Consumer eViews
FLORIDA CHIEF FINANCIAL OFFICER TOM GALLAGHER'S WEEKLY NEWSLETTER

Volume 1, Number 27, July 5, 2004

A number of years ago, the Governor and Florida Legislature took bold steps to improve education by offering educational alternatives for children trapped in failing schools. Other innovative educational programs have followed, including the McKay Scholarship program, which gives disabled students the option to attend private schools, and the Corporate Tax Credit Scholarship program, which provides tax credits to businesses that fund scholarships for low-income students to attend private schools.

These vital programs serve thousands of children in Florida. I say “vital” because these programs empower parents to pursue high-quality educational opportunities that were, at one time, not available to their children.

Recent investigations of school choice programs have uncovered fraud and misuse of education funds. As Chief Financial Officer, it is my responsibility to ensure that tax dollars are accounted for and properly spent. Audits are one method for ensuring good stewardship of public dollars.

Audits of Florida's school choice programs were released last December and offer solid recommendations to both the Department of Education and state lawmakers for improving the fiscal integrity and strengthen the management of the programs.

Although state lawmakers did not pass reforms, there is broad consensus among policymakers that there should be better controls in place and more oversight of our school choice programs.

These programs are too important not to have full financial accountability in place. I firmly believe that just as we hold Florida’s students to high standards, we must also hold government and school choice program providers to the same high standards.

                                        My best,                                                                                                                                                                   -- Tom Gallagher


GALLAGHER, STATE ATTORNEY ANNOUNCE ARRESTS IN SCHOOL VOUCHER FRAUD SCHEME

Florida’s Chief Financial Officer Tom Gallagher and Polk County State Attorney Jerry Hill today announced the arrests of seven individuals for fraudulently obtaining and misusing state education funds.  The arrests stem from an investigation led by the Polk County State Attorney’s Office in partnership with the state Department of Financial Services’ Office of Fiscal Integrity and Division of Insurance Fraud.

Various charges, including racketeering, grand theft, money laundering and scheme to defraud, have been filed against the seven individuals.  Betty J. Mitchell, 37; Jocie Jives, 60; Jeanette Jives Nealy, 36; Demario Quowon Jives, 19; Margaret Burns, 31; Willie James Jives, 35, were booked into the Polk County Jail.  Levy Gail Everett-Davis, 42, was booked into the Hillsborough County Jail.  

The charges are based on evidence that individuals, using a church-based school, illegally obtained and used funds from the John M. McKay Scholarships for Students with Disabilities Program through misrepresentation and theft.   Faith Christian Academy, located at 810 East Main Street in Bartow, was established as a school to educate disabled children.  Allegedly, principals of the school applied to the state Department of Education to qualify for McKay Scholarship Program funds.  They then fraudulently applied for scholarship dollars on behalf of unknowing parents and diverted the money for personal use. 

“These individuals should be prosecuted to the fullest extent of the law,” said Gallagher, who oversees the Department of Financial Services.  “These arrests reinforce the need to have meaningful accountability in all Florida programs, including our school choice programs.  I’m going to do everything I can to ensure these programs are successful and tax dollars are appropriately spent.”
In late December 2003 the department was advised by a financial institution of irregularities involving a bank account from which multiple state warrants were written to more than 60 individuals, deposited into one account, and then withdrawn and converted into cashier’s checks and cashed.   In January 2004, the department stopped payments.  

The state attorney’s affidavit alleges theft in excess of $200,000. The alleged thefts began in late November 2003.

McKay Scholarship funds are required by law to be distributed to parents of children with disabilities who have spent the prior year at a Florida public school and who have been accepted at a private school that has qualified to use McKay Scholarship funds.  The purpose of the program is to provide parents with education options for children with disabilities. 


GALLAGHER COMMENDS GOVERNOR, LAWMAKERS FOR ENDING ABUSIVE PRACTICES IN ANNUITIES SALES

Florida’s Chief Financial Officer Tom Gallagher applauded Governor Bush and state lawmakers today for enacting legislation which puts an end to abusive sales practices used by unscrupulous insurance agents selling annuities to seniors. 

“Annuities can be an effective investment tool for many Floridians wanting a steady stream of income for retirement,” said Gallagher.  “But too many of our state’s seniors have been preyed upon by agents who are motivated by commission payments, not consideration of a senior’s financial circumstances.  Now with this legislation, we will hold companies and agents accountable for the products they sell and the investment advice they give.”

An annuity is an insurance contract that offers a guaranteed series of payments over a period of time.  Under the legislation, which was amended onto Senate Bill 2994, insurance companies and agents offering annuity products to seniors over the age of 65 are required to clearly document the basis for selling the product, including consideration of a senior’s financial and tax status, as well as investment objectives.  It also gives the Department of Financial Services the authority to take corrective action if a company or agent violates the law. 

Gallagher proposed this legislation in response to calls and letters from hundreds of seniors and their families who told the department they were convinced to liquidate CDs, stocks and savings accounts to fund annuities only to discover these actions robbed them of access to their savings.  

Florida is currently home to more than 2.9 million Floridians over the age of 65.  According to Gallagher, the state’s senior population is projected to grow by as much as 30 percent over the next several years, and many of these seniors will look into investing in annuities. 

“This legislation is so important as more and more seniors move to Florida and seek to invest their hard-earned savings,” Gallagher said.  “I thank the governor for signing this legislation to protect our most vulnerable citizens.”


CFO GALLAGHER LAUDS GOVERNOR’S SIGNING OF FUNERAL, CEMETERY AND CONSUMER SERVICES ACT

Chief Financial Officer Tom Gallagher said that Governor Jeb Bush’s signing of the Florida Funeral, Cemetery and Consumer Services Act gives Floridians more choices and more protections when buying funeral and cemetery services.  The Legislature named it after the late Sen. Howard E. Futch, whose body had to be relocated because of a cemetery mistake.

“Families have enough on their minds when putting a loved one to rest,” said Gallagher, who also oversees the Department of Financial Services, which will now regulate all funeral and cemetery services. “They should not have to worry whether their funeral services provider will make a mistake.”

The act requires cemetery operators to survey and plot new grounds, establish minimum grave sizes, and put names on vaults.  It also establishes a monument dealer inspection program, allows monument companies to join funeral homes, cemeteries and cremation service companies in the pre-need funeral services industry, and consolidates the regulation of the industry under the department. 

Oversight had been divided between the Department of Business and Professional Regulations (DBPR) and the Department of Banking and Finance (DBF) until January 2003, when DBF merged with the former Department of Insurance to form the Department of Financial Services.

Now, the industry will be regulated under a newly created Division of Funeral, Cemetery and Consumer Services within the Department of Financial Services and under one new consolidated board of directors.  The consolidation will become effective October 1, 2005. 

Sen. Ken Pruitt (R-Port St. Lucie) and Rep. Don Brown (R-DeFuniak Springs) sponsored the legislation, which passed as Senate Bill 528.


TITLE AGENT ARRESTED FOR STEALING MORE THAN $1.1 MILLION

CLERMONT-A local title agent has been charged with organized fraud after investigators learned she allegedly stole more than $1.1 million in customer escrow funds.

On June 25, after an investigation conducted by the Department of Financial Services’ Division of Insurance Fraud, Kathryn Knight turned herself in at the Lake County Jail for the misappropriation of escrowed funds. The charges against Knight, 37, A.K.A. Kathryn Weed, of 16808 Tequesta Trail, Clermont, include organized fraud, first-degree grand theft and misappropriation of funds while operating Weed & Associates Title Services.

In 2003, American Pioneer Title Insurance Company conducted an audit and discovered discrepancies in the escrow account of Weed & Associates Title Services, Inc. Upon the conclusion of an investigation conducted in November, the Division of Agent and Agency Services revoked Knight’s insurance license.

It was revealed that Knight allegedly misappropriated funds in excess of $1.1 million from the escrow account. On numerous occasions during 2002-2003, Knight allegedly used these funds for personal use, including the purchase of two vehicles, a trip to Las Vegas with employees and her boyfriend, a total of $750,000 as a down payment on a $9 million Lake County land purchase, and her wedding.

The charges against Knight carry a maximum penalty of 35 years in prison.

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. A reward of up to $25,000 may be offered for information leading to a related conviction. 


 

SOUTH FLORIDA AUTO DEALERS' LICENSES REVOKED

MIAMI-The Florida Office of Financial Regulation (OFR) today revoked the retail installment sales licenses of two automobile dealers in South Florida.  According to OFR investigators, U-Ride Motors of Florida, Inc., located at 2160 Northwest 79th Street, Miami, Florida, and Horizon Car & Van Sales, Inc., located at 1590 North State Road 7, Lauderhill, Florida, were at various times selling motor vehicle installment contracts without a license. In addition to the main offices in South Florida, Horizon had branch locations through the state.  Motor vehicle installment contracts are used when an individual purchases a motor vehicle and finances it over a period of time.

The investigation was conducted over the past twelve months by OFR investigators in Orlando, Tampa, Ft. Myers, West Palm Beach, Lauderhill and Miami. At all ten statewide locations for Horizon and the two locations for U-Ride, investigators documented that some money collected for third party fees was not paid out as contracted for by consumers.

In addition to the revocations, OFR has ordered the dealerships to pay a fine of $15,000 and banned Mr. Courtney Longman, who indirectly controlled both licensees but was never approved by OFR, from participating in any motor vehicle financing activities for the next five years.

"Our office will take immediate action when we identify that consumers are at risk in their dealings with companies financing motor vehicles," said Don Saxon, Director of the Office of Financial Regulation.

Customers who may have questions or concerns over the financing of their contracts with Horizon or U-Ride should contact John Kneissel in OFR's Miami office at (305) 810-1111.


Florida Department of Financial Services'
Consumer Services HelpLine
(800)342-2762.