10-002443 Department Of Financial Services vs. Falcontrust Group, Inc. Status: Closed Recommended Order on Friday, October 15, 2010.

Summary: Insurance agent and agency took premiums to pay commissions held back by insurance company. Pending civil suit did not prevent administrative decision interpreting Agency Agreement; taking the premiums violated several insurance code provisions.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANC IAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case Nos. 10 - 2442

) 10 - 2443

ALBERTO LUIS SOTERO AND )

FACLONTRUST GROUOP, INC., )

)

Respondent s . )

______________________________ ___)

RECOMMENDED ORDER

Administrative Law Judge John D. C. Newton, II, of the

Division of Administrative Hearings, heard this case on

August 10, 2010, at the Division of Administrative Hearings,

1230 Apalachee Parkway, The DeSoto Building, Tallahassee,

Florida.

APPEARANCES

For Petitioner: James A. Bossart, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respondent: Daniel C. Brown, Esquire

Carlton Fields, P.A.

Post Office Box 190

Tallahassee, Florida 32302 - 0190

STATEMENT OF THE ISSUES

A . Does Petitioner, Departme n t of Financial Services

(DFS) , have authority to determine if Respondent, Alberto Luis

Sotero (Mr. Sotero) and Respondent, FalconTrust Group, Inc.

(FalconTrust), wron g fully took or witheld premium funds owed an

insurance company while a civil action between the insurance

company and Mr. Sotero and FalconTrust pend s in C ircuit C ourt

presenting the same issues?

B . Should the insurance agent license of Mr. Sotero be

disciplined for alleged violations of Sections 62 6.561(1),

626.611(7), 626.611(10), 626.611(13), and 626.621(4) , Florida

Statutes (200 7) ? 1 .

C . Should the insurance agency license of FalconTrust be

disciplined for alleged violations of Section 626.561(1),

626.6215 (5) (a), 626.621 5 (5)(d). 626.621 5 (5)(f), and

626.621 5 (5)(k), Florida Statutes?

PRELIMINARY STATEMENT

On April 16, 2010, DFS filed Administrative Complaints

against Mr. Sotero and FalconTrust , each with one Count alleging

violations of Chapter 656, Florida Statutes (200 7 ) governing the

business o f insurance. 2 Mr. Sotero and FalconTrust both

requested administrative hearings to dispute the charges. DFS

referred the cases to the Division of Admin i strative Hearings

(DOAH) on May 6, 2010.

DOAH consolidated the cases and set them for Final Hearing

t o be held August 10, 2010. The hearing was held as noticed.

The court reporter filed the T ranscript on August 25, 2010. All

parties submitted Proposed Recommended Orders and supporting

Memoranda of Law. The parties asked for and were granted leave

to file responses to each other's post - hearing filings , which

extended the time for issua n ce of the Recommended Order. The

parties filed responses.

At the f inal h earing DFS submitted the following exhibits

into evidence: Petitioner's Exhibits 1, 2, 3, 4, 6 , 8, 9, 10,

11, 12, 13, and 14. DFS presented testimony from Scott T.

Bothwell, an employee of Zurich American Insurance Company.

Mr. Sotero and FalconTrust entered the following exhibits

into evidence: Respondents' Exhibits C, F, G, L, H, and M. Mr.

S otero was the sole witness for himself and FalconTrust.

FINDINGS OF FACT

Based on the testimony and other evidence presented at the

final hearing and on the entire record of this proceeding, the

following findings of fact are made:

1. Mr. Sotero is licensed by DFS as an insurance agent in

Florida and has been at all times material to this matter. He

holds license number A249545.

2. Falcon T rust is licensed by DFS as an insurance agency

in this state and has been at all times material to th is matter.

It holds license number L014424.

3. Mr. Sotero is an officer and director of Falcon T rust

and held these positions at all times material to this

proceeding. Mr. Sotero also controlled and directed all actions

of FalconTrust described in these Findings of Fact.

4. Zurich American Insurance Company is a commercial

property and casualty insurance company .

5. Falcon T rust Commercial Risk Specialists, Inc. , and

Zurich - American Insurance Group entered into an "Agency - Company

Agreement" (Agency Agr eement) that was effective January 1,

1999. The Agency Agreement bound the following Zurich entities,

referred to collectively as Zurich: Zurich Insurance Company,

U.S. Branch; Zurich American Insurance Company of Illinois;

American Guarantee and Liability Insurance Company; American

Zurich Insurance Company; and Steadfast Insurance Company. The

Agreement specified that Fa l c onT rust was an "independent Agent

and not an employee of the Company [Zurich.]" . . ..

6. The Agency Agreement also state d:

All premiums collected by you [Falcontrust]

are our [Zurich's] property and are held by

you as trust funds. You have no interest in

such premiums and shall make no deduction

therefrom before paying same to us [Zurich]

except for the commission if any a uthorized

by us in writing to be deducted by you and

you shall not under any circumstances make

personal use of such funds either in paying

expense or otherwise. If the laws or

regulations of the above state listed in

your address require you to handle pr emiums

in a fiduciary capacity or as trust funds

you agree that all premiums of any kind

received by or paid to you shall be

segregated held apart by you in a premium

trust fund account opened by you with a bank

insured at all times by the Federal Deposit

Insurance Corporation and chargeable to you

in a fiduciary capacity as trustee for our

benefit and on our behalf and you shall pay

such premiums as provided in this agreement.

(emphasis supplied.

The Agency Agreement commits Zurich to pay Falcon T rust

comm issions " on terms to be negotiated . . . ." It requires

Falcon T rust to pay "any sub agent or sub producer fees or

commissions required."

7. The Agency Agreement also provides:

Suspension or termination of this Agreement

does not relieve you of the duty t o account

for and pay us all premiums for which you

are responsible in accordance with Section 2

and return commissions for which you are

responsible in accordance with Section 3

[the Commission section.]

8. The Agency A greement w as for Mr. Sotero and Fa lcontrust

to submit insurance applications for the Z urich companies to

underw r ite prope r ty and casualty insurance , primarily for long -

haul trucking.

9. The Agency A greement and all the parties contemplated

that Mr. Sotero and Falcon T rust would deduct agre ed - upon

commissions from premiums and remit the remaining funds to

Zurich. On September 14, 2000, Zurich and Mr. Sotero amended

the Agency Agreement to change the due date for premium payment s

and to replace FalconTrust Group, Inc. (FalconTrust) for

Falc onTrust Commercial Risk Specialists, Inc. , and to replace

Zurich - American Insurance Group and Zurich Insurance Company,

U.S. Branch , with Zurich U.S.

10. Mr. Sotero and Zurich's authorized agent , Account

Executive Sue Marcello , negotiated the terms of the commission

agreement as contemplated in the Agency Agreement.

11 . Mr. Sotero confirmed the terms in a July 20, 1999 ,

letter to Ms. Marcello. The parties agreed on a two - part

commission . O ne part was to be paid from the premi ums upon

collection of the premiums . T he second part , contingent upon

the program continuing for five years , was to be paid by Zurich

to Mr. Sotero and Falcon Tru st. The total commission was 20

percent . Falcon Trust and Mr. Sotero were authorized to deduc t

13 percent of the commission from premiums before forwarding

them to Zurich. The remaining seven percent Zurich was to pay

to Mr. Sotero and Falcon Trus t at the end of the program or after

the fifth year anniversar y date. The letter spelled out clearly

that Zurich would hold the money constituting the seven percent

and was entitled to all investment income earned on the money.

12 . The passage describing the arrangement reads as

follows:

Our total commission is 20 percent however

Zurich will hold and re tain the first 7

percent commission where they are entitle

[sic] to earn investment income. I

understand that FalconTrust will not benefit

from this compounded investment income.

However you mentioned you would increase our

initial commission that is set at 13 percent

currently from time to time depending on

FalconTrust reaching their g oals, but it

will never exceed a total commission of 20

percent . It is to our understanding that

the difference will be paid at the end of

the program or after the fifth y ear

anniversary date being 12/31/2005, but not

earlier than five years . I do understand

that if Zurich and/or FalconTrust cancels

the program on or before the fourth year

being 12/31/2004 that we are not entitle

[sic] to our remaining commission that you

will be holding . If the program is

can c elled after 12/31/2004 by FalconTrust

and/or Zurich it is understood that all

commission being held will be considered

earned . (emphasis added.)

13 . Until the program ended, the parties conducted

themselves under the Agency Agreement as described in the

letter. At some point the parties agreed to decrease the

percentage retained by Zurich to five percent and increase the

percentage init i ally paid to and kept by FalconTrust to 15

perc e nt .

14. During the course of the relationship FalconTrust

produced approximately $146,000,000 in premiums for Zurich. At

all times relevant to this matter, all premium payments, except

for the portion deducted by sub - agents and producers before

forwarding the payments to Mr. Sotero a nd FalconTrust were

deposited into a trust account.

15. The various sub - agents of FalconTrust collected

premiums and forwarded them to FalconTrust, after deducting

their commission s , which were a subpart of the FalconTrust 13

percent commission. FalconTr ust in turn forwarded the remaining

premium funds after de ducting the portion of its 13 percent left

after the sub - agent deduction. This was consistent with the

Agency Agreement and accepted as proper by Zurich at all times.

All parties realized that the held - back seven percent , later

five percent , was money that Zurich would owe and pay if the

conditions for payment were met. The parties conducted

themselves in keeping with that understanding.

16 . Mr. Sotero and FalconTrust described the practice this

way in their Third Amended Complaint in a court proceeding about

this dispute : "In accordance with the Commission Agreement,

Zurich held the contingency/holdback commission and received

investment income thereon." ( Emphasis supplied . )

17. In 2006 Zuri ch decided to end the program. In a

letter dated December 8, 2006, Tim Anders , Vice President of

Zurich, notified Mr. Sotero that Zurich was terminating the

Agency - Company Agreement of January 1, 1999. The letter was

specific. It said Zurich was providi ng "notificat i on of

termination of that certain Agency - Company Agreement between

Zurich American Insurance Company, Zurich American Insurance Co.

of Illinois, American Guar a ntee and Liability Insurance Co.,

American Zurich Insurance C ompany, Steadfast Ins u rance Company .

. . and FalconTrust Grup, Inc. . . ., dated January 1, 1999, . .

.. " Mr. Sotero wrote asking Zurich to reconsider or at least

extend the termination date past the March 15, 2007 , date

provided in the letter. Zurich agreed to extend the te rmination

date to April 30, 2007.

18. At the time of termination FalconTrust had fulfilled

all of the requirements under the Agency - Agreement for receipt

of the held - back portion of the commissions. Mr. Sotero asked

Zurich to pay the held - back commission amounts. He calculated

the amount to exceed $7, 0 00,000. Zurich did not pay the held -

back commission amounts .

19. As the program was winding down and the termination

date approached , FalconTrust continued to receive premiums. As

the Agency Agreement and negot i ated commission structure

provided , FalconTrust deducted its initial commission from the

premium payments. But, reacting to Zurich's failure to begin

paying the held back commission amounts, Mr. Sotero engaged in

"self help." He deducted at least $ 6 , 0 00,000 from the premium

payments from customers , received and deposited in the trust

account. He took the money as payment from Zurich of earned and

held back commissions. 3 Nothing in the Agency Agreement or

negotiated commission a greement authorized this action.

20. In March of 2007, Mr. Sotero and FalconTrust also

brought suit against Zurich in the Circuit Court for the

Eleventh Judicial Circuit, Miami, Florida. The issues in that

proceeding include whether Mr. Sotero and Falcon Trust wrongfully

took premiums and how much Zurich owes them for commissions. As

of the f inal h eari n g, that cause ( Case Number 07 - 6199 - CA - 01 )

remained pending before the court and set for jury trial in

August 2010 . There is no evidence of a final disposi tion.

2 1 . But the court has entered a partial Summary Judgment

determining that FalconTrust wrongfully took premium funds for

the commissions that it maintained Zurich owed. The court's

Order concludes that the issue is not whether Zurich owed money

to FalconTrust , but whether FalconTrust was entitled to take the

funds when it did. Like the undersigned, the court determines

that it was not.

2 2 . Between December 8, 2006, the date of the cancelation

letter, and April 30, 2007 , the program termination da te,

Mr. Sotero and FalconTrust did not remit to Zurich any of the

approximately $6,000,000 in premium payments received. Despite

not receiving premiums, Zurich did not cancel or refuse to issue

the policies for which the premiums taken by Mr. Sotero and

F alconTrust were payment. The policies remained in effect.

CONCLUSIONS OF LAW

2 3 . The Division of Administrative Hearings has

jurisdiction over the subject matter and of the parties to this

action in accordance with Sections 120.569 and 120.57(1),

Florida Statutes (2010) .

2 4 . As the Petitioner , DFS must prove the material

allegations by clear and convincing evidence. Department of

Banking and Finance v. Osborne Stern and Company, In c., 670 So.

2d 932 (Fla. 1996) , and Ferris v. Turlington , 510 So. 2d 292

(Fla. 1987). Clear and convincing evidence must be credible.

The memories of witnesses must be clear and not confused. The

evidence must produce a firm belief that the truth of

all egations has been established. Slomowitz v. Walker , 429 So.

2d 797, 800 (Fla. 4th DCA 1983). Evidence that conflicts with

other evidence may be clear and convincing. The trier of fact

must resolve conflicts in the evidence. G.W.B. v. J.S.W. (in Re

Baby E.A.W.) , 658 So. 2d 961, 967 (Fla. 1995).

DFS Authority to Proceed

2 5 . Mr. Sotero and FalconTrust maintain that DFS may take

no action in this proceeding until final disposition of the

circuit court action between FalconTrust and Zurich. They rely

on Ru ssell v . Florida Department of Insurance , 668 So. 2d 276

(Fla. 2d DCA 1996) ( Russell ) for this argument. In Russell , an

a dministrative l aw j udge issued a Recommended Order concluding

that the Department of Insurance should dismiss its complaint

seeking to suspend Russell's insurance agent's license.

26 . Russell involved money that Mr. Russell received from

Principal Mutual Life Insurance Company in excess of commissions

owed him. Over the years, Russell had received multiple

commission advances from Principal with the express and repeated

approval of Principal' s officers. When Principal assigned a new

commissions technician to Russell's account, Russell requested

advances from her. The new technician was not aware of the

previous practice, the approval of the officers, or the way in

which the advances had been made. To grant Russell's request

she devised a method of adding money to his commission statement

and forcing the computer system to make payments of unearned

money. She was diverting Principal's funds to Russell.

27 . Russell had no reason to questio n the means by which

the new technician provided the money advanced. He reasonably

assumed that the payments had been approved by Principal's

officers as his previous payments had been. Department of

Insurance and Treasurer v. Russell , C ase No. 94 - 0810 ( Division

of Administrative Hearings, Recommended Order, December 2,

1994) ; Dep't of Ins. Amended Final Order April 18, 1996 . The

findings of fact included a determination that Russell had no

reason to know that he had no right to the money he received or

that he knowingly or wrongfully sought to obtain payments to

which he was not entitled.

28 . When Principal learned what the new technician had

been doing, it terminated Russell's contracts and filed a civil

suit against him seeking return of the money. Russell

counterclaimed. The Department filed an administrative

complaint against Russell. After a final hearing, the

Administrative Law Judge found the facts described above and

that Russell did not repay Principal when it demanded repayment,

because h e was awaiting the outcome of the civil suit. The

administrative law judge determined that the facts did not

establish any of the violations charged. The Recommended Order

recommended that the Department dismiss its complaint.

29 . The Department's Fi nal Order accepted the Order's

Findings of Fact but rejected the conclusion. The Final Order

concluded instead that Russell had converted and failed to

return funds belonging to an insurer in violation of S ections

626.561, 626.611, and 626.621, Florida St atutes (1993). These

are all statutes involved in this case and not materially

different from the 2009 versions that govern here. The facts

are, however, different. The court reversed the Department's

Final Order saying: "The findings of fact do not su pport this

legal conclusion. Accordingly, we reverse." Russell 668 So. 2d

at 277. Although the court stated that the Department could

file another complaint if the trial court determined that

Russell improperly took or kept the money, the pending trial

court action was not the reason for reversal.

30 . Mr. Sotero and FalconTrust argue that Russell held

that only a court can interpret terms of the contract and that

DFS has no authority to act against their license s until the

circuit court action results in a final determination of whether

the moneys taken were premiums. This is not Russell 's holding .

The decision was based on the fact . H owever, th ose facts are

very different from the facts here. The court did no t make a

jurisdictional determination or decide that DFS could never act

on a set of facts if there was a legal proceeding involving them

pending. Russell does not require dismissing the complaint.

31. Sotero and FalconTrust also cite Webb v. Dep't of

P rof'l Regulation , 595 So. 2d 1103 (Fla. 5th DCA 1992) in

support for their argument that the Department lacks authority

to determine if the moneys that they kept were premiums , not

commissions to which they were entitled. Webb does not support

the argumen t. Like Russell , the holding in Webb is specific to

the facts of the case. Webb involved a fee dispute between an

engineer and client. The court reversed the decision because

the undisputed facts established a fee dispute that did not

amount to miscondu ct. The opinion did not hold that only courts

could determine the meaning of the contract between the engineer

and the client or that facts giving rise to a fee dispute could

never be a disciplinary offense. The other authorities relied

upon by Sotero an d FalconTrust similarly depend upon specific

facts and the authority of specific agencies. They do not

support the theory that actions which may be the subject of a

contractual dispute may never be the basis for a disciplinary

action.

The Charges

3 2 . DFS charges Mr. Sotero with violations of S ections

626.561(1), 626.611(7), 626.611(10), 626.611(13), and

626.621(4) , Florida Statutes . DFS charges FalconTrust with

violations of S ections 626.561(1), 626.6215(5)(a),

626.6215(5)(d), 626.6215(5)(f), and 626. 6215(5)(k) , Florida

Statutes . All of these charges rest on the claim that after

receiving Zurich's December 8, 2006 , notice of termination,

Mr. Sotero and FalconTrust withheld as payment for held - back

commissions the moneys insurance customers paid for pr emiums.

DFS proved that claim with clear and convincing evidence.

3 3 . Mr. Sotero and FalconTrust argue that the funds were

commissions , not premiums. The facts do not support that

argument. The funds were premiums. The facts show that Zurich

held ba ck years' worth of commissions as agreed among the

parties. The facts also show that Zurich was to pay the held -

back commission amounts under certain conditions.

3 4 . Mr. Sotero and FalconTrust may be right that those

conditions all occurred and Zurich owed them over $7,000,000 in

commissions. T hat , however, is an obligation of Zurich to pay

money to Mr. Sotero and FalconTrust. The documents and the

practice of the parties in the course of their relationship do

not support the conclusion that Mr. Soter o and FalconTrust wer e

authorized to deduct the held - back commissions from premium

payments they received from insurance customers. Fortunately

for the customers, Zurich did not choose to deny or cancel

coverage because it had not received premiums. All that remains

is application of the elements of the various charges to the

facts .

Charges Against Mr. Sotero

3 5 . Section 626.561(1) , Florida Statutes, makes all

premiums received by insurance agents and agencies trust funds,

requires agents to keep the fun ds in a separate account, and

requires agents to pay the funds to the insurer or insured

entitled to the funds. The funds that Mr. Sotero and

FalconTrust collected after receiving the December 8, 2006 ,

letter from Zurich were premium funds to which Zurich was

entitled. Mr. Sotero did not pay them to Zurich as required.

DFS proved a violation of Section 626.561(1) , Florida Statutes,

by clear and convincing evidence.

36. The alleged violations of Section 626.611(7), (10),

and (13) , Florida Statutes, requ ire specific intent on the part

of the licensee. See Bowling v. Department of Insurance , 394 So.

2d 165 (Fla. 1st DCA 1981). Clear and convincing evidence

establishes that Mr. Sotero and FalconTrust intended to take the

premium funds to pay the commission s they believed they were

owed. Their rationalization for taking the money does not

change the fact that they knew the funds were premiums and that

the agreement, as memorialized in Mr. Sotero's letter , only

permitted taking the initial commission percent age before

forwarding the remaining money to Zurich.

3 7 . Section 626.611(7) , Florida Statutes, permits DFS to

deny, suspend, or revoke the license of any insurance agent who

has demonstrated a lack of fitness or trustworthiness to engage

in the business o f insurance. Mr. Sotero resorted to self - help

when he concluded that Zurich was unlikely to pay the held - back

commissions. In doing so he put his personal financial

interests ahead of the interest s of the insurance customers who

depended on him to forward their premium payments to Zurich.

This action demonstrated a lack of fitness or trustworthiness to

engage in the business of insurance. DFS proved this charge by

clear and convincing evidence.

3 8 . Section 626.611(10) , Florida Statutes, permits DFS to

deny, suspend, or revoke the license of any insurance agent who

misappropriates, converts or unlawfully withholds money

belonging to an insurer received in the conduct of business

under the insuran ce license. The premiums received after the

December 8, 2006 , letter were premium moneys belonging to

Zurich. Mr. Sotero deliberately and willfully took them and

converted them to his own use . DFS proved this charge by clear

and convincing evidence.

37 . Section 626.611(13) , Florida Statutes, permits DFS to

deny, suspend, or revoke the license of any insurance agent who

willfully fails to comply with or willfully violates any rule of

DFS or any provision of Florida's insurance code. As set forth

in thi s Recommended Order, Mr. Sotero deliberately and willfully

violated several provisions of Florida's insurance code. DFS

proved this charge by clear and convincing evidence.

38 . Section 626.621(4) , Florida Statutes, permits DFS to

deny, suspend, or revoke the license of any insurance agent who

fails or refuses "upon demand, to pay over to any insurer he or

she represents or has represented any money coming into his or

her hands belonging to the insurer." DFS did not prove by clear

and convincing evidence that Zurich demanded money coming into

Mr. Sotero's hand that belonged to Zurich. Consequently DFS did

not prove this charge by clear and convincing evidence.

Charges Against Falcontrust

39 . Section 626.561(1) , Florida Statutes, makes all

premiums rec eived by insurance agents and agencies trust funds,

requires agents to keep the funds in a separate account, and

requires agents to pay the funds to the insurer or insured

entitled to the funds. The funds that Mr. Sotero and

FalconTrust collected after re ceiving the December 8, 2006 ,

letter from Zurich were premium funds to which Zurich was

entitled. FalconTrust did not pay them to Zurich as required.

DFS proved a violation of Section 626.561(1) by clear and

convincing evidence.

4 0 . Section 626.6215(5) , Florida Statutes, permits DFS to

suspend, deny, or revoke an insurance agency license if the

agency or its majority owner commits any of several listed acts

"with such frequency as to have made the operation of the agency

hazardous to the insurance - buying public or other persons . " The

acts charged here are:

(a) Misappropriation, conversion, or

unlawful withholding of moneys belonging to

insurers or insureds or beneficiaries or to

others and received in the conduct of

business under the license.

* * *

(d) 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.

* * *

(f) Failure or refusal, upon demand, to pay

over to any insurer he or she represen ts or

has represented any money coming into his or

her hands belonging to the insurer.

* * *

(k) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance arising out of activities related

to insurance or the insuran ce agency.

4 1 . FalconTrust's willful and deliberate decision to tak e

premium funds to pay the held - back commissions that it

maintained Zurich owed establishes by clear and convincing

evidence that FalconTrust committed each of the offenses

described in s ubsections (a), (d), (f), and (k). The only

remaining question is whether FalconTrust committed the offenses

"with such frequency as to have made the operation of the agency

hazardous to the insurance - buying public or other persons ."

4 2 . There are a number of ways to analyze this element.

Mr. Sotero and FalconTrust take the position that this case

involves a single incident that cannot amount to frequent

violations. DFS does not address the issue , and only alleged

one Count in its Administrative Com plaint. Recurrence implies

more than one action. T he magnitude of the amount of premium

payments involved makes it plausible to conclud e that the single

action of taking over $6,000,000 in premium payments establishes

a violation . In addition the money FalconTrust took likely

represented premium payments of several insurance customers

received and taken over a period of days. Taking premiums of a

number of customers or taking premiums on a number of days could

establish frequent violations. But evidenc e on this subject

does not establish how many customer policies or how many

premium payments were involved. Consequently , DFS did not prove

the several charged violations of Section 626.6215(5) by clear

and convincing evidence.

Penalty

4 3 . Under Florida Administrative Code Rule 69B -

231.040(l)(a), the penalty per count cannot exceed the highest

penalty for any violation found under the count.

4 4 . Mr . Sotero's violation of Section 626.611(10) is

punishable with a 12 - month suspension per violation. This i s

the highest penalty for any violation by Mr. Sotero established

in this case.

4 5 . Florida Administrative Code Rule 69B - 231.160 lists

aggravating and mitigating factors that may be considered. The

following aggravating circumstances are present: will fulness of

the licensee's conduct, motivation of the licensee, and

financial gain to the licensee. The only mitigating

circumstance is the lack of previous disciplinary orders or

warnings.

4 6 . In consideration of the facts and all the aggravating

and m itigating circumstances , a suspension of Mr. Sotero's

license for nine months is appropriate in light of the

deliberate, willful nature of his actions and the amount of

premium moneys that he took.

4 7 . FalconTrust's violation of Section 626.561(1) is

puni shable with a nine - month suspension per violation. Fla.

Admin. Code R. 69B - 231.110. This is the highest penalty for any

violation by FalconTrust established in this case. The

discussion of aggravating and mitigating factors above applies

equally to dete rmining the penalty for FalconTrust.

48 . In consideration of the facts and all of the

aggravating and mitigating circumstances, a suspension of

FalconTrust's license for nine months is also appropriate in

light of the deliberate, willful nature of the acti ons and the

amount of premium moneys taken.

4 9 . DFS also asks that reinstatement of the licenses for

Mr. Sotero and FalconTrust be made contingent upon a

satisfactory accounting of the premium funds. Putting aside the

questions about the existence of statute or rule authority for

imposing this requi rement, the evidence does not permit a

determination of the precise amounts involved since some amount,

albeit less than $1,000,000 applying the 15 percent initial

commission, could have been kept as earned commissions not

payment of held back commissions.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services

suspend the license of Adalberto L. Sotero for nine months and

suspend the license of FalconTrust Group, Inc. for n ine months.

DONE AND ENTERED this 15th day of October, 2010, in

Tallahassee, Leon County, Florida.

S

___________________________________

JOHN D. C. NEWTON, II

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallaha ssee, 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 15th day of October , 2010.

ENDNOTES

1 / All references to Florida Statutes are to the 2007 statutes

unless otherwise noted.

2 / At the Final Hearing DFS withd rew one charge against each

Respondent and amended some of the statutes cited in the

Administrative Complaint against FalconTrust.

3 / The evidence is not clear about the exact amount that was for

the initial commission, 15 percent at that time, and how m uch

was for the held back commissions. But it was clear that

Mr. Sotero and FalconTrust witheld millions of premium dollars

beyond the amount that would have paid the 15% commission they

were entitled to withhold.

COPIES FURNISHED:

Julie Jones, CP, FRP , Agency Clerk

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

Honorable Alex Sink,

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

James A. Bossart, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Daniel C. Brown, Esquire

Carlton Fields, P.A.

Post Office Box 190

Tallahassee, Florida 32302 - 0190

M. Drew Parker, Esquire

Ard Shirley & Rudolph P. A.

Post Office Box 1874

Tallahassee, Florida 33302 - 1874

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.