Findings Of Fact Respondent, Frank Alvin Lashman (Lashman), was at all times material hereto a licensed insurance agent in the State of Florida. Lashman is qualified for licensure and/or licensed as an Ordinary Life, including Health Agent, Dental Health Care Service Contract Salesman, and Legal Expense Insurance Agent. At all times material hereto, all funds received by Lashman from consumers or on behalf of consumers representing premiums or monies for insurance policies were trust funds received in a fiduciary capacity. Such funds were to be paid over to the insurer, insured, or other persons entitled thereto, in the regular course of business. On or about July 1, 1985, Lashman, as a general agent for American Integrity Insurance Company (American), solicited Martha Lunsford to purchase a medicare supplement insurance policy. On July 31 1985, Lashman secured an application for the subject insurance policy from Ms. Lunsford, and delivered to her a "certification" document which provided: That, I am a licensed agent of this insurance company and have given a company receipt for an initial premium in the amount of $189.20 which has been paid to me by ( ) check (x) cash ( ) money order. The proof establishes that Lashman did not receive the initial quarterly premium of $189.20 from Ms. Lunsford, or give a company receipt for any monies. Rather, Lashman collected $25.00 on July 3, 1985 with the intention of submitting the application to American once he had collected the entire initial premium. Over the ensuing months Lashman visited Ms. Lunsford on a number of occasions to collect the balance due on the initial premium. While the proof is uncontroverted that the full premium of $189.20 was never paid, there is disagreement as to the total amount Ms. Lunsford paid to Lashman. The premium installments Ms. Lunsford paid to Lashman were in cash. Lashman kept no record of the amount or date of payment, and gave no company receipt for the monies collected. The only evidence of payment Lashman provided to Ms. Lunsford was a brief note on the back of his business cards stating the amount received. The last business card he gave to Ms. Lunsford reflects a payment of $60.00, and a balance due of $9.00. On balance, the proof establishes that Ms. Lunsford paid to Lashman $180.20 toward the initial premium of $189.20. Under the terms of Lashman's general agent's contract with American, he was: . . . authorized to solicit applications for insurance for (American), to forward these applications to (American) for approval or rejection, and to collect only the initial premium payment due on such applications. While American averred that Lashman's contract did not permit him to collect the initial premium payment in installments, there is no such prohibition contained in the agreement or proof that Lashman was otherwise noticed of such a prohibition. Accordingly, there is no proof that Lashman committed any offense by collecting the premium in installments, by failing to remit any monies to American until he was in receipt of the full initial premium, or by failing to submit the application to American until the initial premium was paid in full. Although Lashman is free of wrongdoing in the manner in which he strove to collect the initial premium and his delay in submitting the application to American, the proof does establish that Lashman breached a fiduciary relationship by failing to safeguard and account for the monies collected. On November 22, 1985, Ms. Lunsford filed a criminal complaint against Lashman for his failure to secure the subject insurance policy. Incident to that complaint, Lashman was interviewed by a criminal investigator with the State Attorney's Office and served with a subpoena duces tecum which required the production of: ANY AND ALL RECORDS PERTAINING TO THE INSURANCE POLICY SOLD TO . . . MARTHA D. LUNSFORD ON JULY 3, 1985 BY FRANK LASHMAN, ACTING AS AGENT FOR AMERICAN INTEGRITY INSURANCE COMPANY. During the course of his interview, Lashman told the investigator that he had not procured the policy because the initial premium had not yet been paid in full. Lashman further stated that although he kept no records of the payments made, all funds received from Ms. Lunsford had been deposited in his account with Florida National Bank. As of December 20, 1985, Lashman's account with Florida National Bank carried a balance of $5.81. At hearing Lashman averred that he had erred when he advised the investigator that he had deposited the monies he received from Ms. Lunsford in his account with Florida National Bank. According to Lashman, he put the money, as he collected it, into an envelope, which he kept in the file with Ms. Lunsford's insurance papers. Lashman's explanation for not exhibiting the envelope and money to the investigator when questioned was ". . . he didn't ask me for that." Lashman's explanation is inherently improbable and unworthy of belief. On January 12, 1986, the investigator advised Lashman's attorney that a warrant had been issued for Lashman's arrest on the complaint filed by Ms. Lunsford. On his counsel's advice, Lashman sent Ms. Lunsford a cashier's check in the sum of $149.00, as a refund of premiums paid. Ms. Lunsford did not negotiate the check, nor was it of a sufficient sum to represent a return of all premiums paid by Ms. Lunsford.
The Issue Whether Respondent, an insurance agent licensed in Florida, violated specified Florida Statutes and agency rules in the sale of an annuity to two senior citizens, as charged in the Administrative Complaint, and, if so, the penalty that should be imposed against Respondent's license.
Findings Of Fact The Parties At all times relevant, Respondent was licensed by Petitioner as an annuity, health, and life insurance agent in Florida. Petitioner is the state agency charged with licensing and regulating insurance agents and taking disciplinary action for violations of the laws and rules it administers. Background Annuities This case arises from Respondent's sale of an Aviva equity index annuity ("Aviva annuity") to Robert and Frances Wexler on or about May 22, 2008. An annuity is a contract under which an insurance company, in exchange for a premium, agrees to pay the owner a specified income for a period of time. Annuities generally are classified as "fixed" or "variable." Under a fixed annuity, the benefit is paid according to a predetermined interest rate. Under a variable annuity, the premium is invested on the owner's behalf, and the amount of the benefit, when paid, reflects the performance of that investment. The annuities at issue in this case are fixed annuities. Fixed annuities can be either "immediate" or "deferred." Under an immediate fixed annuity, the insurer begins paying the benefit upon purchase of the annuity. Under a deferred annuity, the premium is allowed to grow over time until the contract matures or is annuitized and the insurer begins paying the benefit. The annuities at issue in this case are deferred annuities. Annuities may be "equity index" annuities. This means that the insurer pays a benefit to the insured based on a premium that earns interest at a rate determined by the performance of a designated market index. The premium is not invested in the market for the owner's account; rather, the interest rate rises or falls in relation to the index's performance, within predetermined limits. Equity index annuities typically are long-term investments. Owners of equity index annuities have limited access to the funds invested and accumulating in their accounts, although some equity index annuities permit yearly penalty-free withdrawals at specified percentages. The accrued interest generally is not taxed until the funds are withdrawn or the benefit is paid under annuity. The purchaser may incur surrender charges for withdrawing funds or canceling the contract before a specified date. The annuities at issue in this case are equity index annuities. Generally, equity index annuities identify a maturity date, often many years in the future, on which the insurer will "annuitize" the contract if the purchaser has not already opted to do so. The benefit paid under the annuity is determined based on the account's value as of the maturity date, and the payments to the owner of the annuity begin at that time according to a payment plan. The Wexlers Robert Wexler was born on November 12, 1930. His wife, Frances Wexler, was born on March 5, 1932. Both Wexlers finished high school and took some college courses. They married after Mr. Wexler joined the Air Force. While in the Air Force, Mr. Wexler studied electronics, which ultimately led to his career in that field in the private sector. He worked for IBM, Univac, and General Electric before retiring in 1994. Mrs. Wexler worked for a small family-owned printing firm for over 26 years, and retired in 1997. The Wexlers raised three children, and they lived in the same home in Pennsylvania for 40 years. While living in Pennsylvania, the Wexlers saved money by using Mrs. Wexler's salary to pay their living expenses and saving most of Mr. Wexler's earnings in a retirement account. They never bought annuities, but did trade stocks, which resulted in financial loss. For many years, the Wexlers visited Florida as "snowbirds" and eventually purchased a condominium in a gated community in Deerfield Beach, Florida. In 1998, the Wexlers sold their home in Pennsylvania, liquidated the stocks they owned, and bought a larger condominium in the same gated community. They moved permanently to Florida in 1998, with approximately $500,000 in liquid assets. The Wexlers consider themselves conservative investors. Their financial objectives included safe investing of their money, ensuring that they had readily accessible money if they needed it at some point, and having money to pass on to their family. For these reasons, they specifically chose to invest in annuities. Prior Annuity Purchases Before purchasing the Aviva annuity at issue in this case, the Wexlers had purchased many other annuities——perhaps as many as 16——from different insurance agents, including Stephen Wolfe, Brian Plonsky, Fredric Armold, and Mark Breiman between 2002 and 2008. In May 2008, the Wexlers purchased the Aviva annuity at issue in this case from Respondent. The Wexlers purchased the annuity using the money they received from surrender of an EquiTrust annuity (EquiTrust 708F) that Mark Breiman sold them in 2006. Subsequently, the Wexlers became confused about their numerous annuities. In October 2008, Mr. Wexler sent a letter to Petitioner's Consumer Services Department, requesting assistance in determining what products the Wexlers had purchased and whether the purchased annuities were necessary or beneficial to them. As a result, Petitioner initiated an investigation that culminated in administrative complaints being filed against some of the agents, including Respondent, who sold annuities to the Wexlers. The Administrative Complaint The Administrative Complaint alleges, in pertinent part, that Respondent committed the following acts, which violate specified provisions of the Florida Insurance Code: 17. In the process of inducing the purchase of the Aviva annuity, [Respondent] willfully misrepresented and/or omitted material information regarding the sale of that annuity. The misrepresentations, both by omission of material information and commission of false statement, include, but are not limited to the following: [Respondent] verbally asserted to the Wexlers that the nearly $16,000 in surrender charges Robert Wexler incurred in surrendering Equitrust 708F, would be offset by a bonus gained from the purchase of the Aviva annuity. [Respondent], when completing the Aviva annuity application, listed the percentage of charges and penalties incurred by sale of the EquiTrust annuity as 20%, "not less any applicable bonus percentage received on the new [Aviva] annuity," so as to falsely assert in writing that the Wexlers would receive a positive market adjustment of $10,910.83 on the Aviva annuity that would offset the nearly $16,000 surrender penalty on the EquiTrust 708F. [Respondent], when completing the Aviva annuity application, listed the amount of the Wexlers liquid assets as being $320,000, when [he] either knew or should have known that most of the Wexlers' assets were tied up in non-liquid investments (primarily annuities)and they had very limited access to readily available funds totally less than a third of that amount. [Respondent] failed to advise Robert Wexler that the guaranteed cash surrender value of the Aviva annuity would not equal the May 2008 accumulated value of EquiTrust 708F until at least May 2018, assuming the Wexlers did not need to make any withdrawals from the Aviva annuity during that ten year period. [Respondent] failed to advise the Wexlers that surrender penalties would apply for 10 years following the purchase of the Aviva annuity, including the company's recapture of the bonus, when Robert Wexler would be 87 years old. [Respondent] falsely assured the Wexlers that the Aviva annuity was suitable to their needs. The Administrative Complaint further alleges that Respondent's willful misrepresentations were false and material misstatements of fact and Respondent was fully aware of the falsehoods; that given Respondent's position as a licensed life insurance agent, the Wexlers justifiably relied on Respondent's representations and information in purchasing the Aviva annuity and they would not have purchased that annuity but for Respondent's misrepresentations; that the sale of the Aviva annuity was not in the Wexlers' best interests, was neither necessary nor beneficial for persons of their age and financial condition, was without demonstrable benefit to them, and was done by Respondent for the sole purpose of earning a fee, commission, money, or other benefit; and that the Wexlers have suffered financial harm by not being able to access their retirement assets for housing, health care costs, or general living expenses without incurring substantial surrender charges. The Annuities at Issue The 2006 EquiTrust Annuity The Wexlers purchased the EquiTrust 708F annuity2/ from Mark Breiman on May 8, 2006. At the time, Mr. Wexler was 75 years old and Mrs. Wexler was 74 years old. The Wexlers paid a premium of $32,565.68 for the EquiTrust annuity. Over the two years that the Wexlers owned the annuity, they added three separate cash payments totaling $40,844.42, for a total premium of $73,410.10 paid for the annuity. The EquiTrust annuity was a fixed index annuity having a maturity period of 30 years. Interest on the premium was earned according to performance of the market indices in which the premium was invested. After the annuity's first year anniversary date, invested funds could be transferred on the contract's anniversary date between indexed market accounts and fixed rate accounts to reduce exposure to market volatility. The annuity featured a ten percent bonus paid on the amount of the premium paid on the initial contract date.3/ The Wexlers paid a premium of $32,565.68 for the annuity, so the premium bonus was $3,256.58. Pursuant to the contract terms, the premium bonus was allocated proportionately across the investment strategies in the same manner as the premium; it was not paid to the Wexlers as cash. Because the bonus was invested back into the annuity, it, like other sources of funds invested in the annuity, became accessible upon maturity or if the policy was annuitized. The annuity had a 14-year surrender charge period. During this period, if the Wexlers withdrew their money from the annuity in an amount greater than the free withdrawal amount allowed under the contract, ten percent of the contract's current accumulation value,4/ a surrender charge would be imposed. The surrender charges started at 20 percent and gradually declined over the 14-year period. The annuity did not contain terms waiving withdrawal charges in case of diagnosis of terminal illness or confinement in a hospital, hospice, or convalescent facility. Sale of the Aviva Annuity to the Wexlers in 2008 In 2008, Respondent's firm, Cherry and Cherry, Inc., invited the Wexlers to a luncheon at which a program on investment in annuities was presented. The Wexlers attended and made contact with Ronald Cherry, Respondent's father. Subsequently, Respondent arranged to meet with the Wexlers in their home to discuss annuities investments. As a result of that meeting, Respondent sold the Wexlers an Aviva annuity.5/ The Wexlers applied for the Aviva annuity in late April 2008, and the sale became effective on May 22, 2008. Mr. Wexler was 77 years old and Mrs. Wexler was 76 years old when they purchased the Aviva annuity. The Wexlers purchased the Aviva annuity using the money they received from surrender of the EquiTrust annuity that Mark Breiman sold them in 2006. They surrendered the EquiTrust annuity on May 21, 2008, just over two years after purchasing it. At surrender, the EquiTrust annuity's accumulated value was $84,179.97. The Wexlers were assessed a surrender charge of $15,994.19, which constituted 20 percent6/ of the annuity's accumulation value as of May 21, 2008. However, a positive market value adjustment ("MVA")7/ of $7,658.56 was provided upon surrender, so the Wexlers received a total of $75,844.42 for surrender of the EquiTrust annuity. When the Wexlers applied to purchase the Aviva annuity, they completed a "Notice to Applicant Regarding Replacement of Life Insurance" form.8/ The form advised prospective purchasers that the "decision to buy a new policy and discontinue or change an existing policy may be a wise choice or a mistake. Get all the facts." The form further informed prospective purchasers that under Florida law, they could elect to receive a written Comparative Information Form summarizing policy values, which would enable comparison of the existing annuity and the annuity being considered for purchase. The Wexlers elected not to receive the Comparative Information Form. At hearing, Mr. Wexler credibly testified that in selling him the annuity, Respondent discussed the Wexlers' financial objectives to safely invest their money, have ready access to funds if needed, and to leave some money for their family. Mr. Wexler initially testified that when Respondent sold the Wexlers the Aviva annuity, Respondent failed to cover several items, including reviewing the Wexlers' other annuities, and did not provide a comparison of the Aviva and EquiTrust annuities. However, Mr. Wexler subsequently acknowledged that he could not remember whether Respondent covered these matters with him. Respondent credibly testified that he covered these matters with the Wexlers. Mr. Wexler testified that Respondent told the Wexlers that they would incur a substantial surrender charge on surrender of the EquiTrust annuity, but that they would make it up through and the positive MVA that would be realized upon surrender of the annuity and the Aviva ten percent premium bonus. He initially testified that Respondent did not tell the Wexlers that they would not obtain the Aviva policy's premium bonus as an immediate cash payment, but that instead it would be invested in the annuity so would be available only at maturity of the policy; ultimately, however, Mr. Wexler conceded that he could not recall whether Respondent had explained this matter. Respondent credibly testified that he covered this matter with the Wexlers. As an essential part of purchasing the Aviva annuity, on April 24, 2008, Respondent filled out, and the Wexlers executed, a Customer Identification and Suitability Confirmation Worksheet. On the portion of the form requesting a statement of the applicant's liquid assets, Respondent wrote "$320,000." Respondent credibly testified that the Wexlers provided him this figure. His testimony is consistent with, and bolstered by, the Wexlers' written confirmation, by signing the form, that the information filled in on the form regarding their financial status and investment objectives was complete and accurate to the best of their knowledge. Further, by signing the form, the Wexlers each confirmed that they understood that the Aviva annuity was a long-term investment with substantial penalties for early withdrawal, and they believed the Aviva annuity was suitable for them. The Wexlers reconfirmed these statements in their hearing testimony. Terms of the 2008 Aviva Annuity The Aviva annuity was a fixed index deferred annuity, with the premiums allocated to selected investment strategies. The Aviva annuity had a 20-year maturity period and a ten-year surrender charge period. During the surrender charge period, the Wexlers would be assessed a penalty, termed a "withdrawal charge," if they withdrew funds in an amount greater than ten percent of the annuity's accumulated value as of the contract anniversary date for that year. The withdrawal charges were determined based on a withdrawal charge rate schedule and a premium bonus recapture schedule.9/ The annuity allowed the transfer of unused free partial withdrawals to subsequent years, so if the Wexlers did not use the free partial withdrawal in one year, they could transfer it to the following year, enabling them to withdraw up to 20% of the contract's accumulated value for that year without incurring a surrender charge. The annuity also provided for waiver of withdrawal charges, subject to specified conditions, if the insured parties were diagnosed with a terminal illness or if the insured parties were confined to a hospital, hospice, or convalescent care facility. The Aviva annuity featured a ten percent bonus payable on the initial premium and on subsequent premiums paid within the first two years of the contract. The bonus on the initial premium was allocated to the selected index investment strategies, and the bonus on additional premiums was credited to the fixed strategy and then transferred to the selected index investment strategies on the next contract anniversary date. The bonus under the annuity was not paid as cash, so became accessible only upon maturity of the policy or if the policy was annuitized. Respondent informed the Wexlers that there would be a charge for surrendering the EquiTrust annuity, and represented that the surrender charge would be offset by the positive MVA derived from surrender of the EquiTrust annuity and the ten percent premium bonus they would receive by purchasing the Aviva annuity. As of its date of issuance, the Aviva policy had an accumulated value of $83,429.00. This value was derived from payment of the $75,844.42 premium consisting of the funds obtained from surrender of the EquiTrust annuity, plus the ten percent bonus of $7,584.44. Respondent credibly testified that a key reason he recommended that the Wexlers surrender the EquiTrust policy and purchase the Aviva policy was that he believed that they had too much money invested in one company, and that this was not in their best interest given the ominous financial climate in May 2008. He also testified, credibly, that another reason he suggested they surrender the EquiTrust policy was that information had been disseminated within the life insurance industry that the EquiTrust Life Insurance Company's financial strength rating was going to be downgraded. This information ultimately proved to be correct; on September 28, 2008, the company, its affiliate, and its parent company all were downgraded by A.M. Best Company. The press release announcing the downgrade specifically identified concern over EquiTrust's capital position and its difficulty in accessing liquidity as the reasons for the downgrade. Comparison of the EquiTrust and Aviva Annuities The EquiTrust and Aviva annuities both are fixed deferred equity index annuities. They offered similar investment strategies, and both provided 100 percent participation in the selected investment strategies, with substantially similar caps on earnings under those strategies. Both annuities had long-term maturity periods; however, the EquiTrust annuity had a 30-year maturity period, compared to the Aviva annuity's substantially shorter 20-year maturity period. Thus, assuming the Wexlers held the Aviva annuity to maturity, it would begin providing payments eight years sooner10/ than the EquiTrust annuity. The Aviva annuity's surrender charge provisions were substantially more favorable for the Wexlers than those in the EquiTrust annuity. Specifically, the EquiTrust annuity had a 14-year surrender period, compared to the Aviva annuity's ten- year surrender period. The EquiTrust annuity's surrender charges also were substantially higher than those under the Aviva annuity, starting at 20 percent for the first two contract years and thereafter decreasing by one or two percent for the remaining 12 years of the surrender period; by contrast, the Aviva annuity's surrender charge rate started at 12 percent for the first two contract years and then decreased by one or two percent per year for the remaining eight years of the surrender period. The Aviva annuity allowed any unused free partial withdrawal to be carried over to the following policy year and accumulated with that year's free partial withdrawal; the EquiTrust annuity did not allow such carryover. The Aviva annuity also provided for waiver of withdrawal fee, subject to conditions, for diagnosis with a terminal illness or confinement in a hospital, hospice, or convalescent facility, while the EquiTrust annuity did not. The annuities' minimum guaranteed contract values11/ were calculated in a similar manner. However, the EquiTrust annuity had a more favorable guaranteed rate of return of three percent, while the Aviva annuity guaranteed a one percent rate of return. Given the difference in financial conditions between 2006, when the Wexlers purchased the EquiTrust annuity, and 2008, when they purchased the Aviva annuity, relative policy performance is not particularly useful in determining which was policy was better for the Wexlers. In 2006, financial conditions were favorable. The Wexlers paid an initial premium of $32,565.68 for the EquiTrust annuity and received a ten percent bonus of $3,256.58 on that premium, for an initial accumulation policy value of $35,822.26. Over the two years the Wexlers owned the EquiTrust annuity, they added $40,844.42 in premiums, for a total of $73,410.10 paid into the annuity. By the time they surrendered the EquiTrust annuity in May 2008, its accumulation value was $84,179.97; thus, the policy earned approximately $10,769.87 in accumulation value for the Wexlers during the two years they owned it. By the time the Wexlers purchased the Aviva annuity in May 2008, financial conditions had significantly deteriorated. This is reflected in the Aviva annuity's annual statement of annuity showing no earnings for the 2008-2009 year. However, given the similarity of the policies' indexed investment strategies, it is reasonable to infer that the Wexlers would not have earned much, if any, more under the EquiTrust annuity than they did under the Aviva annuity for the 2008-2009 year. The Aviva annuity had greater relative financial strength than the EquiTrust policy. When Respondent sold the Wexlers the Aviva annuity, the EquiTrust Life Insurance Company's financial strength rating was in the process of being downgraded. Petitioner argues that the company still enjoyed an excellent rating in spite of the downgrade.12/ Notwithstanding, the evidence shows that at the time Respondent sold the Wexlers the Aviva annuity, he reasonably believed that the EquiTrust annuity's financial soundness was questionable, and, in fact, the Aviva annuity ultimately was the more financially sound policy.13/ When the Wexlers surrendered the EquiTrust annuity on May 21, 2008, its accumulated value was $84,179.97 and its cash surrender value was $75,844.42. When the Aviva annuity was issued on May 22, 2012, its accumulated value was $83,429.00 and its cash surrender value was $67,027.00——$8,817.34 lower than the EquiTrust policy's cash surrender value. The Wexlers immediately lost $8,817.34 on this transaction; however, the persuasive evidence shows that if they hold the Aviva policy to maturity, they not only will make up this loss, but will earn substantially more. In any event, the persuasive evidence establishes that Respondent told the Wexlers were about this issue and they chose to purchase the Aviva policy. On balance, the Aviva annuity appears more suitable for the Wexlers than the EquiTrust annuity. The EquiTrust annuity had a surrender charge period of 14 years, with extremely high surrender charge rates. The Wexlers would have had to keep the EquiTrust policy seven more years for its surrender charge rate to decline to the rate immediately applicable to withdrawals under the Aviva policy. Had the Wexlers held onto the EquiTrust policy and withdrawn funds in an amount greater than the free withdrawal limit even once during this seven-year period, they likely would have incurred surrender charges in an amount greater than the $8,817.34 they lost by surrendering the EquiTrust policy on May 21, 2008.14/ Ultimate Findings of Fact Regarding Alleged Violations As more specifically addressed below, the undersigned determines, as a matter of ultimate fact, that Petitioner did not demonstrate, by clear and convincing evidence, that Respondent violated sections 626.611 (5), (7), (9), or (13); 626.621(6); 626.9541(1)(e)1, or (1)(l); 627.4554(4)(a) or (c)2.; or rules 69B-215.210 or 69B-215.230.15/ Alleged Violations of Section 627.611 Section 626.611 sets forth violations for which suspension or revocation of an insurance agent's license is mandatory. Petitioner has charged Respondent with violating section 626.611(5), (7), (9), and (13). Petitioner did not prove, by clear and convincing evidence, that Respondent violated any of these provisions. Section 626.611(5) makes the willful misrepresentation of any insurance policy or annuity contract or the willful deception with regard to any such policy or contract a ground for suspending or revoking an agent's license. Petitioner did not prove that Respondent willfully misrepresented any aspect of the Aviva annuity or willfully deceived the Wexlers regarding the Aviva annuity. As discussed above, the persuasive evidence establishes that with respect to the key issue in this proceeding——the large surrender charge——Respondent accurately represented to the Wexlers that the surrender charge would be offset by the positive MVA and the Aviva premium bonus, and that the bonus would have to be earned over the life of the Aviva annuity.16/ Section 626.611(7) makes the demonstrated lack of fitness or trustworthiness to engage in the business of insurance a ground for suspending or revoking an agent's license. The persuasive evidence did not clearly and convincingly establish that Respondent violated any aspect of the Florida Insurance Code in selling the Aviva annuity to the Wexlers; accordingly, Petitioner did not prove, by clear and convincing evidence, that Respondent violated this provision. Section 626.611(9) makes fraudulent or dishonest practices in conducting business under an insurance agent license grounds for suspension or revocation of the license. Again, since the persuasive evidence did not clearly and convincingly establish that Respondent violated any aspect of the Florida Insurance Code in selling the Aviva annuity to the Wexlers, Petitioner did not prove, by clear and convincing evidence, that Respondent violated this subsection. Section 626.611(13) provides that willful failure to comply with, or willful violation of, Petitioner's orders or rules, or any willful violation of any provision of the Florida Insurance Code constitutes a basis for suspending or revoking an insurance agent license. Again, Petitioner failed to prove, by clear and convincing evidence, that Respondent willfully violated its rules or orders, or willfully violated the Florida Insurance Code, in connection with the sale of the Aviva annuity to the Wexlers. Thus, Petitioner failed to prove, by clear and convincing evidence, that Respondent violated section 626.611(13). Alleged Violations of Section 626.9541 Section 626.9541 is entitled "unfair methods of competition and unfair or deceptive acts or practices defined." This statute defines the types of acts that constitute unfair methods of competition and unfair or deceptive acts or practices in the insurance industry, but it does not independently authorize disciplinary action. Werner v. Dep't of Ins., 689 So. 2nd 1211, 1214 (Fla. 1st DCA 1997). Petitioner has charged Respondent with engaging in acts set forth in section 626.9541(1)(a)1.——specifically, that Respondent knowingly made, issued, circulated, or caused to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which misrepresents provides that making any estimate, statement, sales presentation, omission, or comparison which misrepresents the benefits, advantages, conditions, or terms of any insurance policy. As discussed above, the evidence does not clearly and convincingly establish that Respondent knowingly engaged in any of these acts. Accordingly, Petitioner did not prove, by clear and convincing evidence, that Respondent engaged in unfair methods of competition or unfair or deceptive acts as prohibited in section 626.9541(1)(a)1. Petitioner also charged Respondent with engaging in acts delineated in section 626.9541(1)(e)1. This section requires, as a predicate for the imposition of discipline, a finding that the licensee knowingly made false material statements through a variety of acts set forth in that provision. Again, the evidence does not establish that Respondent knowingly engaged in any of these acts. Thus, Petitioner did not prove, by clear and convincing evidence, that Respondent engaged in unfair methods of competition or unfair or deceptive acts as provided in section 626.9541(1)(e)1. Petitioner has charged Respondent with twisting, which is defined in section 626.9541(1)(l) as knowingly making any misleading representation or incomplete or fraudulent comparisons or fraudulent material omissions of or with respect to any insurance policies for the purposes of inducing, or tending to induce, any person to surrender, terminate, or convert any insurance policy or to take out a policy of insurance in another insurer. Again, there is no persuasive evidence that Respondent knowingly committed any of the acts described in this statute. Thus, Petitioner did not prove, by clear and convincing evidence, that Respondent engaged in twisting under section 626.9541(1)(1), Florida Statutes. Alleged Violation of Section 626.621 Section 626.621 sets forth violations for which suspension or revocation of an insurance agent's license is discretionary.17/ Petitioner has charged Respondent with violating section 626.621(6) by engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited by part IX of chapter 626, or having otherwise shown himself to be a source of injury or loss to the public or detrimental to the public interest. For the reasons previously discussed, the evidence does not clearly and convincingly establish that Respondent engaged in any actions that could be considered unfair methods of competition or deceptive acts or practices under chapter 626, part IX. Accordingly, Petitioner has not shown, by clear and convincing evidence, that Respondent engaged in acts under section 626.621(6) that justify the suspension or revocation of his insurance agent's license. Alleged Violation of Section 627.9521 Petitioner has charged Respondent with violating section 626.9521. This statute prohibits persons from engaging in trade practices that are determined to be an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance, and imposes fines for violations of the Unfair Insurance Trade Practices Act, part IX of chapter 626, Florida Statutes. As discussed above, Petitioner did not prove that Respondent violated section 626.9541 or any other provision in chapter 626 charged under the Administrative Complaint. Accordingly, Petitioner has not shown, by clear and convincing evidence, that Respondent violated section 626.9521 and thus should be fined under that statute. Alleged Violation of Section 627.4554 Petitioner has charged Respondent with violating section 627.4554(4)(a) and (c)2. Section 627.4554(4)(a) requires that an insurance agent, in recommending a senior consumer purchase or exchange an annuity, have reasonable grounds for believing that the recommendation is suitable for the senior consumer on the basis of facts disclosed by the senior consumer regarding the consumer's other investments, other insurance products, and financial circumstances. Section 627.4554(4)(c)2. further requires that the insurance agent's recommendation be reasonable under all circumstances actually known to the agent at the time of the recommendation. As discussed above, Respondent recommended that the Wexlers surrender the EquiTrust annuity and purchase the Aviva annuity on the basis of the information they provided him regarding their liquid assets, other annuities, and financial goals. The evidence further shows that Respondent's recommendation was reasonable, based on the financial information the Wexlers provided and on his determination that the Aviva policy's terms and conditions were comparatively more favorable for the Wexlers than were the EquiTrust policy's terms and conditions. Accordingly, Petitioner has failed to demonstrate that Respondent violated section 627.4554(4)(a) or (c)2. Alleged Violations of Agency Rules Petitioner charged Respondent with violating rules 69B-215.210 and 69B-215.230. Rule 69B-215.210 declares that the business of life insurance is a public trust in which all agents have a common obligation to work together to serve the best interests of the insuring public, to understand and observe laws governing the life insurance business by accurately and completely presenting every fact essential to a client's decision, and to be fair in all relations with colleagues and competitors, always placing the policyholder's interest first. Rule 99B-215.230 declares misrepresentation to be unethical, and prohibits a range of acts regarding the making and disseminating of statements that misrepresent the terms of insurance policies or that misrepresent the insurance business or with respect to any person in the conduct of his insurance business. For the reasons previously discussed, the evidence does not clearly and convincingly establish that Respondent committed any acts that constitute violations of these rules.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services enter a Final Order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 27th day of September, 2012, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 27th day of September, 2012.
Findings Of Fact Respondent Judy Louise Robinson is currently licensed by the Florida Department of Insurance as a general lines agent, a health agent, and a dental health agent and has been so licensed since November 21, 1984. At all times material, Respondent engaged in the business of insurance as Fleming Island Insurer. At all times material, Respondent maintained two business bank accounts in the name of Fleming Island Insurer: Account No. 1740043215 at Barnett Bank in Orange Park and Account No. 11630004614 at First Union Bank, Park Avenue Office. First Union Bank is currently First Performance Bank. All funds received by Respondent from or on behalf of consumers, representing premiums for insurance policies, were trust funds received in a fiduciary capacity and were to be accounted for and paid over to an insurer, insured, or other persons entitled thereto in the applicable regular course of business. Respondent solicited and procured an application for a workers' compensation insurance policy from Linda Smith on September 13, 1989, to be issued by CIGNA. Respondent quoted Ms. Smith an annual workers' compensation premium of two thousand six hundred four dollars and forty cents ($2,604.40). Linda Smith issued her check payable to Fleming Island Insurer in the amount quoted by Respondent on September 13, 1989, as premium payment for the CIGNA workers' compensation insurance coverage. On September 14, 1989, Respondent endorsed and deposited Linda Smith's $2,604.40 check into Fleming Island Insurer's business bank account No. 1740043215 at Barnett Bank, Orange Park, Florida. On September 17, 1989, Respondent forwarded her check in the amount of two thousand six hundred eighty nine dollars and forty cents ($2,689.40) to NCCI ATLANTIC for issuance of a workers' compensation policy with CIGNA for Linda Smith, Inc. The difference between the amount paid to Respondent by Linda Smith ($2,604.40) and the amount paid by Respondent to CIGNA via NCCI ATLANTIC ($2,689.40) amounts to $85.00 advanced by Respondent because she misquoted the premium amount to Linda Smith. On September 17, 1989, Respondent notified Linda Smith that another $85.00 was due. Linda Smith never paid this amount to Respondent. On September 19, 1989, CIGNA issued a workers' compensation policy for Linda Smith, Inc. Respondent's check was thereafter returned to CIGNA due to insufficient funds. On or about October 20, 1989, CIGNA notified Respondent that her agency check had been returned as unpayable and requested substitute payment within ten days to avoid interruption in Linda Smith, Inc.'s workers' compensation insurance coverage. Respondent asserted that she was injured in an automobile accident on October 1, 1989 and could not work through July of 1990 due to chronic dislocation of her right arm, but she also asserted that she never closed her insurance business and operated it out of her home. Respondent's home is the address at which CIGNA notified her on October 20, 1989 concerning Ms. Smith's policy. Respondent failed to timely submit substitute payment to CIGNA, and as a result, Linda Smith, Inc.'s policy was cancelled January 1, 1990. On January 4, 1990, Linda Smith forwarded her own check in the full amount of $2,689.40 directly to CIGNA and her policy was reinstated. Respondent did not begin to repay Linda Smith the $2,604.40 proceeds of Linda Smith's prior check paid to Respondent until May 1991. At formal hearing, Respondent maintained that she was never notified that Linda Smith paid for the policy a second time. Even if such a protestation were to be believed, it does not excuse Respondent's failure to account to either Linda Smith or CIGNA for the $2,604.40, which Respondent retained. Respondent also testified that Barnett Bank's failure to immediately make available to Respondent the funds from Linda Smith's check, which cleared, resulted in Barnett Bank reporting to CIGNA that there were insufficient funds to cover Respondent's check to CIGNA. From this testimony, it may be inferred that Respondent knew or should have known that she owed someone this money well before May 1991. On November 11, 1989, Lewis T. Morrison paid the Traveler's Insurance Company six thousand forty-three dollars ($6,043.00) as a renewal payment on a workers' compensation policy for Morrison's Concrete Finishers for the policy period December 30, 1988 through December 30, 1989. At the conclusion of the 1988-1989 policy period, Traveler's Insurance Company conducted an audit of Morrison's Concrete Finishers' account. This is a standard auditing and premium adjustment procedure for workers' compensation insurance policies. It is based on the insured's payroll and is common practice in the industry. This audit revealed that Morrison's Concrete Finishers was due a return premium of two thousand one hundred fifty-three dollars and eighty- seven cents ($2,153.87) from the insurer. On March 30, 1990, Traveler's Insurance Company issued its check for $2,153.87 payable to Fleming Island Insurer. This check represented the return premium due Morrison's Concrete Finishers from Traveler's Insurance Company. On April 6, 1990, Respondent endorsed and deposited Traveler's Insurance Company's return premium check into the Fleming Island Insurer's business bank account No. 11630004614 at First Union Bank. The standard industry procedure thereafter would have been for Respondent to pay two thousand two hundred forty-eight dollars ($2,248.00) via a Fleming Island Insurer check to Morrison's Concrete Finishers as a total returned premium payment comprised of $2,153.87 return gross premium from Traveler's Insurance Company and $94.13 representing her own unearned agent's commission. When Respondent did not issue him a check, Lewis T. Morrison sought out Respondent at her home where he requested payment of his full refund. In response, Respondent stated that she would attempt to pay him as soon as she could, that she was having medical and financial problems, and that the delay was a normal business practice. Respondent testified that on or about April 19, 1990, in an attempt to induce Mr. Morrison to renew Morrison's Concrete Finishers' workers' compensation policy through Fleming Island Insurer, she offered him a "credit" of the full $2,248.00 owed him. Pursuant to this offer of credit, Respondent intended to pay Traveler's Insurance Company or another insurance company for Morrison's Concrete Finisher's next year's premium in installments from Fleming Island Insurer's account. This "credit" represented the return premium Respondent had already received from Traveler's Insurance Company on behalf of Morrison's Concrete Finishers for 1988-1989 which she had already deposited into Fleming Island Insurer's business account. Whether or not Mr. Morrison formally declined Respondent's credit proposal is not clear, but it is clear that he did not affirmatively accept the credit proposal and that he declined to re-insure for 1989-1990 through Respondent agent or Traveler's Insurance Company. Respondent still failed to pay the return premium and commission which she legitimately owed to Morrison's Concrete Finishers. On June 28, 1990, the Traveler's Insurance Company issued a check directly to Mr. Morrison for the full amount of $2,248.00. Respondent did not begin repaying Traveler's Insurance Company concerning Mr. Morrison's premium until after intervention by the Petitioner agency. At formal hearing, Respondent offered several reasons for her failure to refund the money legitimately due Mr. Morrison. Her first reason was that the district insurance commissioner's office told her to try to "work it out" using the credit method outlined above and by the time she realized this method was unacceptable to Mr. Morrison, he had already been paid by Traveler's Insurance Company. However, Respondent presented no evidence to substantiate the bold, self-serving assertion that agency personnel encouraged her to proceed as she did. Respondent also testified that she did not know immediately that Traveler's Insurance Company had reimbursed Mr. Morrison directly. However, it is clear she knew of this payment well before she began to pay back Traveler's, and since Mr. Morrison did not reinsure through her or Traveler's she should have immediately known the "credit" arrangement was unacceptable to him. Respondent further testified that she did not want to repay Mr. Morrison until a claim on his policy was resolved. However, there is competent credible record evidence that the Traveler's Insurance Company 1988-1989 workers' compensation policy premium refund was governed solely by an audit based on payroll. Mr. Morrison's policy premium or refund consequently was not governed by "loss experience rating", and the refund of premium would not be affected by a claim, open or closed. Thus, the foregoing reasons given by Respondent for not refunding Mr. Morrison's money are contradictory or not credible on their face. They also are not credible because Respondent admitted to Mr. Morrison in the conversation at her home (see Finding of Fact 24) that she was having trouble paying him because of medical and financial difficulties. Further, they are not credible because Respondent testified credibly at formal hearing that she would have paid Mr. Morrison but for her bank account being wiped out by a fraudulent check given her by an unnamed third party. On August 10, 1992, Respondent was charged by Information with two counts of grand theft. See, Section 812.014(2)(c) F.S. The allegations in the Information charged Respondent with theft of insurance premiums from Linda Smith and Lewis T. Morrison, and arose out of the same facts as found herein. On December 17, 1992, Respondent entered a nolo contendere plea to only the first count of grand theft as to matters involving Linda Smith and the other count was "null prossed." Respondent secured a negotiated sentence on the first count. "Grand theft" is a felony punishable by imprisonment by one year or more. Adjudication was withheld pending satisfactory completion of probation, including community service and payment of restitution and court costs. Respondent has been complying with her probation, including restitution payments.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Insurance enter a final order finding Respondent guilty of violations of Sections 626.561(1), 626.611(7), (9), (10), and (13); 626.621(2) and (6) F.S. under Count I, violations of Sections 626.561(1), 626.611(7), (9), (10), and (13), and 626.621(2) and (6) under Count II, and violations of Sections 626.611(14) and 626.621(8) F.S. under Count III, finding Respondent not guilty of all other charges under each count, and revoking Respondent's several insurance licenses. RECOMMENDED this 23rd day of June, 1993, at Tallahassee, Florida. ELLA JANE P. DAVIS 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 23rd day of June, 1993. APPENDIX TO RECOMMENDED ORDER 92-2060 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: As modified to more correctly reflect the whole of the record evidence and avoid unnecessary, subordinate, or cumulative material, all of Petitioner's proposed findings of fact are accepted. Respondent's PFOF: Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint. Sentence 2 is covered in Findings of Fact 4-18. Sentence 3 is accepted but subordinate and to dispositive. Sentence 4 is apparently Respondent's admission that she owed $2,604.40 to Linda Smith and paid her $500.00 of it. Accepted to that extent but not dispositive in that full payment was not made timely. Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint but not dispositive. Sentence 2 is accepted but immaterial. Sentence 3 is rejected as argument and not dispositive. As stated, the proposal also is not supported by the record. Sentence 4 It is accepted that Mr. Morrison admitted he had a claim. However, the record does not support a finding that he requested Respondent to contact Traveler's Ins. Co. about it. Even if he had, that is subordinate and not dispositive of the ultimate material issues. Sentence 5 is rejected as not supported by the credible record evidence. Covered in Findings of Fact 23-28. Sentence 6 is rejected as not supported by the record and as argument. Sentence 7 Accepted. Sentence 8 Accepted. The "Descriptive Narrative" is accepted through page 4, but not dispositive. Beginning with the words "In summary" on page 5, the remainder of the proposal is not supported by the record in this cause which closed April 16. 1993. COPIES FURNISHED: Daniel T. Gross, Esquire Division of Legal Services Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300 Judy Louise Robinson 4336 Shadowood Lane Orange Park, FL 32073-7726 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
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 The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint, and if so, what action should be taken.
Findings Of Fact At all times material hereto, Allison Kay Werner (Respondent) was licensed by the Department of Insurance and Treasurer (Petitioner) as a life and variable annuity contracts and life insurance agent. She was issued license number 106486443 in 1989. Prior to being licensed in Florida, in or around 1981 Respondent was a licensed agent in the State of New York. On February 15, 1991, Ms. Estelle Lewis went to the California Federal Bank (Bank), located at 4601 Sheridan Street, Hollywood, Florida, to redeem a $10,000 Certificate of Deposit (CD) which had matured. Ms. Lewis was 81 years old. Also, she was unemployed even though, in her earlier years, she worked. Through the years, Ms. Lewis engaged in short term, two year investments, not long term investments. Nor did she invest in annuities for her belief was that annuities were for young people who are planning towards retirement. Being a senior citizen and unemployed, Ms. Lewis needed her money for income, using the proceeds from her investments as income. She did not want to tie-up her money for long periods of time. Ms. Lewis approached the teller at the Bank to redeem her CD. The teller referred Ms. Lewis to Respondent to discuss re-investing her money. It was not unusual for a teller at the Bank to refer a Bank customer to Respondent. Also, at times, Bank employees assisted with scheduling appointments with Respondent. Respondent's office was located inside the Bank, within a glass enclosure, and could be seen from the teller's location. A sign identified Respondent's office as Kemper-Invest Financial Corporation for which Respondent was a representative. Respondent provided Ms. Lewis with her business card which only identified Respondent as an Invest Financial Corporation (Invest) representative located at the Bank. No where on the business card was Respondent identified as an insurance agent. No where on the business card were the terms "insurance" or "annuity." Furthermore, Respondent did not inform Ms. Lewis that she was an insurance agent. Ms. Lewis trusted the Bank and her trust extended to Respondent even though Ms. Lewis understood that Respondent was a representative of Invest and not employed by the Bank. Because the Bank teller had referred Ms. Lewis to Respondent and because Respondent's office was located within the Bank, Ms. Lewis believed that Respondent had a connection with the Bank. Without this trust, Ms. Lewis would not have engaged in any business with Respondent. Ms. Lewis informed Respondent that she wanted a two year investment. Respondent was not unfamiliar with discussing investments with senior citizens for most of her clients were age 70 and above. Ms. Lewis agreed upon a two year investment at a return of eight percent. Unbeknownst to Ms. Lewis, she had invested in an annuity which would mature in 20 years. The annuity also had an investment time of seven years, which meant that the annuity could be surrendered without a surrender charge in its seventh year. The maximum issuance age for the annuity was 85 which meant that anyone up to age 85 could purchase the annuity. That same day, February 15, 1991, Respondent completed an account application for the investment, which included writing Ms. Lewis' responses to questions on the application which included Ms. Lewis' age and date of birth. Respondent submitted the application to Ms. Lewis for her review. Ms. Lewis skimmed the application only for responses that she felt were important, i.e., her name and social security number. Finding those items correct, she signed the account application. No where on the account application were the terms "life insurance" or an "annuity" mentioned. Invest Financial Corporation and Kemper Fiancial Services were clearly displayed on the application. Also, the investment objective indicated on the application was growth instead of income. An application for an annuity, referred to as the All Savers Plan on the application, was also completed on that same date. However, this application contained the terms life insurance and annuity. Believing that life insurance or an annuity did not apply to her since neither were requested and were not agreed upon, Ms. Lewis signed this second application. Additionally, on February 15, 1991, Ms. Lewis gave Respondent the $10,000 and Respondent provided Ms. Lewis a receipt for the $10,000. The receipt contained a notation that the money was received for "Kemper All Savers." Invest and Kemper Financial Services were displayed on the receipt. No where on the receipt were the terms annuity or life insurance. As with other annuities sold by Respondent, she received a commission for the annuity that she sold Ms. Lewis. Paying commissions to insurance agents for annuities sold is a common practice. Subsequently, Ms. Lewis received an undated letter of thanks from Respondent for obtaining the services of Invest. The letter was on Invest letterhead, with Kemper Financial Services indicated on it. Additionally, on the letter Respondent identified herself as an Invest representative. The letter made no mention of what services Ms. Lewis had obtained or of life insurance or an annuity. Further, Ms. Lewis received two letters dated February 20, 1991 and February 28, 1991 from Kemper. The letters were on "Kemper Investors Life Insurance Company" letterhead and referenced Ms. Lewis' investment as an annuity. Ms. Lewis did not believe that the two letters applied to her since she had not purchased an annuity or life insurance. Consequently, she ignored the letters. Ms. Lewis received a copy of the annuity policy in the mail but did not read it. She filed it away with the rest of her documents associated with the transaction. Ms. Lewis received account summaries regarding her investment. The summaries indicated that they reflected the activity for an annuity called Kemper All Savers Annuity and that they were from the Kemper Investors Life Insurance Company. The summaries showed the performance of her investment. Ms. Lewis ignored the summaries as reflecting activities for an annuity in which she had invested. She continued to believe that she had not invested in an annuity. On or about February 15, 1993, approximately two years after the transaction, Ms. Lewis returned to Respondent's office located in the Bank to redeem her investment. At that time, Ms. Lewis was informed by Respondent that a penalty fee of $525.89 would be assessed for early withdrawal. Respondent advised Ms. Lewis further that she had an annuity which could be cashed-in at no penalty (no surrender charges) after seven years. The meeting on February 15, 1993, was the first time that Ms. Lewis was informed of a penalty by Respondent. Also, the meeting was the first time that Respondent had informed Ms. Lewis that she had purchased an annuity and that the annuity was a seven year investment. Ms. Lewis did not want to wait the additional years to avoid the penalty and insisted on surrendering what she knew now to be an annuity. Subsequently, Ms. Lewis received her $10,000 plus interest less the penalty. Respondent has vast experience in annuities. She has sold annuities since around 1981 when she was employed with Merrill Lynch and Shearson in New York. At all times material hereto, Ms. Lewis had no mental or physical infirmity which interfered with her mental capacity to think and understand. At all times material hereto, Ms. Lewis could read and write. Ms. Lewis has never been offered restitution or a refund of the penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order suspending the license of Allison Kay Werner for one-year. DONE AND ENTERED this 1st day of March, 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 1st day of March, 1996.
Findings Of Fact Petitioner is the administrative agency charged with responsibility for administering and enforcing the provisions of Chapter 626, Florida Statutes. At all times material to this proceeding, Respondent has been licensed and eligible for appointment in Florida as a life and variable annuities agent, a life, health, and variable annuities agent, and a general lines agent. The City of Port St. Lucie (the "City") has had a City-funded pension plan in effect for its employees since October 1, 1977 (the "plan"). The City funds the plan with a contribution of 10.5 percent of the gross income of each employee who is enrolled in the plan (the "participant"). The monthly contributions by the City are sent directly to The Prudential Insurance Company ("Prudential"). The plan is participant directed. It allows each participant to direct the investment of his or her share of the City's contribution into either an investment account or a split investment account. If a participant elects an investment account, all of the City's contributions for that participant are used to purchase an annuity contract. If a participant elects the split investment account, a portion of the City's contribution for that participant is invested in an annuity contract and a portion is invested in whole life insurance issued by Prudential. Each whole life policy builds a cash value and provides benefits not available in the annuity contract, including disability benefits. Each participant is completely vested in the plan after he or she has been enrolled in the plan for five years. Prudential issues annuity contracts and insurance policies on participants and provides plan services to the administrator and trustees of the plan. 1/ The City is the owner of both the annuity contracts and the insurance policies. Both the annuity contracts and insurance policies are maintained in the City offices of the plan administrator. Participants do not receive copies of either annuity or insurance contracts and do not receive certificates of insurance. Beginning in 1984, each participant has received monthly Confirmation Statements in their paycheck envelopes. The Confirmation Statements are prepared by Prudential and disclose the net investment activity for the annuity contract. From the inception of the plan, each participant has received an annual Employee Benefit Statement which is prepared by Prudential and discloses the amount of the employer contributions that were allocated to the annuity contract and the amount that was allocated to insurance. Participants are eligible to enroll in the pension plan after six months of service. Biannual enrollment dates are scheduled in April and October each year. Prior to each biannual enrollment date, the City conducts an orientation meeting to explain the pension plan to prospective participants. The City sends a notice to each eligible employee in his or her payroll envelope. The notice informs the employee of his eligibility and the date and time of the orientation meeting. At the City-run orientation meeting, eligible employees are told that the pension plan is a participant directed plan in which each of them must elect either a straight annuity investment or a split investment involving an annuity and life insurance. Thirty to forty percent of the prospective participants do not attend the City-run orientation meeting. Subsequent to the orientation meeting, Respondent meets individually with each eligible employee in a room located on the premises of the City. The enrollment sessions are scheduled by the City so that Respondent has approximately 30 minutes to meet individually with each prospective participant. During that 30 minutes, Respondent provides each eligible employee who enrolled in 1987 and thereafter with a copy of the Summary Plan Description. 2/ Respondent explains the investment options, answers questions, asks the participants for the information contained in the applications and has the participants sign the appropriate applications. 3/ Each participant elects his or her investment option during the 30 minute enrollment session with Respondent. 4/ There is no separate written form evidencing the participant's election. The only written evidence of the election made by the participant is the application for annuity contract and, if the participant elects the split investment option, the application for insurance. If a participant elects the straight annuity investment option, Respondent completes and has the participant sign only one application. That application is for an annuity contract. If the split investment option is elected, Respondent completes and has the participant sign a second application. The second application is for life insurance. An application for an annuity contract is completed by Respondent and signed by the participant regardless of the investment option elected by the individual participant. 5/ An application for an annuity contract is clearly and unambiguously labeled as such. The top center of the application contains the following caption in bold print: Application For An Annuity Contract [] Prudential's Variable Investment Plan Series or [] Prudential's Fixed Interest Plan Series The participant must determine as a threshold matter whether he or she wishes to apply for a variable investment or fixedinterest annuity contract. Respondent then checks the appropriate box. The front page of the application for annuity contract contains an unnumbered box on the face of the application that requires a participant who applies for a variable investment annuity contract to select among seven investment alternatives. The unnumbered box is labeled in bold, capital letters "Investment Selection." The instructions to the box provide: Complete only if you are applying for a variable annuity contract of Prudential's Variable Investment Plan Series Select one or more: (All % allocations must be expressed in whole numbers) [] Bond [] Money Market [] Common Stock [] Aggressively Managed Flexible [] Conservatively Managed Flexible [] Fixed Account [] Other TOTAL INVESTED 100 % The application for annuity contract is two pages long. Question 1a is entitled "Proposed Annuitant's name (Please Print)." Question 4 is entitled "Proposed Annuitant's home address." Question 10, in bold, capital letters, is entitled "Annuity Commencement Date," and then states "Annuity Contract to begin on the first day of." There is an unnumbered box on the application relating to tax deferred annuities. Question 12 asks, "Will the annuity applied for replace or change any existing annuity or life insurance?" (emphasis added) The caption above the signature line for the participant is entitled "Signature of Proposed Annuitant." An application for insurance is also completed by Respondent and signed by the participant if the split investment option is elected. The application for insurance is clearly and unambiguously labeled as such. The upper right corner of the application for insurance contains the following caption in bold print: Part 1 Application for Life Insurance Pension Series to [] The Prudential Insurance Company of America [] Pruco Life Insurance Company A Subsidiary of The Prudential Insurance Company of America The term "proposed insured" also appears in bold print in the instructions at the top of the application for insurance. The application for insurance is approximately five pages long. 6/ It contains questions concerning the participant's treating physician, medical condition, driving record, and hazardous sports and job activities. 7/ Question 1a is entitled "Proposed Insured's name - first, initial, last (Print)." Question 7 asks for the kind of policy for which the participant is applying. Question 9 asks if the waiver of premium benefit is desired. Question 12 asks, "Will this insurance replace or change any existing insurance or annuity in any company?" (emphasis added) Question 21 asks, "Has the proposed insured smoked cigarettes within the past twelve months?" The caption under the signature line for the participant is entitled "Signature of Proposed Insured," as is the signature line for the Authorization For The Release of Information attached to the application for insurance. Respondent met with each of the participants in this proceeding during the time allowed by the City for the enrollment sessions. Mr. Robert Riccio, Respondent's sales manager, was present at approximately 70 percent of those enrollment sessions. Respondent provided each participant who enrolled in 1987 and thereafter with a copy of the Summary Plan Description. Respondent explained the investment options, and answered any questions the participants had. The name, occupation, and date of the enrollment session of the participants involved in this proceeding are: (a) Edmund Kelleher Police Officer 3-16-88 (b) Raymond Steele Police Officer 9-29-88 (c) Mark Hoffman Police Officer 10-29-86 (d) Joseph D'Agostino Police Officer 3-12-88 (e) Charles Johnson Police Officer 9-24-84 (f) Donna Rhoden Admin. Sec. 3-26-87 (g) John Gojkovich Police Officer 10-2-84 (h) John Skinner Police Officer 9-14-84 (i) John Sickler Planner 3-14-90 (j) James Lydon Bldg. Inspect. 9-13-89 (k) Robert McGhee Police Officer 9-18-84 (l) Richard Wilson Police Officer 3-21-89 (m) Lorraine Prussing Admin. Sec. 9-6-84 (n) Helen Ridsdale Anml. Cntrl. Off. 9-14-84 (o) Sandra Steele Admin. Sec. 4-3-85 (p) Linda Kimsey Computer Op. 3-18-89 (q) Jane Kenney Planner 3-13-85 (r) Alane Johnston Buyer 3-18-89 (s) Paula Laughlin Plans Exam. 3-18-89 Helen Ridsdale Anml. Cntrl. Super. 9-14-84 Jerry Adams Engineer 3-16-88 Cheryl John Records Super. for the Police Dept. 9-14-84 Each participant in this proceeding elected the split investment option during his or her enrollment session with Respondent and signed applications for both an annuity contract and an insurance policy. Each participant signed the application for insurance in his or her capacity as the proposed insured. The City paid 10.5 percent of each participant's salary to Prudential on a monthly basis. The payments were sent to Prudential with a form showing the amount to be invested in annuities and the amount to be used to purchase insurance. Each participant who enrolled in 1987 and thereafter received with his or her paycheck a monthly Confirmation Statement and all participants received an annual Employee Benefit Statement disclosing the value of the investment in annuities and the value of the investment in life insurance. The participants in this proceeding, like all participants, did not receive copies of annuity contracts and insurance policies and did not receive certificates of insurance. The annuity and insurance contracts were delivered to the City, as the owner, and maintained in the offices of the City's finance department. The participants in this proceeding had no actual knowledge that they had applied for insurance during the enrollment session with Respondent. Most of the participants had other insurance and did not need more insurance. Each participant left the enrollment session with Respondent with the impression that they had enrolled in the pension plan and had not applied for insurance. The lack of knowledge or misapprehension suffered by the participants in this proceeding was not caused by any act or omission committed by Respondent. Respondent did not, either personally or through the dissemination of information or advertising: wilfully misrepresent the application for insurance; wilfully deceive the participants with respect to the application for insurance; demonstrate a lack of fitness or trustworthiness; commit fraud or dishonest practices; wilfully fail to comply with any statute, rule, or order; engage in any unfair method of competition or unfair deceptive acts or practices; knowingly make false or fraudulent statements or representations relative to the application for insurance; or misrepresent the terms of the application for insurance. No clear and convincing evidence was presented that Respondent committed any act or omission during the enrollment sessions which caused the participants to believe that they were not applying for insurance. 8/ None of the participants testified that Respondent prevented them or induced them not to read the applications they signed. 9/ All of the participants affirmed their signatures on the application for insurance, but most of the participants did not recognize the application for insurance signed by them. Some participants could not recall having signed the application. The participants could not recall being hurried or harassed by Respondent and could not recall if Respondent refused to answer any of their questions. 10/ None of the participants provided a clear and convincing explanation of how Respondent caused them to sign an application for insurance without their knowledge or described in a clear and convincing fashion the method by which Respondent prevented them or induced them not to read or understand the contents of the documents they were signing. 11/ Eleven of the 22 participants cancelled their insurance policies after "learning" that they had insurance policies. Eight participants cancelled their policies on August 23, 1990. Two cancelled their policies on February 5, 1991, and one cancelled her policy on April 18, 1991. Financial adjustments required by the cancellations have been made and any remaining contributions have been invested in annuity contracts. Since 1983, Respondent has assisted Prudential and the City in the administration of the pension plan, including the enrollment of all participants. Prior to 1990, there was only one incident in which a participant complained of having been issued an insurance policy without knowing that she had applied for an insurance policy. The policy was cancelled and the appropriate refund made. Respondent has a long and successful relationship with the City and has no prior disciplinary history with Petitioner. Respondent is the agent for Prudential. The pension plan was intended by Prudential and the City to provide eligible employees with investment opportunities for annuities and life insurance. Respondent generally makes higher commissions from the sale of insurance than he does from the sale of annuities. 12/ Mr. Riccio receives 14 percent of the commissions earned by Respondent. Respondent encourages all participants to elect the split investment option by purchasing both annuities and insurance. If a participant states that he or she does not want life insurance, Respondent asks them for their reasons and explains the advantages of life insurance. If the participant then rejects life insurance, Respondent enrolls the participant in a straight annuity investment. Such practices do not constitute fraud, deceit, duress, unfair competition, misrepresentations, false statements, or any other act or omission alleged in the one count Administrative Complaint.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner should enter a Final Order finding Respondent not guilty of the allegations in the Administrative Complaint and imposing no fines or penalties. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 14th day of January 1992. DANIEL MANRY 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 14th day of January 1992.
The Issue The issue to be determined is whether Petitioner (“Senior Financial Security”)1/ is entitled to an award of attorney’s fees and costs pursuant to section 57.111, Florida Statutes (2019).2/ Senior Financial Security is entitled to such an award if: (a) the Department of Financial Services’(“the Department”) actions were not substantially justified; or (b) no special circumstances exist that would make an award of fees and costs unjust.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, matters subject to official recognition, the Recommended Order and the Final Order from the underlying proceeding, and the entire record in the instant case, the following Findings of Fact are made: The Parties The Department is the state agency responsible for regulating and licensing insurance agents and agencies. That responsibility includes disciplining licensed agents and agencies for violations of the statutes and rules governing their industry. At all times relevant to the instant case, Jean-Ann Dorrell was a Florida-licensed insurance agent selling fixed annuities and fixed index annuities. She owns Senior Financial Security, a licensed insurance agency located in The Villages, Florida. Ms. Dorrell is not licensed to conduct securities business. The Initiation of the Department’s Investigation At all times relevant to the instant case, Susan Alexander was the regional administrator for the Department’s Jacksonville field office. Prior to becoming a Department employee in 1998, Ms. Alexander had been an insurance agent and financial advisor who held insurance licenses pertaining to life, health, variable annuities, and property and casualty. She also held a Series 6 investment license. At the time of the final hearing in the instant case, she still possessed the aforementioned licenses, but they were “on hold.” On July 1, 2014, Ms. Alexander received a complaint forwarded to her from the Department’s Division of Insurance Fraud. The complaint was from Laura Wipperman who had recently worked for Ms. Dorrell at Senior Financial Security. Ms. Wipperman’s complaint alleged that Ms. Dorrell regularly engaged in the following practices: (a) participating in the sale or delivery of annuities only for new clients, clients with money to move, or existing clients who insisted on meeting with her; (b) giving investment advice without having the necessary licensure; (c) instructing clients to procure reverse mortgages and use the resulting funds to purchase annuities; (d) instructing clients to surrender annuities and replace them with ones that are less suitable for them; and (e) encouraging clients to engage in financially disadvantageous transactions so that Ms. Dorrell would receive commissions. Ms. Wipperman executed an affidavit on July 29, 2014, alleging that Ms. Dorrell had her acting as an agent for Senior Financial Security clients between July of 2010 and March of 2013 despite the fact that she lacked the required licensure. Diana Johnson, another former employee of Senior Financial Security, also provided the Department with an affidavit on July 29, 2014, stating that: I began working for Jean-Ann Dorrell at Senior Financial Security about June of 2010, and I was the receptionist at that time. In the first part of 2013, I was promoted to [] office manager. I do not have and have not been licensed to sell insurance in Florida. . . . When I was promoted to the position of [] office manager, agent Dorrell expanded my duties to include, meeting with clients to review the client’s insurance coverage Agent Dorrell had a motto, “Don’t leave any money on the table.” If a client had an annuity that had a penalty free withdrawal available, I was instructed to contact the client to have them come in for a review. I would then solicit the sale of either another annuity or a life insurance policy and tell the client that funds are available and they will not incur a penalty to withdraw the funds from their policy. If the client made the decision to purchase a policy that I recommended, I would complete the application and have the client sign the paperwork along with the forms to have the funds withdrawn from the existing policy. Agent Dorrell instructed me to explain policies and the benefits. When a policy was issued, I would have the client come to the office and I would deliver the contract to them. . . . I would also answer any questions the client may have [had] about the insurance policy. Many times an appointment was made for agent Dorrell to meet with the client and when the client arrived at the scheduled time, agent Dorrell would make an excuse that she was not able to meet with the client and I was instructed to handle the sale of the policy and then complete the application. I am aware of certain situations where a client passed away and agent Dorrell would have me contact the relatives or beneficiaries to complete the paperwork to receive the death benefits. Agent Dorrell told [me] to sell some type of an insurance policy to the beneficiary using the proceeds from the death benefits. Janet Barbuto was a client who passed away that I remember. I sold an annuity policy to each of her two daughters, Elizabeth Barbuto and Maria Erb, using the proceeds from Janet’s policy. . . . Agent Dorrell would also have me review any client’s brokerage account they may have. Agent Dorrell would have me convince the client to either liquidate their account to cash or transfer the funds to her brokerage house account Agent Dorrell’s ultimate goal is to use funds from the client’s brokerage account to sell the client an annuity or life insurance policy. . . . I have prepared several Lady Bird deeds at the instruction of agent Dorrell. . . . I have taken several insurance company product training classes online for agent Dorrell. Agent Dorrell would send an email to me instructing me to take a particular product training course online. I would log onto the company’s website as agent Dorrell and complete the training course. Agent Dorrell would consistently berate me for not selling life insurance policies because the client would not want to purchase one after I had asked the client if they would be interested in a policy. Agent Dorrell told me that the client does not know what they want and that I needed to learn how to sell policies. Agent Dorrell would say that if I did not learn how to sell, our door would not be open if all the clients said no to my recommendations. Matthew Plunkitt, another former employee of Ms. Dorrell, executed the following affidavit on December 11, 2014: During the time that I worked in agent Dorrell’s office there were a number of issues and regular business practices which made me decide to find a new job. . . . I sat in on several appointments at agent Dorrell’s direction where she would tell the consumer that they should be concerned about the stock market, that a stock market correction was coming, that they were going to lose a lot of money, and that they needed to get out of the market right away. Agent Dorrell was absolutely talking about investments which I knew that she was not licensed to talk to the consumer about. Agent Dorrell would then suggest that if the consumer would transfer their account to Van Guard Capital, the funds could then be turned into cash to purchase annuities, which would make the money safe and the consumer would not lose anything when the market made the correction which was coming. . . . When new clients would come into the office, agent Dorrell would sit with them for usually the first two appointments. Afterwards clients would then meet with usually Diana Johnson, the office manager and sometimes myself. Agent Dorrell was not in the office often, so Diana Johnson, as the office manager was required to handle everything in agent Dorrell’s absence. . . . I remember that on the appointments that I sat in on, everyone was sold an income rider on their annuity whether it was necessary or not. I do not know what the reasoning was behind the rider. . . . Being employed in agent Dorrell’s office was extremely stressful and she was frequently verbally abusive to her staff, threatening to fire them for not following her exact instructions. When objections would be raised about her instructions or office procedure, they would be told that we need to listen to her and not the clients or the insurance companies or the rules. I can’t remember the name of the client, but I remember that at one point she instructed me to pretend to be someone’s grandson to get the information she needed on a stock account. Her attitude made it impossible to discuss many of the issues in the office with her. Ms. Alexander supervised Ruth Williams, the Department’s lead investigator for this matter. Prior to her employment with the Department, Ms. Williams spent 10 years in the insurance industry and had acquired life insurance, health insurance, and variable annuity licenses. She also dealt with indexed annuities. The investigation of Ms. Dorrell was assigned to Ms. Williams, and Ms. Alexander received regular updates on the status of Ms. Williams’s investigation. At the close of a typical investigation, Ms. Alexander would review the evidence and the investigator’s recommendation. She could then decide that a case should be closed without any disciplinary action or that the case should be forwarded to the Legal Processing Unit in Tallahassee for an assessment of the allegations and evidence. If the Legal Processing Unit did not close the case, then the case would be forwarded to the Department’s General Counsel’s Office. Count I – Frederic Gilpin Frederic Gilpin was born in 1940 and worked in the automobile industry, primarily as a service manager in dealerships, for 44 years before retiring in 2006. Mr. Gilpin purchased a Prudential variable annuity in 2006 through Bryan Harris, an investment advisor in Maryland, for $260,851.14. On December 31, 2008, Mr. Gilpin’s Prudential variable annuity was worth only $200,989.32. By March 31, 2009, its value had fallen to $183,217.37. The decrease in the annuity’s underlying value coincided with the precipitous declines experienced by the stock market in 2008 and 2009. On May 1, 2009, Mr. Gilpin exercised a rider in the Prudential annuity contract that guaranteed a yearly income of $15,625.00. That annual income would continue for the rest of his life regardless of the stock market’s performance. The guaranteed income stream would only be destroyed if Mr. Gilpin withdrew from the annuity’s principal. Mr. Gilpin and his wife met with Ms. Dorrell in 2012 to discuss their financial situation. As recommended by Ms. Dorrell, Mr. Gilpin surrendered the Prudential annuity and used the proceeds to purchase a fixed index Security Benefit annuity. The purchase price of approximately $205,000.00 for the Security Benefit annuity was allocated between two accounts whose performance was tied to the Standard and Poor’s 500. Ms. Alexander obtained a letter that Mr. Gilpin wrote to Security Benefit on April 22, 2013, asking that the aforementioned purchase be rescinded: Please accept this letter as indication that I would like my annuity that was rolled over from Prudential and into Security Benefit on January 4th, 2013 rescinded and put back into the contract that we rolled it over from. . . . My agent, Jean Dorrell misrepresented the facts and did not disclose to me the guarantee that I would be giving up when I moved the money over. . . . I put my trust in Ms. Dorrell, and I believe that she did not do what was in my best interest and was simply looking to get paid by moving my annuity contract over. She listed in a letter to me that I was paying $15,000 per year in fees, as a big reason why I should move the money. I have since discovered that was a gross overstatement of the fees that I was paying in my Prudential contract. Upon closer examination, it looks more like my fees were closer to $7,000 per year, not $15,000 and my Management and Expense fee was set to drop from 1.65% to 0.65% when I hit my 10 year marker in 2016 (also not disclosed by Jean). I also paid a $13,077 surrender charge when I moved the contract. Jean told me not to worry about it because with the 8% bonus it would offset the fee that I was paying to move the money. While it appears that this is true, she didn’t take into consideration that I now am in a new contract with a new 10 year surrender charge both on my contract and the bonus I received with not as much liquidity on my money after the move. Probably the most egregious representation is that she stated to me that the old Prudential contract had no guarantees, and I have since come to understand that I had a very valuable lifetime income guarantee that gave me protected income for life based on a protected income base of $312,513.80, which guaranteed lifetime income of $15,625.69. . . . Now that I have moved the funds over, I have forfeited that guarantee. . . . The Department’s April 25, 2017, Administrative Complaint alleged that Ms. Dorrell violated multiple provisions of the Florida Insurance Code and the Florida Administrative Code by using misleading and/or false assertions to induce Mr. Gilpin to purchase an unsuitable annuity. The Findings of Fact from the Recommended Order demonstrate that the Department had valid reasons to question the suitability of the Security Benefit annuity. At the time of the exchange, the Prudential annuity only had four more years of surrender charges, and Mr. Gilpin started a new 10-year period of surrender charges with the Security Benefit annuity. Mr. Gilpin incurred a surrender charge of $13,077.56 for surrendering the Prudential annuity. While that surrender charge was more than offset by an eight percent bonus (i.e., $16,000.00) he earned by purchasing the Security Benefit annuity, that eight percent bonus was subject to recapture for the first six years. The Security Benefit annuity had a 100- percent participation rate, and a seven percent roll-up rate. In contrast, the Prudential annuity only offered a five percent roll-up rate. Also, Mr. Gilpin and his wife experienced significant health issues during the relevant time period and were fortunate to be well-insured. However, they would have likely incurred substantial penalties if they had been forced to use funds from the relatively illiquid Security Benefit annuity to finance their treatment. In addition, moving Mr. Gilpin’s funds from a variable Prudential annuity to the fixed index Security Benefit annuity cost Mr. Gilpin when the stock market rebounded from the lows of the most recent recession. Finally, a significant factor in assessing the suitability of the two annuities was whether Mr. Gilpin destroyed his guaranteed lifetime income stream of $15,625.69 by taking an excess withdrawal from the Prudential annuity. If he had not, then it becomes much easier to argue that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. At the time it issued the Administrative Complaint, the Department possessed statements from Prudential indicating that Mr. Gilpin’s guaranteed income stream was intact as late as September 30, 2012. However, Mr. Gilpin’s hearing testimony, his 2010 and 2011 income tax returns, and Ms. Dorrell’s testimony called that into question. While the totality of the evidence presented at the final hearing did not clearly and convincingly demonstrate that Ms. Dorrell committed the violations alleged in Count I, Mr. Gilpin’s letter to Prudential, the Prudential statements, and a comparison of the Prudential and Security Benefit annuities provided the Department with a reasonable basis for pursuing Count I. This analysis is further discussed in paragraphs 81 through 84 in the Conclusions of Law. Counts II and III – Elizabeth Barbuto and Maria Erb Elizabeth Barbuto executed the following affidavit on November 10, 2014: My mom, Janet Barbuto passed away on April 16, 2014. My aunt, Marlene Brisco and my mom were both clients of agent Jean Ann Dorrell and Senior Financial Security. After the funeral, my aunt, Marlene Brisco, set up an appointment for my sister Maria Erb and me to meet with agent Dorrell to review my mom’s investments with agent Dorrell. When we got to the appointment, Diana Johnson and Matthew Plunkitt were waiting to meet with us. Agent Dorrell came in for a few moments and then left to meet with other clients. When I went into this appointment, I did not realize that I would be making any major decisions that day. I thought that I was going over my mom’s things, and that I would have time to make any major decisions afterwards. In the meeting, I was sitting next to Matthew and my sister Maria was sitting next to Diana. Diana did the majority of the talking. If there was something that I didn’t understand or needed to read Matthew would help me out, but he did not really explain anything about what we were seeing or signing. I remember filling out a form which appeared to be a new client form, asking about my risk tolerance and things. I thought that I would be signing some paperwork to have Mom’s policies placed into my name. Instead I now know that the paperwork, which Diana already had prepared, was paperwork to have new annuity contract[s] issued in my name, not transferring the contracts mom had [set] up into my name. The only thing I remember is that I was told that I would need to keep one for 10 years. I believe that one of the policies was placed with Athene and one was placed with Equitrust. I received a huge packet from Athene, but by the time that I opened it, it was too late to free look the policy. Since that time, I have paid more attention and have spoken to a family friend and financial advisor, David Hodge, who explained to me that I could have made different choices with my inheritance. In looking back on that day, I was still grieving the loss of my mother and cannot believe that paperwork was already prepared to move my financial future without anyone ever having talked with me beforehand to see what I was thinking about doing. At the Department’s request, EquiTrust and Athene offered refunds to Ms. Barbuto. Ms. Erb executed an affidavit on October 30, 2014, that mirrored her sister’s: My mom, Janet Barbuto, passed away in Florida in April, 2014. She was a client of agent Jean Ann Dorrell’s. While I was in Florida a few days after my mom’s passing, my sister Elizabeth Barbuto and I went to agent Dorrell’s office to discuss my mom’s estate. We had a meeting with two people, Diana and Matthew. I do not know either of their last names. Diana did most of the talking. Matthew did not say much. She explained to us that Mom had several Roth and IRA accounts. At sometime during that meeting agent Dorrell came into the office, talked for a few minutes, offered her sympathy, and then left. Agent Dorrell did not discuss any of the policies or accounts with us. Shortly after that one meeting, I returned to Oregon and haven’t been back to Florida to see agent Dorrell since. I think at that first meeting, I may have signed some papers, but I was still in shock, so I am not sure what I signed. At that point, the office of agent Dorrell emailed me some documents to be signed. I know that Mom’s two IRA’s needed to have mandatory withdrawals taken from them, before we could proceed with anything else. Most of Mom’s annuities were with American Equity and I remember at some point either Diana or Matthew informed me that American Equity did not do inherited IRA annuities for people who lived outside Florida, so it would be necessary for me to place my inheritance with another company. My sister is a Florida resident so this problem did not pertain to her. I am not sure if my sister is doing business with agent Dorrell’s office or not. I did receive two packages with contracts from agent Dorrell’s office and I signed where I was instructed to sign and returned everything to the office as instructed. The annuity policies which agent Dorrell selected for me were with Athene. After thinking about it, I contacted my financial planner in Pennsylvania, and found out that the paperwork I had signed was for a 10 year annuity, which I did not want to keep. A portion of Diana Johnson’s July 29, 2014, affidavit corroborated the affidavits from Ms. Barbuto and Ms. Erb: I am aware of certain situations where a client passed away and agent Dorrell would have me contact the relatives or beneficiaries to complete the paperwork to receive the death benefits. Agent Dorrell told [me] to sell some type of an insurance policy to the beneficiary using the proceeds from the death benefits. Janet Barbuto was a client who passed away that I remember. I sold an annuity policy to each of her two daughters, Elizabeth Barbuto and Maria Erb, using the proceeds from Janet’s policy. Counts II and III of the Department’s Administrative Complaint alleged that Ms. Dorrell violated the Florida Insurance Code and the Florida Administrative Code by: (a) directing an unlicensed person, Diana Johnson, to sell annuities to Ms. Barbuto and Ms. Erb; (b) failing to perform any insurance agent services for Ms. Barbuto’s transactions; falsely informing Ms. Barbuto that it was necessary to exchange her late mother’s IRA contracts for new financial instruments so that Ms. Dorrell could obtain a commission; and falsely stating to Ms. Erb that her non-Florida residency made it necessary for her mother’s IRA contracts to be liquidated with the resulting funds being used to purchase an annuity from Athene. The Department noted in the pre-hearing stipulation submitted prior to the final hearing in the underlying case that it would be dropping Counts II and III. Nevertheless, the affidavits from Ms. Barbuto, Ms. Erb, and Ms. Johnson provided a reasonable basis to support the Department’s allegation that Ms. Dorrell utilized unlicensed personnel to sell annuities. Ms. Johnson’s affidavit described how she would engage in the unlicensed sale of insurance products, and she specifically named Ms. Barbuto and Ms. Erb as examples of how Ms. Dorrell instructed her to sell products to the beneficiaries of death benefits. As explained in paragraphs 85 and 86, under the Conclusions of Law, the Department’s action against Petitioner as set forth in Counts II and III was, at the time that action was taken, substantially justified. Count IV – Deborah Gartner’s Annuities At the time of the final hearing in the underlying case, Deborah Gartner was a 71-year-old widow who met Ms. Dorrell at a Senior Financial Security seminar in 2007. Ms. Gartner filled out a form indicating that her net worth was between $500,000.00 and $1 million. In January of 2008, Ms. Gartner met with Ms. Dorrell in order to seek financial advice. Ms. Gartner had $201,344.14 in a Guardian Trust account and $195,182.44 in a Guardian Trust IRA. In addition, Ms. Gartner owned an $80,000.00 certificate of deposit. On a monthly basis, Ms. Gartner was receiving $1,381.00 from social security, $786.15 from a pension, and $4,500.00 from investment withdrawals. The latter came from depleting principal rather than interest. At the time of the January 2008 meeting, the stock market was declining, and Ms. Gartner was adamant about getting out of equities. Ms. Dorrell told Ms. Gartner that annuities would be appropriate if she was interested in principal protection and guaranteed income. Because she lacked a securities license, Ms. Dorrell could not legally recommend or instruct Ms. Gartner to liquidate her equity investments. On June 24, 2014, Ms. Gartner requested assistance from “Seniors vs. Crime,” a special project of the Florida Attorney General. Jon Hartman handled her case, and Mr. Hartman had extensive experience in finance. For example, he previously worked as the director of investments for the K-Mart Corporation’s pension savings plan and managed approximately $2 billion in assets. After leaving K-Mart, Mr. Hartman worked as the chief financial officer for a retail telecommunications company. His last position, prior to retiring from full-time employment, involved advising high net worth individuals on their investments. While Mr. Hartman has never sold insurance or held a brokerage license, he is a chartered financial analyst, and he described that credential as “the gold standard for people who wish to manage money on a professional level.” His November 20, 2014, investigative report from “Seniors vs. Crime” states that on December 31, 2007, Ms. Gartner had $394,814 invested in relatively liquid assets such as stock mutual funds, a short term bonds, and one or more money market funds. The report suggests that Ms. Dorrell arranged for the vast majority of the aforementioned money to be transferred into relatively illiquid annuities. The following paragraph from the report questions the wisdom behind transferring Ms. Gartner’s funds to annuities and whether subsequent annuity purchases enriched Ms. Dorrell at the expense of excessively limiting Ms. Gartner’s liquidity: While some investments in annuities may be appropriate, prudent financial management does not recommend that anyone place 90+% of their investable assets in annuities or any other single investment. All investors should maintain a well-diversified portfolio based upon their risk tolerances and liquidity needs. Further, we are troubled by the fact that annuities typically carry high commission rates for agents. Information that we obtained from the insurance company web sites indicates that the commission rates for these types of annuities are 7-9%. . . . Further, we are curious to know the reasoning behind the transfer of the Reliance Standard annuities to different insurance companies [in] 2011. It appears that these transactions were motivated by additional commissions for Ms. Dorrell. It is our understanding that the current surrender charge for the two Allianz MasterDex 10 contracts is 7.50%, decreasing by 1.25% per year. The surrender charge will not drop to zero until February, 2019. For the two American Equity contracts, the current surrender charge is 16% and will not drop to zero until February, 2024. However, withdrawals limited to 10% annually from Allianz and American Equity may be taken without incurring a surrender charge on the anniversary date of the policies. Thus, the annuities severely restrict Ms. Gartner’s liquidity position. One of the conclusions in Mr. Hartman’s report stated that: It is our opinion that Ms. Dorrell “churned” Ms. Gartner’s investment portfolio for her benefit to earn commission income. As evidenced by the Guardian Trust statements as of December 31, 2007, Ms. Gartner had two different accounts totaling $394,814 that were invested approximately two-thirds in different equity mutual funds and the remaining one-third in short bond funds and money market funds. As stated on page 2 of this report, it is our opinion that no reputable financial advisor would place 90% or more of any client’s assets in any single investment vehicle. Ms. Gartner executed an affidavit on October 7, 2014, indicating that she completely relied on Ms. Dorrell to manage her finances after her husband’s death: To the best of my knowledge, everything that my husband had set up was in the stock market. Most of the funds were in IRA’s in his name. Nothing was in my name until he passed away. After Agent Dorrell had my portfolio transferred, everything was placed into Van Guard Capital Account number 5XG- 153754. . . . When I did meet with Agent Dorrell in the beginning when the accounts were fresh, Agent Dorrell would get out her chalkboard and explain and [] I didn’t understand what she was talking about, but it sounded good. So I would do what Agent Dorrell suggested. I trusted her like she was my sister, and so whatever Agent Dorrell suggested, I would go along with. I had no reason to question what was happening with my accounts. I was getting a monthly allowance of $2500.00 and I thought everything was fine. . . . Pretty soon, after I had some questions, and I would make an appointment with Agent Dorrell, and in would walk Goldie and she would take over. This went on for about two years. It was always Goldie. I’m not sure where the money was coming from. I am assuming that the money came from one of my annuities or my other accounts. I trusted Agent Dorrell to take care of everything and Goldie and Diana worked for her. They were getting instructions from Agent Dorrell on my behalf. In Count IV of the Administrative Complaint, the Department alleged that Ms. Dorrell: (a) operated without a brokerage registration and gave investment advice that led to the depletion of Ms. Gartner’s funds via the conversion of liquid brokerage assets into illiquid annuities; (b) recommended the liquidation of an annuity that caused Ms. Gartner to incur a substantial loss due to surrender charges; and (c) falsified information on annuity application forms. Thus, the Department accused Ms. Dorrell of violating the Florida Insurance Code and the Florida Administrative Code by disseminating false information and by demonstrating a lack of trustworthiness and expertise. Ms. Gartner’s assertions about how she relied on Ms. Dorrell to manage her money corroborated the portion of Mr. Plunkitt’s affidavit in which he stated that Ms. Dorrell gave investment advice without having the proper licensure. While the Recommended Order from the underlying proceeding indicates that the allegation that Ms. Dorrell gave investment advice turned on a credibility determination, the affidavits from Ms. Gartner and Mr. Plunkitt provided a reasonable basis for Count IV. Also, the report from “Seniors vs. Crime” presented a solid basis for concluding that Ms. Dorrell had mishandled Ms. Gartner’s funds. The substantial justification for pursuing Count IV is discussed further in paragraphs 87 through 89, under the Conclusions of Law. Count V – Deborah Gartner’s Real Estate Transactions Ms. Gartner and Ms. Dorrell became friends, and Ms. Gartner sought Ms. Dorrell’s advice in 2012 about selling her home in Summerfield, Florida. At that time, Ms. Gartner wanted to acquire a smaller home in The Villages, Florida. However, Ms. Gartner was having difficulty selling the Summerfield home. Along with referring Ms. Gartner to a real estate agent, Ms. Dorrell allegedly advised her to stop paying the mortgage on her Summerfield home and to do a short sale. Ms. Gartner and Ms. Dorrell informally agreed that Ms. Gartner would select a house in The Villages, Ms. Dorrell would purchase it, and Ms. Gartner would then buy the house from her. Ms. Dorrell made the initial purchase because Ms. Gartner lacked funds and/or a good credit rating following the short sale. Ms. Gartner and Ms. Dorrell discussed Ms. Gartner purchasing the villa from Ms. Dorrell, but they never reached a formal agreement on terms. Because a short sale would have a negative impact on her credit rating, Ms. Dorrell allegedly advised Ms. Gartner to buy a new car prior to executing the short sale. Ms. Gartner sold her 2003 Mazda Tribute to Ms. Dorrell for $10,000.00, and Ms. Gartner purchased a new car. Ms. Gartner selected a villa in The Villages, and Ms. Dorrell purchased it for $229,310.78 on November 1, 2012. Of the aforementioned amount, Ms. Gartner paid $10,000.00 and Ms. Dorrell paid the remaining $219,310.78. At this point in time, Ms. Dorrell was the legal owner of the villa. Ms. Gartner could not move into the villa immediately after the sale because it was being rented, and the tenants’ lease extended through April of 2013. Ms. Dorrell received the rental payments of $1,800.00 per month and paid the expenses associated with the villa between November of 2012 and April of 2013. Those expenses included items such as home insurance, cable television, lawn maintenance, and utilities. By May of 2013, Ms. Gartner had completed a short sale of her Summerfield home. She received a short sale benefit of $36,775.00 and a seller assistance payment of $3,000.00. Ms. Gartner moved into the villa in May of 2013. At that point in time, there was no formal agreement between Ms. Gartner and Ms. Dorrell about when Ms. Dorrell would sell the villa to Ms. Gartner or how Ms. Gartner would pay Ms. Dorrell for it. Ms. Gartner paid no rent to Ms. Dorrell from May of 2013 through April of 2014. In November of 2014, Ms. Dorrell sold the villa to Ms. Gartner for approximately $219,000.00, the same price that Ms. Dorrell had paid for it. In order to finance the sale, Ms. Gartner executed a promissory note that would pay Ms. Dorrell $100,000.00 with four percent interest. Ms. Dorrell did not record that promissory note. In order to finance the remainder of the purchase price, Ms. Gartner obtained a reverse mortgage. Ms. Gartner stated in her October 7, 2014, affidavit that “all of a sudden I received paperwork from Agent Dorrell stating that I owed her all kinds of money and if I did not pay up she could take my home.” Mr. Hartman’s report also covered the aforementioned transactions and reached the following conclusions: It is our opinion that Ms. Dorrell gave Ms. Gartner very poor investment advice in that she convinced Ms. Gartner to enter into a short sale without investigating other alternatives. Second, Ms. Dorrell either kept very poor records or deliberately kept Ms. Gartner “in the dark” regarding her financial obligations. Third, Ms. Dorrell did not formulate a reasonable exit strategy for Ms. Gartner to pay off her obligations to Ms. Dorrell. Apparently, her strategy was to force Ms. Gartner into applying for a reverse mortgage, using those proceeds to pay off the promissory note, and then get the rest of her money from Ms. Gartner’s IRA account [when] Ms. Gartner turned 70 and ½. That strategy would have a negative impact on Ms. Gartner’s income tax situation as it would increase her adjusted gross income, making her social security payments 85% taxable. It is our opinion that Ms. Dorrell has willfully and deliberately overstated her claims for monies due from Ms. Gartner. Further, we documented that Ms. Dorrell was not being truthful with us regarding her relationship with Ms. Gartner during our meeting on August 14, 2014. The true amount of the financial obligation that Ms. Gartner has to Ms. Dorrell is unknown. Ms. Gartner had signed a promissory note for $100,000. Beyond that, some amount is due Ms. Dorrell. However, we do not have sufficient information to make an accurate determination of the additional amount due. The Department’s Administrative Complaint alleged that Ms. Dorrell committed several wrongful acts such as: (a) advising Ms. Gartner to stop making mortgage payments on the Summerfield home; (b) arranging for the purchase of the villa and accepting a $10,000.00 deposit from Ms. Gartner without giving her credit for that payment; (c) failing to record the promissory note; and (d) pressuring Ms. Gartner to apply for a reverse mortgage and arranging to obtain the balance from Ms. Gartner’s IRA account in order to pay off the promissory note. According to the Department, the aforementioned allegations amounted to a violation of Florida Administrative Code Rule 69B-215.210 which declares that all life insurance agents must always place the policyholder’s interests first. The Department also concluded that the aforementioned allegations demonstrated a lack of trustworthiness to engage in the business of selling insurance. Ms. Gartner’s affidavit along with the report from “Seniors vs. Crime” provided a reasonable basis for the Department to pursue the allegations under Count V. The substantial justification for pursuing Count V is discussed further in paragraphs 90 and 91 under the Conclusions of Law. Count VI – Earl Doughman Earl Doughman was born in 1934 and was a client of Ms. Dorrell’s. He wrote the following letter to the Security Benefit Life Insurance Company on April 14, 2014: This letter is to file a formal complaint concerning the Total Value Annuity dated 9/30/2013. Jean A. Dorrell is the listed agent on my annuity. After a recent phone call to [acquire] information regarding my annuity, I discovered that I was extremely misled and all the important details of this contract were never disclosed to me. This links to Elder Financial Abuse. Jean A. Dorrell was never present during the presentation and sale of my annuity. Jean A. Dorrell was not present during the delivery of my annuity. Jean A. Dorrell never witnessed any process involved with my annuity. Diane Johnson did everything involved with the sale, presentation and delivery of my annuity. Why is Jean A. Dorrell the listed agent on my contract? Why did Jean A. Dorrell sign as agent on 8/28/2013? I never saw Jean A. Dorrell on 8/28/2013. I thought Diane Johnson was my agent. During the presentation, I asked Diane Johnson, “Why should I move from Midland National? Midland is paying me 3% guaranteed fixed interest.” Diane told me, “You are going from 3% to 4%.” Diane NEVER disclosed to me that this is a Rider with an ANNUAL initial charge of 0.95% and maximum charge of 1.80%. Diane presented the 4% interest as fixed guaranteed. This makes me very upset! The initial current interest rate is 1.5% with the Security Benefit Total Value Annuity. As I mentioned before, my Midland National annuity was earning 3% guaranteed. Also, the cap on my index with Midland was 5.25%. The cap with the Total Value Annuity is only 3.25%. This is not a good replacement from an annuity to annuity. Selling the Total Value Annuity to me was never suitable. This appears to be illegal and is definitely Elder Financial Abuse. It is my hope that this contract be terminated and my initial Purchase Payment of $29,492.30 be paid out immediately, with no penalties, because I was misled into purchasing this contract under false details regarding the Total Value Annuity. Security Benefit responded to Mr. Doughman’s letter on May 13, 2014, by notifying him that it would cancel the contract and refund the purchase price. The Department’s Administrative Complaint alleged that Ms. Dorrell violated numerous provisions governing insurance agents by having an unlicensed employee sell an unsuitable annuity to Mr. Doughman. Mr. Doughman’s letter describing how an unlicensed employee, Diana Johnson, sold him an annuity corroborated the affidavits of former employees of Senior Financial Security as to how Ms. Dorrell facilitated unlicensed activities. The aforementioned documents were a reasonable basis for pursuing Count VI, and the substantial justification for pursuing Count VI is discussed further in paragraph 92 under the Conclusions of Law. Count VII – Margaret Dial Margaret Dial was born in 1950. Ms. Dial met Ms. Dorrell in July of 2007 and purchased multiple annuities from her. One of those annuities was an Old Mutual annuity that she purchased on November 11, 2007. In 2013, Ms. Dorrell advised Ms. Dial to surrender the Old Mutual annuity and use the proceeds to purchase a Security Benefit annuity. After incurring $16,560.39 in surrender charges, Ms. Dial received $129,901.21 in the form of a check mailed to her home. On March 12, 2013, Ms. Dial signed an application to purchase the Security Benefit annuity recommended by Ms. Dorrell for $130,000.00. The application associated with the Security Benefit annuity was incorrect because it did not show that it was a replacement for the Old Mutual annuity. Ms. Dial’s surrender of the Old Mutual annuity and purchase of the Security Benefit annuity was problematic for multiple reasons. For instance, Ms. Dorrell sold the Old Mutual annuity to Ms. Dial and then encouraged her to surrender it and use the proceeds to acquire the Security Benefit annuity. In effect, Ms. Dorrell earned two commissions on the same money. Also, the manner in which the Security Benefit annuity was purchased could have potentially prevented Old Mutual from engaging in conservation efforts. “Conservation” is the term used to describe an insurance company’s effort to retain existing business. Ms. Dial filed a complaint with Security Benefit in April of 2016 stating that “Jean Dorrell had me CLOSE the account to transfer my monies with a great LOSS to Security Benefit.” Security Benefit responded with a June 8, 2016, letter offering to cancel the Security Benefit annuity and return Ms. Dial’s purchase payment. Security Benefit then issued the following letter to Ms. Dorrell on June 20, 2016: Security Benefit Life Insurance Company (“Security Benefit”) recently received and addressed a complaint from Margaret Dial, to whom you presented a Secure Income Annuity for sale in 2013. As part of our investigation, Security Benefit directed that you provide a statement addressing the complaint, which you furnished through your attorney. In the course of investigating Ms. Dial’s complaint, Security Benefit learned that despite the application and Annuity Suitability form for the Contract indicating otherwise, Ms. Dial’s purchase of the Contract had in fact involved the replacement of an existing annuity contract she owned (said contract was issued by Fidelity & Guaranty Life Insurance Company). Your statement indicated that the transaction was not disclosed to Security Benefit as a replacement due to clerical error on the part of your office staff. As you should know, the proper handling of proposed annuity replacements is a continuing focus of insurance regulators, including the Florida Office of Insurance Regulation. As such, the failure to disclose that a replacement will occur is a very serious matter and one that Security Benefit does not take lightly whether due to clerical error or otherwise. By this letter, Security Benefit is notifying you that any further failure to disclose replacement activity will result in the termination of your appointment and the enforcement of any other remedies available to Security Benefit under the terms of your Producer Agreement. (emphasis added) The Department’s Administrative Complaint generally alleged that Ms. Dorrell violated several governing statutes by transmitting false information and displaying a lack of trustworthiness. In addition to the fact that Ms. Dorrell had admitted to Security Benefit that she had failed to disclose the source of the funds that would be used to purchase the annuity, the Department knew that Ms. Wipperman had specifically named Ms. Dial as a client who had been misinformed about the amount of their surrender charges. That information provided a reasonable basis for pursuing Count VII against Ms. Dorrell. The substantial justification for pursuing Count VII is discussed further in paragraphs 93 and 94 under the Conclusions of Law. Count VIII – Unlicensed Activities The Department alleged under Count VIII of the Administrative Complaint that Ms. Dorrell and/or her employees performed work without having the proper licensure. Specifically, the Department alleged that Ms. Dorrell’s employees wrote Lady Bird deeds3/ and wills without being licensed attorneys. The Department also alleged that Ms. Dorrell and/or her employees encouraged clients to liquidate security holdings without being licensed investment professionals. The affidavits from Laura Wipperman, Diana Johnson, and Matthew Plunkitt provided a reasonable basis for the Department to pursue Count VIII. The substantial justification for pursuing Count VIII is discussed further in paragraphs 95 through 100 under the Conclusions of Law. Count IX – Performance of Unlicensed Insurance Activities The Department alleged in Count IX that Ms. Dorrell had Ms. Wipperman and Ms. Johnson perform acts that could only be performed by a licensed insurance agent. Those allegations were reasonably supported by the affidavits of Ms. Wipperman, Ms. Johnson, and Mr. Plunkitt. The substantial justification for pursuing Count IX is discussed further in paragraph 101 under the Conclusions of Law. Count X – Failure to Report Administrative Actions The Department dismissed Count X, but alleged in the Administrative Complaint that Ms. Dorrell violated Florida Law by failing to report to the Department two administrative actions taken against her by the states of Nevada and Wisconsin. This allegation was supported by a March 14, 2008, letter from Ms. Dorrell to Reliance Standard Life Insurance Company. That letter provided a reasonable basis for pursuing Count X, and the substantial justification for pursuing Count X is discussed further in paragraphs 102 and 103 under the Conclusions of Law.
The Issue Whether Respondent misrepresented or failed to disclose material terms and conditions pertaining to annuities that he sold to two senior citizens; if so, whether discipline should be imposed on Respondent's license to transact business as a life and health insurance agent.
Findings Of Fact At all times relevant to this proceeding, Breiman has been licensed in Florida as an annuity and insurance agent. The Department is the state agency with the responsibility for licensing and regulating agents, such as Breiman, and for taking disciplinary action for violations of the laws in its charge. This case arises from the sale of three Equitrust annuities, all fixed equity indexed deferred annuities, to Robert and Frances Wexler. Broadly speaking, an annuity is a contractual arrangement pursuant to which an insurance company, in exchange for a premium, agrees to pay the owner a specified income for a period of time. Annuities are generally classified as "fixed" or "variable." Under a fixed annuity, the benefit is paid according to a predetermined interest rate. With a variable annuity, the premium is invested on the owner's behalf, and the amount of the benefit, when paid, reflects the performance of that investment. Fixed annuities can be either "immediate" or "deferred." An immediate fixed annuity is one under which the insurer begins paying the benefit upon purchase of the annuity. Under a deferred annuity, in contrast, the premium is allowed to grow over time, until the contract "matures" or is "annuitized" and the insurer begins paying the benefit. The equity index annuities which Breiman sold to the Wexlers are considered fixed deferred annuities. An equity index annuity is a contract under which the insurer agrees to pay a benefit based on a premium that earns interest at a rate determined by the performance of a designated market index, in this case, the S&P 500. The premium is not invested in the market for the owner's account. Rather, the interest rate rises or falls in relation to the index's performance, within predetermined limits. It is undisputed that the equity index annuities which Breiman sold to the Wexlers were approved for sale to senior investors by the Department at the time these transactions took place. Equity index annuities are typically long-term investments. Owners of such annuities have limited access to the funds invested and accumulating in their accounts, although some equity index annuities, such as the Equitrust annuities sold in this case, permit yearly penalty-free withdrawals at set percentages. The accrued interest is generally not taxed until the funds are withdrawn or the benefit is paid under annuity. Besides taxes, the purchaser may incur substantial surrender penalties for canceling the contract and receiving his funds ahead of a specified date. Some equity index annuities identify a date——often many years in the future——on which the insurer will "annuitize" the contract if it has not done so already at the purchaser's request. This date is sometimes called the "maturity date." The benefit payable under the annuity is determined based on the account's value as of the maturity date, and the payments to the owner of the annuity begin at that time. The Wexlers Robert Wexler was born in Brooklyn, New York, in 1930. He was 75 years old when these transactions with Breiman took place. His wife, Frances Wexler, was born in Bronx, New York, in 1932; she was 74 when the transactions took place. Each finished high school and took some college courses. The Wexlers married after Mr. Wexler joined the Air Force. While in the Air Force, Mr. Wexler studied electronics, which ultimately led to his career in that field in the private sector. He worked for IBM, Univac, and General Electric before he retired in 1994. The Wexlers spent 40 years living in the same home in Pennsylvania, and raised three children. Mrs. Wexler worked for a small family owned printing firm for over 26 years. While living in Pennsylvania, the Wexlers saved money by using Mrs. Wexler's salary to pay their living expenses, and saving most of Mr. Wexler's earnings in a retirement account. They never bought annuities, but did trade stocks, which resulted in financial loss. For many years, the Wexlers visited Florida as "snow birds", and eventually purchased a condominium in a gated community in Deerfield Beach, Florida. Mr. Wexler retired in 1994, Mrs. Wexler retired in 1997, and in 1998, the Wexlers sold their home in Pennsylvania, liquidated the stocks they owned, and bought a bigger condominium in the same Deerfield Beach gated community. They moved permanently to Florida in 1998, with approximately $500,000 in liquid assets. As part of an estate plan prepared by an attorney, the Wexlers met two agents in Florida, Mr. Plonsky and Mr. Wolfe, who sold the Wexlers annuities. In 2002, the Wexlers bought four Allianz Life Insurance Company of North America annuities, totaling approximately $180,000 in premium payments. These payments were made by rolling over their combined IRA funds. The Allianz annuities allowed the Wexlers to withdraw a lifetime amount of up to 15 percent after the first year, without penalty. Withdrawals in excess of the penalty free withdrawals began at a rate of 10 percent and decreased yearly to 0 percent by the 13th year. In 2004, Mr. Wolfe sold the Wexlers a Sun Life Assurance Company of Canada non-qualified single premium annuity for a $35,000 cash payment. Since Mr. Wexler had lost money in the stock market while in Pennsylvania, his purpose for purchasing these annuities, including the ones he eventually purchased through Breiman, was to avoid the loss of any principal, and have the ability to withdraw money if needed. The Breiman Transactions In 2006, the Wexlers met Breiman, and told him that they had purchased the Allianz and Sun Life annuities a few years back. Breiman reviewed the five annuities, and encouraged the Wexlers to surrender the annuities they already owned, and purchase Equitrust annuities. Breiman explained the surrender penalties to the Wexlers, and explained that transferring the annuities would result in an immediate loss of capital. The surrender charges for all the annuities combined totaled approximately $45,000. On August 22, 2006, the Wexlers wrote a letter to Allianz, stating that because they had been told by Allianz that they had already reached the 15 percent lifetime withdrawal limit contained as a term of the Allianz annuities, they wished to surrender the annuities. Mr. Wexler wrote: My wife Fran and I Robert Wexler have instructed Mark S. Breiman to... exchange the following policies...These four policies mentioned above are all power based indexed annuities, my wife Frances and I were told by Alliance [sic] Insurance Co.[sic] we have met our maximum fee withdrawal, except for RMV. We are not happy to realize that the contracts mentioned above have a lifetime 15 percent free withdrawal. Frances and I, Robert Wexler, are fully aware of penalties, surrender charges and expenses, please transfer as [sic] ASAP. DO NOT send a conservation letter. Upon meeting with Breiman on more than one occasion in 2006, the Wexlers agreed to purchase three equity index Equitrust annuities, for premiums of approximately $230,000, with the majority of that money coming from the transfer of the Allianz policies. The Equitrust annuities allowed a 10 percent annual withdrawal, with no penalty. By purchasing these particular products, the Wexlers were eligible for a bonus of approximately 10 percent of the premium paid, which was added to the accounts. If they surrendered these annuities during the first 14 years, however, the Wexlers would pay a penalty, starting at 20 percent for a cancellation during the first year and declining each year thereafter until the fifteenth year, when the surrender penalty would be 0 percent. The maturity date on one annuity was May 8, 2036; for the second annuity, it was October 2, 2036; and for the third, it was October 2, 2037. Because Mr. and Mrs. Wexler would be 89 and 88 years old by the time the maturity dates would arrive, the Wexlers could have planned to annuitize the contract before the maturity date, and begin to receive the annuity payments. The Wexlers were not required to keep their funds invested until the maturity date. The fact that the maturity date was beyond the Wexlers expected lifespan is not, of itself, compelling proof that the annuity was an unsuitable investment for Mr. and Mrs. Wexler. In applying for the Equitrust annuities, the Wexlers executed an Annuity Application, which contained the following language: If this annuity is replacing an existing annuity, it is important that you compare the two, taking into account whatever changes you may incur on the surrender of the existing annuity and your need to access your funds. For information about your existing annuity, contact the issuing company. The application also contained an Applicant Statement, which read in part: By signing below, I acknowledge I have read, or have been read, this document and understand I am applying for an equity indexed annuity, I also acknowledge that the annuity meets my financial objectives. I have received a copy of this document, as well as any advertisement that was used in connection with the sale of this annuity. The Wexlers signed and dated the Annuity Application. The Wexlers also executed a Fixed Annuity Needs Analysis form, which indicated that the Wexlers were surrendering annuities which had been held for 1-3 years, and would incur a 9-10 percent surrender charge. Mr. Wexler signed and dated this form as well. The Equitrust annuity contract, which the Wexlers agreed they received, but never read, indicated as follows: READ YOUR CONTRACT CAREFULLY. This is a legal Contract between you, the Owner, and us, the Insurer. RIGHT TO EXAMINE AND RETURN THIS CONTRACT Right to cancel. If you are not satisfied, you may cancel your Contract by returning it within 15 days after the date you receive it...This Contract will then be void from its start. Any premium will be refunded. On Page 3 of the contracts, the Annuity Dates in 2036 were plainly disclosed, as was the "Surrender Charge" for each policy year from the first year (20 percent) to the fourteenth year (2 percent) and fifteenth year (0 percent). The provisions of the Equitrust annuity which the Department alleges Breiman misrepresented or failed to disclose to the Wexlers were clearly stated, unambiguously, in the contract itself. The evidence fails to establish that Breiman misrepresented or failed truthfully to disclose to the Wexlers any of the Equitrust annuity contract's material terms and conditions, knowingly made other false representations of material fact about the products, or otherwise made any false promises in connection with the investment. Breiman is not guilty of any of the following offenses with which he was charged: (a) violating the Wexler's trust and not serving their best interests by presenting every fact essential to a client's decision as required by Florida Administrative Code Rule 69B-215.210; (b) making false or misleading statements misrepresenting the advantages of the Equitrust contracts as prohibited by Florida Administrative Code Rule 69B-215.230(1); (c) making untrue, deceptive or misleading statements, assertions, or representations to a client as prohibited by Florida Administrative Code Rule 69B-215.230(2); (d) willfully misrepresenting the terms of any annuity contract as proscribed in section 626.611(5), Florida Statutes; (e) demonstrating a lack of fitness or trustworthiness to engage in the business of insurance, which is punishable under section 626.611(7), Florida Statutes; (f) engaging in fraudulent or dishonest practices, a disciplinable offense pursuant to section 626.611(9), Florida Statutes; (g) willfully failing to comply with, or of violating, a provision of law, which is punishable under section 626.611(13), Florida Statutes; (h) engaging in unfair methods of competition and unfair or deceptive trade practices as prohibited by section 626.621(6), Florida Statutes; (i) making any estimate, statement, sales presentation, omission, or comparison which misrepresents the benefits, advantages, conditions, or terms of any insurance policy as prohibited by section 626.9541(1)(a), Florida Statutes; (j) making false statements or placing before the public any false material statement as prohibited by section 626.9541(1)(e); (k) knowingly making any misleading representations or incomplete or fraudulent comparisons or fraudulent material omission for the purpose of inducing any client to surrender or convert any insurance policy to take out a policy of insurance with another insurer, as prohibited by section 626.9541(1), Florida Statutes. Moreover, although Breiman did not have the burden to prove his innocence in any respect, the greater weight of the evidence nevertheless establishes that Breiman fulfilled the obligations he owed to the Wexlers under section 627.4554, Florida Statutes, which governs transactions involving sales of annuities to senior consumers.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services dismiss the Administrative Complaint against Respondent. DONE AND ENTERED this 22nd day of February, 2012, in Tallahassee, Leon County, Florida. S JESSICA ENCISO VARN 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 22nd day of February, 2012.
