02-000849 Stephen Karakay vs. Department Of Banking And Finance Status: Closed Recommended Order on Wednesday, June 19, 2002.

Summary: Petitioner failed to prove entitlement to reimbursement of investment funds; proof offered was inconclusive; claim denied.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STEPHEN KARAKAY, )

)

Petitioner, )

)

vs. ) Case No. 02 - 0849

)

DEPARTMENT OF BANKING AND )

FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was held before Daniel M. Kilbride,

Administrative Law Judge, Division of Administrative Hearings,

on May 17, 2002, in Sarasota, Florida.

APPEARANCES

For Petitioner: Stephen Karakay, pro se

6615 Markridge Place

Sarasota, Florida 34231

For Respondent: Cynthia K. Maynard, Esquire

James H. Harris, Esquire

Department of Banking and Finance

The Fletcher Building

101 East Gaines Street, Suite 526

Tallahassee, Florida 32399 - 0350

STATEMENT OF THE ISSUE

Whether Petitioner has proven entitlement to reimbursement

of investment funds allegedly lost through investments with GIC

Government Securities, Inc., under Section 517.1203, Florida

Statutes.

PRELIMINARY STATEMENT

This proceeding arose under Section 517.1203, Florida

Statutes, administered by the Department of Banking and Finance

("Respondent"). Under the terms of the statute, Respondent is

responsibl e for evaluating claims filed by investors who

suffered financial loss due to the actions of GIC Government

Securities, Inc. ("GIC").

Petitioner alleges that he made two investments, one for

$35,000 and one for $20,000, with GIC in the mid - 1980s.

Although he acknowledges that he was fully paid on the $35,000

investment and therefore has no complaint with regard to that

investment, Petitioner asserts that the $20,000 investment was

lost and, despite attempts to collect the funds from the U.S.

Department of Housing and Urban Development, he has not been

reimbursed for any of the $20,000 investment. In response to

Respondent's Notice of Intent to Deny Petitioner's claim under

Section 517.1203, Florida Statutes, Petitioner submitted a

letter, dated February 11 , 2002, which Respondent treated as a

petition for formal hearing. On February 26, 2002, this matter

was referred to the Division of Administrative Hearings for a

formal hearing and discovery ensued. This matter was continued

once in order to permit the completion of discovery.

At the hearing, Petitioner, appearing pro se , testified on

his own behalf and submitted two exhibits into the record.

Respondent presented testimony from William Reilly, Financial

Administrator for Respondent's Division of Securit ies and

Finance, and offered four composite exhibits in evidence.

Official recognition was taken of Section 517.1203, Florida

Statutes, and the Final Order entered by Respondent on April 25,

1995, in the case of GIC Government Securities, Inc., et al. ,

DB F No. 1745 - S - 8/92, et al.

A Transcript of the above - styled hearing was filed on

June 3, 2002. Petitioner has not filed a proposed recommended

order as of the date of this Recommended Order. Respondent

submitted its proposals on June 11, 2002.

FINDINGS O F FACT

1. On October 22, 1996, Petitioner, a Florida resident,

filed a $20,000 claim pursuant to Section 517.1203, Florida

Statutes, with Respondent.

2. On August 13, 1984, Petitioner invested $10,000 with

GIC in what purported to be a six - month GNMA/U.S easury Trust

Note, certificate number 1607, dated September 1, 1984, which

matured on February 28, 1985. The investment was identified

with Elizabeth Karakay's ("Mrs. Karakay"), Petitioner's wife,

social security number.

3. Southern Bond Clearing, In c. was an affiliated company

of GIC that functioned as the transfer agent for the GIC

investment transactions.

4. Petitioner's original $10,000 investment in the six -

month GNMA/U.Seasury Trust Note was repaid to Stephen

Karakay through GIC's transfer agent and affiliate company

Southern Bond Clearing's check number 421, dated February 28,

1985, issued to "Stephen Karakay, P.O. Box 3344, Sarasota,

Florida 33578."

5. Petitioner believed that his $10,000 investment in the

GNMA/U.Seasury Trust Note, c ertificate number 1607, and the

$10,000 Southern Bond Clearing check (number 421) were two

distinct investments which, combined, established his alleged

$20,000 investment with GIC. Through the claims process

pursuant to Section 517.1203, Florida Statutes , Petitioner made

inconsistent statements regarding the amount he allegedly lost

through investments with GIC. At various times, Petitioner has

claimed (1) that he made a $20,000 investment, (2) that he made

two separate $10,000 investments, and (3) at st ill other times,

Petitioner referenced having made only a $10,000 investment.

6. On January 3, 1985, Mrs. Karakay made a $20,000

investment with GIC to purchase a "GNMA/MTG Backed Coll Inv

Note." The investment was identified with Mrs. Karakay's social

s ecurity number.

7. From February 1985 through July 2, 1985, Mrs. Karakay

was issued monthly interest payments on her $20,000 investment

with GIC. On July 2, 1985, and July 19, 1985, Mrs. Karakay was

issued two checks, in the amounts of $441.05 and $20.52 ,

identified as "return principal." Also on July 2, 1985,

Mrs. Karakay's Delmar Trust investment was rolled over into a

GNMA bond in the amount of $19,558.95 with a refund amount of

$441.05. The combined total of the rollover GNMA and the refund

equaled Mrs. Karakay's initial $20,000 investment with GIC in

the Delmar Trust.

8. GIC sent a letter, dated June 20, 1985, to Petitioner

in which it discussed the rolling - over of $20,000 from the

"investment trust" to a "GNMA bond." This $20,000 was the

proceed s of Mrs. Karakay's earlier investment of July 1985.

9. GIC's letter, dated June 20, 1985, to Petitioner states

that the "investment trust note of $20,000 is being rolled over

into a GNMA Bond" and that the "investment of the bond will not

be exactly $20, 000 so therefore, a refund will be coming."

10. There was no evidence produced or testimony offered,

aside from conclusory statements by Petitioner, indicating that

Petitioner had a $20,000 investment with GIC that was separate

and distinct from Mrs. Kara kay's investment.

11. Based upon a review of the dates and contents of

various documents placed into evidence, it is clear that the GIC

June 20, 1985, letter referred to the liquidation and rolling

over of Mrs. Karakay's initial $20,000, used to purchase a

"GNMA/MTG Backed Coll Inv Note," into the purchase of a GNMA

bond in the amount of $19,558.95 with a refund amount of

$441.05.

12. Petitioner acknowledged that he filed a claim with the

Securities Guaranty Fund, pursuant to Sections 517.131 and

517.141, Florida Statutes, to recover the same $20,000

investment at issue in this case. Petitioner did not request an

administrative hearing when he received Respondent's Notice of

Intent to Deny his claim against the Securities Guaranty Fund,

thus the denial be came final.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over this matter pursuant to the authority of

Sections 120.569 and 120.57, Florida Statutes.

14. Subsection 517.1203(2)(a), Florida Statutes, states in

pertinent part:

[M]oneys allocated to the Securities

Guaranty Fund . . . shall be used . . . to

pay investors who have filed claims with the

Department of Banking and Finance after

October 1, 1996, and on or before December

31, 1998, who have:

1. Received a fina l judgment against an

associated person of GIC Government

Securities, Inc., based upon allegations

which would amount to a violation of Section

517.07 or Section 517.301; or

2. Demonstrated to the department that

the claimant has suffered monetary dama ges

as a result of the acts or actions of GIC

Government Securities, Inc., or any

associated person thereof, based upon

allegations which would amount to a

violation of Section 517.07 or 517.301.

15. Respondent is charged with the responsibility and duty

of determining under Section 517.1203, Florida Statutes,

claimant's entitlement to the funds purportedly lost as a result

of doing business with GIC.

16. Petitioner has the burden of establishing entitlement

to the funds claimed. Antel v. Department of Professional

Regulation , 522 So. 2d 1056 (Fla. 5th DCA 1988); Florida

Department of Transportation v. J.W.C. Co. , 396 So. 2d 778 (Fla.

1st DCA 1981).

17. Petitioner sincerely argues that the funds he paid to

GIC for the GNMA/U.Seasury Trust Note, cert ificate number

1607, should be aggregated with the funds that were transferred

to Petitioner by Southern Bond Clearing, Inc., in check

number 421. Petitioner argues that the combination of the funds

paid to GIC plus the funds Southern Bond Clearing paid to

Petitioner though check number 421 should be aggregated.

Petitioner claims that his aggregate investment was acknowledged

by GIC's letter to him of June 20, 1985.

18. However, the greater weight of evidence established

that Petitioner's original $10,0 00 investment in September 1984

to purchase the GNMA/U.Seasury Trust Note was paid to him in

the form of a check from Southern Bond Clearing, Inc., check

number 421, and dated February 28, 1985, to "Stephen Karakay,

P.O. Box 3344, Sarasota, Florida 335 78."

19. The evidence also clearly showed that Petitioner's

wife made an investment of $20,000, which is not claimed by

Petitioner and was not at issue in this hearing, which

investment was consistently referenced by Petitioner's wife's

social security nu mber and which was referred to in the June 20,

1985, letter from GIC to Petitioner.

20. Petitioner has failed to meet his burden and prove his

entitlement to payment of his claim.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

L aw, it is hereby

RECOMMENDED that a final order be entered denying

Petitioner's claim.

DONE AND ENTERED this 19th day of June, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

DANIEL M. KILBRIDE

Administrative Law Judge

Divis ion 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

th is 19th day of June, 2002.

COPIES FURNISHED :

Stephen Karakay

6615 Markridge Place

Sarasota, Florida 34231

Cynthia K. Maynard, Esquire

James H. Harris, Esquire

Department of Banking and Finance

The Fletcher Building

101 East Gaines Street, Suite 526

Ta llahassee, Florida 32399 - 0350

Honorable Robert F. Milligan

Office of the Comptroller

Department of Banking and Finance

The Capitol, Plaza Level 09

Tallahassee, Florida 32399 - 0350

Robert Beitler, General Counsel

Department of Banking Finance

Fletcher Bu ilding, Suite 526

101 East Gaines Street

Tallahassee, Florida 32399 - 0350

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 Recomm ended Order should be filed with the agency that

will issue the Final Order in this case.