ALJDEC

99A-258-INS · Department of Insurance · 2000-02-09

On February 7, 2000, a hearing was held on the Petitioner’s appeal of the Department’s denial of the Petitioner’s application for a life and disability insurance agent’s license. Assistant Attorney General Shelby L. Cuevas represented the Arizona Department of Insurance (the “Department”). Attorney Trisha Kirtley-Wells represented Jeffrey Thomas Conway (the “Petitioner”). 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. On September 13, 1989, the Third Judicial District Court of Minnesota issued a Complaint in State of Minnesota v. Jeffrey Thomas Conway, District Court, Third Judicial District, Case No. K8-89-357, charging the Petitioner with 15 counts of securities violation and 15 counts of theft. See Department’s Exhibit 4.

2. On March 15, 1990, a plea agreement was entered between the Petitioner and the State of Minnesota in which the Petitioner pled guilty to four counts of Theft, a felony. See Department’s Exhibit 3. On March 16, 1990, an Amended Complaint was issued, charging the Petitioner with four counts of Theft, a felony. See Department’s Exhibit 2.

3. On May 10, 1990, the Petitioner was convicted of four counts of Theft. See Department’s Exhibit 4. The Court sentenced the Petitioner to prison terms of 1 year and 1 day for Count 1; 15 months for Count 2; 36 months for Count 3; and 42 months for Count 4. Id. The Court stayed execution of the prison sentence and placed the Petitioner on probation for a period not to exceed 10 years. Id. As conditions of

probation, the Court ordered the Petitioner to serve 8 months in the Waseca County Jail, to pay restitution in the amount of $50,342.31, to pay a fine and surcharge in the amount of $5,500.00, and to perform 500 hours of community service. See Department’s Exhibit 6.

4. The Court found that the Petitioner’s offenses constituted the theft of over $90,000.00 over a two year period of time. See Department’s Exhibit 5. However, the Court found that some of this money was used to repay earlier victims. Id. The Court ultimately found that the Petitioner stole and kept well over $50,000. Id.

5. The Court found that the Petitioner’s offenses demonstrated a high degree of planning and consisted of 30 or more separate acts of theft from different individuals. See Department’s Exhibit 5. The Court found that the Petitioner used his position of trust as an investment advisor and prominent member of the Waseca community to facilitate the commission of the offenses. Id. The Court also noted as an aggravating factor in the case that several of the victims were particularly vulnerable because they were elderly and/or physically handicapped. Id. On November 9, 1998, the Court discharged the Petitioner from probation. See Department’s Exhibit 7.

6. On May 3, 1989, the Petitioner entered into a Consent Order (“Securities Consent Order”), In the Matter of Securities Agent’s License of Jeffrey Thomas Conway, License No. 857697, Case No. SE 8902550, with the Minnesota Department of Commerce, revoking the Petitioner’s securities license No. 857697, effective May 5, 1989. See Department’s Exhibit 8. In the Securities Consent Order, the Minnesota Commissioner of Commerce revoked the Petitioner’s securities license because the Petitioner failed to remit investment funds paid by clients to IDS Financial Services, Inc., deposited the funds in his business account and converted the funds to his own personal use. Id. The Minnesota Commissioner of Commerce ordered that the Petitioner make full restitution to his victims before he could reapply for licensure. Id.

7. On May 3, 1989, the Petitioner entered into another Consent Order (“Insurance Consent Order”), In the Matter of Insurance Agent’s License of Jeffrey Thomas Conway, License No. 0662736, Case No. SE 8902550, with the Minnesota Department of Commerce, revoking the Petitioner’s insurance license, effective May 5, 1989. See Department’s Exhibit 9. In the Insurance Consent Order, the Minnesota Commissioner of Commerce revoked the Petitioner’s insurance license because the Petitioner failed to promptly remit investment funds made payable to IDS Financial Services, Inc., and converted the funds to his own personal use. Id. The Minnesota Commissioner of Commerce ordered that the Petitioner make full restitution to his victims and obtain a $5,000.00 bond before he could reapply for licensure. Id.

8. On October 15, 1999, the Petitioner filed an application (the “Application”) for a life and disability insurance agent’s license with the Department. See Department’s Exhibit 1. In the Application, the Petitioner disclosed that he had a felony conviction for four counts of theft by swindling. Id. The Petitioner also disclosed that both his insurance license and securities license (previously held in Minnesota) were revoked. Id.

9. On November 18, 1999, the Department denied the Petitioner’s Application. See Department’s Exhibit 10. On December 8, 1999, the Department received the Petitioner’s request for a hearing on the Department’s denial of his Application. See Department’s Exhibit 11.

10. At the hearing in this matter, the Petitioner testified that he was born and raised and Waseca, Minnesota. The Petitioner testified that he and his family (i.e., parents) had an excellent reputation in the Waseca community. The Petitioner moved away from Waseca during his adulthood. The Petitioner became a school principal. In 1978, the Petitioner’s wife became seriously ill. The Petitioner decided to move back to Waseca, Minnesota so that his wife could be treated at the Mayo Clinic. The Petitioner also has five daughters. One of his daughters is profoundly hearing impaired.

11. The Petitioner testified that he began a new career in 1978 as an agent and financial planner for Investors Diversified Services (“IDS”). IDS is a corporation that provides financial planning and investment services for its clients. The Petitioner worked at IDS for over 10 years. The Petitioner testified that his prominent family and excellent reputation in the Waseca community helped his career at IDS. The Petitioner testified that he successfully developed over 300 accounts during his employment with IDS.

12. The Petitioner testified that he was elected as a state representative for his district in Minnesota. The Petitioner testified that he was a very successful politician and was voted Freshman Legislator of the Year by his colleagues.

13. The Petitioner testified that his wife had to be hospitalized in 1985 because of her illness. The Petitioner testified that he had to stay at the hospital with his wife. The Petitioner testified that the hospital stay was a financial hardship because he was on commission at IDS. The Petitioner further testified that his wife’s medical bills were escalating upward because she was undergoing experimental treatments. The Petitioner testified that his deaf daughter also required costly medical care.

14. The Petitioner testified that his financial situation was precarious by December 1987. The Petitioner testified that one client gave him $4,000.00 to invest in a money market fund. The Petitioner testified that he used the $4,000.00 to pay for his mortgage, car payment and groceries. The Petitioner testified that he “thought he could make it up with interest” within two weeks. However, the Petitioner testified that he ultimately had to steal from a second client to invest in the money market fund for the first client. The Petitioner testified that he ultimately stole from 15 different families over an 18 month period.

15. The Petitioner testified that he ultimately stole over $90,000.00 from his clients. The Petitioner testified that a portion of the $90,000.00 was used to repay some of the clients. However, the Petitioner stole and kept for himself over $50,000.00. The Petitioner testified that his conduct was criminal and inexcusable. The Petitioner testified that he was convicted and ordered to serve 8 months in the Waseca County Jail. The Petitioner testified that he also was ordered to serve 10 years of probation. The Petitioner testified that he has successfully completed the probation.

16. The Petitioner was also ordered to pay $50,342.31 in restitution. See Department’s Exhibit 6. The Petitioner testified that he made his final restitution payment in November of 1998. The Petitioner further testified that he successfully paid all of the other court ordered fees and fines.

17. The Petitioner testified that he also successfully performed the court ordered 500 hours of community service. The Petitioner testified that he taught 2 prisoners how to read. The Petitioner testified that he also delivered speeches to community groups and investment groups about his prior criminal activities.

18. The Petitioner testified that he committed no crimes prior to the above mentioned felony conviction. The Petitioner testified that he has committed no crimes since his felony conviction. The Petitioner testified that he has no violations regarding his Minnesota insurance license and securities license except for the revocation resulting from the felony conviction.

19. The Petitioner testified that his wife divorced him primarily because of the felony conviction. The Petitioner testified that he also lost custody of his five daughters. The Petitioner further testified that he ruined his good reputation in the Waseca community. The Petitioner testified that he contacted all 15 of his victims to apologize and to beg for forgiveness. The Petitioner testified that 13 of his 15 victims forgave him. The Petitioner testified that it is difficult for him to socialize in the Waseca community because of the guilt and shame associated with his criminal behavior.

20. The Petitioner testified that he resigned in disgrace as a state legislator because of the felony conviction. The Petitioner testified that the media provided extensive coverage of his conviction and resignation from the legislature. The Petitioner testified that the negative coverage was humiliating and embarrassing to himself and his family. The Petitioner testified that it was very difficult to find suitable employment after his conviction.

21. The Petitioner testified that he obtained a job with Redwing Shoe Company (“Redwing”) after his release from jail. The Petitioner testified that he was the Director of Training and Development at Redwing which employed over 2400 employees. The Petitioner testified that he created training programs for new employees and wrote speeches for Redwing’s president. The Petitioner testified that he had control over a million dollar budget. The Petitioner testified that the Redwing management knew of his felony conviction.

22. The Petitioner testified that he worked at Redwing for five years. The Petitioner testified that he subsequently accepted a position as a trainer and salesman with Donnelly Stucco & Windows (“Donnelly”). The Petitioner testified that he had an “open” budget at Donnelly. The Petitioner also taught business management at a local junior college. He also worked as a carpenter. However, the Petitioner testified that it was difficult to obtain a decent job because of his felony conviction and the resulting negative media coverage.

23. The Petitioner successfully completed his probation in November of 1998. The Petitioner testified that the termination of his probation allowed him to move away from Minnesota. The Petitioner testified that he moved to Arizona because he wanted a fresh start where nobody would recognize him. The Petitioner obtained a job at Liberty Estate Management as a Trust Agent. The Petitioner testified that a Trust Agent is an individual who conducts home visits to potential customers to offer legal services involving trusts, wills and estate planning. The Petitioner testified that he could only offer the legal services. The Petitioner testified that he could not perform the legal services. The Petitioner testified that he also could not provide financial planning services (including insurance services) because he was not licensed with the Department.

24. In June of 1999, the Petitioner accepted a job as a Trust Agent for Estate Planning Services (“EPS”). Kathy Johnson is an owner of EPS. She is also licensed with the Department as a life and disability insurance agent. At the hearing in this matter, Ms. Johnson testified that she has known the Petitioner for seven months. Ms. Johnson testified that she reviews the Petitioner’s work at EPS. Ms. Johnson testified that the Petitioner is very intelligent and does excellent work.

25. Ms. Johnson testified that there are safeguards at EPS to protect its customers from dishonest Trust Agents. However, Ms. Johnson testified that the Petitioner’s customers speak highly of him. Ms. Johnson testified that she has received no complaints regarding the Petitioner’s work. Ms. Johnson testified that she believes that the Petitioner is a man of honesty and good character.

26. The Petitioner testified that he will never steal from his customers again. The Petitioner testified that he lost everything because of his felonious behavior. The Petitioner testified that he lost (1) his wife and kids; (2) his business and professional career; (3) his political career; and (4) his reputation. The Petitioner testified that he has learned his lesson. The Petitioner testified that he just wants the opportunity to start all over again. CONCLUSIONS OF LAW

1. The Petitioner 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 (1) the Minnesota Commissioner’s 1989 Consent Order revoking the Petitioner’s insurance license; (2) the Minnesota Commissioner’s 1989 Consent Order revoking the Petitioner’s securities license; and (3) the Petitioner’s 1990 conviction for Theft represent a “record of dishonesty on the part of the [Petitioner] in business or financial matters” within the meaning of A.R.S. §20-290(B)(2).

3. The undersigned Administrative Law Judge concludes that the Minnesota Commissioner’s 1989 Consent Order revoking the Petitioner’s insurance license and the Petitioner’s 1990 conviction for Theft represent a “record of conduct under an insurance license . . . showing the [the Petitioner] . . . to be a source of injury and loss to, or repeated complaints by, the public or any insurer” within the meaning of A.R.S. §20-290(B)(4).

4. The undersigned Administrative Law Judge concludes that the Minnesota Commissioner’s 1989 Consent Order revoking the Petitioner’s insurance license is a “record of . . . revocation of an insurance license in any jurisdiction” within the meaning of A.R.S. §20-290(B)(5).

5. The undersigned Administrative Law Judge concludes that the Petitioner’s 1990 felony conviction is a “record of conviction by final judgment of a felony involving moral turpitude” within the meaning of A.R.S. §20-290(B)(6).

6. The undersigned Administrative Law Judge concludes that grounds exist to deny the Petitioner’s 1999 Application pursuant to A.R.S. §20- 290(B)(2),(4),(5) and (6). However, for the following reasons, the undersigned Administrative Law Judge further concludes that the Petitioner has met his burden of showing that he is qualified to hold a life and disability insurance agent’s license:

A. The Petitioner truly appeared remorseful and shameful for stealing from his customers. B. The Petitioner’s testimony was credible when he testified that he has learned his lesson and is fully rehabilitated. C. The Petitioner lost his family, his political and professional careers, his pride and reputation when he was convicted. It is highly unlikely that the Petitioner will repeat his criminal behavior. D. The Petitioner committed his crimes more than eleven years ago. E. The Petitioner’s insurance and securities licenses were revoked over 10 years ago. F. The Petitioner’s character witness, Kathleen Johnson, was credible and persuasive. G. The Petitioner has had a clean record before and after his felony conviction. H. The Petitioner successfully completed his ten year probation term. I. The Petitioner successfully served his jail term. J. The Petitioner successfully paid the ordered restitution of $50,342.31. K. The Petitioner has successfully managed million dollar budgets since his felony conviction. L. The Petitioner has been successfully employed (with no complaints) since his release from jail in 1991.

RECOMMENDED DECISION

This was a difficult case. However, based upon the foregoing, the undersigned Administrative Law Judge recommends that the Department’s denial of the Petitioner’s 1999 Application be reversed. The Petitioner meets the qualifications for holding a life and disability insurance agent’s license.

Done this day, February 23, 2000.

______________________________________ Casey J. Newcomb Administrative Law Judge

Original transmitted by mail this ____ day of February, 2000, to:

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

By ___________________________

-----------------------

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