13-004755PL Department Of Financial Services, Division Of Insurance Agents And Agency Services vs. Gregory Bruce Sample Status: Closed Recommended Order on Wednesday, October 29, 2014.

Summary: Petitioner proved by clear and convincing evidence that Respondent's license as a life agent and a life and health agent should be revoked. A fine in the amount of $140,000 is recommended.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF INSURANCE

AGENTS AND AGENCY SERVICES,

Petitioner,

vs. Case No. 13 - 4 755PL

GREGORY BRUCE SAMPLE,

Respondent.

_______________________________/

RECOMMENDED ORDER

On February 18 through 21, 2014, a f inal administrative

hearing in this case was held in Fort Myers, Florida, and

completed on May 2 7 , 2014, by video teleconference at sites in

Tallahassee and Fort Myers, Florida, before Linzie F. Bogan,

Administrative Law Judge , Division of Administrative Hearings.

APPEARANCES

For Petitioner: David J. Busch, Esquire

Jessie Harmsen, Esquire

Department of Financial Services

200 East Ga ines Street

Tallahassee, Florida 32399

For Respondent: Robert J. Coleman, Esquire

Coleman and Coleman

Post Office Box 2089

Fort Myers, Florida 33902

STATEMENT OF THE ISSUE

Whether Respondent, Gregory Bruce Sample, should be

disciplined for alleged statutory and rule violations for his

role in several insurance transactions.

PRELIMINARY STATEMENT

On November 22, 2013, the Department of Financial Services ,

Division of In surance Agents and Agency Services (Petitioner or

Department) , filed a six - count Administrative Complaint against

Gregory Bruce Sample (Respondent). Petitioner withdrew Count IV

of the Administrative Complaint during the final hearing.

The Administrative Complaint alleg es violations of s ections

626.611, 626.621, 626.9521, 626.9541, and 627.4554, Florida

Statutes, 1/ and Florida Administrative Code Rules 69B - 215.210 and

69B - 215.230. 2/ Respondent disputed the allegations in the

Administrative Complaint and requested a hearing pursuant to

s ection 120.57(1), Florida Statutes. On December 11, 2013, the

matter was referred to the Division of Administrative Hearings

(DOAH) for the assignment of an a dministrative l aw j udge to

conduct the f inal administrative hear ing.

At the hearing, Petitioner presented the testimony of

Jewel Frisani, Eileen Sarracino, Darlene Morgan, Warren Morgan,

Evelyn Langer, Joel Langer, Gail Shane, Kevin Clark,

Juanita Midgett, and John Richard Brinkley. Petitioner's

Exhibits 1 through 3, 5, 10 through 38 , 4 1 through 102,

104 through 129, 131 through 140, 142 through 153, 216 through

246, 248 through 251, 253, 258 through 271, 27 3 through 290 , and

300 through 305 were received in evidence. Petitioner's

Exhibits 4 and 6 through 9 were received for the limited purpose

pertaining to the penalty, if any, that may be recommended.

Petitioner's Exhibits 39 , 4 0 , 103, 130, and 141 were deemed

hearsay and received for the purpose of supplementing or

explaining other evidence, but not sufficient in themselves to

support finding s of fact.

Respondent testified on his own behalf and presented the

testimony of Ian Sample. RespondentÓs Exhibits 1 through 16, 28,

29, and 31 through 41 were received in evidence .

The Transcript of the final hearing wa s filed on Ju ne 27 ,

2014 . Respondent moved for an extension of time for the

submission of p roposed r ecommended o rders , which was granted .

Each part y time ly filed a Proposed Recommended Order which

received due consideration in the preparation of this Rec ommended

Order.

FINDING S OF FACT

A. Count I Î Jewel Frisani

1. Jewel Frisani was born December 22, 1932. As of

September 23, 2010, Ms. Frisani owned two annuities; one issued

by MetLife and the other issued by ING Golden American (ING).

Ms. Frisani wa s withdrawing $500 per month from each annuity for

a total of $1,000 per month, or $12,000 per year. Death benefits

were provided as a feature of each annuity.

2. On September 23, 2010, Ms. Frisani attended a luncheon

seminar hosted by Respondent. Whil e at the seminar, Ms. Frisani

completed a questionnaire wherein she provided her name, address,

and phone number. The questionnaire directs that individuals

completing the same should note thereon ÐTopics of Most Interest

to Me.Ñ The questionnaire lists some 25 topics and Ms. Frisani

noted that she was only interested in having Respondent to

Ð[r]eview[] [her] existing annuity(ies).Ñ One of the listed

topics is Ð[e]state [p]lanning.Ñ Ms. Frisani did not indicate on

the form that she was interested in dis cussing with Respondent

matters related to planning her estate.

3. Soon after the seminar, Respondent contacted Ms. Frisani

and they agreed that they would personally meet on October 5 and

October 11, 2010, to discuss matters related to her existing

annu ities.

4. On October 5, 2010, Ms. Frisani met with Respondent to

discuss her MetLife and ING annuities. During the meeting,

Ms. Frisani showed Respondent a ÐPortfolio detailÑ for her ING

annuity and a ÐsnapshotÑ summary of her MetLife annuity. The

ÐPo rtfolio detailÑ showed that as of September 30, 2010, the ING

annuity had a market value of $65,604.77. The ÐsnapshotÑ of

Ms. FrisaniÓs MetLife annuity showed that at the beginning of the

year , the opening value of her annuity was $50,638.98 and her

clos ing value as of September 30, 2010, was $46,807.73. Neither

the ÐPortfolio detailÑ nor the ÐsnapshotÑ summary listed any

charges associated with surrendering either annuity.

5. During the meeting with Respondent on October 5, 2010,

Ms. Frisani informed Respondent that her Ðannuities were going to

be [the] inheritance for [her] granddaughter.Ñ This explains why

the words ÐPrisilla Frisani granddaughterÑ appear in RespondentÓs

handwriting on the bottom of the ÐPortfolio detail.Ñ Although

Ms. Frisani info rmed Respondent of her desire to leave an

inheritance for her granddaughter, she did not impress upon

Respondent that any new product(s) that she might purchase must

offer death benefits in an amount not less than what she already

had with MetLife and ING. Specifically, as to this issue,

Ms. Frisani testified as follows:

Q. What investment goals did you share with

[Respondent] at that meeting? What did you tell

him you wanted out of --

A. I wanted him to see if he could do better

than what I was getti ng from my annuities.

Q. Okay. And as you stated earlier, what you

did like about your old annuities was that --

what was it that you stated earlier that you

liked about your old annuities?

A. Oh, that I was getting a thousand a month

from my -- from my checking, and then they had

death benefits for my granddaughter.

Q. Did you also share with Mr. Sample that you

wanted to continue those benefits?

A. No, I didnÓt mention that to him there.

Q. You didnÓt mention the death benefits?

A. The death benefits, no.

Q. Did you mention -- so you just mentioned

that you wanted --

A. I wanted him to make sure that what he was

doing would go in the trust, and that I would

continue getting my thousand a month.

Q. Okay.

A. -- from the annuities --

Q . Okay.

A . -- and that I wouldnÓt lose no money by

switching.

Q. Okay. And you say he was aware that both

annuities had death benefits?

A. Well, I donÓt know if he was aware of that

or not, but

Q. Okay.

A. We didnÓt discuss too much about the dea th

benefits.

Final Hearing Transcript, pp. 149 - 151.

6. Respondent credibly testified that had Ms. Frisani

explained to him that her objective was to maximize the death

benefits payable to her granddaughter, then he would have

recommended life insurance as a vehicle for her investments

instead of annuities.

7. Ms. Frisani also contends that during her meeting with

Respondent on October 5, 2010, he assured her that she would not

lose any money by surrendering the ING and MetLife annuities.

W hen Ms. Fri sani met with Respondent on October 5, 2010, she

informed Respondent she was taking a $500 per month partial

withdrawal from her ING annuity as well as a $500 per month

partial withdrawal from her MetLife annuity. Ms. Frisani also had

$200,000 in the bank , some of which may have been in a money

market account . When asked if she shared information with

Respondent concerning the $200,000, Ms. Frisani testified that ÐI

might have mentioned it, yeah.Ñ

8. Ms. Frisani's ING annuity was characterized as a

qual ified retirement account. Due to her age, in order to avoid a

tax penalty on this qualified account, Ms. Frisani was required to

take a minimum distribution of four percent annually.

9. Ms. Frisani's MetLife annuity was a non - qualified

account. Therefo re, she did not have to take from it any required

minimum distributions (RMD).

10. Respondent suggested to Ms. Frisani that as a means of

paying less in taxes and obtaining growth on her investments,

without losing any principal in the stock market, she should

consider replacing the ING and MetLife variable annuities with

National Western fixed annuities, and that for her $12,000 annual

withdrawals she should take $3,000 a year in partial withdrawals

from the National Western qualified annuity he was off ering her

and $9,000 a year from her money market account. The $3,000 per

year in withdrawals from the qualified National Western annuity

would satisfy her RMD without incurring any penalty. Since her

money market account was paying very little interest, the $9,000

a year from th is account would make up the balance of money she

needed for her annual income. The non - qualified National Western

annuity could then grow at a higher interest rate than the funds

in Ms. Frisani's money market account.

11. In o rder to assist Ms. Frisani with her efforts to

learn more about the National Western annuity, Respondent, during

the meeting of October 5, 2010, gave Ms. Frisani a copy of

National Western's multi - page brochure. The brochure allowed

Ms. Frisani to famili arize herself with the National Western

annuity prior to their next meeting on October 11, 2010.

12. On October 11, 2010, Ms. Frisani met with Respondent a

second time. During this meeting, Ms. Frisani signed several

forms related to the surrender of th e ING and MetLife annuities,

and the purchase of annuities from National Western. It is

undisputed that each form was completed by Respondent and signed

by Ms. Frisani. Ms. Frisani testified that she did not bother to

read the documents that Respondent g ave her to sign. 3/

13. One of the forms signed by Ms. Frisani for each of the

National Western annuities is the Annuity Suitability

Questionnaire. The questionnaire asks two related questions.

The first question asks Ð[w]ill the proposed annuity repla ce any

product?Ñ and the second asks Ð[i]f yes, will you pay a penalty

or other charge to obtain these funds?Ñ The answer noted on the

form to the first question is Ðyes,Ñ and the answer to the second

question is Ðno.Ñ

14. During the October 11, 2010, m eeting with Respondent,

Ms. Frisani also signed, for both National Western annuity

contracts, a ÐDisclosure and Comparison of Annuity ContractsÑ

form (Comparison form). This form facilitates the side - by - side

comparison of certain features of an existing a nnuity contract

with those of a replacement annuity contract. Near the top of

the Comparison form, there is a line where the contract number

for the existing annuity is to be placed. On the Comparison form

for the MetLife annuity, the contract number Ð32 01353529Ñ

appears. This is the correct contract number for the MetLife

annuity. On the Comparison form for the ING annuity, the

contract number ÐI038301 - 0DÑ appears. This is the correct

contract number for the ING annuity. Neither of these contract

num bers appears on the ÐsnapshotÑ or the ÐPortfolio detailÑ

documents that Ms. Frisani presented to Respondent during their

initial meeting on October 5, 2010.

15. Ms. Frisani received quarterly statements from both ING

and MetLife for the annuity contracts that she had with these

companies. The ING and MetLife quarterly statements for the

period ending September 30, 2010, each lists the annuity contract

number, the contract date, and other pertinent information. The

MetLife quarterly statement indicates t hat as of September 30,

2010, Ms. FrisaniÓs MetLife annuity had an account balance of

$46,684.92 and a death benefit in the amount of $57,160.41.

Ms. FrisaniÓs ING quarterly annuity statement for the period

ending September 30, 2010, shows the following:

Guaranteed Minimum

Death Benefit $115,859.39

Accumulation Value $ 65,491.51

Surrender Charges $ 1,345.01

Cash Surrender Value $ 64,146.50

16. When Respondent met with Ms. Frisani on October 11,

2010, the evidence reasonably suggests that Ms. Frisani had her

quarterly statements with her and presented the same to

Respondent so as to assist him with completing the paperwork

related to the surrender of Ms. FrisaniÓs existing annuities and

the purchase of the new annuities from National Weste rn.

17. For Ms. FrisaniÓs MetLife annuity, Respondent wrote on

the Comparison form that this annuity contract was issued in

ÐYr99.Ñ The MetLife quarterly statement that Ms. Frisani

presented to Respondent shows, however, that the actual date of

issue fo r the MetLife annuity was April 22, 2005. The evidence

does not sufficiently explain this discrepancy.

18. For the MetLife annuity, Respondent also noted on the

Comparison form that this annuity had a nine year surrender

charge period and a first year s urrender charge rate of nine

percent that decreased by one percentage point each year that the

annuitant maintained the policy. Although Respondent accurately

noted the surrender period and related percentages on the

Comparison form, it is not clear from the evidence where

Respondent got this information , given that neither the MetLife

quarterly statement for the period ending September 30, 2010, nor

the ÐsnapshotÑ make mention of surrender charges or related

percentages. Respondent, nevertheless, obvious ly knew of the

surrender period and related charges for Ms. FrisaniÓs MetLife

annuity.

19. The Comparison form also notes that the MetLife annuity

provides for a ÐWaiver of Surrender Charge Benefit or Similar

Benefit.Ñ Again, however, there is nothing i n the MetLife

quarterly statement or ÐsnapshotÑ that makes mention of the

waiver of any surrender or similar charges.

20. During the meeting with Respondent on October 11, 2010,

Ms. Frisani also signed, for the MetLife annuity, a form titled

ÐDISCLOSURE OF SURRENDER CHARGES IF EXISTING ANNUITY IS REPLACED

OR EXCHANGED.Ñ There is a section of the disclosure form where

estimated surrender charges are noted. For this section,

Respondent wrote in Ð0Ñ as the amount of surrender charges

associated with replac ing the MetLife annuity with an annuity

from National Western.

21. Contrary to RespondentÓs representations on the form,

Ms. Frisani incurred $2,142.50 in surrender charges related to

the surrender of the MetLife annuity contract. On October 11,

2010, w hen Respondent met with Ms. Frisani, he knew, or should

have known, based on the information available to him, that

Ms. Frisani would incur surrender charges related to the

surrender of the MetLife annuity. The totality of the evidence

as to this transac tion indicates that Respondent willfully misled

Ms. Frisani, thus causing her to be misinformed about the charges

related to the surrender of her MetLife annuity.

22. Petitioner also alleges that Ms. Frisani suffered

financial harm as a result of Respond ent deceiving her into

believing that she would not incur charges related to the

surrender of her ING annuity. According to Petitioner,

Ms. Frisani incurred $1,345.01 in surrender charges related to

this transaction. The evidence of record is insufficie nt to

support this allegation.

23. The ÐDISCLOSURE AND COMPARISON OF ANNUITY CONTRACTSÑ

form that Respondent completed for Ms. FrisaniÓs ING annuity

notes that nine years was the surrender charge period for this

annuity. If this representation is true, the surrender charge

would terminate in November 2009 . PetitionerÓs Exhibit 37

contains a summary of the terms of Ms. FrisaniÓs ING annuity and

it shows seven years as the surrender charge period for this

annuity. Whether it is seven years or nine years, n either of

these yearly figures would result in a surrender charge , given

that Ms. Frisani had held the ING annuity for nine years and

eleven months at the time of actual surrender.

24. To further complicate matters, Ms. FrisaniÓs ING

quarterly statemen t for the period ending September 30, 2010,

shows that if she were to surrender the annuity on September 30,

2010, she would incur $1,345.01 in surrender charges. As

previously noted, Ms. FrisaniÓs ING annuity, as of September 30,

2010, had an accumulated value of $65,491.51. Subtracting the

stated surrender charges would result in a cash surrender value

of the ING annuity of $64,146.50. When this annuity was actually

surrendered on or about October 25, 2010, ING issued a check in

the amount of $65,172.3 3 to National Western for Ms. FrisaniÓs

new annuity. The evidence does not explain with sufficient

clarity why there is only a $319.18 difference between the

accumulated value as of September 30, 2010, and the actual cash

surrender value as of October 25, 2010.

25. Also, on or about October 22, 2010, ING sent

Ms. Frisani a ÐConfirmation NoticeÑ regarding transactions

related to her annuity account. The Confirmation Notice provides

the name (Jeffrey A. Masters), phone number, and mailing address

for Ms. FrisaniÓs ING financial advisor along with a notice

advising that ÐThe ING Variable Annuity Customer Contact Center

is available Monday through Thursday 8:30 AM to 6:30 PM Eastern

Time and Friday 8:30 AM to 5:30 PM Eastern Time at 1 - 800 - 366 -

0066.Ñ The Co nfirmation Notice also states the following:

IMPORTANT NOTICE : Please carefully review

all of the transactions detailed on this

confirmation notice. You must inform us of

any errors we may have made with respect to

allocations of your investment dollars within

30 days from the date of this notice . If you

do not respond within 30 days, all

allocations listed on this confirmation

notice will be deemed final pursuant to your

instructions.

26. The Confirmation Notice lists two transactions with an

effecti ve date of October 22, 2010. The first transaction shows

a ÐTotal Cash SurrenderÑ of $65,172.33, and the second

transaction shows a ÐTotal Surrender ChargeÑ of $1,345.01.

27. Independent of what Respondent may have told

Ms. Frisani, she was given noti ce by ING that there was a

$1,345.01 charge associated with surrendering her ING annuity and

that she had 30 days from the date of the notice to inform ING

about any irregularities associated with the transaction. There

is no evidence that Ms. Frisani eve r contacted ING or Jeffrey A.

Masters about the $1,345.01 surrender charge. Also, Ms. Frisani

had until November 21, 2010, to inquire about the surrender

charges or any other matters, including death benefits, related

to the surrender of her ING policy. There is no evidence

suggesting that Ms. Frisani availed herself of this option.

Petitioner failed to prove that Ms. Frisani suffered, as a

consequence of RespondentÓs conduct, financial harm in the amount

of $1,345.01 , as alleged.

28. T he Department al so allege s that Respondent

misrepresented to Ms. Frisani that she would receive a $9,000 bonus

following her first year of ownership of the National Western

annuities . Respondent denies this allegation. None of the

documentary evidence references a $9,00 0 bonus and the only

testimony regarding this alleged bonus is from Ms. Frisani.

Ms. FrisaniÓs testimony, without more, is insufficient to satisfy

PetitionerÓs burden with respect to this allegation.

29. In its Proposed Recommended Order, Petitioner co ntends

that Respondent Ðstated on Ms. FrisaniÓs disclosure and

comparison of annuity contracts that she would not incur any

administrative fees or margins, but the National Western (annuity

number 0101255052) contract clearly states otherwise.Ñ It is

corr ect that the disclosure and comparison form notes that the

National Western annuity will have zero ÐAdministrative fees or

Margins.Ñ The disclosure and comparison form in evidence does

not define what constitutes an administrative fee or margin.

Petition er equates the ÐchargeÑ that Ms. Frisani paid for the

National Western annuity withdrawal benefit rider with an

administrative fee , but the record does not support PetitionerÓs

conclusion.

30. There is no indication that National Western considers

the ch arge for the withdrawal benefit rider as an administrative

fee. The National Western documents signed by Ms. Frisani advise

that Ð[t]he Account Value of the policy is reduced each year by

the Annual Rider Charge Ñ and Ð[t]here is a charge for this rider,

w hich is assessed annually.Ñ ( e mphasis added). In looking at

Ms. FrisaniÓs National Western statement for this annuity for the

period November 4, 2010 , through September 26, 2011, the only

ÐfeeÑ listed is an ÐOption A Asset FeeÑ that shows zero as the

per centage associated with it . The annual rider charge is not

listed as an ÐadministrativeÑ or any other type of fee. Without

more, the undersigned is unable to conclude that the annual rider

charge is the equivalent of an Ðadministrative feeÑ as these

term s are used in the disclosure and comparison form signed by

Ms. Frisani on October 11, 2010.

31. Respondent explained his rationale for recommending the

National Western annuities to Ms. Frisani. He estimated that

Ms. Frisani may have made $5,000 with h er ING variable annuity in

the ten years that she owned it and $5,000 with the MetLife

variable annuity in the five years she owned that annuity, so her

net return was a half percent and one percent, respectively. On

the other hand, the National Western f ixed annuities Respondent

sold Ms. Frisani had a guaranteed five percent growth so she would

be earning ten times the amount she had been making on her ING

annuity and five times the amount for her MetLife annuity. The

National Western annuities also incl uded a five percent bonus,

which approximated $6,000 .

32. Respondent summarized his comparison of the National

Western annuities he sold Ms. Frisani with the ING and MetLife

annuities she previously owned as follows:

[S]o she had these old cont r acts with no

safety, that had produced a half percent

interest from the get - go for ten years. We

moved her to National Western, which is an

equity index annuity. The principal is fixed.

It had a five percent income rider guarantee,

which is what she wanted. And we were able to

take the nonqualified account and just let it

grow. The other is the qualified contract.

She -- she has to take out four percent for her

RMD. She's making five, which means she

continues to actually make some money. Had she

stayed with the variable, she was just

depleting it every year by this four percent.

So she was losing principal every year, so we

stopped that. We stopped that. It's stopped

cold.

Final Hearing Transcript, pp. 1157 - 1158.

33. Respondent further explained that Ms . Frisani's National

Western annuities are structured so she can withdraw up to ten

percent annually from the account, but if she does not take any

withdrawals in the first year then she is allowed to take up to

twenty percent in the second year, and if sh e elects not to take

any withdrawals in the second year then she may withdraw up to

thirty percent for the third year, and so on for the duration of

the annuity period.

34. Respondent had an objectively reasonable basis for

recommending the National West ern annuities to Ms. Frisani.

B. C ount II Î Fred and Eileen Sarracino

35. Fred Sarracino and Eileen Sarracino are married and reside

in Lake Placid, Florida. Mr. Sarracino was born on September 20,

1934, and is a retired automobile mechanic. Mrs. Sa rracino was born

on February 1, 1935 , and is retired from working for an insurance

broker in Pennsylvania.

36. In October 1993 Mr. Sarracino paid an initial premium of

$2,000 towards the purchase of an Allmerica Financial Life Insurance

and Annuity Compa ny variable annuity contract (Commonwealth 46).

Over the next 15 years, he added premium payments to Commonwealth 46

so that it had a surrender value of $46,435.53 on June 30, 2008, and

an enhanced death benefit of approximately $54,000 on March 31,

2008.

37. In October 1993 Mrs. Sarracino paid an initial premium of

$2,000 towards the purchase of a separate Commonwealth variable

annuity contract (Commonwealth 45). Over the next 15 years, she

added premium payments to Commonwealth 45 so that it had a

sur render value of $18,979.81 on June 30, 2008, and an enhanced

death benefit of approximately $75,000 on March 31, 2008.

38. In September 1997 Mrs. Sarracino paid an initial premium

payment of $94,226.16 toward another Commonwealth variable annuity

contra ct (Commonwealth 03). Over the next 11 years , she added

premium payments to Commonwealth 03 so that it had a surrender

value of $172,831.01 on June 30, 2008, and an enhanced death

benefit of over $237,000 on March 31, 2008.

39. During the initial months of 2008, Mr. and Mrs. Sarracino

were losing money on their Commonwealth variable annuities and

decided, in mid - 2008, to attend a seminar presentation hosted by

Respondent at a restaurant in Sebring, Florida.

40. Mr. and Mrs. Sarracino met privately with Respondent on

June 30, 2008. Acting on RespondentÓs recommendations,

Mr. Sarracino surrendered Commonwealth 46 and used the proceeds of

$46,435.53 to purchase an Old Mutual Financial Life Insurance

Company annuity (Old Mutual 67). Mrs. Sarracino surrend ered

Commonwealth 45 and applied the proceeds of $18,979.81 to purchase

an Old Mutual annuity (Old Mutual 68). Mrs. Sarracino also

surrendered Commonwealth 03 and applied the proceeds of

$172,402.45 to purchase yet another Old Mutual annuity (Old Mutual

6 9). In total, Respondent earned $31,428.52 in commission from

these transactions.

41. When Respondent took the applications for each of the

Old Mutual annuities, he misrepresented the financial profile of

the Sarracinos on the annuity suitability forms. Respondent

accomplished this in part by having the Sarracinos sign blank

suitability forms which Respondent later filled in with false

information. 4/

42. Respondent falsely noted on the suitability form that

Mrs. SarracinoÓs monthly disposable income w as $1,600.

Mrs. Sarracino credibly testified that her monthly disposable

income when she met with Respondent was more in the range of four

to five hundred dollars. Respondent also falsely noted on the form

that Mrs. Sarracino owned $60,000 worth of cert ificates of deposit

(CDs), variable annuities amounting to $300,000, and had $60,000 in

mutual funds.

43. Respondent noted on the suitab ility form that

Mr. Sarracino, like his wife, also had monthly disposable income in

the amount of $1,600. This is fa lse. Respondent also falsely noted

on the form that Mr. Sarracino owned $60,000 worth of CDs, variable

annuities totaling $300,000, and $60,000 in mutual funds. Finally,

Respondent falsely stated that Mr. Sarracino owned a life insurance

policy with a ca sh value of $10,000. The unrefuted evidence is that

Mr. Sarracino has never owned a life insurance policy of any amount.

44. Respondent willfully misrepresented the financial profile

of the Sarracinos so that they could pass Old MutualÓs underwriting

st andards and he could receive a commission.

C. C ount III Î Warren and Darlene Morgan

45. Warren and Darlene Morgan are married and live in Port

Charlotte, Florida. Mr. Morgan was born on May 24, 1947.

Mrs. Morgan was born on April 21, 1948.

46. In 2005, the Morgans decided they should consult a

financial advisor closer to their home. In May and June 2005, the

Morgans met with Respondent for the purpose of purchasing four

Allianz annuities.

47. On May 28, 2005, Mr. Morgan made an initial premium

payment of $56,949.16 toward the purchase of the first Allianz

annuity contract (Allianz 32).

48. On May 28, 2005, Mr. Morgan made an initial premium

payment of $16,701.27 toward the purchase of a second Allianz

annuity contract (Allianz 22).

49. On Ma y 28, 2005, Mrs. Morgan purchased the third Allianz

annuity contract (Allianz 02). The initial premium payment was

$16,701.27.

50. On June 15, 2005, Mrs. Morgan purchased the fourth

Allianz annuity contract (Allianz 43). She made three premium

payments on this policy between May 28, 2005 , and June 15, 2005,

totaling $68,040.34.

51. Each of the Allianz annuities Respondent sold the

Morgans was intended as a long - term investment as evidenced by the

respective annuities Ó multi - year surrender charge perio ds and high

surrender charge penalties.

52. After purchasing the Allianz annuities, the Morgans and

Respondent met annually to review the Morgans' investments, but

until 2010 , they decided not to change anything.

53. In early calendar year 2010, Respon dent, consistent with

the practice of conducting their annual review, called the Morgans

and informed them of a new product that might appeal to them.

Respondent and the Morgans met on January 7, 2010, and Mrs. Morgan

testified that Respondent compared t he new product with the

Allianz annuities they owned. Mrs. Morgan stated in her testimony

that Ðwe asked a lot of questionsÑ during the meeting with

Respondent. Mrs. Morgan thoughtfully considered the merits of

purchasing the new product and explained th at initially she was

opposed to replacing their Allianz annuities because she believed

the surrender penalty that she and her husband would pay was too

steep a price for the exchange. She testified , however , that her

husband, Warren, wanted to make the ch ange and so she agreed

to do so.

54. On January 7, 2010, when they met with Respondent,

Darlene and Warren Morgan were 61 and 62 years of age,

r espectively, and their investment objective remained focused on

growth. During the meeting, Respondent sugge sted that the Allianz

annuities should be replaced with annuities issued by Forethought

Life Insurance Company (Forethought) and O ld Mutual Financial Life

Insurance Company (OM). The Forethought annuities were offering a

new feature known as an "income ri der" that was not available when

the Morgans purchased the Allianz annuities in 2005.

55. Allianz 32 was exchanged for a Forethought annuity

contract (Forethought 03). Mr. Morgan incurred a surrender penalty

of $6,151.79 for exchanging this Allianz annu ity, which at the time

of the exchange was valued at approximately $58,000.

56. Allianz 22 was exchanged for an OM annuity (OM 57).

Mr. Morgan incurred a surrender penalty of $4,441.09 for

exchanging this Allianz annuity , which at the time of the exchang e

was valued at approximately $16,000 .

57. Allianz 43 was exchanged for a Forethought annuity

(Forethought 92). Mrs. Morgan incurred a surrender penalty of

$21,469.82 for exchanging this Allianz annuity , which at the time

of the exchange was valued at a pproximately $65,000 .

58. Allianz 02 was exchanged for an OM annuity (OM 58).

Mrs. Morgan incurred a surrender penalty of $4,441.09 for exchanging

this Allian z annuity , which at the time of the exchange was valued

at approximately $16,000 .

59. Combi ned, the Morgans incurred $36,503.79 in surrender

penalties associated with the exchange of their annuities.

RespondentÓs total commission for these transactions was

$16,581.62.

60. The Administrative Complaint alleges that Respondent

Ðhurriedly pushed annuity application and suitability forms in

front of Mr. and Mrs. M[organ] and had them sign them without

allowing them any time to review them,Ñ and that the Ðentire

meeting on or about January 7, 2010, lasted approximately 20

minutes.Ñ The Administrati ve Complaint also alleges that

consistent with RespondentÓs alleged conduct of rushing the

Morgans, he had them sign blank forms related to the exchange of

the Allianz annuities.

61. According to Mrs. MorganÓs testimony, the meeting with

Respondent on Ja nuary 7, 2010, lasted approximately 45 minutes

(more than twice as long as alleged), during which they Ðasked a

lot of questions.Ñ As for the issue of allegedly signing blank

forms, Mrs. Morgan testified as follows:

Q: Did you sign blank forms or were th ey partially

filled out?

A: I donÓt know. Because he was at his desk

writing very fast. Part of it could have been

filled out.

Final Hearing Transcript p. 645

Q: All right. But what IÓm asking you is: As you

sit here today, can you state with certa inty that

any of the forms that he had you sign were, in

fact, blank?

A: No, I cannot state with certainty that.

Final Hearing Transcript p. 678

62. The evidence is insufficient to clearly and

convincingly establish that the Respondent rushed the Morg ans into

exchanging their Allian z annuities or that Respondent had them to

sign blank documents.

63. Respondent, in filling out the transfer, application,

and suitability forms for the purchase of the Forethought and OM

annuities, listed therein informat ion regarding the Morgans that

was false. Respondent included a false statement that the

Morgans had a net worth of $400,000, excluding the value of their

home, that the MorgansÓ liquid assets totaled $65,000, and that

the Morgans owned CDs . Respondent w illfully misrepresented the

financial profile of the Morgans so that they could pass the Old

Mutual and Forethought underwriting standards thereby allowing him

to receive a commission.

64. Petitioner, i n its Proposed Recommended Order, offers

several pro posed factual findings that ultimately show, Ð[b]ased

on all of the evidence, [that] there was no objectively reasonable

basis to recommend the MorgansÓ annuity exchanges.

£ 627.4554(4)(a), Fla. Stat. (2010).Ñ Section 627.4554, by its

express terms, only applies to ÐSenior consumersÑ that are Ð65

years of age or older.Ñ Neither of the Morgans was within this

age range when they met with Respondent in 2010 and , therefore ,

section 627.4554 cannot be relied upon by Petitioner as a basis

for imposing discipli nary action against Respondent.

D. C ount IV

65. Petitioner withdrew Count IV of its Administrative

Complaint.

E. C ount V Î Joel and Evelyn Langer

66. Petitioner alleges that Respondent told Joel and Evelyn

Langer that he was familiar with the ÐIR S 72t rule,Ñ when in

reality he was not, and because of his unfamiliarity with this

rule, this meant that Respondent Ðknew that by selling the

LangersÓ annuities, they would incur substantial withdrawal

penalties [pursuant to] the terms of the[ir] annuity contracts.Ñ

The essence of this allegation is that Respondent did something

wrong in arranging for the issuance of the OM annuities that

adversely affected the LangersÓ 72(t) protections with the Internal

Revenue Service ( IRS ) and also caused them to lose money.

67. Joel and Evelyn Langer are married and reside in Port

Charlotte, Florida. Mr. Langer was born on September 10, 1948.

Mrs. Langer was born on August 31, 1949. During their employment,

Mr. and Mrs. Langer put their savings in mutual funds ma naged by

Royal Bank of Canada Wealth Management (RBC).

68. Mr. and Mrs. Langer were forced into early retirement

before reaching age 59 1/2. The mutual fund investments then

became their only liquid assets and they depended on these funds

for income.

6 9. On February 21, 2008, Mr. and Mrs. Langer, who were 58

and 59 years of age respectively, attended a luncheon seminar

Respondent hosted in Port Charlotte, Florida. The Langers were

interested in obtaining more information about annuities, because

they had their life savings invested in the stock market , which was

rapidly declining , and they were looking to move their funds to

another investment product . The Langers felt annuities would be

Ða safer investment.Ñ

70. The Langers met with Respondent and explained that they

would need immediate income that would qualify for disbursement

under the 72(t) provisions of the federal income tax code. Because

the Langers had been forced into early retirement, they had elected

to draw on their investments throug h the 72(t) provisions of the

federal income tax code. The 72(t) provisions allow the investor,

prior to age 59 1/2, to receive distributions from their

retirement investment, in substantially equal periodic payments

without paying a penalty for early wit hdrawal, provided the

investor receives the distribution for a period of five years

without interruption.

71. Respondent placed all of Mr. and Mrs. LangerÓs liquid

assets into three Old Mutual annuity contracts, hereinafter ÐOld

Mutual 02,Ñ ÐOld Mutual 0 3Ñ and ÐOld Mutual 04.Ñ

72. On March 7, 2008, Mrs. Langer purchased Old Mutual 02.

The initial premium was paid with an RBC check in the amount of

$237,563.23, made payable to Old Mutual Financial Life .

Respondent earned a commission in the amount of $2 6,131.96 for

this transaction.

73. On March 7, 2008, Mr. Langer purchased Old Mutual 03.

The initial premium was paid with an RBC check in the amount of

$393,073.89, made payable to Old Mutual Financial Life .

Respondent earned a commission in the amoun t of $43,238.13 for

this transaction.

74. On March 7, 2008, Mrs. Langer purchased Old Mutual 04.

The initial premium was paid with an RBC check in the amount of

$72,572.48, made payable to Old Mutual Financial Life . Respondent

earned a commission in th e amount of $7,982.97 for this

transaction.

75. As previously noted, Petitioner alleges that the Langers

incurred Ðsubstantial withdrawal penaltiesÑ as a consequence of

Respondent botching the paperwork related to the Langers

maintaining the protections afforded by the IRS 72 ( t ) rule.

Although the evidence is not at all clear as to the amounts of the

alleged penalties, it appears as though the Langers did not

actually incur any penalties, as alleged, because OM, on or about

April 8, 2008, issued refund c hecks to Mr. and Mrs. Langer in the

amounts of $1,329 and $2,018 , respectively.

76. As for the alleged mishandling by Respondent of the

LangersÓ IRS 72 ( t ) paperwork, Petitioner 's expert witness, John

Richard Brinkley, testified that he assumed Respondent failed to

send the IRS the necessary paperwork to entitle the Langers to the

IRS rule 72(t) privileges for the OM annuities sold to them by

Respondent. Mr. Brinkley conceded, however, that he never

verified whether the necessary forms were or were not de livered ,

or to whom such fault should be allocated.

77. Similarly, both Mr. and Mrs. Langer conceded during their

testimony that they could not say whether it was Respondent's

supposed error in qualifying the OM annuities under the IRS rule

72(t) provisi ons, or whether the supposed error was the fault of OM

itself. The unrefuted evidence is that Respondent faxed OM specific

instructions to set up the annuities so that the annuities complied

with the IRS rule 72(t) provisions and that OM subsequently

conf irmed, in letters sent to each of the Langers, that the

annuities indeed were being set up to conform to the IRS rule 72(t)

provisions. While there is evidence that Respondent initially may

have completed the incorrect OM form for this transaction, the

ev idence is inconclusive as to the effect this had on how the OM

annuities were originally structured by the company. Additionally ,

the Department's investigator, Juanita Midgett, wrote to OM

inquiring as to whether Respondent bore any responsibility in

ens uring that the annuities he sold the Langers did, in fact,

conform to the IRS rule 72(t) provisions. OM's letter in response

stated that Respondent bore no responsibility for any Ðpremature

penalty tax,Ñ and reminded Ms. Midgett that the Langers were

requ ired Ðto consult their personal tax advisor before submitting

a request should they elect to take early distributions from their

retirement funds.Ñ Petitioner has failed to meet its burden of

proof with respect to this issue.

78. The Administrative Comp laint also alleges that Ð[d]ue to

[RespondentÓs] failure to take into account the L[angersÓ]

necessity for a monthly income, the OM 0 2 and OM 0 3 contracts had

to be reissued thereby altering the initial premiumsÑ paid by the

Langers. The only argument adv anced by Petitioner in its Proposed

Recommended Order as to this issue is found in paragraph 35

wherein Petitioner simply restates that Respondent Ðfailed to

properly account for the LangersÓ need for a monthly income and,

as a result, the Old Mutual 02 an d Old Mutual 03 contracts had to

be reissued thereby altering the initial premiumsÑ paid by the

Langers.

79. It is unclear from the evidence why the referenced

contracts had to be reissued. PetitionerÓs allegations imply that

the Ðaltering [of] the init ial premiumsÑ resulted in the Langers

incurring additional expense as a result of the error , but the

evidence is inconclusive as to whether the premium amounts

increased or decreased. Petitioner failed to meet its burden of

proof with respect to this issu e.

80. Paragraph 71(c) of the Administrative Complaint alleges

that Respondent Ðnever explained to the [Langers] that all three

annuities had huge surrender charge rates and periods, starting at

17.5% for the first year of ownership and diminishing there after

until the penalty percentage reached 4.5% in the fourteenth year

of ownership.Ñ Remarkably, PetitionerÓs Proposed Recommended

Order as to this allegation simply restates, verbatim, the

allegation from the Administrative Complaint and only cites to t he

annuity contracts themselves as record support for the

allegation. 5/ This allegation is not sufficiently supported by

the evidence , given that Mrs. Langer testified that Respondent

explained to them, with respect to the issue of surrender charges

assoc iated with the annuities, that they Ðhad to remain in [the

annuities] for a period of years.Ñ

81. Paragraph 71(d) of the Administrative Complaint alleges

that Respondent Ðknew that the Langers wanted to be done with the

risks associated with the stock ma rket and yet [he] pegged all

three Old Mutual annuities to S&P 500 indices in determining their

income returns.Ñ Once again, Petitioner merely restates in its

Proposed Recommended Order the allegation from the Administrative

Complaint and only cites to th e annuity contracts themselves as

record support for the allegation. Nevertheless, Mrs. Langer

testified that Ðat the seminar, [Respondent] went over the

benefits [of the] annuities and went into detailed explanations of

his annuity plans being tied to th e S&P 500, and he did quite a

bit of explaining at the seminar.Ñ The Langers knew that the

annuity products that Respondent was selling were tied to the

S&P 500 well in advance of purchasing the products. The evidence

clearly establishes that the Langer s knew what Respondent was

selling and that they made a conscientious and informed decision

when they ultimately decided to purchase the three Old Mutual

a nnuities.

82. Paragraph 71(e) of the Administrative Complaint alleges

that Respondent Ðchecked a bo x on the Old Mutual suitability forms

indicating that Mr. and Mrs. Langer declined to answer the

questions propounded on the form, which was false.Ñ Respondent

explained that he discussed with the Langers the nature of their

assets, but because the totali ty of their assets consisted of the

money in their brokerage account, there was no purpose in

completing the "Customer Profile" section of the suitability

forms, and so he checked the line on the OM forms indicating that

the Langers were declining to answe r the questions. Mr. Langer

testified that they Ðexplained to [Respondent ] that [they] had no

other assets to considerÑ besides their mutual funds. Given this,

it is inconsequential that Respondent checked the box signifying

that the Langers declined to answer the "Customer Profile"

questions.

83. Paragraph 71(g) of the Administrative Complaint alleges

that Respondent Ðrefused to respond to the LangersÓ inquiries once

they discovered the financial losses they suffered [due to] his

recommendations.Ñ Res pondent generally denies this allegation but

offers no specific defense in response thereto.

84. Mrs. Langer credibly testified that Respondent Ðwould

not return her callsÑ after she and her husband realized that

there was a problem with the application of IRS rule 72 ( t ) to

their Old Mutual annuities. The evidence does not quantify the

number of calls or the length of the time period during which the

Langers made calls to Respondent. RespondentÓs failure to return

Mrs. LangerÓs phone calls is, under th e facts present,

inconsequential given that the evidence is not clear and

convincing regarding any culpability on RespondentÓs part with

respect to Old MutualÓs processing of the LangerÓs IRS rule 72 ( t )

paperwork.

85. Paragraph 71(h) of the Administrativ e Complaint alleges

that Respondent Ðnever explained the Òfree lookÓ provision of the

three Old Mutual contracts.Ñ As to this allegation, Petitioner,

in its Proposed Recommended Order, offers as its only proposed

finding of fact that Respondent Ðnullified the free look option by

pre - dating the delivery receipt so as to eliminate the LangerÓs

option to cancel the contracts.Ñ Alleged actions of Ðpre - datingÑ

a delivery receipt are substantively different from actions

related to the alleged Ðfailure to explai nÑ a contractual

provision. Respondent had no pre - hearing notice of the allegation

that Respondent Ðpre - datedÑ the delivery receipt and therefore

th is allegation , even if true, is irrelevant to the allegation

that Respondent never explained the free look provision of the

three Old Mutual annuities. Petitioner has failed to satisfy its

burden of proof with respect to the allegation that Respondent

Ðnever explained the Òfree lookÓ provision of the three Old Mutual

contracts.Ñ

86. Petitioner has failed to prove by clear and convincing

evidence any violations by Respondent with respect to his

dealings with the Langers.

F. Count VI Î Gail Shane

87. On February 16, 2012, Gail Shane, who was 65 years old

at the time (born June 17, 1946) and an unmarried wo man, attended

a luncheon seminar conducted by Respondent in Sebring, Florida. At

the luncheon, Respondent shared with Ms. Shane information that

convinced her that Respondent could place her in an investment

product suitable for her needs.

88. Ms. Shane met with Respondent in his Sebring office on

March 6, 2012. During this meeting, Ms. Shane explained to

Respondent that she was looking for an investment product where she

could simply park $5,000 and let it Ðgrow,Ñ and that she was not

looking for the i nvestment product to provide her with income. In

other words, Ms. Shane wanted an annuity product that would guarantee

growth and not reduce her principal investment amount. Per

RespondentÓs recommendation, Ms. Shane purchased a $5,000 annuity

issued by National Western Insurance Company (National Western).

RespondentÓs commission for this transaction was $500.

89. During the meeting with Ms. Shane on March 6, 2012,

Respondent did not explain to Ms. Shane that the National Western

annuity contained a y early withdrawal benefit rider that cost $40.95

per year. According to the annuity contract, the withdrawal benefit

rider Ðprovides guaranteed minimum withdrawal benefits . . . in an

amount selected by [Ms. Shane on a] semi - annual, quarterly, or

monthly p aymentÑ basis. At the time of purchase, Ms. Shane did not

bother to read the terms and conditions of the annuity product and

her omission, coupled with RespondentÓs failure to explain to her the

inclusion in the policy of the yearly withdrawal benefit rid er,

resulted in Ms. Shane not knowing that the annuity contained the

rider.

90. It was only after Ms. Shane received a statement from

National Western that she realized that her annuity contained a rider

that she did not need and that was otherwise incon sistent with her

investment goals of Ðgrowth without principal reduction.Ñ

Ms. Shane, upon learning of the existence of the yearly withdrawal

benefit rider, immediately notified National Western and directed the

company to remove the rider from her annui ty. Per Ms. ShaneÓs

request, National Western removed the rider from her annuity policy.

Respondent did not have an objectively reasonable basis for believing

that Ms. Shane desired to have the yearly withdrawal benefit rider as

part of her annuity contr act.

91. Paragraph 79(d) of the Administrative Complaint alleges

that Respondent never explained to Ms. Shane that the National

Western annuity Ðhad huge surrender charge rates and periods,

starting at 15% for the first year of ownership and diminishing

thereafter until the penalty percentage reached 2% in the

thirteenth year of ownership.Ñ As previously mentioned,

Ms. ShaneÓs investment objectives were such that she wanted to

park her $5 , 000 initial investment and let it grow. It is true

that Responde nt did not explain the surrender charge rates to

Ms. Shane. However, his failure to do so is not of legal

significance given her stated investment strategy.

92. Paragraph 79 of the Administrative Complaint also

alleges that Respondent had Ms. Shane to sign suitability forms

that were in many respects blank and that Respondent Ðcompleted

the forms outside [Ms. ShaneÓs] presence . . . [and] failed to

provide a copy to Ms. S[hane] for her review so that she could

discover the falsehoods that were being for warded to National

Western [for] its underwriterÓs review.Ñ

93. Specifically, paragraph 79(e) of the Administrative

Complaint alleges that Ðafter obtaining Ms. S[hane]Ós signature on

the annuity suitability form, [Respondent] completed the form

outside h er presence and indicated therein that she had a net

worth of $1,000,000 knowing that [this representation] was

completely, utterly, and absurdly false.Ñ Ms. Shane credibly

testified that when she met with Respondent on March 6, 2012, her

net worth was so mewhere in the neighborhood of $258,000; not

anywhere near the $1,000,000 that Respondent noted on the

suitability form.

94. PetitionerÓs Hearing Exhibit 261, p. 803, is the

Accredited Investor Acknowledgment Form (Acknowledgment Form)

signed by Ms. Shan e on March 6, 2012. The first sentence of the

Acknowledgment Form provides that ÐNational Western Life Insurance

Company is prohibited by Florida Law from selling the annuity for

which you have applied to any senior consumer (a purchaser 65

years of age o r older) unless that senior consumer is an

ÐAccredited Investor.Ñ The Acknowledgment Form also states the

following:

Florida law defines an ÐAccredited InvestorÑ

as any person who comes within any of the

following categories at the time of the sale

of an annuity to that person:

1. The personÓs net worth or joint net worth

with his or her spouse, at the time of

purchase, exceeds $1 million; or

2. The person had an individual income in

excess of $200,000 in each of the 2 most

recent years, or joint incom e with his or her

spouse in excess of $300,000 in each of those

years, and has a reasonable expectation of

reaching the same income level in the current

year.

The Acknowledgment Form then requires the proposed annuitant to

check the appropriate box, sig n, and date the form. Respondent

checked the box after Ms. Shane signed the form and noted thereon

that Ms. ShaneÓs net worth Ðexceeds $1 million.Ñ

95. Paragraph 79, subparts (f) , (g) and (h), of the

Administrative Complaint allege, collectively, that Ð after

obtaining Ms. S[hane]Ós signature on the annuity suitability form,

[Respondent] completed the form outside her presence and indicated

therein that she had an annual income of $50,000.00, . . . liquid

assets amounting to $80,000.00, . . . [and] that s he owned her own

home and that she owned real estate worth $500,000.00, knowing

that such information was false.Ñ Ms. Shane credibly testified

that in March 2012, her annual income was Ðcloser to $30,000.00,Ñ

her liquid assets were Ð$8,000.00,Ñ she rented and did not own a

home, and that her undeveloped real estate was Ðworth about

$50,000.00.Ñ

96. The Acknowledgement Form makes it abundantly clear that

the only way that Respondent could sell the National Western

annuity product to Ms. Shane was to quali fy her as an ÐAccredited

Investor.Ñ In the absence of Ms. Shane being qualified as such,

Respondent would not earn a commission.

97. The evidence clearly and convincingly establishes that

Respondent willfully misrepresented Ms. ShaneÓs annual income, net

worth, liquid assets, residential status, and real estate holdings

so that he could receive a commission for the sale of the National

Western annuity. 6/

CONCLUSIONS OF LAW

98. DOAH has jurisdiction over the subject matter of and the

parties to this pr oceeding pursuant to sections 120.569 and

120.57(1), Florida Statutes (2014).

99. This is a proceeding in which Petitioner seeks to

suspend or revoke RespondentÓs license s as a life agent and a

life and health agent . Because disciplinary proceedings are

considered to be penal in nature, Petitioner is required to prove

the allegations in the Administrative Complaint by clear and

convincing evidence. DepÓt of Banking & Fin. v. Osborne Stern &

Co. , 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington , 510 So. 2d

292 (Fla. 1987).

100. Clear and convincing evidence Ðrequires more proof

than a Òpreponderance of the evidenceÓ but less than Òbeyond and

to the exclusion of a reasonable doubt.ÓÑ In re Graziano , 696

So. 2d 744, 753 (Fla. 1997). As stated by the Flo rida Supreme

Court, the standard:

entails both a qualitative and quantitative

standard. The evidence must be credible; the

memories of the witnesses must be clear and

without confusion; and the sum total of the

evidence must be of sufficient weight to

con vince the trier of fact without hesitancy.

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

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

1983)); see also In re Henson , 913 So. 2d 579, 590 (Fla. 2005).

ÐAlthough this standard o f proof may be met where the evidence is

in conflict, it seems to preclude evidence that is ambiguous.Ñ

Westinghouse Elec. Corp. v. Shuler Bros. , 590 So. 2d 986, 989

(Fla. 1991).

101. Petitioner is limited to proving the charges and

allegations pled in the Administrative Complaint. Cf. Trevisani

v. Dep't of Health , 908 So. 2d 1108 (Fla. 1st DCA 2005); Aldrete

v. Dep't of Health, Bd. of Med. , 879 So. 2d 1244 (Fla. 1st DCA

2004); Ghani v. Dep't of Health , 714 So. 2d 1113 (Fla. 1st DCA

1998); Willner v. De p't of Prof'l Reg., Bd. of Med. , 563 So. 2d

805 (Fla. 1st DCA 1990).

102. Disciplinary provisions such as the referenced

section s must be strictly construed in favor of the licensee.

Elamariah v. DepÓt of ProfÓl Reg. , 574 So. 2d 164 (Fla. 1st DCA

1990); Taylor v. DepÓt of ProfÓl Reg. , 534 So. 2d 782, 784 (Fla.

1st DCA 1988). Disciplinary statutes must be construed in terms

of their literal meaning, and words used by the Legislature may

not be expanded to broaden their application. Latham v. Fla.

CommÓn on Ethics , 694 So. 2d 83 (Fla. 1st DCA 1997); see also

Beckett v. DepÓt of Fin. S er vs. , 982 So. 2d 94, 100 (Fla. 1st DCA

2008); Dyer v. DepÓt of Ins. & Treas. , 585 So. 2d 1009, 1013

(Fla. 1st DCA 1991).

103. Rule 69B - 215.210 declared the business of lif e

insurance to be a public trust that obligates insurance agents to

work together in serving the best interests of the public by

understanding and observing the laws governing life insurance,

presenting accurate and complete facts essential to a client's

d ecision, and being fair in all relations with colleagues and

competitors, always placing the policyholder's interests first.

104. Rule 69B - 215.230(1) declared insurance sales

misrepresentations as to terms, benefits, and advantages of

insurance products to be unethical and prohibited.

105. Section 627.4554(4)(a) made it a violation for an

insurance agent to recommend to a senior consumer the purchase or

exchange of an annuity that results in another insurance

transaction or series of transactions, unles s the agent has

reasonable grounds to believe that the recommendation is suitable

based on facts disclosed by the consumer as to his or her

investments and other insurance products and financial situation

and needs.

106. Section 627.4554(4)(c)2. made it a violation for an

insurance agent to make a recommendation to a senior consumer

unless it is reasonable under all the circumstances known to the

agent at the time of the recommendation.

107. Section 626.611(5) made it a violation for an

insurance agent to willfully misrepresent any insurance policy or

annuity contract or to willfully deceive with regard to such a

contract.

108. Section 626.611(7) made it a violation for an

insurance agent to demonstrate a lack of fitness or

trustworthiness to engage in the business of insurance.

109. Section 626.611(8) made it a violation for an

insurance agent to demonstrate a lack or reasonably adequate

knowledge and technical competence to engage in the business of

insurance.

110. Section 626.611(9) made it a vio lation for an

insurance agent to engage in fraudulent or dishonest practices in

the conduct of licensed business.

111. Section 626.611(13) made it a violation for an

insurance agent to willfully fail to comply with, or willfully

violate, any adopted rule or willfully violate any provision of

the Insurance Code. This statute is a derivative of other

violations requiring willfulness, adds nothing of substance to

those violations, and does not warrant additional discipline for

the violations from which it i s derived.

112. Section 626.621(2) made it a violation for an

insurance agent to violate any provision of the Insurance Code or

any other law applicable to the conduct of a licensed business of

insurance. Section 626.621( 6 ) made it a violation for an

in surance agent to engage in unfair methods of competition or

unfair or deceptive acts or practices prohibited by part IX of

c hapter 626. Th e s e statute s similarly are a derivative of other

violations, add nothing of substance to the other violations, and

do not warrant additional discipline for the violations from

which they are derived.

113. Section 626.9541(1)(e)1., which is in p art IX of

chapter 626, made it a violation for an insurance agent to

knowingly make, publish, disseminate, circulate, deliver, or

place before the public any false statement.

114. Section 626.9521(2) subjected anyone who violated the

Unfair Insurance Trade Practices Act, which is p art IX of chapter

626 and includes section 626.9541, to a fine of not greater than

$40,000 ($20,000 Count II) per violation, in addition to any

other applicable penalty. 7/

A. Count I Î Jewel Frisani

115. As to Count I of the Administrative Complaint, 8 / the

clear and convincing evidence establishes that Respondent

willfully misled Ms. Frisani into bel ieving that she would not

incur surrender charges related to the surrender of her MetLife

annuity contract. RespondentÓs conduct constitutes a violation

of section 626.611(5), (7), and (9). RespondentÓs conduct also

constitutes a violation of section 626 .9541(1)(e)1., and rules

69B - 215.210 and 69B - 215.230.

B. Count II Î Fred and Eileen Sarracino

116. Paragraph 36 of the Administrative Complaint alleges, as

to RespondentÓs actions involving the Sarracinos, that:

[t]he twisting of the Commonwealth annui ties

into the Old Mutual annuities, was not in the

S[arracino]Ós best interests, was neither

necessary nor appropriate for persons of their

financial circumstances, was without

demonstrable benefit to them, and was done for

the sole purpose of obtaining fe es, commissions,

money or other benefits from Old Mutual in an

amount totaling $31,428.52.

In contrast, Petitioner, in its proposed findings of fact states

only, with respect to the ultimate question regarding RespondentÓs

conduct, that RespondentÓs Ð misr epresentations skewed the

SarracinoÓs suitability forms, allowing them to pass Old MutualÓs

underwriting standards by making it seem that there were Òreasonable

grounds for believing that the recommendation[s were] suitable. Ó Ñ

117. Petitioner did not pro ve by clear and convincing evidence

that the Old Mutual annuities were unsuitable for the Sarracinos.

The clear and convincing evidence does, however, establish that

RespondentÓs conduct of willfully misrepresenting the financial

profile of the Sarracinos is a dishonest practice which also

demonstrates that Respondent is not trustworthy. RespondentÓs

conduct constitutes a violation of section 626.611(5), (7), and (9).

RespondentÓs conduct also constitutes a violation of section

626.9541(1)(e)1., and rule s 69B - 215.210 and 69B - 215.230.

C. Count III Î Warren and Darlene Morgan

118. The clear and convincing evidence establishes that

RespondentÓs conduct of willfully misrepresenting the financial

profile of the Morgans is a dishonest practice which also

d emonstrates that Respondent is not trustworthy. RespondentÓs

conduct constitutes a violation of section 626.611(5), (7), and (9).

RespondentÓs conduct also constitutes a violation of section

626.9541(1)(e)1., and rules 69B - 215.210 and 69B - 215.230.

D. C ount VI Î Gail Shane

119. The clear and convincing evidence establishes that

RespondentÓs conduct of willfully misrepresenting the financial

profile of Ms. Shane is a dishonest practice which also demonstrates

that Respondent is not trustworthy. Respon dentÓs conduct

constitutes a violation of section 626.611(5), (7), and (9).

RespondentÓs conduct also constitutes a violation of section

626.9541(1)(e)1. , and rules 69B - 215.210 and 69B - 215.230.

Additionally, RespondentÓs conduct of including a yearly with drawal

rider as a part of Ms. ShaneÓs annuity, when there was no

objectively reasonable basis for doing so, violates section

627.4554(4)(a).

E. Penalty

120. As to Count I of the Administrative Complaint, the

highest stated penalty for Respondent resul ts from his violation

of section 626.611(9). The penalty for this violation is

suspension of RespondentÓs licenses for 12 months. Fla. Admin.

Code R. 69B - 231.080 (2010).

121. As to Count II of the Administrative Complaint, the

highest stated penalty fo r Respondent results from his violation

of section 626.611(5). The penalty for this violation is

suspension of RespondentÓs licenses for nine months. Fla. Admin.

Code R. 69B - 231.080 (2006).

122. As to Count III of the Administrative Complaint, the

high est stated penalty for Respondent results from his violation

of section 626.611(5). The penalty for this violation is

suspension of RespondentÓs licenses for nine months. Id.

123. As to Count VI of the Administrative Complaint, the

highest stated penal ty for Respondent results from his violation

of section 626.611(9). The penalty for this violation is

suspension of RespondentÓs licenses for 12 months. Fla. Admin.

Code R. 69B - 231.080 (2010).

124. The total penalty for RespondentÓs violations of

secti on 626.611 is suspension of his licenses for 42 months.

Fla. Admin. Code R. 69B - 231.040(2). Due consideration has been

given to the aggravating and mitigating factors outlined in rule

6 9 B - 231.160. Rule 69B - 231.040(3)(d) (2006), provides that Ð[i]n

the e vent that the final penalty would exceed a suspension of

twenty - four (24) months, the final penalty shall be revocation.Ñ

RespondentÓs suspension period is 42 months , so in accordance

with rule 69B - 231.040, the final recommended penalty is

revocation.

12 5. As to Count VI of the Administrative Complaint,

Respondent was found to also be in violation of section

627.4554(4)(a), Florida Statutes (2011). Rule 69B - 231.110(37)

(2010), provides that a violation of section 627.4554 shall result

in a 12 - month susp ension of RespondentÓs licenses. RespondentÓs

violation of section 627.4554 was considered as part of the

Ðaggravating/mitigatingÑ factors under rule 69B - 231.160, which

resulted in the 12 - month suspension period established by the rule

merging into the re commendation for the revocation of RespondentÓs

licenses. Similar rationale applies with respect to the 12 - month

suspension period authorized by rule 69B - 231.100 for the violation

of section 626.9541(1).

126. As to Count I, III and VI, Respondent was fo und to be

in willful violation of section 626.9541. Section 626.9521

provides in part that any person who violates any provision of

this part Ðis subject to a fine in an amount not greater than

$40,000 for each willful violation.Ñ A fine in the amount of

$40,000 is warranted for each violation. The total fine amount

for these violations is $120,000.

127. As to Count II, Respondent was found to be in willful

violation of section 626.9541, Florida Statutes (2007). Section

626.9521, Florida Statutes (200 7), provides in part that any

person who violates any provision of this part shall be subject

to a fine in an amount Ðnot greater than $20,000 for each willful

violation.Ñ A fine in the amount of $20,000 is warranted for

this violation.

RECOMMENDATION

Bas ed on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services,

Division of Insurance Agents and Agency Services, enter a Final

Order finding that Respondent violated section s 626.611(5), (7)

and (9 ), 626.9541(1)(e)1., and 627.4554(4)(a), Florida Statutes.

It is further recommended that the Department revoke his Florida

license s to act as an insurance agent in this state and impose

against him a fine in the amount of $140,000.

DONE AND ENTERED this 29th day of October , 2014 , in

Tallahassee, Leon County, Florida.

S

LINZIE F. BOGAN

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 29th day of October , 2014 .

ENDNOTE S

1/ Unless otherwise indicated, statutory references are to the

version in effect at the time of the transactions that form the

bases of the charges.

2/ Unless otherwise noted, all rule references are to the version

of the Florida Administrative Code that was in effect at the time

of the transactions that form the bases of the charges.

3/ Prior to October 11, 2010, Ms. Frisani had personally met with

Respondent one time, on October 5, 2010. Ms. Frisani claims that

she didnÓt read the forms presented to her by Respondent on

October 11, 2010, because she trusted him. It is not reasonabl e

that Ms. Frisani would have trusted Respondent with her financial

well - being after only a single meeting and consequently her

stated reason for why she didnÓt read the forms that she signed

is not credible.

4/ Included within the Administrative Complai nt are allegations

that Respondent Ðnever told the [Sarracinos] that the OM

contracts had 15 year surrender charge periodsÑ and that he

Ðnever told the [Sarracinos] that the OM contracts had surrender

charge rates starting at 17.5%.Ñ The Administrative Co mplaint

also alleges that Respondent Ðfalsely stated that Mr. and Mrs.

[SarracinosÓ] primary residence was worth $250,000.Ñ On direct

examination, Mrs. Sarracino testified, contrary to the

allegations set forth in the Administrative Complaint, that when

s he and her husband met with Respondent , he Ðquite possiblyÑ

could have discussed with them the 15 year surrender period and

that Respondent definitely discussed with them the fact that the

surrender penalty would start at 17 1/2 percent Ðand it would

work its way down [from there].Ñ Mrs. Sarracino also testified

that it is possible that her primary residence could have been

worth $250,000 in 2008, but she really did not know because she

ÐdidnÓt go to the market to ever find out what is was [worth].Ñ

The e vidence does not support the allegations referenced in this

endnote, which likely explains why Petitioner makes no argument

with respect to these allegations in its Proposed Recommended

Order.

5/ It is the responsibility of counsel to specify the importa nt

parts of the record.

6/ Petitioner does not allege in the Administrative Complaint that

Respondent sold Ms. Shane an illegal product because she was not an

ÐAccredited Investor.Ñ The accuracy of the statement on the

National Western suitability form regarding what the law provides

with respect to the companyÓs ability to sell certain products only

to ÐAccredited InvestorsÑ is not before the undersigned. The

statement is, however, relevant for the purpose of determining

RespondentÓs motivation and int ent when misrepresenting Ms. ShaneÓs

financial circumstances on the suitability questionnaire.

7/ For the Sarracinos (Count II), June 30, 2008, was used as the

date for their respective transactions. The 2007 version of

section 626.9521 remained effect ive through June 30, 2008. This

version of the statute allowed for a maximum penalty of $20,000.

Effective July 1, 2008, the maximum penalty was increased to

$40,000.

8 / Petitioner, throughout its Proposed Recommended Order, makes

no argument with respe ct to certain matters alleged in the

Administrative Complaint. As to such matters, the undersigned

considers PetitionerÓs omission as an indication that Petitioner

has abandoned these allegations.

COPIES FURNISHED:

Robert J. Coleman, Esquire

Coleman a nd Coleman

Post Office Box 2089

Fort Myers, Florida 33902

(eServed)

Jessie Harmsen, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

David J. Busch, Esquire

Department of Financial Services

Division o f Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

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.