97-002270 Richard Eric Watts vs. Department Of Banking And Finance Status: Closed Recommended Order on Tuesday, December 30, 1997.

Summary: Mortgage broker application denied for acting without license, misappropriation of property, and fraud.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RICHARD ERIC WATTS, )

)

Petitioner , )

)

vs. ) Case No. 97-2270

)

DEPARTMENT OF BANKING AND )

FINANCE, DIVISION OF FINANCE, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

On October 15, 1997, a formal administrative hearing in this

case was held in Sarasota, Florida, before William F.

Quattlebaum, Administrative Law Judge, Division of Administrative

Hearings.

APPEARANCES

For Petitioner : Richard E. Watts, pro se

1345 Main Street, Suite C-4

Sarasota, Florida 34236

For Respondent : Pamela R. Jacobs, Esquire

Regional Counsel

Department of Banking and Finance

1300 Riverplace Boulevard, Suite 640

Jacksonville, Florida 32207

STATEMENT OF THE ISSUE

The issue in this case is whether the Petitioner’s

application for licensure as a mortgage broker should be

approved.

PRELIMINARY STATEMENT

On August 29, 1996, Richard Eric Watts filed an application

for licensure as a mortgage broker with the Department of Banking

and Finance. By letter dated October 22, 1996, the Department

notified Mr. Watts that his application would be denied.

Mr. Watts filed a request for formal hearing. The Department

forwarded the request to the Division of Administrative Hearings,

which scheduled the proceeding. The Department twice amended the

Notice of Intent to Deny the Application, amending and clarifying

the proposed grounds for denial.

At the hearing, Mr. Watts presented the testimony of three

witnesses, testified on his own behalf, and had Exhibits numbered

1-26 admitted into evidence. The Department presented the

testimony of two witnesses and had Exhibits numbered 1-3(A, B,

and D), 4-13, 15, and 17 (including parts A-E) admitted into

evidence.

A transcript of the hearing was filed. Both parties filed

proposed recommended orders. A prehearing stipulation filed by

the parties was admitted into evidence.

FINDINGS OF FACT

1. The parties set forth an extensive set of stipulated

facts in the Prehearing Stipulation filed prior to the

commencement of the hearing.

2. The stipulated facts describe the activities of Richard

Eric Watts (Petitioner) on behalf of Frederick M. Larry in

relation to a $50,000 investment of Mr. Larry's funds with D. F.

Owen, Inc., in May 1985. At approximately the same time as the

Larry investment was made, the Petitioner contracted with D.F.

Owen to act as an investment adviser for a fee of $33,500.

3. The stipulated facts describe the activities of the

Petitioner on behalf of Cynthia Halabrin Trust. The Petitioner

was the trustee for the trust, which was a residence. During a

period of time that the residence was under renovation, the

Petitioner allowed Mr. Larry to reside without payment to the

trust.

4. The stipulated facts describe the activities of the

Petitioner regarding the unregistered operation of "Watts

Investment Management, Inc." during 1985 and the subsequent

registration of the entity in 1986.

5. The stipulated facts describe the activities of the

Petitioner regarding his employment as a broker for Paine Webber

from 1982-1985, and the failure to obtain approval for outside

employment activities while working for the investment firm.

6. The stipulated facts describe the legal action taken by

Cynthia Halabrin Raybuck against the Petitioner and Paine Webber

related to the activities of the Petitioner as trustee of the

Halabrin trust. The parties settled the case through

arbitration.

7. The stipulated facts address the creation of "Danbury

Mortgage Company," and describe the preliminary activities of the

unlicensed entity. The facts also identify the Petitioner's

association with the Paradigm Mortgage Company, based in

Jacksonville, Florida.

8. For purposes of this Recommended Order, all stipulated

facts set forth in the prehearing stipulation filed by the

parties are adopted and incorporated herein.

9. On or about August 29, 1996, the Petitioner filed an

application with the Department of Banking and Finance, Division

of Finance (Department) seeking licensure as a mortgage broker.

10. The Petitioner’s application disclosed that in 1989 he

was denied admission to the Florida Bar.

11. In January 1989, the Petitioner was notified by the

Florida Board of Bar Examiners (“Board”) of their intent to deny

his application for admission to the Florida Bar. A hearing was

conducted in June 1989 regarding the denial. The Petitioner was

represented by legal counsel and testified under oath at the

hearing.

12. On August 31, 1989, the Board of Bar Examiners denied

Petitioner’s application for admission.

13. Based on the facts set forth in the Board's order, the

Board concluded that the Petitioner “engaged in acts to serve his

own interest to the detriment of others, violated registration

laws, neglected payment of student loan obligations and issued

numerous worthless checks.”

14. The Board also determined that the Petitioner provided

misleading testimony at his Bar hearing and failed to disclose

material information on his application.

15. Although at the formal administrative hearing the

Petitioner attempted to explain the circumstances under which the

Board's determination occurred, the testimony at hearing and the

stipulated facts support the findings made by the Board.

16. Upon the filing of the Petitioner's application for

licensure as a mortgage broker, the Department undertook a review

of the application. Based on the review, the Department

determined that the Petitioner had held himself out for business

as a mortgage broker without an appropriate license.

17. In December 1995, the Petitioner registered the name

"Danbury Mortgage Corporation" with the Florida Department of

State, Division of Corporations.

18. In January 1996, the Petitioner established a business

location for Danbury Mortgage Corporation.

18. The Petitioner listed the business under the "mortgage

brokers" section of the Sarasota Yellow Pages.

19. At no time was the Danbury Mortgage Company licensed by

the Department of Banking and Finance.

20. At the hearing, the Petitioner suggested that no

mortgage business had been conducted by Danbury Mortgage Company.

The Petitioner asserted that he had affiliated with another

company (Paradigm) and that the other company was handling the

registration of his office as a Paradigm branch.

21. The evidence establishes that the Petitioner was

involved in completion of at least one mortgage loan application

on behalf of Paradigm Mortgage Company without appropriate

licensure. The Paradigm "branch" office was located in the same

building as Danbury Mortgage Company, and shared the Danbury

telephone number.

22. Based on a cryptic telephone message received by the

Petitioner from a Paradigm supervisor, the Petitioner assumed

that he was licensed. The Petitioner did not return the

telephone call and made no credible attempt at determining

whether he was licensed prior to acting on behalf of Paradigm

Mortgage Company.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has

jurisdiction over the parties and to the subject matter of this

proceeding. Section 120.57(1), Florida Statutes.

24. The Department of Banking and Finance, Division of

Finance, is responsible for regulation of mortgage brokers and

related activities, including the licensure of brokers. Chapter

494, Florida Statutes.

25. The Petitioner has the burden of establishing that he

meets the qualifications for licensure. Balino v. Department of

Health and Rehabilitative Services , 348 So. 2d 349 (1st DCA

1977). In this case, the burden has not been met.

26. Section 494.0041(1), Florida Statutes, sets forth the

disciplinary actions, including denial of licensure, which may be

taken by the Department, against a licensed person or an

applicant for licensure. Section 494.0041(2), Florida Statutes,

provides grounds for such discipline and includes the following:

(c) A material misstatement of fact on an

initial or renewal application.

* * *

(h) Any misuse, misapplication, or

misappropriation of personal property

entrusted to his care to which he had no

current property right at the time of

entrustment.

( i) Having a license, or the equivalent, to

practice any profession or occupation

revoked, suspended, or otherwise acted

against, including the denial of licensure by

a licensing authority of this state or

another state, territory, or country for

fraud, dishonest dealing, or any other act of

moral turpitude.

* * *

(k) Acting as a mortgage broker or mortgage

brokerage business without a current, active

license issued under ss. 494.003-494.0043.

* * *

(q) Commission of fraud, misrepresentation,

concealment, dishonest dealing by trick,

scheme, or device, culpable negligence, or

breach of trust in any business transaction

in any state, nation, or territory; or

aiding, assisting, or conspiring with any

other person engaged in any such misconduct

and in furtherance thereof.

27. The investment of the Larry funds with D.F. Owen, Inc.

constitutes a violation of Section 494.0041(2)(q), Florida

Statutes.

28. The misuse of the Halabrin Trust property constitutes a

violation of Section 494.0041(2)(h), Florida Statutes.

29. The preliminary operation of the Danbury Mortgage

Company, including advertising, and manner in which the phone was

answered, and the taking of mortgage applications on behalf of

Paradigm Mortgage Company without appropriate licensure,

constitutes a violation of Section 494.0041(2)(k), Florida

Statutes.

30. The denial of his application for admission to the

Florida Bar is grounds for denial of the mortgage broker license

under the provisions of Section 494.0041(2)( i), Florida Statutes.

31. The Petitioner's explanations at formal hearing of the

circumstances under which such events occurred offered little but

self-serving rationalization for his acts and did not provide any

reasonable information upon which his behavior could be excused.

32. As to the operation of Danbury Mortgage Company, the

Petitioner asserts that Danbury transacted no business and

therefore required no licensure.

33. Section 494.001, Florida Statutes provides the

following relevant definitions:

(2) "Act as a mortgage broker" means, for

compensation or gain, or in the expectation

of compensation or gain, either directly or

indirectly, accepting or offering to accept

an application for a mortgage loan,

soliciting or offering to solicit a mortgage

loan on behalf of a borrower, negotiating or

offering to negotiate the terms or conditions

of a mortgage loan on behalf of a lender, or

negotiating or offering to negotiate the sale

of an existing mortgage loan to a

noninstitutional investor.

(5) "Branch broker" means the licensee in

charge of, and responsible for, the operation

of a branch office of a mortgage brokerage

business.

(13) "Mortgage brokerage business" means a

person acting as a mortgage broker.

(18) "Principal broker" means a licensee in

charge of, and responsible for, the operation

of the principal place of business and all

branch brokers.

34. The evidence establishes that at least one application

for a mortgage was completed by the Petitioner while unlicensed

during the period that the Petitioner believed he was licensed

through Paradigm Mortgage Company.

35. The Petitioner asserts that he was not involved in the

licensing details for the Paradigm "branch" and believed that he

was licensed. Mistaken belief as to registration is not a

defense to unregistered activity. Santacroce V. Department of

Banking and Finance , 608 So. 2d 134, (Fla. 4th DCA 1992).

36. The evidence fails to establish that the Petitioner's

application for licensure should be approved.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is recommended that the Department enter a Final Order

denying the application of Richard Eric Watts for licensure as a

mortgage broker.

DONE AND ORDERED this 30th day of December, 1997, in

Tallahassee, Leon County, Florida.

_ _

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488- 9675 SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of December, 1997.

COPIES FURNISHED:

Honorable Robert F. Milligan

Comptroller, State of Florida

The Capitol, Plaza Level

Tallahassee, Florida 32399-0350

Harry Hooper, General Counsel

Department of Banking and Finance

The Capitol, Room 1302

Tallahassee, Florida 32399-0350

Richard E. Watts, pro se

1345 Main Street, Suite C-4

Sarasota, Florida 34236

Pamela R. Jacobs, Esquire

Regional Counsel

Department of Banking and Finance

1300 Riverplace Blvd, Suite 640

Jacksonville, Florida 32207

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.