09-001662PL Department Of Financial Services vs. Mitchell Brian Storfer Status: Closed Recommended Order on Thursday, December 31, 2009.

Summary: Petitioner proved by clear and convincing evidence that Respondent violated certain provisions of the Florida Insurance Code. Recommend revocation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

) Case No. 09-1662PL

vs. )

)

MITCHELL BRIAN STORFER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a due process hearing was held in this

case on July 22 and 23, 2009, in Vero Beach, Florida, before

June C. McKinney, a duly-designated Administrative Law Judge of

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: David J. Busch, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0333

For Respondent: Douglas J. Kress, Esquire

Debra A. Jenks, Esquire

Schwed McGinley & Kahle

11376 North Jog Road, Ste. 101

Palm Beach Gardens, Florida 33418

STATEMENT OF THE ISSUES

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.

PRELIMINARY STATEMENT

On March 4, 2009, the Department of Financial Services

("Petitioner" or "Department"), filed a three-count

Administrative Complaint ("AC") involving three separate

customers against Mitchell Brian Storfer ("Respondent" or

"Storfer"). Respondent was accused of violating Sections

624.11(5), 624.611(7), 626.611(9), 626.611(13); 626.621(2),

626.621(6), 626.9541(1)(a)1., and 616.95(1)(e)1., Florida

Statutes 1 . Also cited are Florida Administrative Rules 69B-

215.210 and 69B-215.230.

Respondent requested a hearing to contest the charges of

the AC, and the matter was referred to the Division of

Administrative Hearings on March 31, 2009, to conduct a formal

hearing.

At the final hearing, Petitioner presented the testimony of

Doris R. Jorgensen, Robert West, Kikuko West, Celina Grubicy (by

deposition testimony), and Alberto L. Grubicy (by deposition

testimony). Petitioner offered Exhibits 1 through 72, which

were received into evidence. Respondent testified on his own

behalf. Respondent's Exhibits numbered 1 through 114 were

admitted into evidence.

The hearing was completed on July 23, 2009, and the parties

requested that the proposed recommended order filing deadline be

30 days after the date the transcript was filed with the

Division of Administrative Hearings. On August 17, 2009, the

Transcript, consisting of three volumes, was filed. The

undersigned granted the Joint Motion for Extension of Time to

File proposed recommended order and the parties were given until

September 30, 2009, to file proposed recommended orders. The

parties filed timely Proposed Recommended Orders, and each has

been considered in this matter.

FINDINGS OF FACT

1. Petitioner is the state agency with the statutory

authority and duty to license and regulate insurance agents in

Florida.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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

9. 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.

10. 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.

11. 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

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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

20. 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

21. 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.

22. 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 . . . ."

23. 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)

24. 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.

25. 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)

26. 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.

27. 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.

28. 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.

29. The sale of the Allianz annuities generated

commissions of approximately $95,000.00 for Storfer or his

agency, Senior Financial International, Inc.

30. 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.

31. 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.

32. 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.

33. 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.

34. 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.

35. 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.

36. The evidence convinces the undersigned that Storfer

knowingly made false representations of material facts regarding

the MasterDex annuity and its downside cap.

Kikuko West

37. 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.").

38. 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.

39. 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.

40. 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.

41. 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.

42. 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.

43. 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.

44. 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.

45. 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.

46. 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.

47. 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

48. 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.

49. 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.

50. 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

51. 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 withdrawals 14 were defined in

the policy contracts, which K.W. never received. 15

52. 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.

53. 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."

54. On Saturday, August 9, 2008, the Wests met briefly

with Storfer in his office 16 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.

55. 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

56. 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,

57. 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

58. 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.

59. 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

60. 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.

61. 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.

62. Jorgensen's net worth, before meeting Respondent was

approximately a million dollars.

63. 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.

64. 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.

65. 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.

66. 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.

67. At another meeting, Jorgensen provided Storfer her

financial portfolio to review.

68. 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.

69. 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.

70. 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.

71. 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.

72. 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.

73. Together, Jorgensen's transfers totaled over half-a

million dollars and she incurred surrender charges totaling in

excess of $29,000.

74. 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.

75. 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.

76. At some point, Jorgensen attended another investment

seminar presented by insurance agent, Ms. Jones ("Jones"). 22

77. 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.

78. 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").

79. 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.

80. 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.

81. 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.

CONCLUSIONS OF LAW

82. The Division of Administrative Hearings has personal

and subject matter jurisdiction in this proceeding pursuant to

Sections 120.569 and 120.57(1), Florida Statutes (2009).

83. The Department seeks to impose penalties against

Storfer through the AC that include mandatory and discretionary

suspension or revocation of his licenses. Therefore, the

Department has the burden of proving the specific allegations of

fact that support its charges by clear and convincing evidence.

See Department of Banking and Finance, Division of Securities

and Investor Protection v Osborne Stern and Co. , 670 So. 2d 932

(Fla. 1996); Ferris v. Turlington, 510 So. 2d 1292 (Fla. 1987);

and Pou v. Department of Insurance and Treasurer , 707 So. 2d 941

(Fla. 3d DCA 1998).

84. What constitutes "clear and convincing" evidence was

described by the court in Evans Packing Co. v Department of

Agriculture and Consumer Services , 550 So. 2d 112, 116, n. 5

(Fla. 1st DCA 1989), as follows:

. . .[C]lear and convincing evidence

requires that the evidence must be found to

be credible; the facts to which the

witnesses testify must be distinctly

remembered; the evidence must be precise and

explicit and the witnesses must be lacking

in confusion as to the facts in issue. The

evidence must be of such weight that it

produces in the mind of the trier of fact

the firm belief or conviction, without

hesitancy, as to the truth of the

allegations sought to be established.

Slomowitz v Walker , 429 So. 2d 979, 800

(Fla. 4th DCA 1983).

85. See also In re Graziano , 696 So. 2d 744 (Fla. 1997);

In re Davey , 645 So. 2d 398 (Fla. 1994); and Walker v. Florida

Department of Business and Professional Regulation , 705 So. 2d

653 (Fla. 5th DCA 1998).

86. Section 626.611, Florida Statutes, mandates that the

Department suspend or revoke the license of any insurance agent

if it finds that the agent has committed any of a number of acts

specified in that Section.

87. Section 626.621, Florida Statutes, gives the

Department the discretion to suspend or revoke the license of

any insurance agent if it finds that the agent has committed any

of a number of acts specified in that Section.

88. The AC in this case contains three counts. In all

three counts it is alleged that Storfer violated the following

statutory provisions: Sections 626.611 (5),(7),(9), and (13);

626.621(2),(6); and 626.9541(1)(a)1. and (1)(e)1. Florida

Statutes.

It has also been alleged that he violated Florida Administrative

Code Rules 69B-215.210 and 69B-215.230.

89. Section 626.611(5),(7), (9) and (13) Florida Statutes,

provides the following:

626.611 Grounds for compulsory refusal,

suspension, or revocation of agent's, title

agency's, adjuster's, customer

representative's, service representative's,

or managing general agent's license or

appointment. --The department shall deny an

application for, suspend, revoke, or refuse

to renew or continue the license or

appointment of any applicant, agent, title

agency, adjuster, customer representative,

service representative, or managing general

agent, and it shall suspend or revoke the

eligibility to hold a license or appointment

of any such person, if it finds that as to

the applicant, licensee, or appointee any

one or more of the following applicable

grounds exist: (emphasis in original)

* * *

(5) Willful misrepresentation of any

insurance policy or annuity contract or

willful deception with regard to any such

policy or contract, done either in person or

by any form of dissemination of information

or advertising.

* * *

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

* * *

(9) Fraudulent or dishonest practices in

the conduct of business under the license or

appointment.

* * *

(13) Willful failure to comply with, or

willful violation of, any proper order or

rule of the department or willful violation

of any provision of this code.

90. Section 626.621(2) and (6), Florida Statutes, provides

the following:

626.621 Grounds for discretionary refusal,

suspension, or revocation of agent's,

adjuster's, customer representative's,

service representative's, or managing

general agent's license or appointment. --The

department may, in its discretion, deny an

application for, suspend, revoke, or refuse

to renew or continue the license or

appointment of any applicant, agent,

adjuster, customer representative, service

representative, or managing general agent,

and it may suspend or revoke the eligibility

to hold a license or appointment of any such

person, if it finds that as to the

applicant, licensee, or appointee any one or

more of the following applicable grounds

exist under circumstances for which such

denial, suspension, revocation, or refusal

is not mandatory under s. 626.611 :

* * *

(2) Violation of any provision of this code

or of any other law applicable to the

business of insurance in the course of

dealing under the license or appointment.

* * *

(6) In the conduct of business under the

license or appointment, engaging in unfair

methods of competition or in unfair or

deceptive acts or practices, as prohibited

under part IX of this chapter, or having

otherwise shown himself or herself to be a

source of injury or loss to the

public.(emphasis in original)

91. Section 626.9541(1)(a)1. and (1)(e)1., Florida

Statutes provide the following:

626.9541 Unfair methods of competition and

unfair or deceptive acts or practices

defined. --

(1) UNFAIR METHODS OF COMPETITION AND

UNFAIR OR DECEPTIVE ACTS.--The following are

defined as unfair methods of competition and

unfair or deceptive acts or practices:

(a) Misrepresentations and false

advertising of insurance policies.--

Knowingly making, issuing, circulating, or

causing to be made, issued, or circulated,

any estimate, illustration, circular,

statement, sales presentation, omission, or

comparison which:

1. Misrepresents the benefits, advantages,

conditions, or terms of any insurance

policy.

* * *

(e) False statements and entries.--

1. Knowingly:

a. Filing with any supervisory or other

public official,

b. Making, publishing, disseminating,

circulating,

c. Delivering to any person,

d. Placing before the public,

e. Causing, directly or indirectly, to be

made, published, disseminated, circulated,

delivered to any person, or placed before

the public, any false material statement.

92. Florida Administrative Code Rule 69B-215.210 provides

the following:

The Business of Life Insurance is hereby

declared to be a public trust in which

service all agents of all companies have a

common obligation to work together in

serving the best interests of the insuring

public, by understanding and observing the

laws governing Life Insurance in letter and

in spirit by presenting accurately and

completely every fact essential to a

client’s decision, and by being fair in all

relations with colleagues and competitors

always placing the policyholder’s interests

first.

93. Finally, Florida Administrative Code Rule 69B-215.230

provides the following:

69B-215.230 Misrepresentations.

(1) Misrepresentations are declared to be

unethical. No person shall make, issue,

circulate, or cause to be made, issued, or

circulated, any estimate, circular, or

statement misrepresenting the terms of any

policy issued or to be issued or the

benefits or advantages promised thereby or

the dividends or share of the surplus to be

received thereon, or make any false or

misleading statement as to the dividends or

share of surplus previously paid on similar

policies, or make any misleading

representation or any misrepresentation as

to the financial condition of any insurer,

or as to the legal reserve system upon which

any life insurer operates, or use any name

or title of any policy or class of policies

misrepresenting the true nature thereof.

(2) No person shall make, publish,

disseminate, circulate, or place before the

public, or cause, directly or indirectly, to

be made, published, disseminated, circulated,

or placed before the public, in a newspaper,

magazine, or other publication, or in the

form of a notice, circular, pamphlet, letter

or poster, or over any radio or television

station, or in any other way, any

advertisement, announcement or statement

containing any assertion, representation or

statement with respect to the business of

insurance or with respect to any person in

the conduct of his insurance business, which

is untrue, deceptive or misleading.

94. Summarizing the charges against Storfer, the

Department has charged him with essentially ten offenses:

a. Willfully making misrepresentations to, or willfully

deceiving all three victims in this case;

b. Demonstrating lack of fitness or trustworthiness;

c. Fraudulent of dishonest practices;

d. Willful failure or to comply with, or willful violation

of any proper order or rule of Department of violation of the

Insurance Code;

e. Violating any provision of the Insurance Code or any

other law applicable to do business in insurance under a

license;

f. Engaging in unfair or deceptive acts;

g. Knowingly making, causing to be made, issued, sales

presentation which misrepresents the benefits, advantages,

conditions or terms of any insurance policy;

h. Knowingly delivering to any person or causing directly

or indirectly to be delivered to any person any false material

statement;

i. Violating the public trust; and

j. Misrepresenting the terms of a policy issued or to be

issued or the benefits or advantages promised.

95. The Department proved clearly and convincingly that

each of the individuals in this case relied on Storfer's advice

and assurances when making their investment decisions. Further,

the record demonstrates Storfer knew what he was doing when he

sold insurance products to the individuals involved in this

case. His training, education, and experience, combined with

his testimony of his knowledge, demonstrate such.

96. Petitioner also proved by clear and convincing

evidence that Respondent misrepresented the MasterDex annuity

and its downside cap to the Grubicys and willfully deceived the

Wests and processed their application after both being

instructed not to and agreeing not to. Storfer's actions with

regard to the Grubicys and Wests were so contrary to the

interests of those individuals that he also had to have

knowingly and, thus, willfully misrepresented the products he

sold them in violation of Section 626.611(5), Florida Statutes;

in so doing, his actions demonstrate a lack of trustworthiness

to engage in the insurance business in violation of Section

626.611(7), Florida Statutes; his actions also constituted

dishonest practices in the conduct of insurance business in

violation of Section 626.611(9), Florida Statutes; and, finally,

as to the Grubicys and Wests, Storfer's actions were

inconsistent with the duty imposed upon him by Florida

Administrative Code Rules 69B-215.210 and 69B-215.230, in

violation of Section 626.611(13), Florida Statutes.

97. The final alleged violation, that Storfer engaged in

unfair or deceptive acts or practices, was also proven clearly

and convincingly by the Department as to his dealings in Count

I, the Grubicys, and Count II, the Wests. Respondent

misrepresented the nature of the annuities as to the cap if

there was a market loss to the Grucibies and he processed the

investment applications of the Wests contrary to their

instructions. It is concluded that, as to Counts I and II, the

Department has proved that Storfer also misrespresnted the

benefits, advantages, conditions, and terms of the policies as

defined in Section 626.9541(1)(a)1. and (1)(e)1., Florida

Statutes, in violation of Section 626.621(2) and (6),Florida

Statutes.

98. As to Count III, Petitioner asserted that Respondent

sold two annuities to Jorgensen without her knowledge. The

Department further alleges that Respondent also willfully

misrepresented the following: the MasterDex as a suitable

product with a guarenteed eight percent per annum interest

income without reduction of the principal; a penalty free

withdrawal; the surrender penalties on her previously purchased

annuities; the 10 percent bonus; the free look period; the OM

annuity; and his client notes as to the these matters.

Petitioner failed to present clear and convincing evidence to

support the allegations since the only witness presented to

demonstrate Count III did not distinctly remember the facts and

could not precisely testify regarding the details of the

transactions.

Penalty

99. Florida Administrative Code Rule 69B-231.080 provides

guideline penalties for violations of Sections 626.611 and

626.621, Florida Statutes. Florida Administrative Code Rule

69B-231.080 provides the following penalty guidelines for the

violations proved in this case:

69B-231.080 Penalties for Violation of

Section 626.611, F.S.

If it is found that the licensee has

violated any of the following subsections of

Section 626.611, F.S., for which compulsory

suspension or revocation of license(s) and

appointment(s) is required, the following

stated penalty shall apply:

(5) Section 626.611(5), F.S. – suspension 9

months

* * *

(7) Section 626.611(7), F.S. – suspension 6

months

* * *

(9) Section 626.611(9), F.S. – suspension 9

months

* * *

(13) Section 626.611(13), F.S. – suspension

6 months

100. Florida Administrative Code Rule 69B-231.090(2), the

stated penalty for violation of Section 626.621(2), is a three-

month suspension.

101. Florida Administrative Code Rule 69B-231.090(6) refers

to Florida Administrative Code Rule 69B-231.100, for the

appropriate penalty for a violation of Section 626.621(6),

Florida Statutes:

69B-231.100 Penalties for Violation of

Section 626.621(6), F.S.

If a licensee is found to have violated

subsection 626.621(6), F.S., by engaging in

unfair methods of competition or in unfair

or deceptive acts or practices as defined in

any of the following paragraphs of

subsection 626.9541(1), F.S., the following

stated penalty shall apply:

(1) Section 626.9541(1)(a), F.S. –

suspension 6 months

* * *

(5) Section 626.9541(1)(e), F.S. –

suspension 6 months; except that the penalty

for a violation of Section 626.9541(1)(e)1.,

F.S., shall be a suspension of 12 months.

102. Florida Administrative Code Rule 69B-231.130 provides

that the stated penalty for a willful violation of a Department

rule is a six-month suspension.

103. Florida Administrative Code Rule 69B-231.040 provides

the following with regard to the calculation of the appropriate

penalty where multiple violations are found:

(d) In the event that the final penalty

would exceed a suspension of twenty-four

(24) months, the final penalty shall be

revocation.

104. In this case, no mitigating factors were presented.

And, calculating the penalty with Respondent's numerous

violations is in excess of a three-year suspension of

Respondent's license. However, Section 626.641(1), Florida

Statutes (2008), limits the authority of Petitioner to suspend a

license to a period of two years. Therefore, the required final

penalty is revocation of the license pursuant to Florida

Administrative Code Rule 69B-231.040(3)(d).

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

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of December, 2009.

ENDNOTES

1 The events at issue in this case took place in 2007 and 2008.

The pertinent Florida Statutes during this period of time

remained materially the same. All references, unless otherwise

noted, will be to the statute applicable to the events for which

findings of fact or conclusions of law are made.

2 Storfer has residual feelings in his hands from a car accident

and has bad handwriting so his wife fills out documentation for

the office.

3 C.G. keeps the company's books for the residential building

income just as she had in the two previous businesses the

Grucibys owned. Such experience leads the undersigned to find

that C.G. is credible when testifying regarding the detailed

repetitive conversations held with Respondent regarding the cap

for a market loss.

4 Respondent claims the Grubicys had no intention to access the

funds being invested and they intended to leave their money to

their children. The Grubicys' testimony that they wanted access

to their investment money after five years as income is more

persuasive on this issue.

5 The record has conflicting testimony regarding the maturity

date. The Grubicys' testimony is found to be more credible

since five years correlates with the time period the Grubicys

would have sold their rental property and wanted to start

receiving income from their investment.

6 Respondent claims that he fully reviewed the relevant terms

and conditions and all details of the policies with the

Grubicys. The testimony of the Grubicys that Storfer did not

fully review the relevant terms and conditions is found to be

more credible.

7 C.B.'s testimony regarding the 12 percent bonus is found to be

credible.

8 Storfer's testimony that he fully reviewed the relevant terms

and conditions of the policy, including the length of the

policy, the surrender penalties and the methods for calculating

interest, both before application and at the time of delivery of

the policy is rejected as not credible. The Grubicys'

consistent testimony combined with their letter dated May 31,

2007, and affidavit dated August 30, 2007, is deemed to be more

credible.

9 K.W. was tired of getting numerous investment statements and

wanted one consolidated statement.

10 The persuasive evidence presented at hearing is the testimony

of the Wests that they were not introduced to Kretzmar as

working for another company as a broker.

11 K.W. testified that Kretzmar only participated for a minute

when introduced to the Wests. Both R.W. and Storfer testified

that Kretzmar participated in the discussion of the transfer of

the money. Thus, the undersigned finds R.W. and Storfer's

testimony more persuasive.

12 The undersigned finds the Wests' testimony more persuasive

regarding the guarantee based on the review of the transcripts

and evidence including the language in the two memos stating

"This would replace the Mutual Funds $253,289.00. . .With an 8

percent guaranteed growth for income. With no risk."

13 Such a penalty could be a 20 percent loss.

14 In the contract, penalty free withdrawals are deducted "first

from the portion of Your Values representing interest until all

interest is withdrawn, then from the portion representing

premium," which would not allow K.W. to receive her approximate

eight percent interest rate return.

15 The Bonus Gold Indexed Annuity Disclosure detailed that "this

disclosure is intended to summarize this Annuity. Consult your

contract for specific terms and conditions of your annuity." It

also stated "SEE YOUR CONTRACT FOR CURRENT INTEREST, CAPS,

PARTICIPATION AND ASSET FEE RATES."

16 The record has conflicting testimony regarding a meeting

taking place between the Wests and Storfer on Saturday,

August 9, 2008. Mr. and Mrs. West's testimony is held more

credible regarding the meeting held the day before they left for

vacation on August 10, 2008.

17 Respondent claims that the Wests told him they didn't want to

go forward with the broker transfer of funds. Such testimony is

not credible for it defies logic since the Wests initially

didn't even understand there was a separate broker for the

transfer. Additionally, the Wests' testimony that they informed

him to stop the process until their son-in-law looked at the

paperwork is deemed more persuasive.

18 Storfer's client notes to the contrary are rejected as self-

serving and the letter that is erroneously dated August 11,

2009, confirms Storfer's agreement not to go forward with any

investments with the language, "We will not sell any investments

until you approve them." Additionally, the undersigned rejects

the credibility of the client notes and deems them self serving.

19 The undersigned finds that no meeting took place on August

11, 2009, because the Wests had already left for North Carolina.

Nor did they have discussions with Kretzmer on that day. The

Wests' testimony to such is found to be more persuasive.

20 Storfer testified that he did not talk to K.W. after their

last meeting, and American Equity contacted him, which is how he

learned about her dissatisfaction with the transaction. After

reviewing the transcripts and exhibits, the undersigned finds

K.W.'s testimony more credible in that she called his office

numerous times.

21 This policy is essentially identical to the MasterDex policy

sold to the Grucibys discussed above, supra . Therefore, a

detailed description will not be repeated.

22 There is conflicting testimony regarding the Jones' first

name. The undersigned will refer to the agent as Jones, the

common last name Petitioner and Respondent agree upon.

23 The OM purchase is signed Doris Jorgensen, not Doris R.

Jorgensen. The policy delivery receipt and letter of

instruction are also missing the middle initial "R" and the

Respondent's own signature does not appear on OM's required

policy delivery certification form. However, the undersigned

can not make a determination on such matters as no evidence was

presented to demonstrate the standard for forgery or fraud

regarding such.

COPIES FURNISHED :

Mitchell B. Storfer

2001 9th Avenue, No. 114

Vero Beach, Florida 32960

Debra A. Jenks, Esquire

Schwed, McGinley & Kahle

11376 North Jog Road, Suite 101

Palm Beach Gardens, Florida 33418

Douglas J. Kress, Esquire

Schwed McGinley & Kahle

11376 North Jog Road, Suite101

Palm Beach Gardens, Florida 33418

Austin B. Neal, Esquire

Foley & Lardner LLP

106 East College Avenue, Suite 900

Tallahassee, Florida 32301

David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32312

Mitchell Brian Storfer

578 Cross Creek Circle

Sebastian, Florida 32958

Alex Sink, Chief Financial Officer

Department of Financial Services

The Capitol, plaza Level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, plaza Level 11

Tallahassee, Florida 32399-0300

Julie Jones, Agency Clerk

Department of Financial Services

Division of Legal services

200 east Gaines Street

Tallahassee, Florida 32399-0390

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.