The Issue Whether Petitioner is entitled to attorney’s fees and costs pursuant to section 120.595(4), Florida Statutes (2017).
Findings Of Fact A Final Order was issued on May 11, 2017, finding that the Board of Psychology relied on an unadopted rule when it denied Petitioner’s application for licensure. Petitioner timely filed a Motion for Award of Attorney’s Fees and Costs under section 120.595(4), with the Division of Administrative Hearings. Prior to any hearing on the motion, the parties reached a settlement in the amount of $25,000 to be paid to Petitioner for fees and costs incurred in the underlying action. The parties agreed to have the matter forwarded to the Board of Psychology for consideration of the settlement, and for authority to have the administrative law judge re-open the file upon approval of the settlement for the purpose of having a final order entered in accordance with the terms of section 120.595(4). The administrative law judge entered an Order Closing File in order to allow the parties to present the proposed settlement to the Board of Psychology, without prejudice for the case to be re-opened should the Board approve the terms of the settlement. The Board of Psychology has approved the settlement at issue in this proceeding, and the parties have requested a final order approving that settlement.
The Issue As provided in an Order and Amended Notice of Hearing entered on July 18, 1996, the issue for disposition is whether Petitioner, Ms. Smith, knowingly and voluntarily, through settlement, waived her right to pursue her charge of discrimination.
Findings Of Fact Annie L. Smith is sixty-four years of age and has had formal education and training. At the relevant period she was employed at the Orange County Department of Corrections as a Corrections Officer/Licensed Practical Nurse. Sometime in 1990 and thereafter, Ms. Smith sustained a series of injuries at work, including a fall from a chair, a fall while working in a shower, some pain while climbing stairs, and a bump on her head on a glass door. She received medical benefits through Workers' Compensation, but some dispute over her further entitlement to compensation for her injuries still existed as of 1994. Ms. Smith retained counsel and the Workers' Compensation case went to mediation in December 1994. The parties reached an agreement during mediation, but Ms. Smith immediately expressed misgivings about the terms of the agreement. Throughout 1995, the parties continued to negotiate. During this process Ms. Smith discharged her original attorney and engaged another to represent her in her Workers' Compensation claim. Several settlement conferences were held before the Judge of Compensation Claims. In January 1995, Annie Smith filed a Charge of Discrimination with the Florida Commission on Human Relations and the Equal Employment Opportunity Commission. She alleged in the Charge, dated January 12, 1995, that on August 17, 1994 she was denied reasonable accommodations for her disability because of discrimination based on her race/Black and disability. On March 20, 1996, the Florida Commission on Human Relations entered its "Notice of Determination: No Cause" on Ms. Smith's Complaint, identified as FCHR Number 95-1153 and EEOC Number 15D950385. The Notice of Determination informed the Complainant that she could request an administrative hearing on the determination by filing a petition for relief within thirty-five days of the date of the notice. Ms. Smith's Petition for Relief is date-stamped received at the Florida Commission on Human Relations on April 15, 1996. The Petition for Relief, the Charge of Discrimination, and the Commission's Notice of Determination were transmitted to the Division of Administrative Hearings on April 19, 1996. In the meantime, on April 16, 1996, shortly after she prepared her petition for relief, Ms. Smith executed a Stipulation in Support of Joint Petition for Order Approving a Lump-Sum Settlement, and an affidavit that she settled her Workers' Compensation claim as well as American with Disability Act claims and charges of discrimination. The settlement documents, which Ms. Smith admits she signed after reading and discussing with her attorney, provide for a lump-sum disbursement of $50,000, from which $8,250 would be paid for legal services. The settlement documents specifically reference waiver and dismissal with prejudice of FCHR Charge Number 95-1153 and EEOC Charge Number 15D950380. The settlement documents are in simple, understandable terms. The affidavit executed by Ms. Smith plainly recites her understanding that she is under no compulsion to settle, that she is settling voluntarily and freely, and that she is waiving and giving up rights to pursue her claims. At the time that Ms. Smith signed the settlement documents she understood that her attorney did not represent her in the discrimination actions. In a letter dated March 28, 1996, he had referred her to another attorney who specializes in discrimination cases. Ms. Smith contacted the other attorney but did not retain other counsel as, according to Ms. Smith, she did not have the funds to pay up front. Ms. Smith signed the Settlement Agreement, even though she did not really want to waive all of her claims, because she understood that Orange County was only willing to settle everything in one lump-sum. In other words, she understood that she could not settle her Workers' Compensation case and receive that money unless she also waived all of her claims against the county. From the record in this proceeding, it is impossible to find that the $50,000 lump-sum was not consideration for Ms. Smith's waiver of all claims. The settlement documents describe how the sum was arrived as to the Workers' Compensation claim. At the time that she executed the settlement, Ms. Smith and the county were aware that the Florida Commission on Human Relations had found "no cause" after investigating her claim. While this does not mean she could never have prevailed after a full evidentiary hearing, the status of her claim at the time of settlement would impact the value of the claim for negotiation and settlement purposes. Ms. Smith received the lump-sum settlement amount and the attorney's fees were disbursed from the amount. Notwithstanding the disbursement, she states that if she were permitted now to repudiate the settlement and proceed with the claims, she would return all of the $50,000.
Recommendation Based on the foregoing, it is hereby RECOMMENDED: That the Florida Commission on Human Relations enter a Final Order dismissing the Complaint and Petition for Relief in this case. DONE and ENTERED this 13th day of November, 1996, in Tallahassee, Florida. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1996. COPIES FURNISHED: Ms. Annie L. Smith 8603 Snowfire Drive Orlando, Florida 32818 Sharon Moultry, Clerk Commission on Human Relations Building F, Suite 240 325 John Knox Road Tallahassee, Florida 32303-4149 Jeffrey J. Newton Assistant County Attorney Post Office Box 1393 Orlando, Florida 32802-1393 Dana Baird General Counsel Commission on Human Relations Building F, Suite 240 325 John Knox Road Tallahassee, Florida 32303-4149
Conclusions THIS CAUSE came before the BOARD OF MEDICINE (Board) pursuant to Sections 120.569 and 120.57(4), Florida Statutes, on August 5, 2011, in Jacksonville, Florida, for the purpose of considering a Settlement Agreement (attached hereto as Exhibit A) entered into between the parties in this cause. Upon consideration of the Settlement Agreement, the documents submitted in support thereof, the arguments of the parties, and being otherwise full advised in the premises, the Board rejected the Settlement Agreement and offered a Counter Settlement Agreement which was accepted on the record by the parties. The Counter Settlement Agreement incorporates the original Settlement Agreement with the following amendments: 1. The costs set forth in Paragraph 3 of the Stipulated Disposition shall be set at $6,697.92. 2. The requirement for community service set forth in Paragraph 7 of the Stipulated Disposition shall be deleted. 3. The requirement for the continuing medical education (CME) in Paragraph 8 of the Stipulated Disposition shall be deleted. 4. Respondent’s license is permanently restricted as follows: Respondent is prohibited from engaging in telemedicine to treat citizens of the United States. IT IS HEREBY ORDERED AND ADJUDGED that the Settlement Agreement as submitted be and is hereby approved and adopted in toto and incorporated by reference with the amendments set forth above. Accordingly, the parties shall adhere to and abide by all the terms and conditions of the Settlement Agreement as amended. This Final Order shall take effect upon being filed with the Clerk of the Department of Health. DONE AND ORDERED this | yh day of _( gus’ F BOARD OF MEDICINE 2011. Executive Director For GEORGE MAS, M.D., Chair CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Final Order has been provided by U.S. Mail to FRANK C. PIERRE, M.D., 10175 Collins Avenue, Suite 808, Bal Harbour, Florida 33154; to Anthony C. Vitale, Esquire, Law Center at Brickell Bay, 2333 Brickell Avenue, Suite A-1, Miami, Florida 33129; to Allen R. Grossman, Esquire, Grossman, Furlow & Bayo, LLC, 2022-2 Raymond Diehl Road, Tallahassee, Florida 32308; and by interoffice delivery to Veronica Donnelly, Department of Health, 4052 Bald Cypress Way, Bin #C-65, Tallahassee, Florida 32399-3253 this | aay of wot 2011. Mabie I abatio, Deputy Agency Clerk
The Issue The issues for determination in this case are whether Respondent violated the law as charged by Petitioner in its Administrative Complaint, and, if so, what discipline is appropriate.
Findings Of Fact Petitioner is the state agency with the statutory authority and duty to license and regulate insurance agents in Florida. Respondent holds license D033674 as a life and health insurance agent. At the time of the events which are the subject of this case, Respondent also held a license to sell securities. At the time of the events which are the subject of this case, Respondent was employed by First Liberty Group and sold life insurance, annuities, and viatical settlement purchase agreements ("viaticals"). A viatical is a written agreement which provides for an investor's purchase of an interest in the proceeds of a life insurance policy of an anonymous insured person, the "viator." The agreement provides for the amount of money that the investor will receive upon the death of the viator. One general principle underlying a viatical is that it provides a means for a terminally ill person who needs money to sell or assign the proceeds of a life insurance policy that would be paid upon his or her death. Another general principle is that the viator, due to the terminal illness, has been diagnosed to have a short life expectancy. Although the identity of the viator is not revealed to the investor, the investor is provided information about the viator's gender, age, illness, and life expectancy. Facts Common to All Counts A company that "viaticates" life insurance policies and arranges for diagnoses of life expectancies by medical doctors is called a "viatical settlement provider." For all the viaticals sold by Respondent, the viatical settlement provider was Mutual Benefits Corporation. Mutual Benefits Corporation was charged with and ultimately determined to have committed fraud with respect to its practices as a viatical settlement provider. The nature of the fraud was not made a part of the record in this case. Mutual Benefits Corporation was placed in a receivership to manage the remaining assets, liabilities, and contracts of the company. Respondent's employer, First Liberty Group, advertised that it offered a certificate of deposit (CD) at a very competitive annual interest rate. Potential customers who came in to inquire about or to purchase a CD were also informed about annuities and viaticals. Petitioner referred to this as a "bait and switch" technique. However, although the CD interest rate might have been the bait, there was no switch. Customers who wanted CDs were able to and did purchase CDs from First Liberty Group through Respondent at the advertised interest rate. Some customers also purchased annuities and viaticals. In the advertising materials provided to the investors by Respondent and in the Viatical Settlement Purchase Agreements signed by the investors, the amount the investors would receive upon the death of the insured is described as "fixed." For example, the return on an investment in a viaticated insurance policy for a viator with a three-year life expectancy was represented to be 42 percent. The 42 percent return was fixed in the sense that on an investment of $20,000, for example, the investor would receive 42 percent of $20,000, or $8,400, when the viator died. If the viator died six months after the purchase of the viatical, the investor would receive $8,400. If the viator died three years later, the investor would receive $8,400. If the viator died ten years later, the investor would receive $8,400. The viatical sales literature that Respondent gave to customers disclosed that the life expectancy of the viator, as determined by a doctor, was not guaranteed. Therefore, the amount of the return on the viatical investment was not fixed in the sense of an annual interest rate. In the examples given above, the annualized rate of return to the investor if the insured died six months later would be 84 percent (42 divided by .5 years). The annualized rate of return if the viator died three years later would be 14 percent (42 divided by 3 years). The annualized rate of return if the viator died ten years later would be 4.2 percent (42 divided by 10 years). Petitioner charged Respondent with not explaining to the investors that "the real rate of return on the investment was tied to the viator's date of death." However, Petitioner failed to prove this charge. Respondent did not tell the investors that the 42 percent return, for example, was an annual rate of return. The viatical sales materials provided to customers by Respondent did not describe the return on the investment as an annual rate of return. The effect that the date of the viator's death would have on the rate of return on the viatical is obvious. The sooner the viator died, the better the return; the later the viator died, the worse the return. The investors did not need specialized knowledge to understand this simple concept. No investor in this case said they did not understand that their return would be affected by when the viator died. None of the investors said they thought the "fixed rate" figure, such as 42 percent for a three-year viatical, was a guaranteed annual return. Each investor signed a Viatical Settlement Purchase Agreement that included a statement that the returns "are fixed and not annualized returns." (Emphasis in the original). Another factor affecting the actual return on a viatical investment is the possibility provided for under the terms of the viatical contract that the investor might have to pay a portion of the premiums on the life insurance policy in the event the viator lived longer than his or her life expectancy. Any payment of an insurance premium by the investor would cause a reduction in the return on the viatical investment. In the example given above, if the investor was required to pay $2,000 in premiums, his return on the $20,000 would no longer be $8,400, but only $6,400. The annualized return on the investment would be correspondingly reduced. In a worse case scenario, the possibility exists that the requirement to make premium payments could completely eliminate any potential return to the investor and even jeopardize the principal. The viatical advertising materials that Respondent provided to customers did not describe the possibility or impact of having to make premium payments as discussed above. The advertising materials generally downplayed the risks associated with a viatical. For example, one sales document described the viatical as appropriate for a conservative investor and suggested that viaticals are investments that provide "peace of mind." It was reasonable for Respondent and the sales materials to describe the insurance companies that issued the insurance policies as reliable and secure. However, it was not reasonable, nor accurate, to describe the viaticals as conservative investments because of the possibility that the insured person would live many years beyond his or her life expectancy and the possibility that the investor would have to make premium payments. Viaticals have the potential to provide a much better investment return than other types of investments. However, in conformance with the general rule that the higher the potential return on an investment, the greater the risk, the relatively high potential return on a viatical comes with a relatively high risk.1/ Respondent disclosed to the investors that there was a possibility they might have to make future premium payments, and it was described in paragraphs 20 and 21 of the Viatical Settlement Purchase Agreements signed by the investors under the heading "Payment of Future Premiums." The agreement states that the payment of insurance premiums beyond the life expectancy of the viator is at the discretion of Mutual Benefits Corporation. Respondent told the investors that Mutual Benefits Corporation had a reserve or escrow fund that was managed in a way that created a premium "pool" so that the early death of a viator provided a surplus of money that could be used to pay premiums on the insurance policies of viators who lived beyond their life expectancies. Respondent also told the investors that 85 percent of the viators died early, which created a large surplus in the escrow fund to pay future premiums. The viatical contracts, however, only stated that unused premiums "may" be retained in the reserve fund by Mutual Benefits Corporation. At some point after the investors involved in this case purchased viaticals from Respondent, Mutual Benefits Corporation was the subject of enforcement action for fraud and placed in receivership. There was evidently no longer a surplus or reserve fund to pay premiums on insurance policies associated with viators who lived beyond their life expectancy, and that burden fell on the investors. All the investors involved in this case told Respondent they were conservative investors with a low tolerance for risk. There is a commonality in their perceptions of viaticals derived from their discussions with Respondent, that viaticals were safe and conservative investments. However, viaticals are relatively risky investments due to their illiquidity and the fundamental conditions affecting the return and the security of the principal that are beyond the control of the investor. Respondent knew or should have known, through the exercise of reasonable diligence on behalf of the customers who purchased viaticals, that viaticals are relatively high-risk investments. Respondent misrepresented the risk character of viaticals in his discussions with the investors involved in this case. He had a motive to downplay the true risk character of the viaticals, because he received a commission for every sale of a viatical. If Respondent had informed the investors of the true risk character of viaticals, the investors might not have purchased the viaticals. The definition of "security" in Section 517.021, Florida Statutes, was amended in 2006 to specifically identify "viatical settlement investment" as a type of security. Respondent does not dispute that a viatical is a security. There is no dispute that the viaticals sold by Respondent, which are the subject of this case, were not registered securities when Respondent sold them in 2003. Count I - Simons Charles Simons was 81 years old in 2003. He has eight years of education. He used to work as a truck driver in a quarry associated with a cement plant, but is now retired. He owns real estate and has an annual income over $100,000 and a net worth of $600,000 to $700,000. Mr. Simons saw the CD advertised by First Liberty Group and came in with his wife to invest $100,000 he had acquired from the recent sale of real estate. They met with Respondent in July 2003. Mr. and Mrs. Simons invested $50,000 in two or more CDs and an annuity. They also purchased two viaticals for $50,000. Mr. and Mrs. Simons purchased two three-year viaticals, meaning that medical doctors who had purportedly examined the medical records of the insured persons expected them to die of their terminal illnesses within three years. The Simons invested $25,000 in each of the viaticals. Although four years have passed since the Simons purchased the three-year viaticals, neither of the insured persons has died. Mr. Simons has had to make a premium payment of approximately $2,000 on one of the underlying policies.2/ Count II – Lenois Allan Lenois was 70 years old in 2003. He is a high school graduate, studied accounting and taxation, and worked for a lumber company where he supervised 300 employees. His wife, Marion, was an accountant. They are now retired. In August 2003, Mr. and Mrs. Lenois went to see Respondent after seeing the CD advertisement in the newspaper. While in Respondent's office, they noticed a poster advertisement on the office wall about viaticals and asked Respondent about them. Mr. Lenois' deposition testimony that Respondent called the viaticals "guaranteed" is not persuasive, given Respondent's testimony at the final hearing that he used these kinds of words to describe the industry rating of the insurance companies involved and the federal-insured reserve fund account, not the viatical itself. However, as previously found, Respondent misrepresented the viaticals to be relatively conservative investments to all the investors. Mr. and Mrs. Lenois invested $20,000 in an annuity. In a deposition of Mr. Lenois, he stated that he thought he had purchased a CD from Respondent, not an annuity, and was surprised that he had to pay a surrender penalty. Petitioner makes this same allegation in its Proposed Recommended Order, but Mr. Lenois' testimony is not persuasive because he signed a disclosure document that states "I understand that I have purchased an annuity . . . and not a Bank Certificate of Deposit," and the word "annuity" is written on the personal check used to purchase the annuity. Furthermore, the allegation was not included in the Administrative Complaint. Mr. and Mrs. Lenois purchased one three-year viatical for $10,000. Although four years have passed since they purchased the viatical, the viator is still alive. Mr. and Ms. Lenois have not yet had to make a premium payment associated with their viatical. Count II – Luenberger Floy Leuenberger is a retired school teacher. She has a master's degree in counseling and education. Her husband is a retired bank employee. The Leuenbergers have a net worth just over $500,000. The Leuenbergers saw the CD advertised by First Liberty Group and came in to invest $75,000. They met with Respondent in October 2003. They saw a poster on the wall of Respondent's office about viaticals and asked Respondent about them. The Leuenbergers invested $50,000 in CDs and purchased two viaticals for $12,500 each. One of the viaticals purchased by the Leuenbergers "paid out" because the viator died, and they received the return Respondent quoted to them. The other viatical they purchased from Respondent has not yet paid out. The Leuenbergers have had to make a premium payment of approximately $1,500 on the remaining viatical. Count III – Berge Oscar Berge is retired from the United States Air Force and from a subsequent job as a maintenance supervisor for a health care facility. Mr. Berge obtained a college degree in avionics instrument technology while in the Air Force. Mr. Berge saw the CD advertised by First Liberty Group. He and his wife met with Respondent in late 2002 and, in January 2003, invested in two annuities and five viaticals. Mr. and Mrs. Berge purchased two three-year viaticals for $30,000 each and three five-year viaticals for $30,000 each; a total investment of $150,000. Although four years have passed since the Berges purchased the three-year viaticals, the two viators have not died. The Berges have had to make two premium payments totaling approximately $5,000.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth above, it is RECOMMENDED that a final order be entered which finds that Respondent Bradley Kline violated Subsections 626.611(5), (7), (9), and (16) and 626.621(9), Florida Statutes, and revokes his license as an insurance agent. DONE AND ENTERED this 9th day of October, 2007, in Tallahassee, Leon County, Florida. S BRAM D. E. CANTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 2007.
The Issue The issue is whether Proposed Rule 69O-204.040 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Viatical Settlement Act codified in Part X of Chapter 626, Florida Statutes, is one of several statutes that provide for the regulation of viatical settlements in Florida. A viatical settlement is the sale of a life insurance policy by its owner on the secondary market.3/ The parties involved in the transaction are the viator, the viatical settlement broker, the viatical settlement provider, and the investor who purchases the policy. The viator is the owner of the policy being sold. The viator is typically, but not always, the insured under the policy. The viatical settlement broker is the person who solicits bids and negotiates the sale of the policy on behalf of the viator. In order to perform the services of a viatical settlement broker in Florida, a person must be a licensed life insurance agent, self-appoint him/herself with the Department of Financial Services (DFS), and pay the applicable fees to DFS. The viatical settlement provider is the intermediary between the viatical settlement broker and the investor who purchases the policy. The viatical settlement provider presents the policy to potential investors; conveys the investors’ bids to the viatical settlement broker; and, after a bid is accepted by the viator, performs the administrative functions necessary to complete the transaction. Viatical settlement providers are licensed and regulated by OIR. Viatical settlement brokers are licensed and regulated by DFS, not OIR. Petitioner ILS-Florida is a Delaware limited liability company owned by NFP Life Services, LLC (45.5 percent), Genworth Institutional Life Services, Inc. (45.5 percent), and GS Re Holdings, Inc. (nine percent). NFP Life Services, LLC, is a wholly-owned subsidiary of National Financial Partners Corporation (NFP). NFP Brokerage Agency is also a wholly-owned subsidiary of NFP. NFP Brokerage Agency employs licensed viatical settlement brokers in a number of states, including Florida. The viatical settlement brokers working for NFP Brokerage Agency are considered to be “affiliated brokers” of ILS-Florida by virtue of NFP’s ownership interest in both companies. ILS-Florida was formed on September 8, 2008, “specifically for the purpose of doing business as a viatical settlement provider . . . in the State of Florida.” On or about October 29, 2008, ILS-Florida submitted to OIR an application for licensure as a viatical settlement provider. The application was still “pending” as of the date of the final hearing, but on March 20, 2009, OIR approved the application, and ILS-Florida is now a licensed viatical settlement provider, No. 09-800257957. ILS-Florida’s parent companies have another subsidiary -- ILS-Florida’s “sister company” -- that is currently licensed as a viatical settlement provider in a number of states. ILS-Florida intends to use a similar business plan in Florida that its sister company uses in the states where it is licensed. The business plan contemplates using only brokers working for NFP Brokerage Agency for at least the first year of operation, although it is possible that ILS-Florida may use both affiliated and non-affiliated brokers from the outset. ILS-Florida wants to be able to use brokers working for NFP Brokerage Agency because it considers them to be “higher-quality brokers” because they “have already agreed to a higher standard of compliance than is generally seen . . . in the industry.” Also, because NFP Brokerage Agency already has a number of brokers involved in the viatical settlement business in Florida, its brokers represent a significant source of potential business for ILS-Florida. The proposed rule will more likely than not preclude ILS-Florida from using affiliated brokers working for NFP Brokerage Agency because NFP has significant ownership interests in both companies. Petitioner David Matthew Janecek is a resident of Texas. He works for a brokerage in Texas that is owned by NFP Brokerage Agency. Mr. Janecek is licensed in Florida as a non-resident life insurance agent. His license, No. P161957, was issued on September 9, 2008. Mr. Janecek is not, and never has been, a licensed viatical settlement broker in any state. He has not self- appointed himself as a viatical settlement broker with DFS, and he has no present intention of acting as a viatical settlement broker in Florida.4/ Respondent Financial Services Commission (Commission) is the agency head responsible for the promulgation of the proposed rule. The Commission, which is comprised of the Governor and Cabinet, was created within DFS, but it is not subject to the control of DFS and it is effectively a separate agency from DFS. Respondent OIR is an office under the Commission. OIR developed the proposed rule and will be responsible for implementing the rule. Respondents published the proposed rule in the Florida Administrative Weekly (FAW) on September 26, 2008. A notice of change to the proposed rule was published in the FAW on December 24, 2008. The parties stipulated that Respondents met all applicable rulemaking publication and notice requirements, and that the petition challenging the proposed rule was timely filed. The proposed rule is titled “Prohibited Practices and Conflicts of Interest,” and states: With respect to any viatical settlement contract or insurance policy, no viatical settlement provider knowingly may enter into a viatical settlement contract with a viator, if, in connection with such viatical settlement contract, anything of value will be paid to a viatical settlement broker that is controlling, controlled by, or under common control with such viatical settlement provider, financing entity or related provider trust that is involved in such viatical settlement contract. The “specific authority” listed in the FAW notice for the proposed rule is Section 626.9925, Florida Statutes. That statute authorizes the Commission to: adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the reporting of life expectancies, and for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. (Emphasis supplied). The only language in the statute that Respondents are relying on as authorization for the proposed rule is the underlined language. The FAW notice states that the “law implemented” by the proposed rule is Sections 626.9911(9), 626.9916(1), and 626.9916(5), Florida Statutes. Section 626.9911(9), Florida Statutes, defines “viatical settlement broker” for purposes of the Viatical Settlement Act. The definition includes the following language, which is also contained in Section 626.9916(5), Florida Statutes: Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. Section 626.9916(1), Florida Statutes, prohibits any person other than a licensed life agent from performing the functions of a viatical settlement broker. The text of the proposed rule was derived almost verbatim from Section 12.B. of the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners (NAIC). The “model acts” developed by NAIC are intended to be used by state legislatures in drafting statutes. NAIC also develops “model regulations” that are intended to be used by state regulatory agencies in drafting rules to implement the statutes. The proposed rule prohibits a viatical settlement provider from entering into a viatical settlement contract involving a viatical settlement broker over which the provider has direct or indirect control. The determination as to whether the viatical settlement provider has control over a viatical settlement broker will be made on a case-by-case basis applying the definition of “control” contained in Proposed Rule 69O- 204.020(1). According to OIR, the proposed rule is intended to protect the viator by preventing the viatical settlement provider from using its control over the viatical settlement broker to induce or encourage the broker to breach his or her fiduciary duty to the viator. It is undisputed that Florida law does not currently prohibit the practice prescribed by the proposed rule so long as the broker satisfies his or her fiduciary duty to the viator. The proposed rule will prohibit transactions between affiliated viatical settlement providers and brokers, irrespective of whether the broker’s fiduciary duty to the viator has been breached. For example, if a broker recommends that a viator accept a bid for the policy from an affiliated provider that was not the highest bid, such action would constitute both a breach of the broker’s fiduciary duty and a violation of the proposed rule; however, if the bid from the affiliated broker was the highest bid for the policy, the broker’s recommendation to accept the bid would not constitute a violation of the broker’s fiduciary duty, but it would violate the proposed rule. During the rulemaking process, OIR staff considered adding language to the proposed rule that would have allowed affiliated providers and brokers to enter into viatical settlement contracts so long as certain disclosure requirements and other safeguards were met. The record does not reflect why this language was not included in the proposed rule published in the FAW, although it can be inferred from the e-mails received into evidence on this issue that OIR and/or the Commission did not feel compelled to add the language suggested by staff.
Findings Of Fact At all times material to this case, Respondent Bruce D. Robertson ("Respondent") was a licensed real estate broker, license #0343680, operating as a president and qualifying broker for IDC Properties ("IDC") At all times material to this case, IDC was a corporation registered as a real estate broker, license #0234614, located at 17980 San Carlos Boulevard, Fort Myers Beach, Florida. By agreement dated January 16, 1990, the Respondent agreed to pay to salesperson Randy Thibault a commission of $10,362.50 upon the closing of the sale of property at "Old Pelican Bay, Inc.," to Paula E. Brown, hereinafter referred to as the "Brown transaction". On July 5, 1990, the Brown transaction closed. The Respondent received the commission funds related to the sale of the property. The Respondent subsequently issued a check in the amount of $10,362.50 payable to Mr. Thibault. When Mr. Thibault attempted to negotiate the check, he was informed that the Respondent had issued a stop payment order on the check. Mr. Thibault thereafter filed a civil complaint against the Respondent in the Circuit Court of the Twentieth Judicial Circuit in and for Lee County, Florida Case No. 90-5851-CA. The matter was heard in a bench trial. On October 3, 1991, Mr. Thibault obtained a Final Judgement in the amount of $11, 817.42 against IDC for the sum owed plus interest. On October 28, 1991, Mr. Thibault obtained a Final Judgement in the amount of $14,551.31 against IDC for the sum owed plus interest, attorney's fees and costs. On November 4, 1991, the Respondent filed a Notice of Appeal in the matter in the Second District Court of Appeal but subsequently abandoned the appeal. At hearing, the Respondent asserted that Mr. Thibault received his commission share at the closing. The Respondent presented no credible documentary evidence to support the claim. The Respondent also asserted that Mr. Thibault misled the Respondent as to Mr. Thibault's role in the sale of other unrelated property and that the Respondent intends to take legal action against him. The Respondent presented no credible documentary evidence to support the claim. The Respondent admitted that the Final Judgement obtained by Mr. Thibault remains unsatisfied and stated that stated that he will not pay the judgement pending resolution of the unrelated matter alleged above.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Professional Regulation, Division of Real Estate, enter a Final Order determining Bruce D. Robertson and IDC Properties, Inc., guilty of the violations set forth herein and revoking the licenses identified herein. DONE and ENTERED this 19th day of March, 1993, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6308 The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order. The Respondent did not submit a proposed recommended order. COPIES FURNISHED: Darlene F. Keller, Director Division of Real Estate Department of Professional Regulation Hurston North Tower 400 W. Robinson Street Post Office Box 1900 Orlando, Florida 32802 Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Steven W. Johnson, Esquire Division of Real Estate Department of Professional Regulation Hurston North Tower 400 W. Robinson Street Post Office Box 1900 Orlando, Florida 32802 Mr. Bruce D. Robertson IDC Properties, Inc. 17980 San Carlos Boulevard Fort Myers, Florida 33931
The Issue The issues in this case are whether Respondent violated sections 626.611(7), 626.611(9), 626.611(16), 626.621(2), 626.621(6), 626.9541(1)(e)1., 626.9927(1), 626.99275(1)(b), and 626.99277(6), Florida Statutes (2003),1/ and, if so, what discipline should be imposed.
Findings Of Fact At all times material to the Administrative Complaint, Mr. McCloskey was licensed in Florida as an insurance agent. He currently is licensed as a life and variable annuity agent and health agent, life and variable annuity insurance agent, life insurance agent, life and health insurance agent, non-resident life and health and variable annuity agent, non-resident life insurance agent, and a general lines insurance agent. He has been working in the insurance business for approximately 24 years. No prior disciplinary actions have been taken against Mr. McCloskey. In the latter part of 2003, a representative from Mutual Benefits Corporation (Mutual Benefits) visited Mr. McCloskey to discuss the offering of Mutual Benefits' viatical settlement products to Mr. McCloskey's clients. A viatical settlement (viatical) is the purchase of an interest in the death benefits of a life insurance policy for an economic benefit. Mr. McCloskey was not familiar with viaticals. He checked on Mutual Benefits by researching Mutual Benefits on the internet. He called the Department's predecessor, the Department of Insurance, and also looked on the Department of Insurance's website. When he contacted the Department of Insurance, he was advised that viaticals were regulated by the Department of Insurance. Everything that he learned led him to believe that Mutual Benefits was a legitimate business. Mr. McCloskey also called the office of Mutual Benefits and talked to representatives who seemed to be familiar with insurance products and who answered questions that he had concerning Mutual Benefits. After researching Mutual Benefits, Mr. McCloskey decided to offer viaticals from Mutual Benefits to his customers. On October 9, 2003, Mr. McCloskey entered into a Sales Representative Agreement with Mutual Benefits. The agreement contained the following provision: Representative [Mr. McCloskey] hereby warrants to MBC that he/she has obtained and holds valid and current securities and/or insurance licenses that are required by the law of a prospective purchaser's and Representative's respective state of residence, if any, to market, solicit, offer, or sell viatical or life settlements to that prospective purchaser. Mr. McCloskey understood that he would be selling the viaticals pursuant to his life insurance license. Mr. McCloskey understood that there were many other insurance agents in Florida who were selling Mutual Benefits' viatical products. When Mr. McCloskey sold a viatical from Mutual Benefits, he received a commission. The total percentage of his income derived from the sale of viaticals was approximately five percent of his total business income. The viatical settlement purchase agreement forms at issue in this case had been approved for use by the Department of Insurance on February 5, 2002. The viatical settlement purchase agreements provided: This Agreement covers the purchase of an interest in the death benefit of a life insurance policy or policies insuring the life of persons who are either terminally ill or have an estimated life expectancy of 72 months or less. * * * WHEREAS, both parties understand and agree that neither Mutual Benefits Corp., nor any representative of Mutual Benefits Corp., is in any way acting as an insurance agent, broker, dealer, or representative, or a securities broker, dealer or representative, and the parties further agree that this transaction does not constitute the offer for sale or the sale of a security. * * * The only benefit the Purchaser will receive pursuant to this Agreement will be payment of the agreed portion of the death benefit upon maturity of the life insurance policy(ies). Policies are priced at a discount of the death benefit which depends on the projected life expectancy of each insured. Mutual Benefits Corp. makes no representation or warranty as to the specific date when a policy will mature. The return realized by the Purchaser does not represent an annual return. An annual return cannot be determined until the policy(ies) in which the Purchaser obtains an interest matures. * * * Purchaser hereby represents and warrants that he/she is sophisticated in financial matters and/or has access to professional services, has adequate means for providing for current financial needs and possible personal contingencies, and also acknowledges that once the policy closes the funds committed are not liquid and the funds are not available until the policy matures. Purchaser hereby also acknowledges that the life expectancy(ies) provided by the reviewing physicians are only estimates. Mutual Benefits Corp. does not make any warranties regarding the accuracy of these estimates. Purchaser further acknowledges that the policy may mature before or after the projected life expectancy. Purchaser also represents that he/she is able to bear the risk of the purchase of a policy(ies) for an indeterminate period and will only commit himself/herself to a purchase which bears a reasonable relationship to his/her net worth. * * * This agreement is voidable by the Purchaser at any time within three (3) days after the disclosures mandated by Florida Statute § 626.99236 are received by the Purchaser. * * * Pursuant to the terms of the Viatical Settlement Purchase Agreement, Mutual Benefits Corp. will escrow with a trustee funds for future premium payments for a minimum of the projected life expectancy of the insured, or longer at the company's discretion, and has agreed that the interest on those funds and any unused premiums may be retained as a reserve for payment on those policies where the insured outlives his/her projected life expectancy. Additionally, Viatical Services, Inc., a company the Purchaser may select to perform post closing services, has agreed to establish a premium reserve account to pay unpaid premiums for those policies that exceed their projected life expectancy if the above referenced trustee premiums are ever exhausted. Viatical Services, Inc.'s agreement to pay any unpaid premiums is limited to the exhaustion of the funds in its premium reserve account. In the event the trustee and Viatical Services Inc.'s respective premium reserve accounts are exhausted, the Purchaser may be responsible for a payment of his/her pro rata share of any unpaid premium. In the event the Purchaser is required to pay premiums, such payments will reduce the fixed returns referenced above. * * * The purchase of the death benefit of one or more life insurance policies should be not be considered a liquid purchase. While every attempt is made to determine the insured's life expectancy at the time of purchase, it is impossible to predict the exact time of the insured's demise. As a result, the Purchaser's funds will not be available until after the death of the insured. It is entirely possible that the insured could outlive his/her life expectancy, which would delay payment of the death benefits under the Viatical Settlement Purchase Agreement. Mutual Benefits estimated the life expectancies of the insureds and determined which policies would meet the estimated life expectancies chosen by the purchasers. The choice of which policies would be purchased would be done after the closing of the purchase agreement between the purchaser and Mutual Benefits. Mutual Benefits would provide the medical records of the insureds to the purchasers after the execution of the purchase agreement. In some instances, the purchasers would not be purchasing a full interest in the insurance benefits, but would be one among others who were purchasing interests in a specific insurance policy. Mutual Benefits would determine the amount that needed to be escrowed for the payment of future premiums, and the escrow agent would disburse the funds for the premiums as they came due. The viaticals offered by Mutual Benefits were investment contracts that were required to be registered in accordance with chapter 517. At the time that Mr. McCloskey offered the viaticals to his clients, he did not understand that the viaticals could be considered as securities which had to be registered. Neither Mutual Benefits nor Mr. McCloskey was registered with the Office of Financial Regulation (OFR) of the Financial Services Commission at the time the viaticals at issue were sold. In December 2003, George Bode, who was retired and approximately 74 years old, saw a newspaper advertisement placed by Mr. McCloskey concerning various types of investments. Mr. Bode contacted Mr. McCloskey and made an appointment to meet with Mr. McCloskey at his office in Melbourne, Florida, to discuss potential investments for Mr. Bode. One of the types of investments that was discussed was viaticals. Mr. McCloskey never represented that viaticals were securities and made no guarantees concerning the outcome of the purchase of viaticals. Mr. Bode understood that there was some risk involved in the purchase of the viaticals and that the insured might not die within the estimated life expectancy. Mr. Bode was also aware that he might have to pay additional funds for premiums depending on the longevity of the insured. On December 9, 2003, Mr. Bode entered into a Viatical Settlement Purchase Agreement with Mutual Benefits. The purchase price was $10,000.00. The estimated life expectancy of the insured was 36 months. The rate of return if the insured died within the 36 months was 42 percent. The insured did not expire within the estimated 36 months, and Mr. Bode was required to pay for additional premiums for the viaticated insurance policy after the expiration of the 36 months. Sometime in November 2003, Alan Clemente (Mr. Clemente) saw an advertisement placed in a newspaper by Mr. McCloskey. The advertisement was for annuities. Mr. Clemente went to Mr. McCloskey's office to discuss possible investments. Mr. Clemente told Mr. McCloskey that he had lost $100,000.00 with a financial planner and was looking for a safe investment. Mr. McCloskey talked with Mr. Clemente about several types of products that his agency offered, including annuities, certificates of deposit, and viaticals. Mr. Clemente was not interested in certificates of deposits, but was very interested in annuities, such as Mr. McCloskey had advertised in the newspaper. Mr. Clemente was also interested in viaticals, and Mr. McCloskey made a presentation to Mr. Clemente concerning viaticals. Mr. Clemente did not make a purchase at the first meeting with Mr. McCloskey. A few weeks after his initial visit with Mr. McCloskey, Mr. Clemente came to Mr. McCloskey's office and purchased an annuity for $50,000.00. The annuity policy was delivered to Mr. Clemente on December 5, 2003, at Mr. McCloskey's office. When Mr. Clemente came to pick up his annuity policy, he again discussed viaticals with Mr. McCloskey. Mr. Clemente understood that a viatical was the purchase of an insurance policy of someone who was terminally ill and when the person died that he would get his money back plus a return on the investment depending on when the person died. He wanted to invest in a viatical for which the insured's life expectancy was estimated at three years, which would result in a 42 percent return on his money. He also understood that he would be responsible for the payment of the premiums on the policy until the insured died. Mr. McCloskey went over the Viatical Settlement Purchase Agreement with Mr. Clemente. He told Mr. Clemente that he thought it was a good investment. Mr. McCloskey never guaranteed that Mr. Clemente would get a 42 percent return on his money. Mr. McCloskey told Mr. Clemente that "in the last ten years that no one [had] lost any money in the contracts, principal and interest, and no one [had] to pay premiums." Mr. Clemente entered into a Viatical Settlement Purchase Agreement with Mutual Benefits on December 5, 2003. The purchase price was $20,539.00 for two policies for insureds whose life expectancies were estimated to be three years. The return listed in the policy was 42 percent. This return was conditioned on the insureds dying within the three-year period. Mr. Clement initialed each page of the agreement and signed the agreement. Additionally, Mr. Clemente executed a Purchaser Suitability Questionnaire which stated: I have carefully examined my financial resources, investment objectives, and tolerances for risk. After conducting this examination and reviewing the terms of the Viatical Settlement Purchase Agreement, I have determined that this purchase is appropriate for me. I sufficiently understand the risk factors and objectives associated with this investment, either independently or as explained to me by one or more professional financial advisors not affiliated with or in any way compensated by Mutual Benefits Corporation or its representatives. I have adequate means of providing for my current financial needs and personal contingencies, have no need for liquidity of this investment, and I am able to bear the financial risk of a purchase of life insurance policy death benefits for an indefinite period of time. In the early part of 2004, Carol Mauter (Ms. Mauter) came to Mr. McCloskey's office seeking some information about products that would generate an income for her mother, Julia Teny (Ms. Teny). Mr. McCloskey discussed various products with Ms. Mauter, including single premium immediate annuities and viatical settlements. A few days after Ms. Mauter's initial visit, she returned to Mr. McCloskey's office with Ms. Teny, who was approximately 87 years old. On March 3, 2004, Ms. Teny purchased a single premium immediate annuity for $30,000.00. This annuity was purchased to provide an income stream for Ms. Teny for five years. Mr. McCloskey discussed the purchase of a viatical settlement for an insured whose life expectancy was 48 months. It was decided that the purchase of the viatical would suit Ms. Teny's needs since it was estimated that the return on the viatical purchase would occur shortly before the annuity ended, and the proceeds from the viatical could be used to purchase another single premium immediate annuity to continue a stream of income for Ms. Teny. Mr. McCloskey gave Ms. Mauter and Ms. Teny a brochure from Mutual Benefits concerning viaticals. He did not guarantee a return on the purchase of the viatical nor did he guarantee that Ms. Teny would never have to pay any premiums on the policy. He did tell Ms. Mauter and Ms. Teny that as of the date of their visit to his office persons purchasing viatical settlements from Mutual Benefits had not lost any principal or interest or paid any premiums. There was no evidence presented to show that this statement was not true or that Mr. McCloskey knew that the statement was not true at the time the statement was made. On March 8, 2004, Ms. Teny executed a Viatical Settlement Purchase agreement with Mutual Benefits for policies on insureds whose life expectancies were estimated to be 48 months. The purchase price was $70,000.00. Ms. Teny initialed each page of the purchase agreement, but she relied on the judgment of her daughter concerning the understanding of the terms of the purchase agreement. On May 3, 2004, the Securities and Exchange Commission (SEC) filed in the United District Court of the Southern District of Florida an Ex Parte Motion for Temporary Restraining Order and Other Relief and Entry of Preliminary Injunction against Mutual Benefits and others, claiming Mutual Benefits was defrauding investors by offering unregistered securities in the form of investment interests in viatical settlement contracts. The motion for a temporary restraining order was granted. On February 14, 2005, the court entered an Order Granting Motion for Preliminary Injunction, finding that there was sufficient evidence of fraud committed by Mutual Benefits, specifically that the announced life expectancies of the insureds were a product of fraud. The court enjoined Mutual Benefits from further violations of the anti-fraud and registration provisions of the Federal Securities Laws in connection with the offering of viatical settlement products. SEC v. Mutual Benefits, Corp., No. 04-60573-CIV-Moreno (S.D. Fla. February 14, 2005)(order granting preliminary injunction). On May 4, 2005, the court entered an Order Appointing Receiver for Mutual Benefits. SEC v. Mutual Benefits, No. 04-60573-CIV-Moreno (S.D. Fla. May 4, 2005)(order appointing receiver). Mr. Clemente received notice about a year and a half after he entered into the viatical settlement agreement with Mutual Benefits that Mutual Benefits had been placed in receivership. He was instructed by the receiver that premiums were due on the insurance policies that were covered by Mr. Clemente's viatical settlement agreement and that in order to preserve his investment, Mr. Clemente would be required to pay the premiums on the policies. Due to the high cost of the premiums, Mr. Clemente elected to forfeit three of the policies covered by his viatical settlement agreement. Mr. Clemente is currently paying the premiums on one policy. To date, the receivership had paid Mr. Clemente approximately $5,000.00 out of his original purchase price. Sometime after Ms. Teny purchased her viatical, she began receiving letters requesting her to pay the policy premiums on the policies covered by her viatical settlement agreement. Ms. Teny did not know who sent the requests, but given the timing of the appointment of the receiver, it can be inferred that the receiver was requesting the payments. Ms. Teny initially paid the premiums, but as the amounts of the premiums increased to as much as over $10,000.00 in 2008, Ms. Teny allowed the policies to lapse and lost her entire investment of $70,000.00. Mr. Bode was also requested to make premium payments on the policies covered by his viatical settlement agreement. Mr. Bode made some payments, but stopped making payments and forfeited his purchase price of $10,000.00.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Mr. McCloskey did not violate sections 626.611(7), 626.611(9), 626.621(2), 626.621(6), 626.9541(1)(e)1., 626.9927(1), 626.99275(1)(b), and 626.99277(6); finding that Mr. McCloskey violated section 626.611(16); and suspending his license for two months for each of the three violations for a total of six months. DONE AND ENTERED this 18th day of April, 2012, in Tallahassee, Leon County, Florida. S SUSAN BELYEU KIRKLAND 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 18th day of April, 2012.
