n March of 2002, the State of Florida qualified a group of Port St. Lucie investors to recover $100,000.00 from Florida Guaranty Fund for fraudulent activity of a broker

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STATE OF FLORIDA
DEPARTMENT OF FINANCIAL SERVICES
OFFICE OF FINANCIAL INSTITUTIONS AND SECURITIES REGULATION

NOTICE OF INTENT TO ENTER FINAL ORDER APPROVING RECOVERY FROM THE SECURITIES GUARANTY FUND AND NOTICE OF RIGHTS

The State of Florida, Office of Financial Institutions and Securities Regulation of the Financial Services Commission of the Department of Financial Services (the “Office”), being authorized and directed to administer and to accept and pay claims against the Securities Guaranty Fund (“the Fund”), codified in Sections 517.131 and 517.141, Florida Statutes, does hereby enter a Notice of Intent to Enter a Final Order approving the applications of Joseph T. Barone and Mary G. Barone, JTWROS (“Barone”); The Charles H. Klein & Gertrude A. Klein Living Trust, Chareles H. Klein and Gertrude A. Klein, Trustees (“Klein”); Janice W. Kuebler and Albert Kuebler (“Kuebler”); The Leenher Family Trust, Neil R. Leenher, Trustee (“Leenher”); The Sylvia and Julian Lukowski Living Trust (“Lukowski”); Frank S. Scirrottto (“Scirrotto”); Raymond Waite and Lorraine Waite, individually and as trustees under that certain trust dated June 19, 1990 (“Waite”); and the Gene Wink and Beverly Wink Living Trust (collectively “Claimants”) for payment from the Fund for violations of the Florida Securities and Investor Protection Act by respondents Victor Verola (“Verola”) and denying the applications as to respondent Edward L. Bates (“Bates”) and Great American Financial Network, Inc. (“Great American”).

The Fund is disbursed as provided in Section 517.141, Florida Statutes, to a person who is adjudged by a court of competent jurisdiction to have suffered monetary damages as a result of a dealer, investor advisor, or associated person having violated Sections 517.07 or 517.301, Florida Statutes, subject to the waiver provisions of Section 517.131 (2), Florida Statutes.

STATEMENT OF FACTS

1.         Under the provisions of the Florida Securities and Investor Protection Act (the “Act”), the Office is charged with the responsibility and duty of administering the fund, which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 517.141(3)(a), Florida Statutes.

2.         Great American was registered pursuant to Chapter 517, Florida Statutes, CRD No. 1669381, from November 1, 1983 to December 31, 1998.

3.         Bates was registered pursuant to Chapter 517, Florida Statutes, CRD No. 1815183, from May 24, 1998, to June 18, 1999.

4.         Verola was registered pursuant to Chapter 517, Florida Statutes, CRD No.  844714, from July 20, 1979, to January 28, 1997.

5.         On December 31, 1998, the Department of Banking and Finance (the “Department”), statutory predecessor to the Office by §20.121, Fla. Stat., issued an Administrative Complaint for Entry of Cease and Desist Order Imposing Sanctions and Notice of Rights, DOAH Case number 99-0634 (the “Administrative Complaint”), against respondents and others, arising from respondents’ dealing With Claimants and others while registered with the Department, and alleging violations of 517.07 and 517.301, Fla. Stat.

6.         On September 3, 1998, the Department entered its Final Order as to allegations against respondent Victor Verola in the Administrative Complaint, pursuant to a stipulation and consent in which Verola neither admitted nor denied wrongdoing.

7.         On January 1, 2000, the Department entered its Final Order as to allegations in the Administrative Complaint against respondents Bates and Great American, following trial, which Final Order determined that while registered with the Department, Bates and Great American both violated §517.07, FIa. Stat., by engaging in the sale of unregistered securities, and that Bates and Great American both violated §517.301, Fla. Stat., by employing a scheme to defraud investors, including Claimants, by persuading Investors to purchase the unregistered securities.

8.         On or about April 30, 2001, the Office received from Claimants’ attorney Jeffrey P. Coleman, Esq., a letter requesting payment from the Securities Guaranty Fund. With the letter, Claimant also included:

8.1.      A copy of an Amended Complaint, in the Nineteenth Judicial Circuit, Florida, No. 98-788-CA-I 7, in which Claimants are the plaintiffs and respondents Great American, Bates and Verola, among others, were defendants, and requesting damages arising from the fraudulent sales to Claimants of unregistered securities in the amounts as follows:

8.1.1. Barone $30,000

8.1.2. Klein $209,000

8.1.3. Kuebler $15,597

8.1.4. Leenher $30,000

8.1.5. Lukowski $105,000

8.1.6. Scirrotto $25,000

8.1.7. Raymond Waite individually and jointly with Lorraine Waite $179,341

8.1.8. Lorraine Waite $13,828

8.1.9. Wink $266,000

8.2.      A copy of the Final Order by the Department as set forth in paragraph 7, above.

8.3.      Copies of a Proof of Claim filed for each of the Claimants in the bankruptcy of respondent Verola, setting forth the amounts in 7.1 above for each of the Claimants, but also itemizing recovery by Claimants, as follows:

8.3.1.  Barone $2,016.74

8.3.2.  Klein $0

8.3.3.  Kuebler $0

8.3.4.  Leenher $0

8.3.5.  Lukowski $19,800

8.3.6.  Scirrotto $0

8.3.7.  Raymond Waite individually and jointly with Lorraine Waite $0

8.3.8.  Lorraine Waite $0

8.3.9.  Wink $6,600

8.4.     Copies of various newspaper and internet articles indicating that both respondent Bates and respondent Verola had been criminally charged arising from their transactions with Claimants.

9.         On or about May 16, 2001, in State v. Bates, Nineteenth Circuit Court #2001-71 5-CF, respondent Bates was convicted of the felony of engaging in “boiler room sales” in violation of §517.312(1), Fla. Stat., by obtaining money or property of an aggregate value exceeding $50,000 from five or more persons, which conviction includes as a predicate a violation of §517.301, FIa. Stat., and Bates was ordered to make restitution to, among others, the Claimants.

10.       On or about November 21, 2001, in State v. Verola, Nineteenth Circuit Court #2001-771 -CF, respondent Verola was convicted of the felony of engaging in “boiler room sales” in violation of §517.312(1), Fla. Stat., by obtaining money or property of an aggregate value exceeding $50,000 from five or more persons, which conviction includes as a predicate a violation of §517.301, Fla. Stat., and Verola was ordered to make restitution to, among others, the Claimants.

11.       On or about May 8, 2002, the Office received from Claimant’s attorney Jeffrey P. Coleman, Esq., a letter which responded to the October 22, 2001, inquiry by the Office requesting additional information. With the letter, Claimant included all materials previously sent on April 30, 2001, and a copy of a Discharge of Debtor as to respondent Verola, entered by the United States Bankruptcy Court, Southern District of Florida, Case Number O0-31318-SHF.

12.       On or about August 12, 2002, the Office received from Claimant’s attorney Jeffrey P. Coleman, Esq., another letter. With the letter Claimant included an Order of Stay Due to Bankruptcy As to All Pending Claims and Directing Clerk to Close File as to Claimants’ civil suit described in 8.1, above.

CONCLUSIONS OF LAW

13.       The requirements for perfecting a claim to the Fund are found in Sections 517.131 and 517.141, Florida Statutes.

14.       Section 51 7.131(3) provides:

(3) Any person is eligible to seek recovery from the Securities Guaranty Fund if:

(a)       Such person has received final judgment in a court of competent jurisdiction in any action wherein the cause of action was based on a violation of those sections referred to in subsection (2).

(b) Such person has made all reasonable searches and inquiries to ascertain whether the judgment debtor possesses real or personal property or other assets subject to being sold or applied in satisfaction of the judgment, and by her or his search the person has discovered no property or assets; or she or he has discovered property and assets and has taken all necessary action and proceedings for the application thereof to the judgment, but the amount thereby realized was insufficient to satisfy the judgment. To verify compliance with such condition, the department may require such person to have a writ of execution be issued upon such judgment and may further require a showing that no personal or real property of the judgment debtor liable to be levied upon in complete satisfaction of the judgment can be found.

(c) Such person has applied any amounts recovered from the judgment debtor, or from any other source, to the damages awarded by the court.

(d) The act for which recovery is sought occurred on or after January 1, 1979.

(e) The department waives compliance with the requirements of paragraph (a) or paragraph (b). The department may waive such compliance if the dealer, investment adviser, or associated person which is the subject of the claim filed with the department is the subject of any proceeding in which a receiver has been appointed by a court of competent jurisdiction. If the department waives such compliance, the department may, upon petition by the debtor or the court-appointed trustee, examiner, or receiver, distribute funds from the Securities Guaranty Fund up to the amount allowed under s. 517.141. Any waiver granted pursuant to this section shall be considered a judgment for purposes of complying with the requirements of this section and of s. 517.141.

15.       Based upon the foregoing Statement of Facts, the Office concludes that the Claimants have satisfied the requirements in Section 517.131, Florida Statutes, as to respondent Verola in that:

15.1.   The Claimants have demonstrated that Claimants purchased securities from respondents Great American, Bates and Verola in a concerted scheme, when each of the respondents was registered with the Office.

15.2.   The Claimants have demonstrated that Claimants’ purchases of securities from the respondents involved violations of §§ 517.07 and 517.301, Fla. Stat., in that the Office made that determination in litigation with respondents Bates and Great American, and in that both respondent Verola and respondent Bates were criminally convicted for conduct where a necessary element of such conviction was proof of fraudulent conduct in connection the sale of a security.

15.3.   The Claimants have demonstrated compliance with  §§ 517.131(3)(a) and (b), Fla. Stat., through waiver pursuant to §517.131(3)(e), Fla. Stat., in that Claimants have demonstrated that Verola, “the subject of the claim,” is the subject of bankruptcy proceedings, thus preventing further efforts to obtain a judgment and enforce that judgment against Verola.

15.4.   The acts for which Claimants seek recovery occurred after January 1, 1979.

16.       Based upon the foregoing Statement of Facts, the Office concludes that the Claimants have not satisfied the requirements in Section 517.131, Florida Statutes, as to respondents Great American and Bates, in that Claimants have failed to demonstrate that either respondent Great American or respondent Bates “is the subject of the claim filed with the department [and] is the subject of any proceeding in which a receiver has been appointed by a court of competent jurisdiction.”

17.       Each Claimant is limited to recovering .the amount equal to the unsatisfied portion of any judgment against respondent Verola or $10,000, whichever is less, as set forth in Section 517.141(1), Florida Statutes.

18.       The total claims against respondent Verola may not exceed $100,000, and all claims will be prorated based upon the ratio that the person’s claim bears to the total claims filed, as set forth in Section 517.141(2), Florida Statutes.

19.            Section 51 7.141(3), Florida Statutes, provides that no payment from the Fund shall be made until two (2) years after the first claim has been determined by the Office to be eligible for payment from the fund. This subsection further provides that any additional claims or potential claims filed with or approved by the Office during the two year period shall also be considered by the Office and provision made for further prorations concerning such additional claims, if any, two (2) years hence.

20.       Since there are not such prior claims approved as final orders against respondent Verola, it is the conclusion of the Office that no payment shall be made in connection with any claim made against respondent Verola until two years from the date of the Final Order regarding respondents in this matter, that is, two years following the date of the Final Order adopting this Notice of Intent.

PROPOSED FINAL ORDER

Upon due consideration of the factual statement set forth above and the law applicable thereto, NOTICE is hereby given that the Office intends to and will issue a Final Order substantially as follows, subject only to the Notice of Rights attached and made a part of this Notice of Intent:

1.         The Office hereby grants each Claimant’s claim in the amount of up to $10,000 due to the conduct of respondent Victor Verola;

2.         No payment from the fund shall be made until two (2) years from the date of entry of the first Final Order regarding respondents:

3.         Upon expiration of such period, provided that no further claims are duly received or approved by final order by the Office alleging violations of the Act by Victor Verola, and subject to further proration and limitation as may be required by Section 517.141 (3) and (4), Florida Statutes, the Office shall pay each Claimant the amount of up to $10,000 from the Fund for each claim against respondent Victor Verola;

4.            Claimant shall assign any right, title, and interest in the debt to the extent of and prior to any payment by the Office from the Fund.

NOTICE OF RIGHTS

Notice is hereby given that a party may request a hearing on the Notice of Intent to Enter a Final Order Approving Recovery From the Securities Guaranty Fund to be conducted in accordance with the provisions of Section 120.57, Florida Statutes. Requests for such a hearing must comply with the provisions of Florida Administrative Code 28-1 06.201, and must be filed with:

Agency Clerk
Office of Financial Institutions and Securities Regulation
Fletcher Building, #526
200 East Gaines Street
Tallahassee, Florida 32399-0379

within twenty-one (21) days after the party receives a copy of this Notice of Intent to Enter a Final Order Granting Recovery From the Securities Guaranty Fund and Notice of Rights, otherwise the party shall be deemed to have waived all rights to such hearing. Should a party request such a hearing, the party is further advised that at such hearing the party will have the right to offer testimony, either written or oral; to call and cross-examine witnesses; and to have subpoenas and subpoenas duces tecum issued on the party’s behalf.

Pursuant to Section 120.573, Florida Statutes, please be advised that mediation is not available.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing Notice of Intent to Enter Final Order Granting Recovery from the Securities Guaranty Fund and Notice of Rights were duly sent by U.S. Certified Mail, Return Receipt Requested, to the following:

Victor Verola, DOC#60981, Loxahatchee Correctional Institution, 230 Sunshine Road, West Palm Beach, FL 33411;

Edward Lee Bates, DOC#K60318, Quincy Annex, 2225 Pat. Thomas Parkway, Quincy, FL 32351;

Great American Financial Network, Inc., 3300 Holcomb Bridge Road, Suite 292, Norcross, GA 30092;

Andrew Hicks, Registered Agent, Great American Financial Network, Inc., 3835 Mockingbird Drive, Vera Beach, FL 32963;

Jeffrey P. Coleman, Esq., 581 South Duncan Avenue, Clearwater, Florida 33756; on this   6^th   day of  March ,  2003

____________/s/__________

James H. Harris
FL Bar #817775
Attorney Supervisor
Office of Financial Institutions and Securities Regulation
Legal Services Office
Fletcher Building #526
200 East Gaines Street
Tallahassee, Florida 32399-0379
850-410-9896

Copies furnished to:

Don B. Saxon, Director
Division of Securities