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FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER

Volume 3, Number 23, June 5, 2006

Every one of us hopes for a comfortable and peaceful retirement. We work hard, save our money, and look admiringly upon those who have “made it.” That’s why, in Florida, we do not tolerate anyone taking advantage of our senior citizens.

In the past week, we have announced tough actions against four individuals who scammed dozens of seniors. Based on investigations by our department, two Sarasota men were sentenced to lengthy prison terms for stealing hundreds of thousands of dollars in a Ponzi scheme and, in another case, we are taking action against two men for selling worthless home health care plans.

The department’s Senior Resource Center, at www.flseniors.net, is specifically designed to help seniors sort out the flood of information and financial offers presented to them. For those who may not have access to a computer, please call our toll-free hotline at 1-800-342-2762 for free brochures.

Key points for all of us to keep in mind are to never be rushed into making a decision – a deal that is good today should still be good tomorrow – and take the time to read, ask questions and talk about any offer with your family or someone you trust.

The department is committed to protecting you and your nest egg, and making sure your golden years are just that – golden.

-- Tom Gallagher


JUDGE APPROVES LIQUIDATION OF POE INSURANCE COMPANIES

Gallagher successfully protects the companies’ policyholders this hurricane season

TALLAHASSEE– A judge today approved putting three financially-troubled insurance companies under the state’s control, a move Florida’s Chief Financial Officer Tom Gallagher said will protect more than 320,000 Floridians this hurricane season. The insurance companies – Atlantic Preferred, Southern Family and Florida Preferred – are subsidiaries of the Tampa-based Poe Financial Group.

“My priority is to ensure policyholders have continuous coverage this hurricane season, and we’ve achieved that,” Gallagher said. “Now our focus is resolving outstanding hurricane claims.”

Leon County Circuit Court Judge Janet Ferris signed liquidation orders for all three insurers and appointed the Department of Financial Services as receiver. As receiver, the department takes control of the companies’ operations and liquidates the companies’ assets to pay outstanding claims.

Gallagher, who oversees the department, said that since Southern Family and Atlantic Preferred entered rehabilitation on April 25, 2006, the department has already paid more than $76 million in outstanding claims for both companies. When an insurance company is in rehabilitation, the department oversees its operations to protect resources to ensure claims get paid.

Under the liquidation orders, homeowners who are currently covered by one of the three Poe companies and who are unable to secure new homeowner’s coverage in the private market will be automatically covered by Citizens Property Insurance Corporation on July 1. Gallagher said that a formal plan for smoothly transitioning policyholders to Citizens Property Insurance Corporation will be presented for the court’s approval by Friday.

Gallagher said effective tomorrow, June 1, the department will be able to tap into the Florida Insurance Guaranty Association (FIGA) to help resolve outstanding claims. FIGA is funded by insurers with written premiums in the same lines of coverage.

Any insured can call FIGA to check on the status of a claim at 1-866-928-4310 between 8AM and 8PM Monday thru Friday Eastern Standard Time. FIGA charges a $100.00 deductible to administer these claims. FIGA will be sending out postcards to all existing claimants to facilitate direct communication.


Southern Family covered nearly 43,000 homeowners and condominium and homeowners’ associations. Atlantic Preferred and Florida Preferred primarily provided coverage to approximately 280,000 homeowners, mostly in South Florida.

For more information, policyholders can contact the Department of Financial Services at 1-800-342-2762 or log onto www.MyFloridaCFO.com.


GALLAGHER FILES CHARGES AGAINST TWO SARASOTA AGENTS FOR MISLEADING ELDERLY IN HOME HEALTH CARE PLAN SALES

Tom Gallagher, Florida’s chief financial officer, announced that he has ordered two Sarasota agents to answer charges that they made “false and worthless promises” to dozens of elderly Floridians who thought they were buying a home health care services plan but paid nearly $200,000 for access to providers, yet never received any services.

James W. Crain, Jr., 40, director and president of Independent Living Home Care Membership Association, was ordered to immediately stop selling or collecting premiums for the home health care plan and, along with Michael D. Carll, 48, has 21 days to respond to an administrative complaint alleging that they defrauded elderly customers. The charges follow an investigation by the Department of Financial Services, Division of Agent and Agency Services’ Bureau of Investigation. If the charges are upheld, Crain and Carll face revocation of their insurance agent licenses. Gallagher said he will also seek restitution.

“It is unconscionable that anyone would take advantage of a senior citizen looking for help to enjoy their golden years and have peace of mind,” said Gallagher, who oversees the department and in the past three years has taken action against more than 110 agents for elder fraud. “We will continue to bring the full force of the law against unscrupulous agents and aggressively educate our seniors against these scams.”

The 44 victims, most in their 80s or 90s, suffered from various disabilities including diminished mental capacity. One 96-year-old victim is legally blind. Investigators said Crain and Carll convinced the seniors to buy the plan by misleading them into believing they were buying coverage for homemaker/companion services and home medical care services. However, the plan’s fine print indicates that they only bought “access” to providers and not coverage for homemaker/companion or home medical care services. The victims received no services at all.

The emergency order affects only the home health care plan being sold by Independent Living Home Care Membership Association, and not Crain’s other companies that also operate out of offices at 2477 Stickney Point Rd. in Sarasota. The other companies are International Life & Health Services, lnc.; Independent Life Home Care Agency, Inc.; International Life and Health Services of Manatee County, Inc.; and International Life and Health Services of Sarasota County, Inc.

To file a complaint, visit www.MyFloridaCFO.com or call the department’s toll-free consumer helpline at 1-800-342-2762.


GALLAGHER LAUNCHES SPANISH-LANGUAGE WEBSITE

Goal is to Help Hispanic Residents Prepare for Hurricane Season and More

TALLAHASSEE – Tom Gallagher, Florida’s chief financial officer, today announced the launch of a Spanish-language version of the Department of Financial Services’ (DFS) consumer website to better serve Florida’s growing Hispanic population.

“Nearly three million Hispanics call Florida home and need access to information that impacts their financial well-being and future,” Gallagher said. “Following the 2004 and 2005 hurricanes, we had the opportunity to help thousands of Spanish-speaking residents, and many asked to get more information on insurance and financial issues in Spanish. My hope is that launching this new technology before the start of the hurricane season will ensure a greater number of Floridians are better protected and prepared if a disaster strikes.”

Gallagher said that his department is among the first statewide government agencies in Florida to dynamically and comprehensively launch its site in Spanish. The Spanish site can be accessed by clicking on the “En Español” tab on the DFS homepage at www.MyFloridaCFO.com.


More than 5,000 pages were translated on the department’s website, including consumer-focused areas that offer information about disaster assistance, homeowners’ insurance, financial matters such as mortgages and investments, unclaimed property; victim rights and more.

The department used MotionPoint Corporation’s proprietary TransMotion® technology and service to deploy its Spanish website. MotionPoint’s approach is fundamentally different from the traditional approach to website translation, because MotionPoint combines best-of-class professional human translations with proprietary software tools eliminate the need for any upfront IT development and technical integration.

“The Department of Financial Services is leading the way among government agencies that need to serve citizens with information in Spanish,” said Will Fleming, CEO of MotionPoint. “Florida has one of the largest Spanish-speaking populations in the country, and CFO Gallagher understands these residents want access to critical information in the language of their choice.”


GALLAGHER ANNOUNCES TWO SOUTH FLORIDA AGENTS GET 25-YEAR SENTENCES IN PONZI SCHEME

Tom Gallagher, Florida’s chief financial officer, announced that two former south Florida agents have been sentenced to 25 years in prison for their roles in a Ponzi scheme that bilked more than 30 investors out of $1.2 million.

Thomas A. Masciarelli, 49, and Steven Petrarca, 55, were convicted of aggravated white collar crime and fraudulent investment transactions following an investigation by the Department of Financial Services, Division of Insurance Fraud, and the Office of Financial Regulation.

“What these individuals did was egregious, and their sentences reflect that,” said Gallagher, who oversees the department. “We will not put up with Florida’s investors - particularly our vulnerable elderly investors - being preyed upon.”

The department’s Division of Agent and Agency Services first began investigating Masciarelli and Petrarca for suspected failure to return unearned commissions, but the investigation soon led to suspicions that the two were engaged in selling unregistered securities and the Division of Insurance Fraud was brought in to assist. The probe revealed the two convinced clients to liquidate annuity investments and invest in a bogus company that would buy and sell distressed real estate, and promised returns of up to nine percent. No real estate was purchased, and investors received phony statements.

The scheme snared victims in St. Petersburg, Riviera Beach, Gulfport, Greenacres, Lighthouse Point, Silver Springs, Boca Raton, Jupiter, Sarasota, North Palm Beach, Lake Worth, Gainesville and West Palm Beach.

Detectives arrested Masciarelli a second time in 2005 and charged him with stealing $300,000 from three investors – a 58-year-old woman supporting a disabled adult daughter, an 82-year-old woman with no family, and an 80-year-old man suffering from Parkinson’s disease. All three cases were nearly identical: Masciarelli sold them fixed annuities from American Investors Life Insurance Company (AILIC) and then later advised them to cash out the AILIC annuities and buy investments purportedly offered through his own company, Palm Beach Financial Services, Inc. However, detectives said Masciarelli did not invest the funds but instead used the money for personal and other expenses.

The Department of Financial Services, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance. To report fraud, visit www.MyFloridaCFO.com or call the department’s Fraud Fighters Hotline at 1-800-378-0445. A reward of up to $25,000 may be offered for information leading to an arrest and conviction.


NEW YORK MAN SENT TO PRISON FOR STEALING FROM FLORIDA’S UNCLAIMED PROPERTY PROGRAM

Tom Gallagher, Florida’s chief financial officer, announced that a New York man has been sentenced to 18 months in federal prison and ordered to pay more than $630,000 in restitution after he pleaded guilty to an elaborate scheme to steal money from Florida’s Bureau of Unclaimed Property. More than $500,000 of the stolen money was tracked to a bank in Ramallah, Palestine.

Michael Bronstein, 37, pleaded guilty to mail fraud and was sentenced Thursday by North Florida Federal District Court Judge Robert L. Hinkle. The charges were the result of a joint investigation by the Florida Department of Financial Services, Office of Fiscal Integrity, and the Federal Bureau of Investigation. The North Florida U.S. Attorney’s Office prosecuted the charges.

“I commend the investigators for unraveling this complex scheme and bringing this individual to justice,” said Gallagher, who oversees the department. He noted that during the three-year investigation, the Office of Fiscal Integrity issued 30 subpoenas and tracked more than 600,000 telephone calls.

Bronstein participated in an elaborate scheme to file fraudulent claims for unclaimed property through the Florida Bureau of Unclaimed Property, which currently holds accounts valued at more than $1 billion in unclaimed cash and property.

The scheme began to unravel in 2002 when a legitimate owner filed a claim on property that Bronstein had collected on. The Department’s Office of Fiscal Integrity launched an investigation and determined that Bronstein’s organization had made six other fraudulent claims in Florida as well as attempting fraudulent claims in nine other states. The FBI’s Tallahassee office joined the case, and the investigation expanded into New York where investigators learned Bronstein had rented office space and equipped it by using fraudulent credit cards and bank accounts. All told, Bronstein’s illegal operation took in more than $895,000 in unclaimed property, and $60,000 from fraudulent credit card transactions.

Since 2003, Gallagher has returned nearly $300 million in cash and property to current or former Floridians -- about one-third of all of the cash and property returned since the program’s inception in 1961. Most of the unclaimed property is turned over from dormant bank accounts, utility deposits, insurance premium refunds, un-cashed payroll checks and trust holdings, as well as valuables from abandoned safe deposit boxes. Owners or heirs can claim their property for free by logging on to www.fltreasurehunt.org or by calling 1-88-VALUABLE (1-888-258-2253.)


GALLAGHER BANS AGENT WHO TOOK FUNDS FROM TITLE ESCROW ACCOUNTS

Tom Gallagher, Florida’s chief financial officer, announced the revocation of the license of a Lake County title insurance agency, 1st Land Title Services, and the license of an agent who misappropriated funds from the agency’s escrow accounts.

Gallagher’s order revoked the title insurance license of Portia Lynne Rodriguez, 57, of Mt. Dora, and permanently banned her from transacting insurance in Florida. Rodriguez had been a licensed title insurance agent in Florida since 1993 and was president of 1st Land Title Services, which had offices in Tavares, Leesburg, Summerfield and Mt. Dora.

“This department is determined to ensure that no one takes advantage of our citizens,” Gallagher said. “Having an agent’s license is an opportunity to serve, not an opportunity to steal.”

The actions against Rodriguez’ license followed a department investigation that uncovered more than $613,000 missing from an escrow account. The investigation began after reports of checks being returned to the agency for insufficient funds. Affected customers were reimbursed by the title insurance companies.

Title insurance is required by mortgage lenders to protect themselves and the homebuyer from property ownership disputes. Last September, in an unrelated matter, Gallagher announced that approximately 10,000 Central Florida residents would share a $2.2 million refund agreed to by Fidelity National Title Insurance Company after a department investigation uncovered illegal referrals to title agencies for business.

Gallagher issued a warning to the industry in 2004 against engaging in illegal kickback arrangements, and initiated investigations into all title agencies for similar practices. Fidelity National Insurance Company was the first to reach a settlement with the department.

To file a complaint, visit the Department of Financial Services web site at www.MyFloridaCFO.com or call the toll-free consumer helpline at 1-800-342-2762.


Consumer Services HelpLine (800) 342-2762