Findings Of Fact Parties Respondent, Department of Insurance (DOI) and Intervenor, Department of Banking and Finance (DBF) are state agencies charged with the regulation of insurance and banking activities, respectively. Great Northern Insured Annuity Corporation (GNA) is an insurance company and agency operating in Florida and elsewhere in space leased in financial institution lobbies, customer service areas and atriums. From its approximately eighty-four locations in Florida it markets annuities, securities and whole life insurance products. Approximately one-third of its 1992 sales of $130 million was in annuities. GNA's principal profits in Florida are derived from its sale of annuities, which it directly underwrites and services. First Nationwide Bank (FNB) leases space in its lobbies and other common areas to insurance agencies and companies, including Vista Financial Group, (Vista). In 1992 Vista sold approximately $13.5 million in annuities from the locations it leases from FNB. First Union Mortgage Corporation (FUMC) is a financial institution with "grandfathered" insurance activities pursuant to section 626.988(5), F.S. It has also been granted a certificate of authority by DOI as a Third Party Administrator pursuant to section 626.88, F.S. Florida Bankers Association (FBA) is a trade association of the banking industry in Florida. It represents its financial institution members. The Association of Banks in Insurance Inc. (ABI) is a trade association of financial institutions and insurance companies. The Florida Association of Life Underwriters (FALU) is a professional association of life, health and direct writer multi-line insurance agents with approximately 8,900 members. James Mitchell and Co. and its subsidiary, JMC Insurance Services Corporation (JMC) are California corporations involved in marketing financial products, including annuities in Florida. Florida Central Credit Union, Railroad and Industrial Federal Credit Union and GTE Federal Credit Union are state or federally chartered credit unions authorized to do business in Florida. Credit Union Services, Inc., a wholly owned subsidiary of GTE Federal Credit Union, sells insurance to credit union members. The Florida Association of Insurance Agents (FAIA) is a trade association representing independent insurance agents in Florida. Barnett Banks Trust Company, N.A. is a trustee for annuities issued by James Mitchell and Company. Barnett Banks Insurance, Inc. is a Florida licensed insurance company providing credit insurance of various types for credit extended by Barnett Banks throughout Florida. BTI Services, Inc. a subsidiary of Barnett, provides records administration services for insurers. Marketing One, Inc., Liberty Securities Corporation and Compulife, Inc. market annuities to existing and prospective customers of financial institutions. Those marketing activities are conducted from lobbies, atriums or other central areas of the premises of the financial institutions. The Financial Institutions Insurance Association is a California non- profit association of financial institutions and insurance companies with members in Florida who lease space to insurance agency tenants. California Federal Bank is a federal savings bank operating branches in the State of Florida and leasing space to a company selling insurance in that space in bank branch offices. The Statute Although other sections of statutes are cited as "law implemented" in proposed Chapter 4-223, its undeniable focus is section 626.988, F.S., as described in the first rule of the proposed chapter: 4-223.001 Purpose. The purpose of these rules is to implement the provisions of Section 626.988, Florida Statutes, and to ensure that customers of financial institutions conduct their business in an atmosphere free from direct or indirect coercion, unfair competition, and unfair or deceptive trade practices, and to implement those statutory provisions which prohibit insurance agents and solicitors who are directly or indirectly associated with, under contract with, or controlled by a financial institution from engaging in insurance agency activities as an employee agent, principal, or agent of a financial institution agency. These rules establish procedures and standards for insurance companies, agencies, agents and solicitors in their relationships and business arrangements with financial institutions. Embodied in Florida's insurance code, a code described as more lengthy than the New Testament, Section 626.988 F.S. enacted in 1974, ". . . generally prohibits banking institutions from engaging in insurance agency activities. . . ." Florida Association of Insurance Agents, Inc. v. Board of Governors, 591 F.2d 334 (U.S. 5th Cir. 1979). The prohibition is accomplished indirectly by forbidding licensed insurance agents or solicitors from engaging in insurance agency activities under certain relationships with financial institutions. There are exceptions to the blanket prohibition, including an amendment in 1990 to permit state chartered banks to sell annuities in the event that federal law permits federal banks to sell annuities. After almost twenty years of attempted enforcement, DOI has described section 626.988, F.S. as "a vague statute with imprecise standards". (Notice of proposed rule, Florida Administrative Weekly, June 26, 1992) The Rules DOI's experience with interpretation and enforcement of Section 626.988, F.S. commenced in earnest in the early 1980's, when insurance companies began to market annuities in the lobbies or public access areas of financial institutions. Many of these companies consulted with the department and obtained guidance as to the applicability of the law to their varied circumstances. In 1985, American Pioneer Life Insurance Company, through its counsel, Edward Kutter, Esquire, inquired of Commissioner Gunter concerning the effect of the law on its operations. American Pioneer Life Insurance Company was a wholly owned subsidiary of American Pioneer Savings Bank. Donald Dowdell, General Counsel of the department, responded by letter dated November 18, 1985. He analyzed the relationships among the insurer, the financial institution, and the insurance agents and determined that there was no significant probability of the financial institution exercising control over the agents: . . . In view of the fact that American Pioneer Savings Bank is the ultimate parent of American Pioneer Life Insurance Company, the specific issue which must be resolved in responding to your inquiry is whether an independent agent appointed by American Pioneer Life is directly or indirectly associated with, or retained, controlled, or employed by American Pioneer Savings Bank. Absent such a relationship, Section 626.988 does not prevent American Pioneer Life and its agents from marketing insurance in this state. . . . These corporate relationships in and of themselves do not create a prohibited relationship between American Pioneer Savings Bank and independent insurance agents appointed by American Pioneer Life. . . . It is recognized that as the corporate parent, American Pioneer Savings Bank may influence or control various corporate activities of its subsidiaries which would not entail control of the solicitation, effectuation and servicing of coverage by insurance agents. If, in fact, American Pioneer Savings Bank does not directly or indirectly control the conduct of insurance activities by American Pioneer Life agents but, instead, the agents sell insurance free of influence from the financial institution, the prohibitions of the statute are inapplicable. (GNA Exhibit No. 8) (emphasis added) Thus, in 1985, the department limited the prohibitions of section 626.988, F.S. to the financial institution's control of, and authority over, an agent's insurance activities. By 1986, other aspects of an association became a concern of the department. Letters responding to inquiries outlined requirements that leased space and insurance sales literature be physically or visually separated from the functions of the financial institution. (GNA Exhibits No. 10, 13 and 16) As a result of the body of opinions being circulated in the form of incipient policy, the department proposed rules implementing section 626.988. These proposed rules were later withdrawn before adoption, but the department continued to use them as guidelines. During this period, DOI received a handful of complaints, mostly from agents. Douglas Shropshire, director of Agent and Agency Services during the relevant period, testified that he could not recall a single consumer complaint with respect to financial institutions engaging in the distribution of insurance products. Gail Connell, identified by Mr. Shropshire as "the Department's person most intimately familiar with field investigation of .988 issues" (Tr. at 760), agreed. (FUMC Exhibit No. 35, at 184-85 See also. FUMC Exhibit No. 36 at 347-50, 353) In 1991, in anticipation of the rule-making mandate of section 120.535, the department reviewed its guidelines. As a part of that review, representatives of the agents' associations, FALU, FAIA and others, were consulted as to the desirability of the rules. In January, 1992, DOI published proposed rules that were substantially similar to the guidelines. Donald Dowdell stated that the proposed rules published at that time represented the department's determination of a reasonable interpretation of the statute, adding, "[T]he line was drawn with the realization of what was happening in the real world today. We could have -- I think the statute prohibits an association, and as I indicated yesterday, if we had wanted to be Draconian about it and make life easier on ourselves, we could have attempted to prohibit any kind of association and see how that would have flown." (FUMC Exhibit No. 36 at 260-261) The rules published in January of 1992 were withdrawn in order to permit the department to correct some perceived inadequacies in the economic impact statement. The rules were presented at a workshop and were republished in June, 1992. The rules were virtually the same as those published in January. A public hearing was held July 12, 1992. On October 6, 1992, DOI published a Notice of Change which materially altered Rules 4-223.003, .004, and .005. According to the Notice of Change, the change was in response to comments received at the public hearing held July 12. More specifically, the amendments were the result of the department's adoption of FALU's position in its petition challenging the June version of the rules. The amendments most significantly provided a definition of "associated" or "associate" and forbade insurance agents from occupying space virtually anywhere within the confines of a financial institution. Mr. Shropshire drafted the amendment to Rules 4-223.003-.005. His source for the definition of "associate" was Webster's Dictionary. Mr. Shropshire testified that the modified proposal resulted from "explosive changes" in the number of banks involved in insurance in this state (Tr. at 793) and information which had come to his knowledge which indicated a need for a more restrictive rule. The two sources of information regarding insurance activities in Florida identified by Mr. Shropshire were the report prepared by investigator Ernest Ulrich in support of the economic impact statement and an ongoing investigation and prosecution of JMC for its marketing of annuities. Both sources predate or were contemporaneous to the June publication of the rules. Mr. Shropshire's reason for the October change was the anticipated difficulty DOI faced in enforcing its rules as originally published. He stated, "So it was getting plain to us that we were going to have to very vigorously and closely and labor-intensively enforce the rule, if it was passed as it was promulgated in June of '92." (tr. at 808) As described by Mr. Shropshire and others, the agency was concerned that insurance activities in financial institutions were not being conducted behind partitions, or even behind planters or other visual separations; and that bank agents were making referrals, taking telephone messages, and setting appointments for insurance agents who covered multiple bank branches on a "circuit-rider" system. Banks leasing space to agents also commonly paid bank employees a bonus for making appointments and referrals of customers to the agents. DOI determined that these leasing arrangements established a strong connection between the bank and the agent, in effect wrapping the insurance program in the bank's colors and presenting it as another bank product. This, to DOI, justified the previously characterized "Draconian" measures. The banks' and other witnesses freely described the economic advantage to a financial institution of having insurance services available at the same location for its customers. Additional amendments to the proposed rules were published in December 1992. Those amendments acknowledge or track the statutory exceptions to the section 626.988(2), F.S. prohibitions. The rules therefore do not apply to mortgage insurance business, credit unions, banks located in cities having a population of less than 5,000, and the sale of annuities when national banks have been authorized to sell such annuities. During the course of the formal hearing, the agency proposed a final change to the rules at issue, clarifying that Chapter 4-223 does not apply to credit life and disability insurance and credit unemployment insurance. (American Banking Insurance Co. Exhibit No. 1) The Economic Impact Dr. Tim Lynch, Director for the Center for Economic Policy Analysis for Florida State University, conducted surveys, collected data and analyzed the economic impact of the June 1992 version of the proposed rules. He prepared the economic impact statement for DOI. Dr. Lynch was consulted by the department about the October changes to the proposed rules and did additional analysis on the impact of the proposed changes. The economic impact statement prepared for the June publication was not amended, but Dr. Lynch's observations are found in his notes, or what he terms a "work in progress". He discussed those observations with department staff and considers the economic impact of prohibiting leases to be at least in the $ millions. The agency did not republish an economic impact statement after the October changes, but plainly considered the impact of those changes as articulated by its consultant, Dr. Lynch. Prohibiting the sale of annuities on bank premises would have a devastating effect on companies engaged in that activity. Banks, also, would be affected, as they recognize a substantial benefit of providing their customers the convenience of an in-house service. Although annuities are defined in Florida law as "life insurance" (See Section 364.602(1), F.S.) they are generally considered investments for future security rather than a cushion against loss. On March 20, 1990, the Office of the Comptroller of the Currency (OCC) issued a formal approval letter stating, among other things, that under controlling Federal banking law, annuities are primarily financial investment instruments that national banks are permitted and authorized to sell. (GNA Exhibit No. 41) A follow-up letter to J. Thomas Caldwell as representative of the Florida Bankers Association specifically concluded that federally chartered banks in Florida were authorized to sell annuities. (GNA Exhibit No. 42) The OCC conclusion with regard to the authority of national banks was upheld in the Variable Annuity Life Insurance Co. v. Robert Clarke, et. al., (VALIC) on November 22, 1991, by the U.S. District Court for the Southern District of Texas, Civil Action No. H-91-1016, 786 F. Supp. 639. The case is pending on appeal before the U.S. Court of Appeals for the Fifth Circuit. (Variable Annuity Life Insurance Company v. Clarke, Case No. 92-2010) In the meantime, the OCC continues to issue opinion letters consistent with its earlier opinion. (See 5/10/93 letter filed as supplemental authority on 6/18/93) National banks are presently selling annuities, and the impact of the October 1992 absolute prohibitions is nullified as to annuity products by the December 1992 amendments addressed in paragraph 30, above.
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 has been licensed as a life including variable annuity and health agent, life insurance agent, and life and health insurance agent. At the time of the events which are the subject of this case, Respondent held the aforementioned licenses and was the president of Seniors Financial International, Inc., an insurance agency located in Vero Beach. Storfer is licensed to sell fixed annuities for most of the insurance companies licensed to transact business in the State of Florida, including Allianz, IMG, Aviva, North American, Old Mutual, and American Equity. Storfer keeps himself abreast of the suitability requirements and features of annuities by regularly attending and participating in the quarterly, if not monthly, training presented by insurance companies. The companies also provide seminars at Storfer's office. He goes to their offices or views webinars that can last two-to-three hours. The companies also offer assistance by providing people in-house to answer questions about their products. Even though Storfer could have the option for each client to submit cases to the companies for the company to help prepare and work to find a suitable product for each customer/individual, there was no testimony he did so with the individuals in this case. He also testified that he understood and was knowledgeable about all the products sold, relating to the three clients, from which the AC stems. Storfer regularly holds luncheon/dinner workshops and seminars at restaurants in and around Vero Beach that focus on financial issues. He invites the attendees by mailing them a flier. Each attendee receives a free meal while listening to Storfer's financial presentation. During the luncheons, Storfer does not offer any investment products for sale. However, attendees are asked to complete a "Senior Financial Survival Workshop Evaluation Form" and are invited to request an in- office appointment if they are interested in discussing specific investment products. The form elicits information including family background, financial history, current expenses, and tax liabilities. The attendees are asked to put "yes" or "no" at the top of the form. If an attendee puts yes, then a follow-up appointment is scheduled in Storfer's office. Storfer's wife picks up the forms and sets the appointment. Storfer's procedures at the appointment typically start by filling out a client profile. He goes through the form with the client and asks the client questions to obtain the details regarding age, contact information, beneficiaries, health, estate, plans for money, rate of return, percentage of life saving willing to lose, risk tolerance, liquidity, income needed form investment accounts, what needs to be fixed, income, assets and liability inventory, life insurance, and long-term care insurance/disability insurance. After completing the profile, Storfer reviews the documents that he has requested the client bring in to the appointment. This includes tax returns, an investment portfolio, and list of how much money they have and where it is, including life insurance or long-term care. There is no fee for the appointment. Typically, after the first meeting, Storfer reviews the documents and the client returns for a second appointment. At the client's next appointment, Storfer has reviewed everything and put together a product that he wants to sell the client. He also provides an illustration of the product demonstrating the product's growth and how it would work. If the client decides to go forward and invest in one of the products Storfer has recommended, Storfer gets an application for the product and his wife fills it out.2 After the application has been completed, Storfer's office procedure is to submit it to the company the same day to await approval. Once the application has been approved, then the policy is funded either by transferring from another type of product (direct transfer rollover) or by a 1035 exchange. The policy can not be issued if not funded. Once the policy is funded and issued, the company mails the policy and the documents for the client to sign to Storfer, as the agent to deliver. Storfer's operating procedure is to call the client to set an appointment for policy delivery. The appointment's purpose is to go over the policy with the client, including the amount of money that went into the policy, where the funds came from and what the policy will do for them, including liquidation and charges. Storfer keeps documents which he refers to as client notes in each client's file. After client meetings, he uses a service to dictate what he wants as a summary of the client meeting. The service types up what he says and emails it back to him. It is printed, reviewed, and scanned into his system. Alberto and Celina Grubicy Celina Grubicy ("C.G."), a native of Argentina, was born on April 6, 1940. She was married at age 19 to Alberto Grubicy ("A.G."), who was also born and raised in Argentina. They moved to the United States in 1965; English is their second language. The Grubicys opened a repair shop in New York in 1964. Then, they went in the construction business in Connecticut for about ten years before retiring to Florida. In both successful businesses, C.G. handled the paper work and kept the books. The Grubicys retired in the early 90's and purchased a condominium in Florida, where they now reside. On February 5, 2007, the Grubicys attended Respondent's luncheon seminar at Carrabbas Italian Grill in Vero Beach. At the seminar, the Grubicys listened to the presentation and completed the seminar evaluation form confirming an estate in excess of one million dollars. At the time, A.G. was 65 years old and C.G. was 66 years old. The Grubicys thought the presentation sounded good, so they made an appointment to see Storfer in his office. Prior to any interaction with Storfer, C.G. was the owner of a Transamerica variable annuity with a contract date of September 23, 2002, an AXA Equitable variable annuity with a contract date of June 17, 2005, and a Hartford variable annuity with a contract date of July 25, 2005. Each of the annuities was doing well and approaching dates when surrender charges would no longer apply. The Grubicys met with Storfer on February 7, 2007. At the meeting, the Grubicys informed Respondent that their investment goals were two-fold. They explained that their primary financial goal was safety. Their plan included selling their residential building complex from which they were currently collecting rental payments for income.3 Their goal in five years was to have an investment that would provide their income after they sold the property.4 The Grubicys wanted an investment to replace the rental money that they would no longer receive after the sale of their building. The Grubicys also stressed to Storfer that the security of the investment was a paramount concern. C.G. wanted out of variable annuities because she was concerned about the stock market risk and did not want annuitization to take place. At their second meeting on February 12, 2007, knowing the Grubicys' goals, Storfer misrepresented the advantages for the product he recommended with a graphic illustration on a blackboard. He showed the MasterDex annuity with Allianz in such a fashion, that, when the market advanced in relation to a base line, the return on the annuity would also advance, up to a three percent cap per month on the gain, but that when the market fell below the base line, there would be a zero percent return, but never a loss of the gain made in the previous months, or a loss of invested capital. Storfer recommended and proceeded to sell the Grubicys the Allianz MasterDex 10 ("MasterDex") policy, being fully aware of the Grubicys' goals. He insisted that was the way for the Grubicys to invest because they would never lose their principal compared to the other annuities that have high risk plus excess fees. Storfer did not provide the Grubicys any other investment option. The annuity was a long-term investment that provided for surrender penalties on a declining scale for fifteen years even though Storfer told the Grubicys that the Allianz annuity would mature in five years from the day it started.5 Storfer assured the Grubicys that they were not going to lose anything by investing in the MasterDex annuity with Allianz. They were not accurately informed of the provisions in the contract by Storfer during the meeting nor did Storfer fully review the relevant terms and conditions, including the length of the policy.6 The Grubicys knew that when they surrendered the three variable annuities there would be surrender charges. However, Storfer told them that the product he was selling them had a 12 percent bonus that would offset the monetary lost from surrender penalties of the transferring funds.7 The Grubicys decided to follow Storfer's recommendation with his assurances that they wouldn't lose money, and they surrendered their three annuities to purchase two MasterDex annuities in excess of about one million dollars. After Storfer completed the numerous forms and documents, the Grubicys authorized the transfers of money to Allianz by way of assignment on or about March 2, 2007, and authorized him to buy the new policies. Storfer allocated 100 percent to the Standard & Poors ("S&P") 500 instead of allocating the total investment among three possible choices in smaller increments. Respondent's 100 percent allocation choice on the Supplemental Application contravenes both of the Grubicys' requests on each of their Liquidation Decision forms, which specifically state "the decision to liquidate . . . based solely on . . . desire to eliminate market risk and fees " The annuity product Storfer sold the Grubicys provided for three different values: annuitization value, cash surrender value, and guaranteed minimum value. The Statement of Understanding provided: * * * Annuitization value The annuitization value equals the premium you pay into the contract, plus a 10% premium bonus and any annual indexed increases (which we call indexed interest) and/or fixed interest earned. This will usually be your contract's highest value. Withdrawals will decrease your contract's annuitization value. Cash surrender value The cash surrender value is equal to 87.5% of premium paid (minus any withdrawals) accumulated at 1.5 percent interest compounded annually. The cash surrender value does not receive premium bonuses or indexed interest. The cash surrender value will never be less than the guaranteed minimum value (which we define below). The cash surrender value will be paid if you choose to receive a) annuity payments over a period of less than 10 years for Annuity Option D and five years for Alternate Annuity option IV, or over a period of less than 10 years for all other annuity options, b) annuity payments before the end of the first year for Alternate Annuity Option IV or before the end of the fifth policy year for all other annuity options, or c) a full surrender at any time. Guaranteed minimum value. The guaranteed minimum value will generally be your lowest contract value. The guaranteed minimum value equals 87 5% of premium submitted, minus any withdrawals. The guaranteed minimum value grows at an annual interest rate that will be no less than 1% and no greater than 3%. (emphasis in original) The Grubicys signed the numerous forms and documents without reading them because they trusted Storfer and he sounded as if he knew what he was talking about. They relied on his advice. Storfer sold the Grubicys a policy completely different from what he had described.8 The monthly cap was opposite of the way Storfer explained it. A description of the "monthly cap" stated: Although there is a monthly cap on positive monthly returns, there is no established limit on negative monthly returns. This means that a large decrease in one month could negate several monthly increases. Actual annual indexed interest may be lower (or zero) if the market index declines from one month anniversary to the next, even if the market index experienced an overall gain for the year. (emphasis in original) The Grubicys later learned that the advice Storfer provided them regarding how the MasterDex annuity worked was erroneous. Respondent provided them misleading representations regarding the sale of the annuity products. On April 5, 2007, C.G. received her annuity contract for a MasterDex annuity for approximately $1,123,000, and she executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. On April 12, 2007, A.G.'s annuity contract for a MasterDex annuity for approximately $35,000 was delivered and he executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. The sale of the Allianz annuities generated commissions of approximately $95,000.00 for Storfer or his agency, Senior Financial International, Inc. The Grubicys became concerned about the MasterDex product Storfer sold them while watching television at home one day, and seeing a class action lawsuit advertisement about their purchased product. They called Storfer immediately to discuss Allianz. He set up an appointment with the Grubicys to meet with him about their concerns. When Storfer met with the Grubicys, he assured them that they didn't need to change anything, their product was fine. He also informed them that their product was six percent up and not to worry because if the S&P 500 went down, they didn't have to worry because they had already made six percent. In May 2007, the Grubicys went to Connecticut and attended another investment seminar. Afterwards, they set up a meeting with the financial advisor, Mr. Ray ("Ray"). The Grubicys took their investment paperwork to Ray and he reviewed it. Ray explained how the MasterDex worked and called an Allianz customer service representative while they were in the office to further explain how the product worked. The Grubicys were informed that there was a monthly cap of three percent when it went up but no monthly cap on stock market losses. Such a description of the cap combined with the description in the contract support a finding that the MasterDex annuity did not meet the Grubicys' financial goals and was not a suitable investment for them. In particular, the Grubicys had been clear that they did not want to have any market risk. Subsequently, the Grubicys contacted Storfer again and questioned his declaration regarding the cap on stock market losses. Respondent continued to describe the crediting method incorrectly and told them Ray was just trying to sell them something. He insisted that the S&P 500 is the way he explained it earlier and that Ray's interpretation was wrong. Ray eventually sent the Grubicys an article from the Wall Street Journal, which they testified reemphasized that the investment worked completely different from what Storfer continued to tell them. The Grubicys requested a refund from Allianz. Approximately one year later, Allianz eventually set the contract aside and refunded the investment principal, surrender charges for the three annuities, and some interest. The evidence convinces the undersigned that Storfer knowingly made false representations of material facts regarding the MasterDex annuity and its downside cap. Kikuko West Kikuko West ("K.W."), a native of Japan, was born in 1933. She marrried a U.S. soldier and moved to the United States when she was 18 years old. Together they had four children. She is now married to Robert West ("R.W."). K.W.'s employment history started with her working in a bakery, then as a waitress in a Chinese restaurant, and her ultimately owning and operating a successful flower shop for over 30 years in West Warwick, Rhode Island. She sold it in 2006. K.W. sold her house in Rhode Island and used the money to invest in a Smith-Barney mutual fund and an AXA Equitable Life Insurance Company (AXA) annuity (contract # 304 649 121), which she purchased in June 30, 2004. West purchased a condominium in Florida and has been a permanent resident for the past five years. On January, 15, 2008, Robert and Kikuko West ("Wests") attended Respondent's seminar. They scheduled an appointment for January 23, 2008, but didn't show. They attended a second workshop on or about June 3, 2008, and scheduled a meeting for July 9, 2008, but didn't show. The Wests rescheduled their appointment with Storfer on August 4, 2008, and met with him in his office for the first time. Even though K.W.'s husband attended the meeting, the focus of the meeting was her finances. K.W. explained that their monthly income was $2,900 and their monthly living expenses were $2,100, but a majority of it came from her husband's pension so she was worried about income if he passed. She only received $600 a month in social security and wanted income in the future. She had $100,000 for emergencies in a money market account. K.W. also informed Storfer that when she dies she wants her four daughters and six grandchildren to inherit her money. K.W. wanted to stop receiving various statements from each of her numerous investment accounts and bundle her assets. She told Storfer that she wanted to keep everything that she had and would be happy with a rate of return of four or five percent. She emphasized she had zero risk tolerance. K.W. provided the following information for her asset/liability inventory: an AXA variable annuity(non- qualified) in the amount of about $119,589.58; mutual fund (non- qualified) of $253,289.55; IRA (qualified) $80,039.33; CDs (nonqualified) for $25,000 and $35,000; a Fidelity and SunTrust (nonqualified) totaling $40,000; and a Vanguard equaling $60,000. West explained that she didn't have life insurance but had prepaid funeral. Her husband had three life insurance policies. K.W. had a second meeting with Storfer on August 6, 2008. At that meeting, K.W. provided income tax and other paperwork to detail the stocks that she wanted consolidated into one statement.9 Storfer went over the financial illustrations and company profiles he had compiled as proposed investments. Unbeknowest to the Wests, Storfer's plan for restructuring K.W.'s reinvestments was to transfer funds from her variable annuity (approximately $215,000) to a fixed annuity and transfer assets from K.W.'s existing brokerage accoung (approximately $80,000) to a new brokerage account, which were both with American Equity. During the meeting, Storfer also introduced the Wests to Kevin Kretzmar, a broker for Summit Brokerage Services, by speakerphone.10 The discussion consisted of how the money would be transferred.11 The Wests thought Kretzmar worked for Storfer as his assistant and were unaware that he brokered for a separate company. Storfer brought Kretzmar into the transaction to handle the brokerage account because he was not a broker, but he did not make this plain to the Wests. In the meeting, Strofer emphasized to the Wests that K.W. was paying too much in income tax and her investments should be set up to reduce the income tax. Storfer also informed the Wests that K.W. would get a guaranteed eight percent interest each year and would be able to withdraw 10 percent a year with no penalty,12 which K.W. relied upon in deciding to follow Storfer's recommendation to purchase the American Equity annuity selected by Storfer. Respondent provided two letters to K.W. on Seniors Financial International, Inc., letterhead that stated: Kikuko: This would replace the Mutual Funds $253, 289.00. You will receive a bonus w[h]ich is added the first day of $25,329.00. Your account will start with $278,618.00. With an 8% guaranteed growth for income. With no risk. Mitchell Kikuko This would replace the AXA Variable Annuity $119,589.00. You will receive a bonus w[h]ich is added the first day of $11, 959.00. Your account will start with $131,548.00. With an 8% guaranteed growth for income. With no risk. Mitchell After the meeting, the Wests decided to go forward with Storfer's recommendation for K.W.'s investments. On August 8, 2008, the Wests returned to Storfer's office and K.W. agreed to transfer the funds. She signed the applications and contracts including 14 documents, which would transfer the money and invest in the annuity. K.W. did not read everything that she was signing because she couldn't understand all the terminology and trusted and relied upon Storfer. Storfer told K.W. that even after she signed, if she didn't like the product, she could call and everything would get put back to the way it was before. K.W. thought she was purchasing one policy. Respondent sold her two policies numbered 693752 ("the SunTrust transfer" or "the 80K contract") and 693755 ("the AXA transfer" or "the 215K contract"). Both applications indicate each is replacing an AXA policy. K.W.'s SunTrust is not mentioned in the 80K application. The documents attached to the applications K.W. signed without reading also detail that the American Equity Bonus Gold (BG) has a 10 percent bonus; Various "values"; and the minimum guaranteed interest rate is only one percent. The Lifetime Income Benefit Rider (LIBR) document states "a lifetime income that you cannot outlive" is tied to the owner's age. On the BG contract, the income account value (IAV), the second option, was checked at a rate of eight percent rider guaranteed income. The cash surrender penalty listed for the BG contract in the application is 80 percent of the first year premiums.13 The BG application also described a nine percent interest crediting method. Out of the nine options listed, Respondent admitted that he chose the S&P monthly Pt. to Pt. w/Cap & AFR for K.W. The option was not defined in the application, and K.W. had to rely solely on Storfer to define and explain the product. Specific terms and conditions of the annuity such as the penalty free withdrawals14 were defined in the policy contracts, which K.W. never received.15 In the car on the way home from the August 8, 2008, meeting, K.W. looked at the back page of the brochure for American Equity Insurance and read that she could only earn one percent a year with the annuity. This caused her some concern. Subsequently, K.W. called her son-in-law, a director at Merrill Lynch on Wall Street, who agreed to review the documents during K.W.'s upcoming visit to New York. K.W. then called Storfer's office back and left a message not to process the applications. The Wests also attempted to fax Storfer a letter that stated, "I do have to hold off on any changes . . . do no process until I review all papers." On Saturday, August 9, 2008, the Wests met briefly with Storfer in his office16 to request the original paperwork back that had been signed on Friday and stop the process. K.W. instructed Storfer to do nothing until her son-in-law approved it. She and her husband were pleased that Storfer agreed not to process the forms until her son looked at them and said that the investment was good.17 Stofer gave K.W. a yellow manila envelope with copies of the paperwork West had signed and a note. At some point, Storfer processed K.W.'s application for the purchase of the American Equity annuity, contrary to his agreeing not to finalize the purchases until the Wests gave the go-ahead.18 The Wests left for North Carolina to start their vacation on Sunday, August 10, 2008. While on vacation, K.W. opened the manila envelope and discovered that it did not contain the originals of the signed forms she had requested. Additionally, a letter was enclosed dated August 11, 2009,19 on Seniors stationary that stated: Dear Kikuko, Attached is transfer paperwork to transfer the brokerage account from Suntrust to us. We will not sell any investments until you approve them. If you and your son in law have any questions please contact me I will be more then happy to assist. Sincerely, K.W. had her son-in-law review the investment paperwork and requested that he talk to Storfer. After K.W. talked to her son, she decided the investment was not good for her. Ultimately, K.W. learned that her money had been transferred out of the Suntrust account without her permission. She called Storfer's office numerous times to get him to cancel the annuity transactions, but was unable to reach him.20 K.W. was eventually provided Kretzmar's contact information and he instructed her how to reverse the transfer of funds. K.W. had communications with Kretzmar and representatives from American Equity that lead to her funds being refunded. The American Equity annuities were ultimately cancelled. Viewing the evidence as a whole, the undersigned determines that Respondent made false promises not to process K.W.'s annuity applications in connection with the investments and did so contrary to K.W.'s instructions, as well as made false misrepresentations to her regarding the details of the annuity. Doris Jorgensen Ms. Doris Jorgensen ("Jorgensen") was born in New York City on December 20, 1921. She grew up in Connecticut. She married William Jorgensen. While married she owned and operated an antique shop out of her house in Connecticut. She started investing with her husband, William, before he passed in 1999. She and her husband would discuss their investments and decide how to invest together. She has no children and lives alone in Sebastian, Florida. Prior to meeting with Storfer, Jorgensen was the owner of an Integrity Life Insurance Company (Integrity) variable annuity with a contract date of July 28, 2003, and Aviva Life and Annuity Company (Aviva; formerly AmerUs) deferred annuity with a contract date of December 26, 2003. Jorgensen's net worth, before meeting Respondent was approximately a million dollars. Jorgensen attended two luncheon seminars presented by Respondent on April 2, 2007, and on October 23, 2007. She was 86 years old at the time. At the first seminar, Jorgensen filled out a Senior Financial Survival Workshop Evaluation Form, indicating she was a widow, had an estate from $25,000-$200,000, and had concerns in the area of Social Security Tax Reduction, Variable Annuity Rescue, and Equity Index Annuity. When Jorgensen attended the second workshop, she filled out the form identical to the previous one, except she also circled Asset Protection from Nursing Home as a concern. On or about November 5, 2007, Jorgensen met Storfer in his office for the first time. Storfer prepared her client profile and Jorgensen described her risk tolerance as "none" and indicated that she was unwilling to lose any of her life savings through investments. She also informed him that she intended to leave her entire estate to numerous charities and had set up a trust for that purpose. Jorgensen provided Storfer income information at the meeting that indicated that she lived off her monthly social security and pension payments, a total monthly income of $1,800.00, and her expenses were $1,100.00. She also had $120,000 cash and a net worth of $900,000.00. At another meeting, Jorgensen provided Storfer her financial portfolio to review. One meeting Jorgensen had with Storfer was attended by her brother, who did not provide her any advice regarding what to do with her investments. Ultimately, Storfer recommended and sold Jorgensen an Allianz Life Insurance Company Equity Indexed Annuity. Upon his advice, Jorgensen surrendered her $208,015.74 Integrity Life Policy #2100073292 issued on July 28, 2003. The transfer resulted in the initial funding of the Allianz MasterDex,21 which became effective November 16, 2007. Jorgensen told Respondent that she had a problem with monetary loss and Storfer said he could make it up with the Allianz Life. The policy provided that she could start withdrawing the money in five years and then must annuitize the policy and withdraw the money over a 10-year period. The Allianz annuity was delivered on December 12, 2007. The Allianz Life contract, a MasterDex, contract #70610993, included a 10 percent bonus. Respondent placed 100 percent of Jorgensen's funds in the S&P 500 index like the Grubicys. Later, on or about January 16, 2008, Storfer also had Jorgesen authorize an additional transfer of $306,507.21 in funds from her Aviva/AmerUS policy purchased December 1, 2003, to Allianz. The policy was $330,137.95. Surrender charges on the AmerUs annuity would have expired December 1, 2014. On February 4, 2008, the money was sent to Allianz into contract #70610993. Together, Jorgensen's transfers totaled over half-a million dollars and she incurred surrender charges totaling in excess of $29,000. Jorgensen was unable to understand the annuity application and contract language. She trusted Storfer and took him at his word and signed a lot of forms without filling them out or asking questions. Jorgensen testified that she always followed the directions of whoever gave her business advice. Jorgensen also testified in this matter that she was "not certain," "I don't really remember," and "I have no idea whether it was or not" regarding numerous questions relating to the transactions and policy receipts. At some point, Jorgensen attended another investment seminar presented by insurance agent, Ms. Jones ("Jones").22 On February 11, 2008, Allianz gave Jorgensen a receipt for her payment of $306,423.03. Jorgensen contacted Allianz and directed the company to return the transferred funds to Aviva. Jorgensen directed Allianz to "rescind this policy in full." On or about February 14, 2008, Jones also helped Jorgensen with a typewritten letter dated February 15, 2009, from Jones' office to Allianz following up the request. Jorgensen ultimately dealt with Storfer instead of Jones regarding rescission of the Aviva/AmerUs to Allianz transaction. Storfer ultimately placed the funds with Old Mutual/OM Financial annuity ("OM"). An application, transfer/1035 exchange, was executed in Jorgensen's name and other documents relating to the OM annuity on or about March 14, 2008. The policy is signed Doris Jorgensen not "Doris R. Jorgensen." Jorgensen testified she typically signs her name to include the middle initial "R" "Doris R. Jorgensen" on official papers.23 Jorgensen discovered the policy when she received the annuity confirmation letters from OM. Respondent earned a commission of nearly $7,000 on the OM transaction. The policy delivery receipt dated May, 1, 2008, six weeks after the purchase date of the OM policy, also has a signature without a "R" initial and Jorgensen denies the signature is hers. Storfer's signature is not on OM's required policy delivery certification form. The Delivery Receipt for the OM policy is dated May 1, 2008. Jorgensen still has the OM annuity. The undersigned finds that the evidence fails to show that Storfer misrepresented the sale of the two annuities or made false representations regarding the annuities sold to Jorgensen.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the final order be entered by the Department (1) finding that Mitchell Storfer violated the provisions of Chapter 626, Florida Statutes, described, supra, and (2) revoking his licensure. DONE AND ENTERED this 31st day of December, 2009, in Tallahassee, Leon County, Florida. JUNE C. McKINNEY 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 31st day of December, 2009.
The Issue Whether Respondent violated Sections 627.832(1)(i) and 627.848, Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Respondent, Alliant Premium Finance Corporation, is a Florida licensed premium finance company domiciled in Florida. Alliant has been licensed to sell premium finance agreements to the general public in Florida since December 16, 1993. William J. Villari has been the president of Alliant since its licensure. In 1995, Petitioner, Department of Insurance, performed a routine regulatory examination of Alliant. During the examination, 15 Alliant files, which had refunds due to insureds within 30 days, were reviewed. Out of the 15 files, 12 were late, ranging from 87 to 329 days late. The Department sent Alliant the Department's 1995 Report of Examination, which gave notice to Alliant that between December 16, 1993, and June 30, 1995, Alliant had violated the insurance code by failing to make refunds within 30 days. Mr. Villari advised the Department by letter dated December 18, 1995, that he was taking steps to ensure that in the future refunds would be made on a timely basis. No disciplinary action was taken by the Department as a result of the 1995 examination. During January 1998, the Department performed another routine regulatory examination of Alliant. The findings of the examination are contained in the Report of Examination for the period from July 1, 1995, to September 30, 1997. As was noted in the report, 11 Alliant accounts were reviewed which had refunds due to insureds within 30 days, and 8 of the 11 accounts were refunded late. The lateness ranged from 5 to 67 days. The report was mailed to Alliant on February 17, 1998. The 1998 examination also revealed that between July 1, 1995, and September 30, 1997, Alliant had failed to maintain certificates of mailing showing that notices of intent to cancel insurance contracts were mailed to insureds ten days before cancellation. The evidence did not show that Alliant had failed to mail the cancellation notices, only that Alliant had failed to maintain certificates showing that the notices had been mailed. Respondent does not dispute that Alliant was late in making refunds as noted in the 1998 Examination Report or that Alliant did not maintain certificates of mailing for the cancellation notices. Alliant disagrees with the penalty proposed by the Department.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered, finding that Alliant Premium Finance Corporation violated Sections 627.832(1)(i) and 627.848(1), Florida Statutes, and imposing a penalty of $2,500 for the violation of Subsection 627.832(1)(i), Florida Statutes, and $250 for the violation of Section 627.848(1), Florida Statutes. DONE AND ENTERED this 24th day of May, 2000, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 24th day of May, 2000. COPIES FURNISHED: Christopher R. Hunt, Esquire Department of Insurance Division of Legal Services 612 Larson Building 200 E. Gaines Street Tallahassee, Florida 32399-0333 William J. Villari, President Alliant Premium Finance Corporation 303 Gardenia Street West Palm Beach, Florida 33401 Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 2 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
