06-003421PL Department Of Financial Services vs. Joseph John Ripa Status: Closed Recommended Order on Wednesday, May 16, 2007.

Summary: Respondent sold deferred equity indexed annuities to persons whom Respondent should have realized could not understand the product. He also sold this product when asked to provide something his product did not provide.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 06 - 3421 PL

)

JOSEPH JOHN RIPA , )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to n otice, a formal hearing was held in this case

before Larry J. Sartin, an Administrative Law Judge of the

Division of Administrative Hearings, on March 1 2 through 14 ,

2007, by video teleconference at sites in West Palm Beach and

Tallahassee, Florida.

APPEAR ANCES

For Petitioner: Roxanne Rehm , Esquire

Division of Legal Services

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respon dent: Joseph John Ripa, pro se

19347 Skyridge Circle

Boca Raton , Florida 3 3498 - 6211

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent, Joseph John

Ripa , comm itted the offenses alleged in a First Amended

Administrative Complaint issued by Petitioner, the Department of

Financial Services, on Ma y 11, 2006 , and amended on October 16,

2006, and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

On or about May 11, 2006, Petitioner issued a three - count

Administrative Complaint, Petitioner's Case No. 857 6 3 - 0 6 - AG,

alleging that Mr. Ripa had violated certain statutory provisions

governing the conduct of Florida insurance agents. M r . Ripa

executed a document titled Election of Proceedings, disputing

the factual allegations of the Administrative Complaint and

requesting a hearing pursuant to S ection 120.57(1), Florida

Statutes (200 6 ). The Election of Proceedings was filed with

Petitioner along with a Petition for Adversarial Administrative

Hearing and Answer of Joseph John Ripa.

A copy of the Administrative Complaint , the Election of

Proceedin gs, and the Petition were filed with the Division of

Administrative Hearings on September 12 , 200 6 . The matter was

designated DOAH Case No. 0 6 - 3421 PL and was assigned to the

undersigned.

The final hearing was scheduled for November 6 through 9,

2006, by N otice of Hearing entered September 25, 2006 . By Order

Granting Continuance and Re - Scheduling Hearing, Respondent's

Unopposed Motion for Continuance was granted and the final

hearing was re - scheduled for December 5 through 8, 2006.

On November 15, 2006, co unsel for Respondent filed an

Amended Motion to Withdraw as Counsel for Respondent. The

Amended Motion was granted by an Order entered November 20,

2006. As a consequence, Mr. Ripa requested a continuance of the

final hearing. That unopposed request was granted by an Order

entered November 17, 2006. The final hearing was re - scheduled

for January 23 through 26, 2007.

On January 8, 2007, Mr. Ripa filed another request for

continuance of the final hearing due to illness. This unopposed

request for continu ance was granted by Order entered January 12,

2007. The final hearing was re scheduled for March 12 through

16, 2007.

An Unopposed Motion for Leave to Amend Administrative

Complaint was granted by Order entered October 16, 2006.

The undersigned conducted t he final hearing from

Tallahassee, Florida. Counsel for Petitioner , M r . Ripa , most

witnesses, and the court reporter participated in the hearing

from West Palm Beach , Florida. Two witnesses appeared by

telephone.

At the final hearing, Petitioner presente d the testimony of

Joy B. Merrill, David J. Nye , Ph. D. , Mary M. Barnes, Janet

Yocum, Kenneth La Valley, Gerald Tuinstra, Marcel Donald

VandenB osch, and Irene Putnam . Dr. Nye was accepted as an

expert in finance and insurance. Ms. Barnes was accepted as an

expert in dementia. Petitioner also had admitted Petitioner 's

Exhibits numbered 1 through 28 . M r . Ripa offered limited

testimony on his own behalf and had admitted Respondent's

Exhibits numbered 1, 2, and 3 .

Official recognition was taken of a consume r brochure

offered as an E xhibit by Mr. Ripa.

The official Transcript of the final hearing was filed on

April 3 , 200 7 . By Notice of F iling Transcript issued April 4,

2007 , the parties were informed that their proposed recommended

orders were due on or bef ore April 2 3 , 20 07 . Mr. Ripa filed a

Proposed Recommended Order on April 19, 2007. Petitioner filed

its Proposed Recommended Order on April 25, 2007, along with a

Motion for Extension of Time to File Proposed Recommended Order.

That Motion is hereby gra nted. Both Proposed Recommended Orders

have been fully considered in rendering this Recommended Order.

FINDINGS OF FACT

A. The Parties .

1. Petitioner, the Department of Financial Services

(hereinafter referred to as the "Department"), is the agency of

t he State of Florida charged with the responsibility for, among

other things, the investigation and prosecution of complaints

against individuals licensed to conduct insurance business in

Florida. Ch. 626, Fla. Stat. 1

2. Respondent Joseph John Ripa was, a t the times relevant,

licensed in Florida as a life and health (2 - 18) insurance agent.

M r . Ripa's license number is A220906 .

3 . At the times relevant to t his matter, M r. Ripa was

associated as a n agent with Fidelity Assurance , Inc.

(hereinafter referred to as "Fidelity Assurance "), an insurance

agency.

4. As an agent for Fidelity Assurance , Mr. Ripa sold

annuities, including equity indexed annuities, to a target

clientele of individuals 65 years of age or older.

B. Equity Indexed Annuities .

5. Very bro adly speaking, an "annuity" is an

insurance/ investment product whereby a person invest s money in

exchange for regular payments over a period certain, over one or

more specified individuals' lifetime s , or over a combination of

life (s) and a period certain. There are two primary types of

annuities: o ne is called a "fixed" annuity because payments are

made in fixed amounts or in amounts that increase by a fixed

percentage; the other is called a "variable" annuity because

payments vary according to the invest ment performance of a

specific type of investments, typically bond and equity mutual

funds.

6. Fixed annuities maybe "deferred" or "immediate." With

a deferred fixed annuity, an investment of money is made and the

earnings thereon are deferred both in pa yment and for tax

purposes until payment at a later time. An immediate fixed

annuity is one where an investment of money is made and payments

(a potion of principal and earnings) begin immediately.

Immediate annuities usually have "mortality" component a lso:

upon the death of the annuitant, payments are made to a

beneficiary.

7. Within the past ten years or so, equity indexed

deferred annuities, a form of fixed annuity, has been developed

and marketed in Florida. The features of this type of annuity

ar e far more complex than the traditional fixed annuity.

8. For any annuity, and especially an equity indexed

deferred annuity, a prospective annuitant must understand a

number of things about the annuity: (a) the overall product

features; (b) investing; ( c) tax impacts of the annuity; (d) the

projected rates of return and how certain those rates are; (e)

the risks associated with the insurance company, or "credit

risk" ; (f) liquidity of the investment; and (g) fees or costs

associated with the annuity.

9. There are several features of deferred annuity

products, including equity indexed deferred annuities, which can

have adverse consequences for some annuitants: (a) it is far

more complex than traditional fixed annuities; (b) the

uncertainty of the return on the annuitant's investment; (c) the

treatment of income from the annuity as ordinary income rather

than capital gains; (d) the treatment for tax purposes to

beneficiaries (no stepped - up basis or capital gains); (e) the

lack of liquidity and surrender ch arges; (f) inflexibility in

changing or "rebalancing" the mix of assets invested in; and (g)

fees associated with the annuity.

C . Count I: The VandenBosch Transactions .

10 . In December 2003 Mr. Ripa met with Emil and Georgette

VandenBosch at their Boy n t on Beach, Florida home. Emil was 88

years of age at the time and Georgette was 89 years of age.

While the evidence failed to prove their exact net worth, they

were retired and of relatively modest means. 2

11 . As a consequence of the December 2003 meetin g,

Mr. Ripa sold a fixed deferred annu ity in the amount of

$108,900.69 , contract number 449001, from American Investors

Life Insurance Company (hereinafter referred to as "American

Investors")(hereinafter referred to as the " First VandenBosch

Annuity"). T he annuitant was Georgette VandenBosch.

12 . The First VandenBosch Ann uity, while allowing up to a

10 percent withdrawal from the annuity , after the first year the

annuity was in force, once a year . For any other withdrawal

from the annuity the contract p rovided for a 12 percent , 1 2 - year

declining surrender charge. Consequently, in order for the

VandenBosch e s to fully access the annuity without penalty,

M s . VandenBosch would have to live until s he was at least

101 years of age. H er life expectancy at the time s he purchased

the First VandenBosch Annuity was only 5 . 3 5 years, a fact that

Mr. Ripa knew or should have been aware of.

13 . The sale of the First VandenBosch Annuity generated

commissions of $ 7 , 895 .3 0 for Mr. Ripa or his agency, Fidelity

Assurance.

14 . In January 200 4 , Mr. Ripa again met with the

VandenBosch e s, this time selling them a $26,520. 11 deferred

annuity, half in a traditional fixed annuity and half in an

equity indexed annuity, contract number 449729, from American

Investors ( hereinafter referred to as the " Second VandenBosch

Annuity"). The annuitant was Emil VandenBosch.

15 . Within four months after purchas ing the Second

VandenBosch Annuity, Mr. VandenBosch , through Mr. Ripa, invested

an additional $22,200.00 into the annuity, for a tot al

investment of $48,620. 11 .

16 . The Second VandenBosch Annuity , while allowing up to a

10 percent withdrawal of the annuity once a year after th e first

year, provided for a 12 percent , 10 - year declining surrender

charge for any other withdrawals. Conseq uently, in order for

Mr. VandenBosch to fully access t he annuity without penalty,

Mr. VandenBosch would have t o live until he was at least

99 years of age. His life expectancy at the time he purchased

his a nnuity was only 4.85 years, a fact that Mr. Ripa knew or

should have been aware of.

17 . The sale of the Second VandenBosch Annuity generated

commissions of $ 4,862.02 for Mr. Ripa or his agency, Fidelity

Assurance.

18 . It has been the practice of the VandenBosch e s, that

Mr. VandenB osch handled all fi nan cial transactions impacting the

family. It is, ther efore, inferred that Mr. VandenB osch was

responsible for the purchase of the First and Second VandenBosch

Annuities.

19 . While neither Emil nor Georgette VandenBosch testified

at the hearing of this matt er, 3 one of their children, Donald

VandenBosch did. While much of his testimony constituted

hearsay , not subject to any exception under Chapter 90, Florida

Statutes, 4 he did testify credibly that Mr. VandenBosch was, at

the times relevant to this matter, experiencing declining

health. His declining health included macular degeneration ,

which impacted his eye sight, and a decline in his mental

capacity. While the evidence failed to prove clearly and

convincingly that Mr. VandenBosch was unable to read the

documents involved with the purchase of the First and Second

VandenBosch Annuities, it is found that, due to his declining

mental capacity and the complexity of the contracts for the

annuities, Mr. VandenBosch relied heavily, if not exclusively,

on Mr. Ri pa's represen tations concerning the policies Mr. Ripa

sold them.

20 . In January 2005, the VandenB osches, along with their

son, Donald VandenBosch , arranged to meet with Ripa. During

that meeting the VandenBosch es told Mr. Ripa that they desired

to access their investments and needed his assistance to avoid

the high penalties associated with withdrawals. 5 Mr. Ripa

accurately explained that the only way to avoid the surrender

penalties and access the ir investments currently would be to

make a onc e - a - year w ithdrawal of up to 10 percent of the

annuities . After emphasizing to Mr. Ripa that they did not want

to incur any penalties, Mr. Ripa was instructed to arrange for

them to make a 10 percent withdrawal from the First VandenBosch

Annuity, which Mr. Ripa exp lained would amount to the equivalent

of approximately $950.00 to $970.00 per month. At no time

during the meeting was their any instruction given to Mr. Ripa

to arrange for the cancellation of either of the annuities or

the purchase of any other product . Mr. Ripa agreed to prepare

the necessary paperwork to carry out the VandenBosches'

instructions.

21 . The events of the Ja nuary 2005 meeting support a

finding that the First and Second VandenBosch Annuities did not

meet the VandenBosches' financial goals and were not suitable

investments for them. In particular, it is inferred that the

VandenBosches did not want to invest in a product that so

severely restricted their access to their assets.

22 . Despite the clear instructions to Mr. Ripa concerning

the VandenBosches' wishes, 6 Mr. Ripa presented the VandenBosches

with forms for their execution subsequent to their January 2005

meeting which resulted in the cancellation of the First

VandenBosch Annuity and the purchase of a n ew immediate fixed

annuity from American Investors, contract number 473129. As a

result of these transactions, the VandenBosches incurred a

surrender penalty of $11,301.65 , the very result th ey had

explicitly told Mr. Ripa they wished to avoid.

23 . The monthly payments received by the VandenB osches

through the newly purchased fixed annuity we re very close to the

amount of money they would have received by taking a penalty -

free yearly withdrawal and dividing that amount on a monthly

basis. There was, therefore, no apparent reason why th e

VandenBosches would have incurred the penalty of $11,301. 65

imposed upon them for canceling the First VandenBosch Annuity.

These transactions were carried out by Mr. Ripa d espite

instructions to contrary, despite the severe penalty incurred by

the Vande nBosches, and without any discernable reason . It is,

therefore, inferred that Mr. Ripa, at best, simply failed to

adequately explain the transactions or, at worst, deceived the

VandenBosches into believing the documents he provided for their

signature wer e consistent with their instructions during the

January 2005 meeting.

D . Count II: The Tuinstra Transaction .

24 . In May of 2004, Gerald Tuinstra met with Mr. Ripa at

his Boynton Beach home. Mr. Tuinstra was 83 years of age at the

time. His wife, Marce lla, was 80 years of age and had recently

moved into a nursing home.

25 . Mr. Tuinstra contacted Mr. Ripa because he was

interested in creating an income source with money he had

received from the sale o f some property. He wanted to create an

income sourc e in order to help with the funding of h is wife's

nursing home expenses, while avoiding the exhaustion of his

limited assets. Additionally, Mr. Tuinstra was interested in

protecting his property against possible loss which might be

caused by the need to s eek government funding for his wife's

nursing home costs.

26 . At the time of his meeting with Mr. Ripa, the money

which Mr. Tuinstra was interested in investing was deposited in

a bank where it was earn ing approximately 4 percent interest.

27 . Mr. Tuinst ra explained his investment goals to

Mr. Ripa during their meeting and Mr. Ripa assured him that both

goals could be achieved through products offered by Mr. Ripa .

As to the goal of creating an i ncome source, Mr. Ripa told

Mr. T uinstra that he would earn 7.37 percent interest on his

investment for the first year and would likely earn more in

following years. Mr. Ripa told Mr. Tuinstra that he would

receive $391.05 per month, writing this amount on notes he left

with Mr. Tuinstra. Mr. Ripa did not inform Mr. Tuinstra that

the annuity he was proposing was subject to the risk of earning

even less then he was currently earning from his bank account or

even earning nothing. Mr. Ripa also assured Mr. Tuinstra that

his investment would be protected , meeting his second investment

goal .

28 . Based upon Mr. Ripa's representations, which were , at

best , misleading, Mr. Tuinstra purchased a $40,000.00 equity

indexed deferred annuity from American Investors, contract

number 458412, recommended by Mr. Ripa (hereinafter referred to

as the "Tuinstra Annuity"). Mr. Tuinstra's wife was made the

annuitant. The m oney used to make this purchase constituted

substantially all of Mr. Tuinstra's liquid assets.

29 . The commission on the sale of the Tuinstra Annuity was

$4,200.00.

30 . The Tui nstra Annuity provided for a 17 percent

surrender charge for the first three year s of the contract,

declining to a 3 percent charge in the 13th year.

Mr. Tuinstra's life expectancy at the time of the purchase was

6.65 years. Mr. T uinstra was not informed of these provision s

of the contract by Mr. Ripa during their meeting. In fact,

Mr. Ripa led Mr. Tuinstra to believe that he would be receiving

monthly payments throughout the term of the annuity.

31 . The Tuinstra Annuity that Mr. Ripa had a ssured

Mr. Tuinstra would provide the monthly income he desired,

act ually failed to provide for any payment . The only provision

for a return of his investment without penalty during the first

13 years of the contract was th e allowance of a 10 percent

with drawal, after the first year of the contract, on an annual

basis, which was not what Mr. Tuinstra asked for or was told he

was limited to.

32 . When the actual contract for the Tuinstra Annuity was

received by Mr. Tuinstra from American Investors, he read the

contract and realized that much of what Mr. Ripa had told him

about what he was purchasing was incorrect. He then began

making efforts to cancel the policy, which he was ultimately

able to do. It was during these efforts that he learned for the

first time about the withdrawal penalties, not from reading the

rather lengthy contract, but from an unidentified man he spoke

to about the contract at Fidelity Assurance.

E . Count III: The Putnam Transaction .

33 . In March of 2005, the son of Louis Bruno, wh o was 90

years of age at the time , was pursuing court proceedings to be

appointed Mr. Bruno's guardian. Mr. Bruno was living in Boyton

Beach , Florida at the time with his companion of 15 or so years,

Ir ene Putnam.

34 . Due to his advanced age and lack of short - term memory,

Mr. Bruno was unabl e to manage his own finances, i nstead,

relying upon Ms. Putnam, who h ad a power of attorney from

Mr. Bru no. Ms. Putnam was 82 years of age at that time.

35 . At some time shortly before a hearing was schedule d to

be h eld on the guardianship matter , Ms. Putnam and Mr. Bruno

discussed the upcoming proceeding with Mr. Ripa, whom Mr. Bruno

and Ms. Putnam had known as a fri end for a number of years.

Mr. Ripa agreed to testify at the court proceeding on behalf of

Mr. Bruno.

36 . At som e point during their discussion , Mr. Ripa asked

Mr. Bruno and Ms. Putnam whether they realized that, if

Mr. Bruno lost the court proceeding, his son would have

authority over all of his assets, including $18,000.00 , which

Mr. Bruno maintained i n two separate bank accounts. This money

represented Mr. Bruno's liquid assets at the time. The

possibility of losing control of his money was not something

that Mr. Bruno or Ms. Putnam had considered and, in response to

Mr. Ripa's warning, they asked hi m if he knew how they could

avoid this result. Mr. Ripa told Mr. Bruno and Ms. Putnam that

he knew how the money could be protect ed until after the

proceeding . They unequivocally explained to Mr. Ripa that they

did want to protect the money, but for only a short period of

time. Their intent, which was fully explained to Mr. Ripa, was

to re - take possession of the money immediately after the

guardianship proceeding ended, in w hich they expected to

prevail .

37 . Instead of carrying out Mr. Bruno's clear, un equivocal

goal, Mr. Ripa, no more than two or three days before the March

2005 guardian proceeding, sold Mr. Bruno an $18,000.00 equity

indexed deferred annuity from American Investors, contract

number 476076, with Ms. Putnam as the annuitant 7 (hereinafter the

"Putnam Annuity").

38 . The Putnam Annuity provided for penalties for

withdrawal of the annuity during the first 10 years of the

contract, starting at 12 percent during the first year and

declining thereafter. Ms. Putnam, whose life expectancy was

8. 45 years, would have had to survive to age 92 in order to

withdraw the full annuity without penalty. Mr. Bruno would have

had to live to age 100 to do so.

39 . The commission on the sale of the Putnam Annuity was

$1,800.00.

40 . Following Mr. Bruno's succ essful defense of the

guardianship proceeding, Ms. Putnam spoke to Mr. Ripa about the

retrieval of the $18,000.00 investment. Having received the

actual contract, however, Ms. Putnam realized that the Putnam

Annuity was not what Mr. Bruno and she had beli eved they were

purchasing . Indeed, having relied totally on Mr. Ripa to

protect Mr. Bruno's money for a very short time, including

allowing him to complete all of the paperwork for them , she had

not even realized that Mr. Bruno had purchase d an annuity of any

kind prior to receiving the contract. In response to her

inquiry, Mr. Ripa suggested that Ms. Putnam have Mr. Bruno

surrender another annuity which he owned, one without surrender

charges, thereby obtaining cash for his immediate needs and

avoiding a ny surrender charges on the Putnam Annuity. While

this suggestion would have allowed Mr. Bruno to replace the

$18,000.00 he had tied up in the Putnam Annuity , it was not an

option that had ever been discussed with Mr. Bruno or Ms. Putnam

and was contrary to what they had requested that Mr. Ripa do

with the $18,000.00.

F . Count IV: The LaValley Transactions .

41 . In September 2005, Mr. Ripa met with Virginia LaValley

at her Boyton Beach , Florida home. Ms. LaValley, who lived

alone, was 75 years of age at the time.

42 . Ms. LaValley had been evidencing signs of dementia as

early as 2003 , and her symptoms had continued to increase up to

the time Mr. Ripa met with her. 8 She had begun to have

difficulty remembering simple words to describe objects as early

a s 2003. During 2005 (prior to September) , she had expressed

the belief that a computer - generated form letter had been

personally written to her; she had begun piling her mail on the

dining room table rather than deal with it ; she believed that

she would " go to jail" if she threw out any of the mail sent to

her; she had sealed return envelopes from solicitations she had

received and written words to the effect that she would not mail

them until the addressees provided her with stamps, a demand

that the addr essees could not be aware of without the letters

being mailed to them, a fact that Ms. LaValley did not

understand; and she ha d stopped reconciling her check book or

otherwise keeping up with her personal finances. 9

43 . Janet Yocum, a friend and an individ ual who had sold

annuities to Ms. LaValley in the 1990's, noticed as early as

2003 that Ms. LaValley was having difficulty following simple

instructions concerning the completion and return of a form that

Ms. Yocum had sent to Ms. LaValley. It was obvious to

Ms. Yocum, although she did not see Ms. LaValley on a regular

basis, that Ms. LaValley was losing her ability to understand

even simple matters long bef ore Mr. Ripa's meeting with

Ms. LaValley.

44 . While Mr. Ripa was not aware of some of the foregoing

events, it is found that Ms. LaValley's state of health in

September 2005 should have been evident to Mr. Ripa when he met

with her. If nothing else, Mr. Ripa should have realized that

Ms. LaValley was not capable of understanding the complex ities

of fix ed annuity contracts , much less equity index ed deferred

annuity contracts .

45 . Despite what must have been obvious to him, Mr. Ripa

convinced Ms. LaValley during his September 2005 meeting to

surrender six annuities which she had purchased from Jackson

Na tional Life Insurance Company (hereinafter referred to as

"Jackson National") between 1993 and 1997. Mr. Ripa also

convinced Ms. LaValley to use the proceeds from the Jackson

National annuities , which were old enough to avoid any surrender

charges for the ir surrender and provided f or a minimum return of

at least 3 percent , to purchase two American Investors annuities

(hereinafter referred to jointly as the "LaValley Annuities") .

46 . One of the LaValley A nnuities, contract number 499901,

was an equity inde xed deferred annuity for which Ms. LaValley

paid $19,500.00. The other, contract number 500794, was also an

equity indexed deferred annuity in the amount of $19,079.49.

Both provided surrender penalties over 15 years, with a p enalty

for the first year of 19 percent . Ms. LaValley , whose life

expectancy at the time was 12.6 years, woul d have to live until

she was 91 years of age to avoid any surrender penalty. The

minimum i nterest on the annuities w as 2 percent compared to the

minimum 3 percent rate of th e Jackson National policies.

47 . During his meeting with Ms. LaValley, Mr. Ripa gave

her a company brochure from American Investors' parent,

"Amerus." There were a number of handwritten notations on the

brochure written by Mr. Ripa. One notation indicat es "7%" and

is followed by Mr. Ripa's initials. Next the heading "Fixed

Strategy" is the notation "3%." While there was no evidence

explaining what was said about these notations, they all

emphasize "positive" aspects or selling points for the annuity

pr oducts sold to Ms. LaValley. What Ms. LaValley took from the

meeting and, likely, the notations, is that she would be earning

7 percent each year on the LaValley Annuities. 10

48 . As further evidence of her declining mental state,

when Ms. LaValley receiv ed a letter from American Investors'

parent company within two weeks after purchasing the LaValley

Annuities congratulating her on her purchases. Ms. LaValley,

apparently not realizing what the letter meant, wrote a note

dated "10/4/200 [5] " 11 on it statin g that "I do not want American

Investors Life. Please Cancel." Her signature followed this

note. This letter, with her handwritten reply, was returned to

American Investors.

49 . Whether Ms. LaValley intended to "cancel" the LaValley

Annuities or simply thought the letter was a solicitation to

purchase insurance is not clear . If the former, she clearly

evidenced intent to cancel the LaValley Annuities; if the

latter, she evidenced a lack of understanding about what she had

done only two weeks before.

50 . American Investors apparently treated Ms. LaValley's

instructions literally as evidence of her intent to cancel the

LaValley Policies, apparently informing Mr. Ripa. Mr. Ripa then

revisited Ms. LaValley and prepared a letter for her signature

repudiati ng her attempt to cancel the annuities. The letter,

Petitioner's Exhibit 10, was faxed from Fidelity Assurance's fax

machine on October 13, 2005.

G . The Unsuitability of the VandenBosch, Tuinstra, Putnam

and LaValley Annuities .

51 . Given the ages of the annuitants at the time of the

purchase of the various annuities at issue in this case (all

except one of which were equity indexed deferred annuities; the

other was a deferred fixed annuity) , their relatively modest

financial situations, the long - term nat ure of the annuities and

the high penalties associated with access ing their investments

should the need arise (all of the individuals involved would

have had to outlive their life expectancies in order to access

their investments without penalty) , the Vand enBosch Annuities ,

the Tuinstra Annuity, the Putnam Annuity, and the LaValley

Annuit i es were not suitable investments for those individuals , a

fact which Mr. Ripa knew or should have known .

52 . Th e foregoing conclusion is also supported by the

VandenBosch es' efforts not too long after purchasing their

annuities to unsuccessfully access their investments and their

expression of disappointment upon learning of the severe

withdr awal penalties associated with accessing their

investment s ; Mr. Tuinstra's explana tion of his intended

investment goals when he purchased his annuity and the failure

of the Tuinstra Annuity to meet those goals; Ms. Putnam's and

Mr. Bruno's explanation of their intended short - term investment

goal when the Putnam Annuity was purchased and the failure of

the Putnam Annuity to meet that goal; and Ms. LaValley's obvious

impaired ability to understand the nature of the transactions

carried out by Mr. Ripa, transactions that make no sense from a

financial point of view.

53 . Finally, the conclu sion that the investments at issue

in this case were sold to inappropriate purchasers is based upon

the obvious failure of Mr. Ripa to perform a basic suitability

analysis at the time he sold the annuities to the any of the

individual involved or, if he di d perform such an analysis, his

failure to recognize that the annuities were no t a suitable

investment for those individuals . The VandenBosches, the

Tuinstras, Ms. Putnam and Mr. Bruno, and Ms. LaValley were all

individuals of somewhat advanced age and mo dest financial

resources. It is hard to imagine how Mr. Ripa could have

performed the type of financial risk analysis he should have

performed for these individuals and still concluded that the

annuities sold to them were appropriate. None of the

individ uals were looking for such long - term investments and it

was prove d that some expressed interest in short - term

investments or investment s that would create an immediate income

stream: the VandenBosches expressed their desire for a return

of their funds sho rtly after Mr. Ripa sold them their annuities;

Mr. Tuinstra testified convincingly of his desired investment

outcome (income producing and asset protection); and Ms. Putnam

testified convincingly that she and Mr. Bruno only wanted to

protect his funds for a few weeks. Despite these known goals,

Mr. Ripa sold the VandenBosches, the Tu i n stras, and Ms. Putnam

and Mr. Bruno a product which did nothing but thwart those

goals.

CONCLUSIONS OF LAW

A. Jurisdiction .

54 . The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Sections 120.569 and 120.57(1),

Florida Statutes (200 6 ).

B. The Burden and Standard of Proof .

55 . The Department seek s to impose penalties against Mr .

Ripa thr ough the Administrative Complaint that include mandatory

and discretionary suspension or revocation of h is licenses.

Therefore, the Department has the burden of proving the specific

allegations of fact that support its charges by clear and

convincing evid ence. 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 292 (Fla. 1987); and Pou v. Department of Insurance and

Treasurer , 707 So. 2 d 941 (Fla. 3d DCA 1998).

56 . 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 i n 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 797, 800

(Fla. 4 th DCA 1983).

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

652 (Fla. 5th DCA 1998)(Sharp, J., dissenting).

C. The Depart ment's Charges .

57 . 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.

58 . Section 626.621, Flor ida 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.

59 . The Amended Administrative Complaint in this case

con tains four counts . In all four counts it is alleged that Mr.

Ripa violated the following statutory provisions: Sections

626. 6 11 (5), (7), (8), (9), and (1 3 ); 626.621( 6 ) ; and

626.9541(1)(l) , Florida Statutes. It has also been alleged that

he violated Flor ida Administrative Code Rule 69B - 215.210.

60 . Section 626.611, Florida Statutes, provides, in

pertinent part, the following:

The department shall . . . suspend, revoke,

or refuse to renew or continue the license

or appointment of any applicant, agent,

tit le 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

appointe e any one or more of the following

applicable grounds exist:

(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 an form of disseminatio n of information

or advertising.

. . . .

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

(8) Demonstrated lack of reasonably

adequate knowledge and technical competence

to engage in the transactions au thorized by

the license or appointment;

(9) Fraudulent or dishonest practices in

the conduct of business under the license or

appointment.

. . . .

(1 3 ) Willful failure to comply with, or

willful violation of, any proper order or

rule of the Depa rtment of willful violation

of any provision of this code.

. . . .

61 . Section 626.621( 6 ), Florida Statutes, provides:

The department may, in its discretion, deny

an application for, suspend, revoke, or

refuse to renew or continue the license or

appoi ntment 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, li censee, 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:

. . . .

( 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 to be a source of

injury or loss to the public interest.

62 . Section 626 .9541(1)(l), Florida Statutes, is contained

with in Chapter 626, Part IX , Florida Statutes. This statutory

provision defines "unfair methods of competition and unfair or

deceptive accts or practices", including the one at issue in

this proceeding:

(1) U NFAIR METHODS OF COMPETITION AND

UNFAIR OR DECEPTIVE ACTS. - The following are

defined as unfair methods of competition and

unfair or deceptive acts or practices:

. . . .

(l) Twisting . - Knowingly making any

misleading representations or incomplete o r

fraudulent comparisons or fraudulent

material omissions of or with respect to any

insurance policies or insurers for the

purpose of inducing, or tending to induce,

any person to lapse, forfeit, surrender,

terminate, retain, pledge, assign, borrow

on, or convert any insurance policy or to

take out a policy of insurance in another

insurer.

63 . Finally, 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

servic e 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 e very 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 .

D. Summary of All Four Counts .

64 . Summarizing the charges against Mr. Ripa, the

Department has charged him with essentially six offenses:

a. Wi llfully ma king misrepresentations to, or willfully

deceiving all four victims in this case;

b. Demonstrating lack of fitness or trustworthiness;

c. Demonstrating lack of knowledge and technical

compet ence;

d. Fraudulent or dishonest practices;

e. Failing to comply with Florida Administrative Code Rule

69B0215.210; and

f. Employing an unfair or deceptive act or practice --

"twisting."

65. The offense s summarized in paragraph 64a., b., d., e.,

and f. a re related and somewhat si milar offense and they all

require a finding of some specific intent on the part of a

licensee. See Bowling v. Department of Insurance , 394 So. 2d

165 (Fla. 1st DCA 1981). It is difficult to find that a person

committed any of t hose offenses without also finding the

individual knew what he or she was doing. The offense

summarized in paragraph 64c. relates to the ability of a

licensee to practice insurance and may result in punishment of a

license e despite his or her best intenti ons.

66. While there was some ev idence presented concerning

Mr. Ripa's knowledge about, or lack thereof, the transactions

involved in this matter, that evidence was not clear and

convincing. The testimony concerning Mr. Ripa's lack of

knowledge was limit ed to opinion testimony without the source of

those opinions, Mr. Ripa's deposition testimony, being also

offered in evidence. It was, therefore, no t possible to review

the context in which Mr. Ripa's "incorrect" responses was given.

Additionally, a find ing that Mr. Ripa lacks "reasonably adequate

knowledge and technical competence . . . " to engage in the

insurance business would be a finding inconsistent with the

other charges against him, all of which require some element of

intent on Mr. Ripa's part. If Mr. Ripa didn't know what he was

doing, it simply cannot be found that he made willful

misrepresentations or was willfully deceptive in his dealings

with the VandenBosches, Mr. Tuinstra, Ms. Putnam and Mr. Bruno,

or Ms. LaValley; that he acted in such a way as to be considered

un trustworthy; that he acted fraudulently or dishonestly in his

dealings with them ; that he willfully failed to comply with

Florida Administrative Code Rule 69B - 215.210; or that he

knowingly mislead the VandenBosches and Ms. LaVall ey to

surrender annuities and purchase new products from him.

67. Because it is concluded that the Department proved

clearly and convincingly that Mr. Ripa knew what he was doing

when he sold insurance products to the individuals involved in

this case, it cannot be concluded that he violated Section

626.621(8), Florida Statutes.

68. What t he evidence did prove clearly and convincingly

is that Mr. Ripa's actions with regard to all of the individuals

involved in this case were so contrary to the interests o f those

individuals that he 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, h is actions

demonstrate a lack of trustworthiness to engage in the insurance

business in violation of Section 626.611(7), Florida Statues ;

h is actions also constituted dishonest practices in the conduct

of insurance business in violation of Section 626.611(9),

Florida Statutes ; and, f inally, as to all the individuals

involved, Mr. Ripa's action s were inconsistent with the duty

imposed upon him by Rule 69B - 215.210 , in violation of Section

626.611(13), Florida Statutes.

69. The final alleged violation, that Mr. Ripa engag ed in

unfair or deceptive acts or practices , was also proven cl early

and convincingly by the Department as to his dealings in Count

I, the VandenBosches, and Count IV, Ms. LaValley. Both

surrender policies under circumstances which, in the case of the

VandenBosches were contrary to their specific instructions, and

in both cases made virtually no financial sense to anyone. It

is concluded that, as to Counts I and IV but not Counts II and

III, the department has proved that Mr. Ripa engaged in

"twisting" as defined in Section 926.9541(1)(l), Florida

Statutes, in violat ion of Section 626.621, Florida Statutes.

E . Penalty .

70 . Florida Administrative Code Rule Chapter 69B - 231

provides guideline penalties for violations of Sections 626.611

and 626.621, Florida Statutes. Florida Administrative Code Rule

69B - 231.080 provid es the following penalty guidelines for the

violations proved in this case: a suspension of nine months for

a violation of Section 626.611(5 ), Florida Statutes ; a

suspension of six months for a violation of Section 626.611(7),

Florida Statutes; a suspensi on of nine months for a violation of

Section 626.611(9), Florida Statutes; and a suspension of six

months for a violation of Section 626.611(13), Florida Statutes.

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. Florida Administrative Code Rule 69B -

2 31.100(12), provides for a nine - month suspension for a

violation of Section 626.9541(1)(l), Florida Statutes.

71. Sec tion 626.9521(2), Florida Statutes, also provides

for the imposition of an administrative fine for the commission

of unfair and deceptive practices in violation of Section

626.9541, Florida Statutes, of not greater than $2,500.00 for a

non - willful violatio n (maximum aggregate of $10,000.00), and

$20,000.00 for each willful violation (maximum aggregate of

$100,000.00).

72 . Florida Administrative Code Rule 69B - 231.040, provides

the following with regard to the calculation of the appropriate

penalty where mul tiple violations are found:

(1) Penalty Per Count.

(a) The Department is authorized to find

that multiple grounds exist under Sections

626.611 and 626.621, F.S., for disciplinary

action against the licensee based upon a

single count in an administra tive complaint

based upon a single act of misconduct by a

licensee. However, for the purpose of this

rule chapter, only the violation specifying

the highest stated penalty will be

considered for that count. The highest

stated penalty thus established for each

count is referred to as the “penalty per

count”.

(b) The requirement for a single highest

stated penalty for each count in an

administrative complaint shall be applicable

regardless of the number or nature of the

violations established in a singl e count of

an administrative complaint.

3 2

(2) Total Penalty. Each penalty per

count shall be added together and the sum

shall be referred to as the “total penalty”.

(3) Final Penalty. The final penalty

which will be imposed against a licensee

under these rules shall be the total

penalty, as adjusted to take into

consideration any aggravating or mitigating

factors, provided however the Department

shall convert the total penalty to an

administrative fine and probation in the

absence of a violation of Section 626.611,

F.S., if warranted upon the Department’s

consideration of the factors set forth in

rule subsection 69B - 231.160(1), F.A.C.

73 . Florida Administrative Code Rule 69B - 231.160 provides

the following relevant aggravating and mitigation factors :

(1) For penalties other than those

assessed under Rule 69B - 231.150, F.A.C.:

(a) Willfulness of licensee’s conduct;

(b) Degree of actual injury to victim;

(c) Degree of potential injury to victim;

(d) Age or capacity of victim;

(e) Time ly restitution;

(f) Motivation of agent;

(g) Financial gain or loss to agent;

(h) Cooperation with the Department;

(i) Vicarious or personal responsibility;

(j) Related criminal charge; disposition;

(k) Existence of secondary violations i n

counts;

(l) Previous disciplinary orders or prior

warning by the Department; and

(m) Other relevant factors.

7 4 . In this case, the highest prescribe d disciplinary

action is a nine - month suspension and a fine of $20,000.00.

Having proved four vio lations of Section 626.611(5), (7), (9),

and (13), Florida Statutes, and two violations of Section

626.621(6), Florida Statutes, the total aggregate suspension of

36 months, with a limitation imposed by Section 626.641(1),

Florida Statutes, of two years, a nd a fine of $40,000.00

($20,000.00 each for Count I, the VandenBosches, and Count IV,

Ms. LaValley ) .

75. The Department has reasonably argued that, considering

the willfulness of the violations, the age and capacity of the

individuals involved, and the i njury sustained by those

individuals, the need to deter such exploitation of elderly

consumers, and Ms. Ripa's gain from the transactions, support

the revocation of his license.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that a final order be entered by the

Department finding that Joseph John Ripa violated the provision s

o f Chapter 626, Florida Statutes , described, supra , requiring

that he pay an administrative fine of $40,000.00 and revoking

his licensu re as a life and health agent.

DONE AND ENTERED this 16th day of May , 200 7 , in

Tallahassee, Leon County, Florida.

S

___________________________________

LARRY J. SARTIN

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 16th day of May, 2007 .

ENDNOTES

1 / The events at issue in this case took place in 2003, 2004,

and 2005. The pertinent Florida Statutes during this period of

time remained materially the same. All references, unless

otherw ise noted, will be to the statute applicable to the events

for which findings of fact or conclusions of law are made.

2 / Relying upon the testimony of Donald VandenBosch, the son of

Emil and Georgette VandenBosch, it is been argued that the

VandenBosches ' net worth was approximately $400,000.00. Donald

VandenBosch also testified about what he believed the

$400,000.00 was made up of. This testimony is not credited,

however, because inadequate testimony concerning the basis for

Donald VandenBosches' testi mony on this subject was elicited.

It was not, therefore, proved clearly and convincingly that this

testimony was based upon knowledge or speculation or a

combination of both.

3 / Mr. VandenBosch had been placed in a nursing home shortly

before the final hearing. Why Mrs. VandenBosch did not testify

was not clearly proved.

4 / It was suggested during the hearing and in Petitioner's

Proposed Recommended Order that a number of hearsay exceptions

apply in this case. The evidence failed to support some of

Petitioner's assertions.

In particular, as it relates to statements made to relatives and

friends of the VandenBosches and Virginia LaValley, who is

discussed, infra , Petitioner suggested that Section 90.803(24),

Florida Statutes, applies to hearsay state ments made to those

relatives and friends which were reported during the hearing.

This assertion is not supported by that limited exception to the

hearsay rule. The exception of Section 90.903(24), Florida

Statutes, applies to statements of "elderly pers ons or disable

persons, as defined in s. 825.101." The statements that are

excepted, however, are limited to statements "describing any act

of abuse or neglect, act of exploitation . . . on the declarant

elderly person . . . ." While the individuals who did not

testify in this proceeding, in particular the VandenBosches and

Ms. LaValley, come within the definition of "elderly persons"

under Section 825. 101, the hearsay statements of their family

members and friends who did testify were, in large part, no t

about the alleged "act of abuse or neglect" or "act of

exploitation" involved in this case. Rather, they were

statements of a very general nature not subject to any exception

to the hearsay rule.

Secondly, Petitioner has argued that Section 90.803(3), Florida

Statutes, applies to statement reported by Ms. LaValley's son,

Kenneth LaValley. It is doubtful that any statements made by

Ms. LaVelley which Mr. LaValley testified to come within this

exception. The statements which may be relied upon under

Sec tion 90.803(3), Florida Statutes, are only those of the

declarant describing the "declarant's then - exiting state of

mind, emotion, or physical sensation . . . ." No such

statements made by Ms. LaValley were testified to.

5 / The statements made by the Va ndenBosches during this meeting

were reported by Donald VandenBosch. Donald VandenBosches'

testimony, to the extent it related instructions which he heard

his father give to Mr. Ripa and his statements of displeasure

about the products sold to him by Mr. Ripa are not hearsay

statements. They are not hearsay because they were not offered

to prove the truth of a statement; instead, they were offered to

prove an event which was witnessed by Donald VandenBosch. As an

example, if someone testifies they heard a woman yell "there is

a fire, everyone run", the statement could not be relied upon to

find that there was "a fire", but it could be relied upon to

prove that an instruction was given to "run."

6 / Mr. Ripa's testimony that he had a telephone conversatio n

with Donald VandenBosch about surrendering the First VandenBosch

Annuity is not credited. Mr. Ripa's testimony in this regard

was self - serving, he failed to raise the issue during his cross -

examination of Donald VandenBosch, and, most importantly, such a

request defies logic. Mr. Ripa gave no explanation as to why

Donald VandenBosch would make such a request or why he would

honor such a request from anyone other than the annuitant.

7 / Petitioner has suggested that a finding of fact be made

concerning the fact that Mr. Ripa listed Ms. Putnam as Mr.

Bruno's spouse, when Mr. Ripa knew that this was not correct.

While the evidence supports such a finding, it is not relevant

to prove the charges of the Amended Administrative Complaint.

Mr. Ripa has not be en charged with knowingly including false

information in an insurance application.

8 / It was suggested in Petitioner's Proposed Recommended Order

that Ms. LaValley has been "diagnosed as having dementia and

deemed mentally incapacitated." Competent, non - hearsay evidence

or hearsay evidence subject to an exception to the hearsay

evidence rule was not offered to substantiate this proposed

finding. The evidence relied upon consisted of two physician

prescription pad pages attached to a letter which is purp ortedly

from Joseph M. Lee, Esquire, a lawyer hired by Ms. LaValley's

son to represent her in efforts to obtain the cancellation of

the products sold to her by Mr. Ripa. Petitioner has suggested

that these documents, more particularly, the physician notes ,

come under the exception to the hearsay rule of Section

90.803(4), Florida Statutes. Petitioner's position is rejected

for two reasons. First, neither the letter, nor, more

importantly, the physician notes were identified by the authors.

Secondly, eve n if the documents had been authenticated properly,

the exception to the hearsay rule does not apply to the

physician statements. Section 90.803(4), Florida Statutes,

provides an exception for statements made by a person for

purposes of medical treatment or diagnosis. Thus, statements of

Ms. LaValley to a physician might be subject to the exception.

The exception does not, however, extend to the actual resulting

treatment prescribed by or the diagnosis of the physician, which

is what the statements conta ined in the physician notes and

relied upon by Petitioner are.

9 / It has been suggested by Petitioner that the testimony of

Kenneth LaValley which formed the basis for these findings is

admissible as an exception to the hearsay rule found in Section

90.8 03(3), Florida Statutes. That argument has been rejected.

See Endnote 3, supra . His testimony, however, is admissible

because it reflects things that he witnessed and heard.

Ultimately, these facts, along with similar antidotal facts

testified to by Ja net Yocum, a friend of Ms. LaValley, were

found to support a finding as to Ms. LaValley's mental state.

10 / This finding is based upon a hearsay statement made by Ms.

LaValley to her son which comes with the exception to the

hearsay rule of Section 90.80 3(24), Florida Statutes.

11 / Ms. LaValley dated her note "2004", an obvious error.

COPIES FURNISHED:

Roxanne Rehm , Esquire

Division of Legal Services

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 323 99 - 0333

Joseph John Ripa

19347 Skyridge Circle

Boca Raton, Florida 33498 - 6211

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Daniel Sumner , General Counsel

Depar tment of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

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 exception s

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.