ALJDEC

99A-018-INS · Department of Insurance · 1999-06-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

On June 11, 1999, a disciplinary hearing was held regarding the Respondent’s life and disability insurance agent license (the “License”). Assistant Attorney General Michael De La Cruz represented the Arizona Department of Real Estate (the “Department”). Attorneys Michael Low and Christy Chism Brown represented Donald W. Purk (the “Respondent”). Evidence and testimony were presented. Based upon a review of the entire record, the following Findings of Fact, Conclusions of Law and Recommended Decision are made.

FINDINGS OF FACT

1. The Respondent is currently, and was at all times material to this case, licensed as a life and disability insurance agent in the State of Arizona. The Respondent’s License is set to expire on July 31, 1999. The Respondent previously held a property and casualty insurance agent license which expired on July 31, 1996.

2. On or about August 10, 1995, the Respondent entered into a Consent Order with the Department in In the Matter of: Donald W. Purk, Case No. 95- 122. See State’s Exhibit 1. Pursuant to this Consent Order, the Director of the Department suspended the Respondent’s property and casualty insurance agent license for a period of 14 days. Id. The Director also imposed a civil penalty against the Respondent in the amount of $250.00. Id.

3. On or about March 1, 1996, an Information was filed in the United States District Court, District of New Jersey, in United States of America v. Donald W. Purk, Case No. 1:96-Cr-125-01, charging that during the period of November 1990 to December 1991, the Respondent had knowingly and wilfully conspired with Charles V. Giordano, the president of the International Brotherhood of Teamster’s Local 125 Union (“Local 125”) and also a trustee and administrative manager of all employee benefit plans affiliated with Local 125, to commit offenses in violation of 18 U.S.C. §1954, by giving, offering, and promising to give and offer, a fee, kickback, commission, namely, one-third of the commissions that the Respondent’s insurance agency was to receive on the sale of insurance and financial products to the Local 125 Employee Benefit Plans, to Charles V. Giordano, with the intent to influence his decisions in connection with the Local 125 Employee Benefit Plans’ purchases of insurance and investment products. See State’s Exhibit 2, at pages 3-4.

4. The Information further charged that on or about February 1991, the Respondent gave Giordano $6,000.00 in cash in furtherance of the conspiracy. See State’s Exhibit 2, at page 6. The Information further charged that on or about December 1991, the Respondent gave Giordano $3,000.00 in cash in furtherance of the conspiracy. Id. at page 7. The Information charged that these acts were in violation of 18 U.S.C. §371. Id.

5. On or about March 1, 1996, a plea agreement was filed in United States of America v. Donald W. Purk, Case No. 1:96-Cr-125-01. See State’s Exhibit 3. The Respondent agreed to plead guilty to conspiring to make unlawful payment to a union pension fund officer, in violation of 18 U.S.C. §371, a Felony. Id.

6. On or about September 25, 1998, the United States District Court, District of New Jersey, entered a Judgment in United States of America v. Donald W. Purk, Case No. 1:96-Cr-125-01, convicting the Respondent of Conspiring to Make Unlawful Payments to a Union Pension Fund Officer, a Class E Felony, in violation of 18 U.S.C. § 371. See State’s Exhibit 4. The Court ordered that the Respondent pay a fine of $10,000.00 and make restitution to the Trustees of the Local 125 Fund in the amount of $9,000.00. Id.

7. Robert W. McDonald is the chairman and CEO of Life USA Holding, Inc, a national financial services holding and marketing company based in Minneapolis, Minnesota. See Respondent’s Exhibit F. Mr. McDonald’s insurance career began in 1965 as an agent for New England Life. Id. From 1970 to 1975, Mr. McDonald was a Regional Manager for Jefferson Standard Life. Id. He was Second Vice President for State Mutual Life from 1975 to 1977. Id. In 1977, Mr. McDonald joined ITT Life Insurance and was named President and Chief Executive Officer in 1980. Id. He resigned in 1987 to form Life USA Holding, Inc. Id.

8. Mr. McDonald testified that he has known the Respondent since 1977. Mr. McDonald testified that he directly supervised the Respondent from 1977 to 1980 when the Respondent was a “top producer” at ITT Life Insurance. Mr. McDonald testified that Life USA Holding, Inc. has had a Field Marketing Organization contract with the Respondent’s insurance agency (Union Programs, Inc.) for about 12 years.

9. Mr. McDonald testified that he was aware of the Respondent’s felony conviction. Mr. McDonald testified that Life USA Holding, Inc. has a policy that it will terminate any employee, agent or independent contractor who has a felony conviction. Mr. McDonald testified that Life USA Holding, Inc. will even initiate (i.e. contact the appropriate authorities) and assist a criminal investigation regarding a felonious act by an employee, agent or independent contractor. However, Mr. McDonald testified that he made an exception for the Respondent. Mr. McDonald testified that he made the exception because (1) he has a 22 year friendship and business relationship with the Respondent; (2) the Respondent never concealed his legal problems; and (3) he felt that the Respondent’s felony conviction was just an aberration.

10. Mr. McDonald testified that the Respondent is trustworthy and “more than competent.” Mr. McDonald testified that he has never received a complaint about the Respondent in 22 years. Mr. McDonald testified that he has never questioned the Respondent’s honesty and integrity. Mr. McDonald testified that he could not believe that the Respondent would do such a stupid act that resulted in the felony conviction.

11. Mr. Pete Gorraiz has been a firefighter for the Phoenix Fire Department since 1977. See Respondent’s Exhibit E. He has been the Fire Captain for the Phoenix Fire Department since 1992. Id. Mr. Gorraiz is currently the Executive Vice President for the United Phoenix Fire Fighters Association. Id. The Respondent is the insurance agent for the United Phoenix Fire Fighters Association for life and cancer insurance.

12. Mr. Gorraiz testified that he has known the Respondent for 19 years. Mr. Gorraiz testified that he considers the Respondent to be a friend. Mr. Gorraiz testified that he was aware of the Respondent’s criminal conviction. Mr. Gorraiz testified that the Respondent has done a great job for the United Phoenix Fire Fighters Association. Mr. Gorraiz testified that he hopes that the Respondent will not lose his license.

13. Mr. Gorraiz testified that the Respondent is honest, trustworthy and beyond reproach. Mr. Gorraiz testified that he is not concerned about the Respondent’s felony conviction. Mr. Gorraiz testified that the Respondent’s criminal conduct was “atypical” and “out of character” for the Respondent.

14. The Respondent is 58 years old. He has been in the insurance business for over 30 years. He is currently a salaried agent for Union Programs, Inc. His daughter passed away so he is currently paying for his three grandchildren’s private schooling. As a child, the Respondent spent over three years in a Nazi concentration camp. See Respondent’s Exhibit A. He later served in the United States Army and was honorably discharged. Id. He has been licensed in Arizona, Michigan and Ohio. He has never been disciplined in Michigan and Ohio. 15. The Respondent testified that Union Programs, Inc. received $27,000.00 in commissions for the insurance and investments purchased by Local 125 in 1991. The Respondent admitted that he paid Mr. Giordano $6,000.00 and $3,000.00 pursuant to a previous agreement whereby the Respondent would give Mr. Giordano one-third of the commissions in return for Mr. Giordano’s support of the Respondent’s investment and insurance proposals.

16. The Respondent testified that Mr. Giordano got into some legal trouble in 1995. Apparently, Mr. Giordano testified to a grand jury about the payments that he received from the Respondent. The Respondent testified that he cooperated fully with the federal authorities. In fact, Assistant U.S. Attorney Timothy McInnis wrote a letter to the sentencing judge urging a downward departure in the sentencing of the Respondent. See Respondent’s Exhibit B.

17. The Respondent testified that he did a stupid thing by paying Mr. Giordano the $9,000.00. The Respondent testified that he shamed himself, his family and his insurance agency. The Respondent testified that he would never commit another felony again.

18. The Respondent testified that the Local 125 was never financially damaged by his criminal act. The Respondent testified that he paid the $9,000.00 court ordered restitution to the Local 125. The Respondent testified that he also paid the court ordered $10,000.00 fine. The Respondent is also successfully serving his probation sentence.

19. The Assistant Attorney General requested that the Respondent’s License be revoked. The attorneys for the Respondent stated that the Respondent would be agreeable to probation, restrictions on his License and/or a reasonable civil penalty.

CONCLUSIONS OF LAW

1. The Department has the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A "preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not." Morris K. Udall, Arizona Law of Evidence, §5 (1960). It "is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not." Black's Law Dictionary, 1182 (6th ed. 1990).

2. The undersigned Administrative Law Judge concludes that the Consent Order is a record of suspension or revocation of an insurance license in any jurisdiction, within the meaning of A.R.S. §20-316(A)(5). However, the undersigned Administrative Law Judge concludes that the Respondent has already been satisfactorily disciplined for the behavior set forth in the Consent Order. Accordingly, the undersigned Administrative Law Judge’s Recommended Decision, as set forth below, will only pertain to the Respondent’s 1998 felony conviction.

3. The undersigned Administrative Law Judge concludes that the Petitioner’s 1998 felony conviction is a “record of dishonesty . . . in business or financial matters” within the meaning of A.R.S. §§ 20-316(A)(1) & 20-290(B)(2).

4. The undersigned Administrative Law Judge concludes that the Petitioner’s 1998 felony conviction is a “record of conviction by final judgment of a felony involving moral turpitude” within the meaning of A.R.S. § 20-316(A)(6).

5. The undersigned Administrative Law Judge concludes that grounds do exist to revoke (or refuse to renew) the Respondent’s License pursuant to A.R.S. §§ 20-316 (A)(1), 20-316(A)(6) & 20-290(B)(2). This is not the type of case that involves an agent’s youthful indiscretion. Nor is it the type of case involving a felony that is unrelated to the business of insurance. Rather, this case involves a Respondent’s criminal behavior that goes to the very heart of the insurance industry. It involved an experienced agent who dishonestly and unfairly manipulated an insurance transaction for his own personal financial gain. The Respondent’s License should be revoked.

RECOMMENDED DECISION

Based upon the foregoing, the undersigned Administrative Law Judge respectfully recommends that the Respondent’s life and disability insurance agent license (No. 93524) be revoked. Done this day, June 24, 1999.

______________________________________ Casey J. Newcomb Administrative Law Judge

Original transmitted by mail this ____ day of June, 1999, to:

Mr. Charles R. Cohen Department of Insurance ATTN: Curvey Burton 2910 North 44th Street, Ste. 210 Phoenix, AZ 85018

By ___________________________

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826