with the Association. The censure also provided a specific payment plan for the $20,000 fine which was assessed. To date, Respondent has not complied with that provision of the settlement. From 1973 through 1991, Respondent was registered with several different firms pursuant to Chapter 517, Florida Statutes. Additionally, Respondent has been licensed to sell securities in the following states: California, Colorado, Connecticut, Delaware, Idaho, Illinois, Louisiana, Maine, Maryland, Nevada, and New York. Respondent has also been licensed in Washington, D.C. and Puerto Rico. Respondent has been a licensed stock broker with the Securities and Exchange Commission since 1971. Respondent answered questions 11 and 12 (a) and (b) falsely. Respondent knew he was licensed to sell securities and knew of the sanction from the NASD at all times material to the entry of the answers. Pursuant to Rule 61B-60.003, when the Department receives an application for licensure which is in the acceptable form, it is required to issue a temporary license. Had the Respondent correctly answered questions 11 and 12 on the application, the Department would not have issued Respondent's license.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes, enter a final order dismissing Respondent's challenge to the notice of intent and revoking his license. DONE AND RECOMMENDED this 13th day of March, 1995, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 13th day of March, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4258 Rulings on the proposed findings of fact submitted by the Petitioner: Paragraphs 1 through 9, 11, 13, and 15 through 17 are accepted. Paragraph 10 is rejected as repetitive. Except as to findings reached above, paragraphs 12 and 14 are rejected as irrelevant. It is found that Respondent falsely answered question 11. Rulings on the proposed findings of fact submitted by the Respondent: Respondent's proposed findings of fact are rejected as they do not comply with Rule 60Q-2.031(3), Florida Administrative Code. However, to the extent findings do not conflict with the findings of fact above, they have been accepted. Such proposed findings of fact are paragraphs: 1, 7 and 8. The remaining paragraphs are rejected as they are not supported by the record cited (none), irrelevant, argument, or contrary to the weight of the credible evidence. COPIES FURNISHED: Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 E. Harper Field Senior Attorney Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 David M. Goldstein LAW OFFICE OF DAVID M. GOLDSTEIN 100 S.E. 2nd Street Suite 2750 International Place Miami, Florida 33131
Findings Of Fact At all the times here involved C. Patrick Long, Jr. was a real estate salesman employed by NPS. NPS commenced operation in August, 1975 with Gary Adam Tritsch as broker. Long was employed in September after he was contacted by Tritsch and visited the Ft. Lauderdale office. There the operation was explained to him as salesman soliciting listings from out of state owners of Florida land for which the owners would pay a listing fee. The salesmen worked from 6:00 to 10:00 P.M. making telephone calls to home owners to inquire if they were interested in selling the land they had previously purchased. It was agreed that Long could conduct his operations from his home in Spring Hill near Royal Highlands, a development where Long had previously sold lots. Long was given a script to use in his soliciting. He was told that Tritsch was setting up out-of-state broker and that NPS would fly in these brokers with potential customers to which Long would show the property. Long advised those owners he called long distance, in accordance with what he was told, and in accordance with the script that NPS would fly in brokers and customers to whom Long would show the property. After making numerous inquiries to Tritsch about the lack of customers, Long quit. To those Long called who indicated an interest in selling their land be advised that the Ft. Lauderdale office would send a listing contract and thereafter advertise their property for sale in National Multiple Listing Services. The owner paid a listing fee of $350 and Long received $125 for each listing he collected, plus the cost of his calls. No evidence was submitted that Long advised his clients that NPS sold 90 percent of the listings or that the lots could be sold for more than the current market price. After several weeks with no potential buyers arriving to be shown the land for which he had solicited listings Long inquired of Tritsch regarding the advertising that was supposedly being done but he did not receive copies of this advertising. After realizing that no customers would show up to view the listings he had obtained, Long quit.
The Issue Whether the Respondent is guilty of the violations alleged in the Notice of Cease and Desist Order dated March 13, 1989; and, if so, what penalty should be imposed.
Findings Of Fact At all times material hereto, Respondent, Timothy Gibbons, was an associated person and employed by J.B. Hanauer as a sales representative in institutional sales. Each of the subject transactions at issue in this case constituted a purchase and sale of securities. In the summer of 1988, Mr. Gibbons subscribed the City of Daytona Beach, Florida, as a client. Mr. Mike Robertson, as Deputy Finance Director for the City, was charged with investing the City's funds. The subscription was consummated by a written agreement between the City and J.B. Hanauer establishing a non-discretionary account on behalf of the City. Both Mr. Gibbons and Mr. Robertson were designated in the agreement as authorized representatives of their respective employers for the purpose of conducting transactions between the City and J.B. Hanauer. Mr. Gibbons contacted Mr. Robertson on an almost daily basis with numbers for proposed deals at different market levels. In these conversations, Mr. Robertson would give Mr. Gibbons the authority to enter the market for the City when the market reached certain, agreed market levels. The direction to initiate a trade at a certain previously approved market level was the sole "discretion" granted to Mr. Gibbons. Mr. Robertson retained and required the non-discretionary authority to approve all transactions. Mr. Gibbons did not at any time have the authority to encumber the City's funds without the prior approval of Mr. Robertson. Mr. Robertson further limited Mr. Gibbons by placing a $1,000,000 cap on the amount of the City's funds he would risk per trade. Mr. Robertson told Mr. Gibbons about the $1,000,000 trading practice and each of the approved trades was limited to the $1,000,000 amount. Their first trade was executed on August 25, 1988. Then, on August 31, 1988, without the knowledge or consent of the City, Mr. Gibbons executed several trades in the name of the City. Most of the subject trades were in excess of $1,000,000. In fact, they encumbered increments of $5,000,000 and $6,000,000. When these trades were settled, the City's account owed J.B. Hanauer in excess of $29,000. On September 1, 1988, Mr. Gibbons left the employment of J.B. Hanauer, and subsequently, J.B. Hanauer absorbed the City's loss as a result of the subject trades. By trading without the authorization of his client, the City, the respondent misrepresented his authorization to purchase and sell securities for the City and demonstrated his unworthiness to transact the business of an associated person.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Banking and Finance issue a Final Order: Revoking any and all registrations of Timothy Gibbons under Chapter 517, Florida Statutes; and Assessing against Timothy Gibbons an administrative fine of $5,000. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th of September 1989. JANE C. HAYMAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of September 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 89-2214 Petitioner's proposed findings of fact are addressed as follows: Addressed in paragraph 1. Addressed in paragraphs 2 through 4. Addressed in paragraphs 3, 4 and 5. Addressed in paragraph 4. Addressed in paragraph 5, and subordinate to paragraph 5. Subordinate to paragraphs 4 and 5. COPIES FURNISHED: Eric Mendelshon, Esquire Office of Comptroller 111 Georgia Avenue, Suite 201 West Palm Beach, Florida 33401 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Timothy Gibbons Number 5 Par Drive Maumelle, Arkansas 72118
Findings Of Fact Both Respondent, Terry A. Kilgore (Kilgore), and Respondent, Karen C. Obluck (Obluck), are duly licensed Florida real estate brokers holding license numbers 0317402 and 0387822, respectively. Starting June 1, 1983, both were registered as employees of Florida Leasing Services, along with a third friend, Karen Kolander. It was understood among the parties to the employment agreement that the three friends intended to form their own brokerage company as soon as one of them obtained a broker license. Obluck got her broker license first on or about July 26, 1983, and Kilgore placed her salesman's license with Obluck on or about August 22, 1983. Obluck then attempted to qualify the new corporation the three had formed, "National Investment Properties, Inc." (emphasis added), as a corporate real estate broker. But, due in part to unfortunate technical errors in the application process and in part to Obluck's inadequate appreciation for the significance of legal technicalities, on or about August 19, 1983, Obluck instead qualified "National Investment Properties" as the corporate broker. Starting approximately August 19, 1983, the three began operating their new real estate brokerage business, sometimes using the name "National Investment Properties," as technically officially registered, but more often using the full corporate name, "National Investment Properties, Inc." (emphasis added.) But they omitted to have Kilgore's salesman's license transferred to the corporate broker license until she got her broker's license and tried to place it under the corporate broker license on March 14, 1984. Because of the technical errors in qualifying the corporate broker, the Department placed Kilgore's broker license under Obluck, an individual broker trading as National Investment Properties. By the time Obluck was notified in March, 1986, that the corporate broker had not been registered properly, Kilgore was no longer working with Obluck's company. On or before June 23, 1983, while still employed by Florida Leasing Services but anticipating the formation of the new business under the name Obluck had reserved at the time (Investment Properties of Central Florida, Inc.), Kilgore contacted fellow licensee, Robert R. Elkin (Elkin), an employee of Sun-Tan Realty, Inc. 1/ in an effort to help a client, U.S. Homes Corporation, find real property to buy. Elkin had an exclusive listing on five acres of property owned by Manor Care, Inc., and he and Kilgore negotiated a deal between the parties on June 23. On June 24, Kilgore and Elkin signed a "Cooperation Agreement Between Brokers" on the Manor Care property, providing that the two brokers involved would divide equally any brokerage commission. But when Elkin presented U.S. Homes' signed offer to his client, Manor Care rejected it, asking for more money. U.S. Homes refused to increase its offer. Kilgore passed this information on the Elkin, and the deal fell through. Kilgore then asked Elkin if he knew of any other land available for sale that might be of interest to U.S Homes. Elkin gave her the name of Dr. Michael Tedone as the owner of approximately 16 acres at County Road 581 and Skipper Road for sale at approximately $972,000. Trying to generate business, Elkin had located Tedone's name as owner of the 16 acres on microfiche records in his office and first spoke to Tedone by telephone in approximately October, 1982. Elkin asked if the property was for sale. Tedone said it was for sale for the right price, $972,000, but that it was not actually on the market. Elkin asked if Tedone would pay a commission if Elkin found a buyer. Tedone said he would but it would have to be negotiated. Elkin asked for some information about the property and asked for a survey. Elkin picked up a survey from Tedone's office and put together an information packet on the property for use in crying to find a buyer. Between October, 1982, and July, 1983, Elkin distributed the packet to a handful of builders and land developers he thought might be interested in the property or know a prospective buyer. Elkin spoke to Tedone about three more times by telephone before approximately April, 1983, confirming that the property was still for sale at $972,000. He never met Tedone and did not have any contact with him in May or June, 1983. He was never even aware that there was a co-owner of the property, a James Carlstedt. Because of what had happened on the Manor Care deal, Kilgore asked if the price was firm. Elkin replied that he had not verified the price in several months and would have to check. He said he would give her an information packet on the property and verify the price. Kilgore got part of the information packet on or about July 5, 1983, but Elkin told her that Tedone was out of town and that Elkin had not yet been able to verify the price. At this point, the evidence began to diverge sharply. The Department attempted to prove through Elkin's testimony that Elkin got Kilgore to agree to co-broker this property under the same terms as the "Cooperation Agreement Between Brokers" for the Manor Care property. He says he added the Tedone property to the list of properties covered on his copy of the agreement shortly after July 5, 1983. He also says he asked Kilgore not to show the information to U.S. Homes until he had a chance to verify the price. But, he says, Kilgore disregarded his request and, on the following Monday (three days later), Kilgore called back to say U.S. Homes was ready to sign a contract at $972,000. Elkin says he then was able to contact Tedone to relay the offer and was told that the price was too low and the Tedone wanted $70,000 an acre for the property. Elkin says he relayed this to Kilgore and that he never heard back. Kilgore, on the other hand, testified that she never agreed to co-broker the Tedone property and that Elkin never asked her not to show U.S. Homes the information on the property. She says she waited for Elkin to verify the price but that he kept making excuses why he had not been able to contact Tedone. Kilgore says finally she went to Tedone herself to get the information. She testified that she made an appointment to see Tedone and showed him the information Elkin had given her. She says Tedone's response was: "I don't know who this [Elkin and Sun-Tan] is but the information is wrong." Kilgore says Tedone never acknowledged that he knew Elkin or had any agreement with him to broker the property. Kilgore says she therefore negotiated the deal for U.S. Homes directly with Tedone and Carlstedt, completely independent of Elkin, and successful concluded negotiations on July 20, 1983. The sales price for the property was $1.1 million; the brokerage commission to National Investment Properties, Inc., was 2 1/2 percent or $27,500. Kilgore testified that she never heard from Elkin again until approximately March, 1984, after the January 9, 1984, closing of the deal, and that she assumed Elkin had abandoned the deal. The key to resolution of the sharp differences between the testimony of Elkin and Kilgore is Tedone. But, for reasons not explained, Tedone did not testify. Without Tedone's testimony to corroborate Elkin's testimony, the Department's case was insufficient to prove the truth of the facts to which Elkin testified. Elkin brought Tedone another prospective buyer in August, 1983. Tedone told him he already had a contract. Elkin did not ask for details. Instead, he began to try to locate Kilgore, who by this time was working for National Investment Properties, Inc., (National) under Obluck. He did not confront Kilgore and Obluck until approximately March, 1984. They confirmed that the property had been sold to U.S. Homes. Elkin demanded a share of the brokerage commission. Kilgore replied that he had abandoned the deal, leaving Kilgore to try to complete the deal herself, and that he was not entitled to any share of the brokerage commission. Obluck knew generally that Kilgore had negotiated a deal between U.S. Homes and Tedone and Carlstedt and that, after a short delay, the deal closed in January, 1984. But Obluck knew none of the details of what had transpired between Kilgore and Elkin. On the other hand, Kilgore knew generally that Obluck had taken steps to properly qualify National as a corporate broker. But she did not know or inquire into any of the details of the qualification process. She left National on or about August 23, 1985, long before the Department notified Obluck in March, 1986, that National was not properly registered. Kilgore, however, must take personal responsibility for failing to take any steps between August 19, 1983, and March 11, 1984, to have her salesman's license transferred from Obluck, individual broker, to National. See Finding Of Fact 1, above. The technical licensure errors made by Obluck and Kilgore, referred to in Findings Of Fact 1 and 12, above, should have come to the Department's attention before March, 1986. On March 11, 1984, Kilgore applied to place her new broker license under "National Investment Properties, Inc.," and the Department accepted the application and placed it under Obluck, trading as National Investment Properties. On March 1, 1985, Kilgore applied to change her personal mailing list, showing her employing broker as "National Investment Properties, Inc.," and the Department accepted the application. The Department did not take either of these opportunities to notify Obluck and Kilgore that the corporate broker had not been properly qualified and registered. On November 13, 1984, the Department received notification from Obluck, "doing business as National Investment Properties, Inc.," that she had lost her license. The Department simply struck through the "Inc." on the notification but did not give Obluck any explanation why. The technical licensing errors referred to in Findings Of Fact 1 and 12, above, were not intentional or intended to deceive. They were inadvertent oversights that Obluck and Kilgore would have cured if they were aware of them. When the Department notified Obluck of the oversights in March, 1986, she immediately had National properly qualified and registered as a corporate broker.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Florida Real Estate Commission enter a final order: (1) holding both Respondent, Karen C. Obluck, and Respondent, Terry A. Kilgore, guilty of a technical violation of Sections 475.42(1)(b) and 475.25(1)(a), Florida Statutes (1985); (2) imposing a $500 administrative fine against Respondent, Karen C. Obluck, for her violation; (3) reprimanding Respondent, Terry A. Kilgore, for her violation; and (4) dismissing all other charges. RECOMMENDED this 16th day of January, 1987, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 1987.
