11-005758PL Department Of Financial Services, Division Of Insurance Agents And Agency Services vs. Richard Edward Carter Status: Closed Recommended Order on Wednesday, November 28, 2012.

Summary: Application's false statements completed & signed by agent were willful & demonstrated lack of fitness to engage in insurance business. Aggressive efforts to stop client from withdrawing annuity proved lack of fitness to engage in business of insurance.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF INSURANCE )

AGENTS AND AGENCY SERVICES , )

)

Petitioner , )

)

vs. ) Case No. 11 - 5758PL

)

RICHARD EDWARD CARTER , )

)

Respondent . )

)

RECOMMENDED ORDER

Administrative Law Judge John D. C. Newton, II , conducted

the administrative hearing in this case at sites in Tampa and

Tallahassee, Florida, by video teleconference on June 12

through 14, 2012. The hearing was recessed and reconvened on

July 16 and 17, 2012 , in Tampa, Florida.

APPEARANCES

For Petitioner: David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: M. D. Purcell, Jr., Esquire

Law Offices of M. D. Purcell, Jr.

1110 North Florida Avenue

Tampa, Florida 33558

STATEMENT OF THE ISSUE S 1/

1. Did Mr. Carter violate sections 627.4554(4)(a),

627.4554(4)(c)2., 626.611(5), 626.611(7), 626.611(9),

626.611(13), 626.621(2), 626.621(6), 626.9541(1)(a)1., and

626.9541(1)(e)1., Florida Statutes (2006, 2009, 2010); section

626.9521(2), Florida Statutes (2006, 2010); sections

626.9541(1)(k)2., 626.9541( 1)(l), and 626.9521(2), Florida

Statutes (2009, 2010); section 626.621(9), Florida Statutes

(2010); and Florida Administrative Code Rule 69B - 215.210?

2. If so, what discipline should be imposed?

PRELIMINARY STATEMENT

The Petitioner, Department of Financi al Services

(Department), on October 18, 2011, filed a seven - count

Administrative Complaint seeking to revoke the insurance licenses

of Petitioner, Richard Edward Carter.

Count I charged that Mr. Carter ' s sale in 2006 to W .K. 2 /

(then age 72) , and his wi fe, J.K. (then age 69) , of an Allianz

Life Insurance Company annuity know n as the Master Dex 10 violated

sections 627.4554(4)(a), 627.4554(4)(c)2 . , 626.611(5),

626.611(7), 626.611(9), 626.611(13), 626.621(2), 626.621(6),

626.9541(1)(a)1 . , and 626.9541(1)(e) 1 . , Florida Statutes (2006).

Count II charged that Mr. Carter ' s liquidation in 2010 of

the Master Dex 10 to use the proceeds to purchase the EquiTrust

Financial Services annuity 92F for J.K. violated sections

627.4554(4)(a), 627.4554(4)(c)2 . , 626.611(5), 6 26.611(7),

626.611(9), 626.611(13), 626.621(2), 626.621(6),

626.9541(1)(a)1 . , 626.9541(1)(e)1 . , 626.9541(1)(k)2 . , and

626.9541(1)(l), Florida Statutes (2010).

Count III charged that Mr. Carter caused J.K. to surrender a

Genworth Life Insurance Company of New York annuity in 2010 to

make an additional premium payment to J.K. ' s Equi Trust 92F

annuity and that violated sections 627.4554(4)(a),

627.4554(4)(c)2 . , 626.611(5), 626.611(7), 626.611(9),

626.611(13), 626.621(2), 626.621(6), 626.9541(1)(a)1 . ,

626.9541( 1)(e)1 . , 626.9541(1)(k)2 . , and 626.9541(1)(l), Florida

Statutes (2010).

Count IV charged Mr. Carter with violating sections

627.4554(4)(a), 627.4554(4)(c)2 . , 626.611(5), 626.611(7),

626.611(9), 626.611(13), 626.621(2), 626.621(6),

626.9541(1)(a)1 . , 626.95 41(1)(e)1 . , and 626.9541(1)(l), Florida

Statutes (2010) , by causing the liquidation of a RiverSource Life

Insurance Company annuity contract of W.K. and J.K.

Count V charged that in 2010 Mr. Carter attempted to gain

control over the Great American annuity polic i es of W.K and J.K.

by using a power of attorney , give n to J.K. by W.K , to change the

agent - of - record for those polic ies and liquidate the policies.

This , Count V charges , violated sections 627.4554(4)(a),

627.4554(4)(c)2 . , 626.611(5), 626.611(7), 6 26.611(9),

626.611(13), 626.621(2), 626.621(6), 626.9541(1)(a)1 . ,

626.9541(1)(e)1 . , 626.9541(1)(k)2 . , and 626.9541(1)(l), Florida

Statutes (2010).

Count VI charged that in 2010 Mr. Carter violated sections

626.611(5), 626.611(7), 626.611(9), 626.9541(1)(a )1 . , and

626.9541(1)(e)1 . , Florida Statutes (2010) , by causing K.D. (then

age 82) and G.D. (then age 75) to liquidate certificates of

deposit worth $330,000 to purchase t w o Allianz MasterDex 10

insurance annuities.

Count VII charged that in 2010 Mr. Carte r violated sections

627.4554(4)(a), 627.4554(4)(c)2 . , 626.611(5), 626.611(7),

626.611(9), 626.611(13), 626.621(2), 626.621(6),

626.9541(1)(a)1 . , and 626.9541(1)(e)1 . , Florida Statutes (2010) ,

by causing G.B. (age 79 at the time) to liquidate brokerage

acco unts and use the proceeds to purchase two EquiTrust

annuit ies .

Mr. Carter requested a hearing, and the Department referred

the matter to the Division of Administrative Hearings to conduct

the requested hearing. The hearing was scheduled for January 10,

2 012. After two agreed - upon continuances, the hearing was

conducted in Tampa, Florida , during June and July of 2012.

The Department presented the testimony of G.B., Mercedes

Bujamas, G.D. (transcript and exhibits), J.K., Karen Ortega,

Paula Rego, Christ opher Trombetta (transcript and exhibits), and

Brenda Troup. Department E xhibits 1, 6, 9, 11 through 13, 19,

20, 23 through 31, 33 through 35, 39, 41 through 44, 47 through

54, 56 through 61, 63 through 73, 75 (page 215) through 77, 7 9 ,

80, 87 through 91 , 93 through 96, 98, 102, 104, 107 through 109,

117 through 122, 127 through 129, 131, 148, 150 through 169,

171 through 273, 276, and 278 through 283 were admitted into

evidence . Department Exhibits A and B were also admitted.

Mr. Carter testified and p resented the testimony of

Christopher Drew and Robert Leone.

A T ranscript of nine volumes was filed, and the time for

filing proposed recommended orders was extended. The parties

timely filed proposed recommended orders. Mr. Carter also

submitted time lines as attachments to his proposed recommended

order. The parties ' proposals have been considered in the

preparation of this recommended order.

FINDING S OF FACT

1. At all times material to this proceeding , the

Legislature has vested the Department with the authority to

administer the disciplinary provisions of Chapter 626, Florida

Statutes. § 20.121(2)(g) and (h)1.d., Fla. Stat. (2011).

2. At all times material to his proceeding, Mr. Carter was

licensed by the Department as a Florida life (including v ariable

annuity) agent (2 - 14), life including variable annuity and health

agent (2 - 15), life insurance agent (2 - 16) and life and health

agent (2 - 18). He has been appointed as an agent for several

different life insurance companies, including Allianz, Equi Trust

and Great American, but not RiverSource .

Counts I through V -- W.K. and J.K.

2006 , J.K. and W.K., and the MasterDex 10

3. J.K. was born in 1937 in Madrid Spain, where she

finished high school. Spanish is J. K . ' s native tongue. She

cannot write in En glish and does not speak or understand English

well. When J.K. was 17, she met W.K. , a member of the United

States ' armed services. They married in Spain.

4. Six months after the marriage, the newlyweds moved to

Brooklyn, New York, W.K. ' s home. They later relocated to

Florida. W. K. constructed a mall in New Port Richey containing

18 stores that included a restaurant and a frame shop. J.K. ran

the frame shop. Wal - Mart eventually bought the mall. By 2006 ,

J.K. and W.K. had accumulated approximately two million dollars

in brokerage investments.

5. Until the decline of his health and mental faculties in

2008, W.K. handled all financial matters for the couple. J.K.

did not understand them or have any interest in them.

6. In 2006, J.K. and W.K. met Mr. Carter, who began

marketing annuities to them. J.K. ' s testimony demonstrated that

her memory was significantly impaired. That fact, combined with

the fact that W.K. had died several years before the hearing,

limit the ability to determine what repre sentations Mr. Carter

made to J.K. and W.K. or what information or instructions they

gave him.

7. On July 25, 2006, W.K. applied for a MasterDex 10

a nnuity p olicy from Allianz Life Insurance Company of North

America. He paid an initial premium of $603, 470.34 for the

policy. W.K. was 73 years old at the time.

8. W.K. obtained the money to fund the policy from the

couple ' s Merrill Lynch brokerage account. Mr. Carter knew this.

9. As part of the annuity application process , Mr. Carter

submitted an Alli anz " Product Suitability Form " for W.K.

Completion of the form is a prerequisite to processing the

application and issuing the policy. The stated purpose of the

form is " to confirm that your [the applicant ' s] annuity purchase

suits your current financial situation and long - term goals. "

10. The form, signed by W.K. and Mr. Carter, stated that an

annuity was the source of the funds for payment of the annuity ' s

premium. This statement was not accurate. Mr. Carter knew that

it was not accurate.

11. Signing and submitting the application with the

suitability form containing this known incorrect statement was a

willful deception by Mr. Carter with regard to the policy.

12. Signing and submitting the application with the

suitability form containing this known i ncorrect statement was a

dishonest practice in his conduct of the business of insurance.

13. The suitability form also indicate d that W.K. expected

the annuity to provide him a steady stream of income in six to

nine years.

14. Allianz accepted the applic ation and issued the policy.

Mr. Carter received a commission of $66,381.73.

15. The MasterDex 10 is a complex financial product with

many difficult to understand restrictions, conditions, interest

options, bonuses, penalties, and limitations. The Mast erDex 10

that W.K. and J.K. purchased paid interest linked to the

performance of the Standard and Poors 500 stock market index. It

also guaranteed interest of at least one percent.

16. A " Nursing Home Benefit " was one of the options the

MasterDex 10 provi ded. The " benefit " permitted the policy holder

to receive payments of the full " annuitization " value of the

policy over a period of five years or more if the holder was

confined to a nursing home for 30 out of 35 consecutive days.

17. The " annuitization value " is the maximum value that the

policy can reach. It is the total of all payments that would be

made to the holder if he either (1) let the premium and interest

earned accumulate for a minimum of five contract years and then

took ten years of intere st only payments , followed by a lump sum

payment of the annuitization value or (2) equal payments of

principal and i nterest over ten or more years.

18. Policy holders could make additional premium payments

to increase the policy value. The policy also per mitted limited

withdrawals without penalty. After holding the policy for 12

months after the most recent premium payment, a holder could,

without penalty, withdraw up to ten percent of the premium paid

once a year until a maximum of 50 percent of the prem ium had been

withdrawn. This meant that after one year passed , W.K. could

make five annual withdrawals of $60,347.03.

19. The policy also provided for loans on the annuity.

20. In the years following this transaction, Mr. Carter

maintained contact with W.K. and J.K. by periodically asking them

to join him at a restaurant for lunch.

Decline of W.K. ' s Health

21. While visiting his mother in Greece in 2008, W.K. fell

and hit his head. Afterwards his health declined. On June 3,

2008, W.K. was diagnosed with Alzheimer ' s disease and determined

to be unable to make sound financial and medical decisions. From

June 2008, forward, J.K. was very worried about W.K. ' s health,

caring for him, and making him as comfortable as possible.

22. On November 5, 2008, W.K . , at Mr. Carter ' s suggestion,

executed a Durable Power of Attorney , prepared for her by a

lawyer, giving J.K. broad authority to act on his behalf in

financial matters.

23. At some point , W.K. was admitted to the Bear Creek

Skilled Nursing Center and resi ded there for a period of time .

On April 4, 2010, he was discharged from Bear Creek. W.K.

resided in Bear Creek for a period of time. Although there is

some hearsay evidence about when W.K. entered Bear Creek, the

evidence does not corroborate direct ev idence or hearsay evidence

that would be admissible over objection in circuit court ,

sufficient to prove when W.K. entered Bear Creek. Consequently ,

the evidence does not establish the length of time that W.K.

spent in the facility and does not establish that W.K. would have

been eligible for the " Nursing Home Benefit " described in

paragraph 16.

24. After W.K. returned home in April, J.K. engaged an

enterprise called " Granny Nannies " to provide caretakers at home.

The services cost approximately $12,000 p er month.

25. During this period J.K. ' s health also declined

markedly. Among other things , she had appendicitis and breast

cancereatment of the cancer required chemotherapy , which

left her in pain and exhausted. During this time Mr. Carter

obtained a copy of the power of attorney executed by W.K. in

favor of J.K.

26. On June 18, 2010, the court appointed Paula Rego as

guardian for W.K and J.K. with authority to act on their behalf

in all matters affecting property rights.

27. On November 26, 2010, W.K. died in hospice care after a

short hospital stay.

The Events of 2010

28. In December 2009 , J.K. met with insurance sales agents

and sisters Kimberly Trotter and Chandra Valdez. J.K. had

responded to a mail solicitation by them. During the meeting,

J.K. and Ms s. Trotter and Valdez realized that J.K. knew them

because J.K. and W.K. had rented space to the sisters ' parents.

29. Capitalizing on the connection and J.K. ' s concerns

about paying the monthly costs of care for W.K., Msotter and

Ms. Val dez began providing financial advice and marketing annuity

products that they sold. They advocated liquidating W.K. ' s and

J.K. ' s existing annuitie s, including the MasterDex 10.

30. In December 2009, Msotter and Ms. Valdez sold W.K.

and J.K. two annuit ies with Great American for approximately

$661,098.

31. On January 28, 2010, W.K. authorized J.K. and

Ms. Trotter to access policy information.

32. In January 2010, Msotter attempted to liquidate the

MasterDex 10 policy and transfer the funds to Great American.

33. Allianz notified Mr. Carter of this in February 2010.

He intervened to stop the transfer.

34. On March 3, 2010, Allianz received another request to

liquidate the MasterDex 10 from J.K. Allianz sent her what it

calls a " conservation lette r. " The purpose of the letter is to

" conserve " the business with the company. The letter also

identified needed information, including a copy of J.K. ' s power

of attorney for W.K.

35. On March 4, 2010, Allianz notified Mr. Carter of the

liquidation requ est. He contacted J.K. and began a successful

effort to obtain a letter asking to reverse the liquidation.

36. O n March 17, 2010 , Msotter or Ms. Valdez again

convinced J.K. to liquidate the MasterDex 10 funds and transfer

them to Great American. Ag ain Mr. Carter acted to stop the

liquidation.

37. On March 23, 2010, J.K. signed a letter written by

Mr. Carter asking for William Pearson to be her new financial

a dvisor. Mr. Carter sent the letter to RiverSource, a company

that issued another annuity po licy of J.K ' s. J.K. did not know

who Mr. Pearson was. She only signed the letter because Mr.

Carter told her that it would help her save money.

38. On March 26, 2010 , J.K. submitted a liquidation request

form for the MasterDex 10 signing it on behalf of herself

and W.K. J.K. submitted the request at the urging of Msotter

and/or Ms. Valdez.

39. Allianz received the request on March 31, 2010. It

began processing the full liquidation of the annuity policy.

40. On April 1, 2010, Mr. Carter sent Allianz a letter

saying that J.K. did not want to liquidate W.K. ' s MasterDex 10

policy. The letter claimed that this was the second time that

competing agents had tried to cancel the policy. Allianz

reinstated the policy.

41. On April 1, 2010, Mr. Carter sent a handwritten letter

to Great American stating that J.K. did not want the MasterDex 10

policy canceled. The letter refers to having previously provided

the power of attorney. Mr. Carter sign ed the letter. J.K.

signed the letter on behalf of W.K. and her self.

42. O n April 7, 2010, Great American received a typewritten

letter addressed to " To Whom It May Concern " stating that J.K.

and W.K. wanted to transfer their funds to Great American since

" December and January " and that J.K. did not see Mr. Carter o n

April 1 and did not sign a letter that he sent.

43. O n April 9, 2010 , Mr. Carter wrote and sent a letter,

signed by J.K. at his request, asking Great American to cancel

the policies sold by Msotter and Ms. Valdez and waive all

surrender charges. T he letter states that J.K. is fighting

cancer and that the agents forced her to sign the policy

documents. Mr. Carter included with the letter a

Withdrawal/Surrender Request Form completed by him and signed

by J.K.

44. On April 23, 2010 , Mr. Carter wrot e a letter to Allianz

stating that J.K. needed more than ten percent of the value of

the MasterDex 10 policy (the penalty - free withdrawal permitted)

to provide the funds needed to take care of W.K. The letter

states that W.K. and J.K. wish ed to change own ership of the

policy to J.K. only and then to fully surrender the policy.

45. Mr. Carter ' s letter is signed by J.K. on her behalf and

on behalf of W.K. Mr. Carter enclosed forms with the same date,

which he prepared for J.K. ' s signature, requesting the change of

ownership and liquidation.

46. Allianz sent J.K. a letter, with a copy to Mr. Carter,

on April 29, 2010, identifying alternatives to liquidating

MasterDex 10 for getting the money needed to care for W.K. The

Allianz letter also disclosed that li quidating the policy would

result in a substantial loss of money.

47. In part , the letter stated:

We understand you wish to surrender your

annuity policy. As we review your request,

we want to be certain you are aware of all

the alternatives that are avai lable to you.

This information can help you make an

informed decision based on your best

financial interests.

It is possible for you to access a portion

of your policy ' s value while your policy

remains in deferral. This would allow its

value to continue to grow tax - deferred, and

still provide the cash you need. Your

annuity may permit you to take a free

withdrawal, policy loan, or partial

surrender.

Finally, it ' s important to realize exactly

how much you will be giving up should you

decide to fully sur render your policy.

Your policy ' s current Accumulation Value is

$751,566.07 and its Surrender Value is

$585,014.49. By surrendering your policy

now, you are giving up the difference

between these two values [$166,551.58].

Any one of these options could provide you

with needed cash while allowing you to

receive your full accumulation value in

cash after your policy ' s 10 - year surrender

charge period.

48. The letter provided a ten - day period, called a

conservation period, during which J.K. could withdraw h er request

to liquidate the policy.

49. Mr. Carter called Allianz on April 30, 2010, and spoke

to Amber Hendrickson. In the recording of the conversation ,

Mr. Carter sounds agitated and speaks forcefully. J.K.

participated in the telephone call. She is quiet and

deferential. In the call, J.K. waives the ten - day " conservation "

period. Mr. Carter insists that Allianz process the surrender

swiftly.

50. Allianz processed the liquidation of the MasterDex 10

on April 30, 2010. It wired funds from the liqu idated annuity to

J.K. ' s Regions Bank account the same day.

51. On April 30, 2010, J.K. signed a check for $475,000 to

EquiTrust Life Insurance Company to purchase an annuity.

Mr. Carter wrote the check. Also on April 30, 2010, J.K. signed

an EquiTrust a nnuity application completed by Mr. Carter. The

form indicates that the policy is not replacing an existing

annuity contract. This is not an accurate representation.

52. On April 30, 2010 , Mr. Carter also completed an Annuity

Suitability Questionnaire fo r J.K. to sign and submit with the

EquiTrust application. He indicated that J.K. had income from a

pension. Mr. Carter knew that this was not accurate.

53. Mr. Carter also indicated that J.K. ' s income was

adequate to cover all expenses , including medic al. He knew this

was not accurate because he was fully aware of the cost of W.K. ' s

caregivers and J.K. ' s concern about them.

54. The form, as completed by Mr. Carter, is misleading

about the source of the funds for purchase of the annuity. He

made the technically correct representation that the funds come

from a checking account. But the funds were from the liquidation

of the MasterDex 10 and were placed in the checking account the

same day the application was completed. The funds were actually

from t he liquidation of the MasterDex 10 annuity.

55. The form also stated that the proposed annuity would

not replace any product. Mr. Carter knew this was not accurate

also. He knew that the EquiTrust annuity was replacing the

MasterDex 10, albeit in a low er amount , because J.K. kept some

cash and lost a good deal of money in surrender costs.

56. A letter Mr. Carter sent to EquiTrust on August 16,

2010, when it was investigating complaints about J.K. ' s purchase

of the annuity , demonstrates that he knew th e EquiTrust annuity

was replacing the MasterDex 10.

57. Mr. Carter ' s letter described the surrender and

purchase this way: " An amount of $475,000 was placed into the

EquiTrust Annuity (Market Power Bonus Index ' s Fixed account), the

remaining balance o f $110,038.75 was sent to her checking

account, plus two other accounts valued at $50,000 that were

closed, and a Jefferson National check that wasn ' t cashed for

$3,500. "

58. Also , on April 23, 2010, J.K. signed , on behalf of

herself and W.K. , a Surrender/ Withdrawal Request to RiverSource

asking for the full withdrawal of the net accumulation value of

their annuity contract with RiverSource. RiverSource sent J.K. a

check for $26,430.07. It deducted $2,158.32 for a withdrawal

charge and $295.98 for a " ride r charge " from the full value of

$28,884.37.

59. On May 5, 2010, EquiTrust received J.K. ' s policy

application documents and check. EquiTrust required additional

documents including a financial needs analysis form.

60. Mr. Carter sought an exception to the requirement for a

financial needs analysis form. He did not receive the exception.

61. On May 6, 2010, Mr. Carter sent EquiTrust the required

financial needs analysis form. He completed the form for J.K.,

who was 72 at the time. J.K. also signed this form. The form

repeats some of the incorrect statement s of the previous forms.

It is also includes additional incorrect statements .

62. The instructions for the section about " Replacements "

states , " complete if an existing life insurance policy or ann uity

contract will be used to fund this product. " Mr. Carter checked

" no " as the response to the question: " Is the agent assisting

you with this annuity purchase the same agent on the life

insurance policy or annuity contract being replaced ? " This

indic ates he is aware that the policy replaces the MasterDex 10.

The response was also a representation that he knew to be false ,

because he was the agent on the policy being replaced.

63. Mr. Carter also indicated on the needs analysis form

that the source o f funds for the EquiTrust annuity purchase was

" Stocks/Bonds/Mutual Funds. " Mr. Carter knew that this

representation was not correct. It was also inconsistent with

the statement on the suitability questionnaire that the funds

came from a checking account .

64. On May 18, 2010, J.K. signed a letter, written by

Mr. Carter, asking for William Pearson to be her new financial

a dvisor. Mr. Carter sent the letter to Genworth, a company

holding another annuity policy of J.K ' s. J.K. did not know who

Mr. Pearson was and only signed the letter because Mr. Carter

told her that it would help her save money.

65. J.K. signed a letter, dated May 20, 2010, instructing

EquiTrust to cancel the annuity she had with it.

66. On May 23, 2010, Mr. Pearson submitted a form, signed

by J.K., using the power of attorney, asking Genworth to

liquidate an annuity held for W.K.

67. On May 26, 2010 , EquiTrust received the request to

cancel J.K. ' s policy and advised Mr. Carter.

68. On May 31, 2010 , Mr. Carter sent EquiTrust a letter

saying that J.K. d id not want to cancel and enclosed a letter he

prepared, dated May 26, 2010, and signed by J.K. asking EquiTrust

to withdraw the cancelation request. The letter also stated that

an agent who provided her untruthful information initiated the

request.

69. On June 2, 2010, at Mr. Carter ' s urging , J.K. sent

EquiTrust a letter saying she want ed to keep the EquiTrust

p olicy.

70. On June 2, 2010, Mr. Carter sent , by facsimile , a

letter written by him and signed by J.K. asking Great American to

make Peter Gotsis her annuity agent. J.K. did not know Peter

Gotsis and only signed the letter because Mr. Carter asked her

to.

71. On June 29, 2010 , EquiTrust received a check for an

additional $90,302.19 premium for J.K. ' s policy.

72. In July 2010 , with the assistance of employees at her

bank and others, J.K. contacted an attorney.

73. The attorney, Joan Hook, contact ed Mr. Carter and the

various companies with annuities. Due to the efforts of

Ms. Hook, J.K. ' s guardian, Ms. Rego, Ms. Karen Ortega o f the

Department , and others, the series of transactions were undone

and J.K. returned to her position before the liquidation of the

MasterDex 10 annuity.

74. From December 2010 forward, it was clear to Mr. Carter

or anyone else having regular dealings wit h J.K. that she is

confused, uninformed about financial matters, compliant,

reasoning poorly, and not capable of making sound decisions.

75. J.K. ' s testimony demonstrated that her memory was

significantly impaired. That fact combined with the fact that

W. K. died several years before the hearing, makes it impossible

to determine what representations Mr. Carter made to W.K. and

J.K. and to determine what information or instructions they gave

him.

76. M uch of the evidence related to Counts I through V is

hear say evidence that would not be admissible over objection in a

civil action . In addition , there is no expert testimony

evaluating the facts of record and analyzing the suitability of

the investments advocated by Mr. Carter. Also , there is no

evidence of t he life expectancy of W.K. and J.K., which is an

important factor in evaluating suitability of annuity products.

Consequently , the record is inadequate for determining the

reasonableness or suitability of the various products promoted by

Mr. Carter or of the liquidation of the MasterDex 10.

7 7 . Mr. Carter willfully misrepresented information with

regard to the application s for the Allianz and the EquiTrust

annuit ies . This was dishonest. In the process , Mr. Carter also

demonstrated a lack of trustworthine ss to engage in the business

of insurance. These willful misrepresentations were false

material statements knowingly delivered to Allianz and EquiTrust.

Count VI -- G.D. and K.D.

7 8 . G.D. lives in New Port Richey, Florida , where she moved

from New York abo ut 40 years ago. She was born on January 17,

1935 , and has a ninth - grade education.

79 . G.D. had worked as a courier. Her investment

experience consists of funding certificates of deposit (CDs) ,

placing money in a mutual fund, and purchasing a Transamer ica

annuity. She is frugal and a conservative investor.

8 0 . G.D. is married to K.D. who was born April 12, 1927.

Both are retired.

8 1 . G.D. met Mr. Carter in January 2010 , when she responded

to a postcard that he sent suggesting that he could save he r

money on taxes on social security payments. At that time , G.D.

was 75 years old and K.D. was 83.

8 2 . G.D. was and is in bad health due to having suffered

four strokes. She had difficulty speaking to Mr. Carter during

his sales presentations.

8 3 . G.D. and K.D. disclosed to Mr. Carter that their total

monthly family income, including social security and K.D. ' s

pension income, was approximately $2,400.00. They also disclosed

that their assets included approximately $325,000.00 in CDs held

with Suncoast S chools Federal Credit Union. G .D. and K.D. each

owned an annuity, one with Hartford and one with Transamerica,

which they told Mr. Carter about. Together , the annuities had a

value of approximately $85,000 . G.D. and K.D. also had

approximately $66,000 i n a money market account.

8 4 . Mr. Carter convinced G.D. and K.D. to liquidate their

CDs to purchase two Allianz annuities called a MasterDex 10 Plus.

One required payment of a $38,219.39 premium. The other required

payment of a $287,365.00 premium. The couple applied for the

annuities for G.D. , with K.D. as the beneficiary, because he was

the older of the two . Mr. Carter completed the applications ,

which they signed.

8 5 . Part six of the applications is titled: " Replacement

(this section must be compl eted). " It asks two questions. The

first is: " Do you have existing life insurance or annuity

contracts? " Mr. Carter checked " no " as an answer. This was not

correct, and he knew it.

8 6 . The second question asks: " Will the annuity contract

applied for replace or change existing contract or policies? "

This Mr. Carter correctly answered " no. " Section six also asks

for the amount of coverage in force. Mr. Carter did not provide

this information.

8 7 . Mr. Carter also completed the Florida Senior Consume r

Suitability Form Questionnaire for G.D. and K.D., which they

signed. The form accurately reflects the couple ' s net worth,

liquid assets, and income. It reports correctly that they owned

or had owned CDs , fixed annuities, and variable annuities. The

co mpleted form also accurately reflects the couple ' s desire for

guaranteed income. The form discloses that the annuity must be

owned a minimum of 15 years to receive i t s maximum value.

8 8 . The MasterDex 10 Plus annuity is a complicated

financial product wit h a ten percent " bonus " that the buyer does

not receive unless she holds the policy for 15 years. In fact ,

holding the policy for 15 years is the only way to get the full

benefit of the policy. While money may be withdrawn earlier,

that results in losses of the benefits and in some cases

penalties. For instance , if a policy holder chooses to liquidate

the policy, the value she receives is only 87.5 percent of the

premium paid with one percent interest for the period held.

89 . These provisions have a su bstantial financial effect on

the benefits of the annuity. For example , in the fifth year , the

cash surrender value of the $38,219.49 premium policy is

$36,027 .00 .

9 0 . About ten months after purchasing the annuities, G.D.

and K.D. began having second t houghts about the purchase of the

annuities. G.D. consulted with the financial advisor " Wayne " at

her bank.

9 1 . G.D. later concluded that she had also misunderstood

the interest rate. Mr. Carter had shown her sales material with

the ten percent " bonus , " which generated a high interest rate of

13.3 percent for one year. B u t G.D. did not understand that the

interest rate only applied in one year , and the money was not

immed i ately available.

9 2 . On November 17, 2010, G.D. , with Wayne ' s help, composed

a c omplaint letter to Allianz that summarized her complaints and

requested that her premium payments be returned without fees.

9 3 . On November 28, 2010, Carter responded with a letter to

Allianz defending his annuity sales.

9 4 . On December 17, 2010, Allianz ' s employee , Mary Lou

Fleischacker , advised G.D. by letter that the " free look " period

for cancelling the contracts had passed . But Fleischacker did

request further information about the sales.

9 5 . By two letters dated January 10, 2011, Allianz advised

G. D. that she would suffer over $80,000 in penalties if she

canceled the contracts.

9 6 . G.D. ' s efforts to terminate the annuities prompted

Carter to come uninvited into G.D. ' s home and insistently demand

that G.D. telephone Allianz and cancel her attempt to rescind the

contracts. He also asked her, without explanation, to wait one

week before liquidating the policies.

9 7 . G.D. refused. Carter repeatedly telephone d G.D. and

returned uninvited to the house several times making the same

demand. G.D. refused to answer her door.

9 8 . Mr. Carter came to G.D. ' s daughter ' s house uninvited

one evening, told her that her mother was going to lose a lot of

money, and revealed her mother ' s financial matters to her.

99. Mr. Carter demanded that G.D. ' s daughter deliver to her

mother for signature a letter he wrote rescinding the liquidation

requests. G.D. ' s daughter agree d to get Carter to leave. G.D. ' s

daughter feared for her mother ' s safety because of Mr. Carter ' s

harassing telephone calls to her and her mother. She urged her

mother to call the police.

1 00 . G.D. called the police and a New Port Richey officer

told Mr. Carter to cease the harassment, and then filed a report

on January 13, 2011. Mr. Carter did not contact G.D. or her

daughter after that.

1 01 . Event ually, with the assistance of Department

I nvestigator Ortega, G.D. was able to obtain the return of her

funds from Allianz.

1 02 . There is no expert testimony evaluating the facts of

record and analyzing the suitability of the investments advocated

by Mr. Carter. Also , there is no evidence of the life expectancy

of G.D. and K.D. , which is an important factor in evaluating

suitability of annuity products. Consequently , the record is

inadequate for determining the reasonableness or suitability of

the liquid ation of the CDs and purchase of the MasterDex 10 Plus

annuities as promoted and sold by Mr. Carter.

103. Mr. Carter willfully misrepresented information with

regard to the applications for the MasterDex 10 Plus annuity.

This was dishonest. In the proce ss , Mr. Carter also demonstrated

a lack of trustworthiness to engage in the business of insurance.

These willful misrepresentations were false material statements

knowingly delivered to Allianz. Mr. Carter ' s repeated,

persistent , and overbearing efforts to require G.D. to speak with

him about the cancelation and withdraw it demonst rate a lack of

fitness to engage in the business of insurance.

Count VII - - G.B.

1 04 . G.B. was born on January 14, 1930. She has a high

school education. G.B. worked at and re tired from Lucent

Technology wiring telephone boards. S he receives a small

pension. Her husband, K.B. , managed their financial affairs

before he died ten years ago.

1 05 . Before K.B. ' s death, the couple maintained investment

accounts with Schwab. After K.B. ' s death, Schwab employee , Barry

Tallman , recommended that G.B. seek financial advice from

Christopher Trombetta, CPA. She did so.

1 06 . Mr. Carter and a colleague, Christopher Drew, met with

G.B. on June 29, 2010. She was 70 years old , timid, and ea sily

confused .

1 07 . G.B. had responded to a promotional post card she

received from them purporting that the law governing taxes on

social security income had changed and that they could lower her

taxes. Mr. Carter was the person who presented G.B. infor mation

and persuaded her to purchase an annuity in the course of a

meeting that lasted one to two hours.

1 08 . The evidence does not permit a determination of what

representations and information Mr. Carter presented in his sales

meeting with G.B. Her mem ory of the meeting was not distinct.

She was confused about the meeting and did not remember facts

precisely or explicitly.

1 09 . Mr. Carter completed application s for EquiTrust

annuity product s . G.B. signed the application s . Mr. Carter also

completed f inancial needs analys es. G.B. signed them also. A

box that asks if the applicant is aware that the annuity may be

" a long - term contract with substantial penalties for early

withdrawal " was checked " yes. " The form also accurately

represented that the sou rce of funds for the annuity premium was

stocks, bonds, or mutual funds. The other representations in the

form were accurate.

1 10 . Mr. Carter persuaded G.B. to purchase two EquiTrust

Market Power Plus annuities. G.B. signed two EquiTrust annuity

con tracts ending with 29F (E - 29F) and 30F (E - 30F). The initial

premium for E - 29F was $458,832.71. The initial premium for E - 30F

was $118,870.34. Both annuities were designed to provide G.B.

with income in 2036.

1 11 . The funds for the premium came from t he liquidation of

her stock brokerage account.

1 12 . Both contracts had 20 percent surrender charge s for

the first two years of ownership. G.B. could not have

surrendered the contract with its full financial benefits without

a penalty until she was 95 y ears old.

1 13 . Mr. Carter delivered the annuity contract s to G.B. on

August 6, 2010. The contract s provided G.B. the right to cancel

the annuity by returning it within 15 days of the date she

received it.

1 14 . Soon afterwards , Barry Tallman notified G .B. that her

Schwab accounts had been liquidatedansamerica A gent William

Pearson had liquidated the accounts to transfer the money for

purchase of the EquiTrust annuit ies. She was surprised.

1 15 . G.B. grew concerned about the annuities and consulted

Mrombetta and a financial advisor named Judith Gregory on

September 20, 2010. With their assistance, G.B. wrote a

complaint letter to EquiTrust asserting that Mr. Carter had

assured her, among other things, that the annuities would protect

her money should she enter a nursing home. G.B. wanted to cancel

the annuities and have her full premium returned.

1 16 . G.B. ' s letter to EquiTrust said, " I do not want any

calls or visits from the agent or the agent ' s office. "

1 17 . Mr. Carter learned of the effo rt to cancel the

annuities.

1 18 . On November 15, 2010, at Mr. Carter ' s suggestion , he

and Mr. Drew returned to G.B. ' s home uninvited and unannounced .

Mr. Carter insisted on entering and speaking to G.B.

1 19 . Mr. Carter began loudly and forcefully arguin g with

G.B. She telephoned Mr. Trombetta and asked that he speak to

Mr. Carter. Mr. Carter yelled at Mrombetta. Mr. Trombetta

credibly describes part of the conversation as follows:

And before I could barely get that out, Rick

exploded on me. He sn a pped and he started

cursing up and down. F ' n me up one side and

down the other. And " you don ' t F ' n know

what you a r e talking about. You don ' t care

about this pers o n. You don ' t f ' n know what

you are doing; " and this and that.

1 20 . When G.B. returned to the telephone to speak with

Mr. Trombetta, he advised her to call the police if Mr. Carter

did not leave her house within five minutes.

1 21 . Mr. Carter and Mr. Drew left.

1 22 . EquiTrust eventually returned over $600,000 to G.B.

1 23 . There is no ex pert testimony evaluating and analyzing

the suitability of the investments advocated by Mr. Carter.

Also , there is no evidence of G.B. ' s life expectancy which is an

important factor in evaluating suitability of annuity products.

Consequently , the record is inadequate for determining the

reasonableness or suitability of the two annuities Mr. Carter

sold G.B.

1 24 . Mr. Carter ' s conduct , in his unannounced visit to G.B.

to try to persuade her to change her plans to liquidate the

annuiti e s and his conversatio n with Mrombetta , demonstrated a

lack of fitness to engage in the business of insurance.

CONCLUSIONS OF LAW

Burden and Standard of Proof

1 25 . The Department seeks to impose penalties upon

Mr. Carter. Therefore , the statutes and rules the Department

charges that Mr. Carter violated must be strictly construed, with

ambiguities resolved in favor of Mr. Carter. Lester v. Dep ' t of

Prof ' l & Occ. Reg. , 348 So. 2d 923, 925 (Fla. 1st DCA 1977). The

Department must prove the charges specifically alleged in the

A dministrative C omplaint by clear and convincing evidence.

Ferris v. Turlington , 510 So. 2d 292, 294 (Fla. 1987); McKinney

v. Castor , 667 So. 2d 387, 388 (Fla. 1st DCA 1995); Kinney v.

Dep ' t of State , 501 So. 2d 129, 133 (Fla. 5th DCA 1987).

1 26 . Cl ear and convincing evidence is an " intermediate

standard, " " requir[ing] more proof than a ' preponderance of the

evidence ' but less than ' beyond and to the exclusion of a

reasonable doubt. '" In re Graziano , 696 So. 2d 744, 753 (Fla.

1997). For proof to be considered

" [C] lear and convincing " . . . the evidence

must be found to be credible; the facts to

which the witnesses testify must be

distinctly remembered; the testimony must be

precise and explicit and the witnesses must

be lacking in confusion as to t he facts in

issue. The evidence must be of such weight

that it produces in the mind of the trier of

fact a firm belief or conviction, without

hesitancy, as to the truth of the

allegations sought to be established.

In re Davey , 645 So. 2d 398, 404 (Fla. 1994), quoting, with

approval, from Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th

DCA 1983); see also In re Adoption of Baby E. A. W. , 658 So. 2d

961, 967 (Fla. 1995) ( " The evidence [in order to be clear and

convincing] must be sufficient to convince the trier of fact

without hesitancy. " ). " Although this standard of proof may be

met where the evidence is in conflict, . . . it seems to preclude

evidence that is ambiguous. " Westinghouse Electric Corp. v.

Shuler Bros., Inc. , 590 So. 2d 986, 989 (Fla. 1 st DCA 1991).

Violations Charged

127. The alleged violations occurred in various years. The

statutes involved are the same for all of the years during which

violations are alleged to have occurred, with two exceptions.

The first is that section 627.455 4(4) is the same for the years

2006, 2009, and 2010, except that the 2010 version mysteriously

includes " objectively " before reasonable basis. Chapter

2010 - 175, Laws of Florida, is the only law amending section

627.4554 in 2010. It does not make any chan ges to section

627.4554(4). Nonetheless, the addition of " objectively, " however

it occurred, is not material since it is redundant to

interpretation of this statute. The stated purpose of the

statute is convincing enough authority that " reasonable " shoul d

be construed as meaning objectively reasonable, not reasonable in

the eyes of the person selling the annuity. The second exception

is variations in the penalty provisions of section 626.9521(2).

Because the statutes are for the most part identical, the y are

cited without reference to the year of the statute unless there

are differences between the statutes for different years.

1 2 8 . Section 627.4554, titled " Annuity investments by

seniors , " imposes specific obligations upon individuals marketing

annuiti es to seniors. It defines " senior consumer " as " a person

65 years of age or older. " If the purchase is a joint purchase,

the purchasers are considered seniors if any of them are age 65

or older. § 627.4554(3)(c). All of the consumers to whom Mr.

Carter sold annuities were seniors.

1 2 9 . The declared purpose of the section is: " to set forth

standards and procedures for making recommendations to senior

consumers which result in a transaction involving annuity

products to appropriately address the insur ance needs and

financial objectives of senior consumers at the time of the

transaction. " § 627.4554(1) .

1 30 . Rule 69B - 215.210 declares:

The Business of Life Insurance is hereby

declared to be a public trust in which

service all agents of all companies have a

common obligation to work together in

serving the best interests of the insuring

public, by understanding and observing the

laws governing Life Insurance in letter and

in spirit by presenting accurately and

completely every fact essential to a

clie nt ' s decision, and by being fair in all

relations with colleagues and competitors

always placing the policyholder ' s interests

first.

1 3 1 . Section 627.4554(4)(a) imposes a duty towards senior

consumers on insurers and insurance agents. It provides:

In re commending to a senior consumer the

purchase or exchange of an annuity that

results in another insurance transaction or

series of insurance transactions, an

insurance agent, or an insurer if no

insurance agent is involved, must have an

objectively reasonab le basis for believing

that the recommendation is suitable for the

senior consumer based on the facts disclosed

by the senior consumer as to his or her

investments and other insurance products and

as to his or her financial situation and

needs.

1 3 2 . The Department did not prove by clear and convincing

evidence that Mr. Carter violated this statute.

1 3 3 . Section 627.4554(4)(c)2 . provides that: " [a]n insurer

or insurance agent ' s recommendation subject to subparagraph 1

shall be objectively reasonable unde r all the circumstances

actually known to the insurer or insurance agent at the time of

the recommendation. " The Department did not prove by clear and

convincing evidence that Mr. Carter violated this statute.

1 3 4 . Section 626.611(5) provides for discipl inary action

for " [w]illful misrepresentation of any insurance policy or

annuity contract or willful deception with regard to any such

policy or contract, done either in person or by any form of

dissemination of information or advertising. " The Department did

not prove by clear and convincing evidence that Mr. Carter

violated this statute.

1 3 5 . Section 626.611(7) provides for disciplinary action

for a: " Demonstrated lack of fitness or trustworthiness to

engage in the business of insurance. " The clear an d convincing

evidence established that Mr. Carter demonstrated a lack of

trustworthiness to engage in the business of insurance by the

deliberate misrepresentations in the applications of J.K. , W.K.,

and G.D. The clear and convincing evidence proved that Mr.

Carter ' s conduct , when trying to stop G.D. and G.B. from

liquidating their annuities , demonstrated a lack of fitness to

engage in the business of insurance.

1 3 6 . Section 626.611(9) authorizes discipline for:

" Fraudulent or dishonest practices in the conduct of business

under the license or appointment. " Clear and convincing evidence

proved that Mr. Carter ' s willful misrepresentations in the

annuity applications of J.K. , W.K., and G.D. violated this

statute.

1 3 7 . Section 626.611(13) permits disciplin e for: " Willful

failure to comply with, or willful violation of, any proper order

or rule of the department or willfully violation of any provision

of this code. " Clear and convincing evidence demonstrated that

Mr. Carter violated several provisions of t he code as established

in this Recommended Order. The Department did not prove a

violation of any order or rule of the Department.

1 3 8 . Similarly to section 626.611(13), section 626.621

establishes discretionary grounds for suspension or revocation of

a license. Section 626.621(2) permits disciplinary action for:

" Violation of any provision of this code or of any other law

applicable to the business of insurance in the course of dealing

under the license or appointment. " Clear and convincing evidence

d emonstrated that Mr. Carter violated several provisions of the

code as established in this Recommended Order.

1 3 9 . Section 626.621(6) permits disciplinary action for:

" In the conduct of business under the license or appointment,

engaging in unfair meth ods of competition or in unfair or

deceptive acts or practices, as prohibited under part IX of this

chapter, or having otherwise shown himself or herself to be a

source of injury or loss to the public. " Part IX includes

section 626.9541 , which defines var ious unfair methods and unfair

or deceptive acts or practices. Those charged here are listed in

section 626.9541(1)(a)1 . and 626.9541(1)(e)1.

1 40 . Section 626.9541(1)(a)1 . includes among the prohibited

practices: " Knowingly making, issuing, circulating, or causing

to be made, issued, or circulated, any estimate, illustration,

circular, statement, sales presentation, omission, or comparison

which . . . [m]isrepresents the benefits, advantages, conditions,

or terms of any insurance policy. " The Department did not prove

violation of this statute by clear and convincing evidence.

141. Section 626.9541(1)(e)1 . include s among the prohibited

practices making, publishing, disseminating, circulating, or

delivering any false material statement. Clear and convinc ing

evidence established that Mr. Carter made false statements in the

applications of G.D and G.B. and delivered the statements to

Allianz and EquiTrust.

1 4 2 . Section 626.9541(1)(k)2 prohibits:

Knowingly making a material omission in the

comparison of a life, health, or Medicare

supplement insurance replacement policy with

the policy it replaces for the purpose of

obtaining a fee, commission, money, or other

benefit from any insurer, agent, broker, or

individual. For the purposes of this

subparagraph, a material omission includes

the failure to advise the insured of the

existence and operation of a preexisting

condition clause in the replacement policy.

The Department did not prove a violation of this statute by clear

and convincing evidence.

1 4 3 . Se ction 626.9541(1)(l) provides for discipline for

" twisting. " It defines " twisting " as follows:

Knowingly making any misleading

representations or incomplete or fraudulent

comparisons or fraudulent material omissions

of or with respect to any insurance pol icies

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.

The Depart ment did not prove a violation of this statute by clear

and convincing evidence.

Penalty

1 4 4 . Violation of s ection 626.611(5) -- Rule 69B - 231.080(5)

establishes a nine - month suspension as the penalty for a

violation of section 626.611(5). Mr. Carter viola ted this

section twice.

1 4 5 . Violation of s ection 626.611(7) -- Rule 69B - 231.080(7)

establishes a six - month suspension as the penalty for violation

of section 626.611(7). Mr. Carter violated this section twice.

1 4 6 . Violation of s ection 626.611(9) -- Rule 6 9B - 231.080(9)

establishes a 12 - month suspension as the penalty for a violation

of section 626.611(9). Mr. Carter violated this section twice.

1 4 7 . Violation of s ection 626.9541(1)(e)1 . -- Rule

69B - 231.100(12) establishes a 12 - month suspension as the penalt y

for a violation of this section. Mr. Carter violated this

statute twice.

1 4 8 . The total of the penalties to be imposed because of

Mr. Carter ' s violations is 78 months , applying the provis i on of

Rule 69B - 231.040(1)(a) that states a single act of miscon duct may

be grounds for multiple disciplinary actions . This is the " total

penalty " as defined in r ule 69B - 231.040 (2) , which establishes the

procedure for aggregating penalties. The evidence does not prove

the aggravating factors advanced by the Departmen t. It also does

not prove any mitigating factors. Therefore the " total penalty "

is also the " final penalty. " Rule 69B - 231 . 040(3)(d) requires:

" In the event that the final penalty would exceed a suspension of

twenty - four (24) months, the final penalty s hall be revocation.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services

enter a f inal o rder revoking the licenses of Richard Edward

Carter.

DONE AND ENTERED this 28th da y of November , 2012 , in

Tallahassee, Leon County, Florida.

S

JOHN D. C. NEWTON, II

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

( 850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of November , 2012 .

ENDNOTE S

1/ The issue s are stated as stipulated by the parties.

2/ The consumers involved in this matter are referred to by their

initials.

COPIES FURNISHED:

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

David J. Busc h, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399

M. D. Purcell, Jr., Esquire

Law Offices of M. D. Purcell, Jr.

1110 North Florida Avenue

Tampa, Florida 33558

N OTICE 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 i n this case.