Office of Financial Regulation Quarterly Report to The Financial Services Commission Don B Saxon Commissioner March 31 2008 by bjx12360


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									Office of Financial Regulation
           Quarterly Report to

  The Financial Services Commission

            Don B. Saxon
            March 31, 2008
                                            Office of Financial Regulation
         The Office of Financial Regulation (Office or OFR) is dedicated to safeguarding the private financial
       interests of the public by licensing, chartering, examining and regulating depository and non-depository
         financial institutions and financial service companies. The Office protects consumers from financial
               fraud, while preserving the integrity of Florida’s markets and financial service industries.

               Major Initiatives                                                        Significant Events
• OFR implemented the f irst release of the Regulatory
                                                                 Attended North American Securities Administrators Association
Enforcem ent and Licensing (RE AL) System. This phase
                                                                (NASAA) Winter Enf orcement Meeting
enables mortgage brokers and lenders to apply or renew their
                                                                 Attended the Miami-Dade Mayor’s Task Force on Mortgage Fraud
registration and update license inf ormation online.
                                                                 Attended NASAA/Central Registration Depository (CRD) Steering
• OFR assisted the Florida Department of Education (DOE) in
securing a $175,000 grant f rom the Investor Protection Trust
                                                                 Attended Association of Registration Management (ARM) Annual
(IPT). FL DOE will use the grant f unds to develop a new
                                                                Conf erence
mathematics course to include the Financial Literacy Body of
                                                                 Participated in Financial Industry Regulatory Authori ty (FINRA)
Knowledge standards and benchmarks approved by the Florida
                                                                Dispute Resolution Panel
Commissioner of Education and State Board of Education. The
                                                                 Presented “Current Federal and State Regulatory Framework for
course will have an emphasis on investing, accounting, and
                                                                Mortgage Lending” during the Mortgage Lending HOPE Task Force
f inancial security.
                                                                 Met with the Florida Association of Mortgage Brokers (FAMB)
                                                                 Met with the Office of Statewide Prosecution
              134 Final Orders Issued                            Participated in NASAA Continuing Education Working Group
                       (1/1 – 3/31/2008)                        Meeting
                                                                 Met with representatives of Financial Industry Technical Services
                    8                                           (FITS)
                Securities                      21               Met with court-appointed receiver f or Bergman Mortgage
                                       Financial Institutions   Corporation
                                                                 Attended Anderen Bank Grand Opening Ceremony
                                                                 Attended Jefferson Bank of Florida Ribbon Cutting Ceremony
                                                                 Spoke at Florida Banker’s Association (FBA) 9th Annual Bank
                                                                Director’s Conf erence
            105                                                  Representatives f rom all areas of OFR participated in a f inancial
          Finance                                               literacy phone bank conducted by Tampa’s WFLA TV. A total of 965
                                                                phone calls were received during the two-day phone bank, and OFR
                                                                received 66 f ollow-up intake f orms as a result.
                                                                                Financial Institutions
                                  Ensure the safety and soundness of the state financial institution system. Support efforts
                                       to promote Florida’s domestic and international financial services industries.
                                                                                                              Significant Events
                                                                                                • Participated in career fairs at the University of Florida
                                                                                                and University of Central Florida
                         Financial Institutions Performance                                     • Participated in a Small Credit Union Conference in
              100%     100%
                                                                                                • Presented at the Central Florida Compliance
100%                                                    93%                       95%
                                              90%                         90%                   Association (Orlando)
80%                                                                                             • Participated in a Compliance Conference Call with the
60%                                                                                             Florida Credit Union League (FCUL)
40%                                                                                             • Attended a meeting of the Anti-Money Laundering
                                                                                                Association (Winter Park)
                                                                                                • An application for an International Administrative Office
       % new applications that are     % of banks receiving exam % of credit unions receiving
                                                                                                (Orlando) for Banco do Brasil, S.A. was filed February
       statutorily complete that are   report within 45 days after exam report within 30 days   20th
             processed within             conclusion of exam        after conclusion of exam
        Administrative Procedure                                                                • An application for TIB Trust Company (Naples) was
             Act requirements                                                                   filed February 29th
                                       Standard     3rd Quarter Results                         • An application for First Green Bank (Eustis) was filed
                                                                                                March 24th
                                                                                                • An application for Performance First Business Bank
                                                                                                (Pensacola) was filed March 26th
                                                                                                • First Colony Bank of Florida (Maitland) opened
                                                                                                January 28th
                                                                                                • Prime Meridian Bank (Tallahassee) opened February

                                                                                                • Institutions under formal administrative action: 5
                                                                                      Division of Securities
                                                 Licenses and regulates securities firms to protect consumers from illegal securities
                                                                   activities while facilitating capital formation

                                                                                                                                Significant Events
                             Regulatory Review Performance
         100%       100%                  99%                                       100%                     • Trinity Wealth Management and Roger Darrell Jones - Jones
100%                               90%
                                                                                            75%              pled no contest to 1 count of grand theft. He was placed on 12
                                                                                                             months probation and ordered to pay fines of $1834. His license
                                                             45% 42%
                                                                                                             was permanently revoked and he is not to reapply for licensure.
                                                                                                             This action was the result of Jones systematically receiving
                                                                                                             money from an elderly, widowed investment advisory client who
         % of applications     % of filing requests     % of applicants not      # of actions taken as       was diagnosed with Alzheimer's.
         processed within      processed within         granted registration       result of licensing   .   • Jose Rafael Mirabal and Ernesto J. Casco – A 19 count
          Administrative      designated standard      who subsequently are     review process (as %
          Procedure Act         number of days          subject of additional     of 3rd quarter goal)       indictment charging Mirabal and Casco with conspiracy to solicit
           requirements                                regulatory disclosure                                 foreign investors to purchase purported World Bank bonds was
                                      Standard     3rd Quarter Results                                       unsealed in Miami. The defendants were charged with several
                                                                                                             counts of conspiracy, wire fraud, and money laundering.
                                                                                                             According to the indictment, between 2002 and 2006, Mirabal
                               Examination Performance                                                       and Casco solicited at least 12 foreign nationals living abroad
                96%                100%                            100%
100%                                                   92%                95%                                and sold them bonds, purportedly issued by the World Bank.

80%                          75%                 75%                                                         The monies received from investors were not used to purchase
                                                                                                             World Bank bonds. Instead, the money was used for their
                                                                                                             personal benefit, including the purchase of local real estate.
40%                                                                                    30%
                                                                                                             • William Chien, owner of the defunct broker dealer Cybervest
20%                                                                                                          Securities, Inc., pled guilty in Miami federal court to a 13 count
 0%                                                                                                          indictment charging him with wire fraud and securities fraud in
         % complaints      % compliance % of enforcement # compliance            % compliance
       closed or referred exams closed, or exam referrals that exams completed exams resulting in
                                                                                                             connection with the theft of $700,000 of client funds.
        within 180 days referred to Legal      resulted in       (as % of 3rd       action                   • Oppenheimer & Co. was fined $15,000 for failing to timely
                           or enforcement     enforcement        quarter goal)
                          exam within 180        action
                                                                                                             register 3 branch offices.
                                days                                                                         • M&I Brokerage Services, Inc. was fined $20,000 for failing to
                                     Standard     Results 3rd Quarter                                        timely register 10 branch offices.
                                                                                                                             Division of Finance
                                                                   Licenses and regulates business activities of non-depository financial services
                                                                                     companies and other related industries

                                                   Regulatory Review Performance
                                                                                                                                                                                 Significant Events
                                                                                                                                                 • Examinations of 84 financial services entities (i.e., mortgage lenders and brokers,
150%                                                                                                                                             consumer finance companies, etc.), resulted in $103,500 in fines assessed and
                                                                                                                                                 $20,550 refunded to consumers.
                 100%         100%                                            97%                            100%                                • Complaint investigations resulted in $165,634 in refunds to consumers.
100%                                                                                                                                             • Bureau of Regulatory Review took action for unlicensed activity against 8 Retail
75%                                                                                                                                              Installment, 22 Motor Vehicle Installment Sellers, as well as 3 Sales Finance
                                                                                                                                                 companies, resulting in administrative fines totaling $68,500.
                                                                                                                                                 • OFR re voked the registration of the Check Cashing and Mone y Center, Inc. for
25%                                                                                                                                              significant statutoryviolations.
 0%                                                                                                                                              Tampa: A Final Order was issued against Safe Harbour Foundation of Florida,
          % of applications processed w ithin          % of filing requests processed w ithin      # of actions taken as a result of licensing   Inc., Silverstone Lending, LLC and Peter J. Porcelli, II, of Clearwater, Florida. Safe
       Administrative Procedure Act requirements       designated standard number of days         review process (as % of 3rd quarter goal)      Harbour Foundation operated as a not-for-profit corporation which purportedly aided
                                                                                                                                                 homeowners facing foreclosure. The entities participated in a scheme to make loans
                                                          Standard 3rd Quarter Results                                                           containing unauthorized and excessive fees, often exceeding 30% of the loan amount
                                                                                                                                                 and violating Chapter 494, Florida Statutes. Silverstone’s Mortgage Lender license
                                                                                                                                                 was revoked and Porcelli’s principal representative designation was terminated. All
                                                                                                                                                 parties agreed not to apply for a license for 10 years, and Porcelli agreed not to be
                                                    Examination Performance                                                                      involved in any business regulated under Chapter 494, Florida Statutes, for 10 years.
                                                                                                                                                 Miami: OFR worked a joint investigation of Southeast Capital Mortgage Company,
                                                                                                                                  120%           et al, with the Florida Office of Attorney General (FOAG). The major issues with the
125%                                                                                            100% 94%                  100%
                                                                            87%                                                                  investigation included concerns of mortgage loan fraud and foreclosure assistance
100%          75% 82%                    75% 76%                    75%                                                                          fraud, as well as equity skimming. On January 22, the FOAG filed a lawsuit under
 75%                                                                                                                                             Chapters 494, and 501, Florida Statutes, naming Southeast Capital Mortgage
 50%                                                                                                                                             Company as one of the defendants who facilitated the scheme that defrauded at least
                                                                                                                                                 80 homeowners out of approximately$1.7 million in home equity.
                                                                                                                                                 Ft. Lauderdale: “Operation Whose House” is a joint investigation conducted by the US
  0%                                                                                                                                             Attorney’s Office, OFR, US Postal Inspectors, Florida Department of Law Enforcement
            % of licensees    % of licensees    % of licensees # for cause exams # routine exams                                                 (FDLE) and the Secret Service. It resulted in a federal indictment charging mail and
           examined where examined on for examined on routine completed (as % of completed (as % of                                              wire fraud, and identity fraud involving mortgage fraud where 8 people were found
           agency action is cause basis where basis where agency 3rd quarter goal) 3rd quarter goal)                                             guilty and sentenced to 10 years in prison. Yvette and Delroy Patterson, the
                taken        agency action is   action is taken                                                                                  masterminds, fled to Jamaica to avoid prosecution. An extradition request was
                                  taken                                                                                                          approved and the Pattersons were arrested on March 6 by the Ministry of Foreign
                                                                                                                                                 Affairs in Jamaica on outstanding federal warrants. They await their next court
                                                       Standard Results 3rd Quarter                                                              appearance scheduled for June 5, 2008.
                                                                             Bureau of Financial Investigations
                              Conducts financial investigations into allegations of fraudulent and unlicensed activity.

                                                                                                                                   Significant Events
                        Financial Investigations Performance                                       Ft. Lauderdale: D & H Investments of South Florida - In February, 6 defendants pled guilty in a
                                   100%                                                            mortgage fraud case involving properties in Broward County. The organiz ers, Ruben Jimenez and
    100%                95%                                                                        Antonio Ram os, pled guilty to conspiracy to commit money laundering and face 10 years in federal
                                                                               84%                 prison. Jimenez has an active mortgage broker license w hic h w ill be surrendered to OFR via the U.S.
     80%                                                                                           Attorney's Offic e. This mortgage scheme involved 12 fraudulent loans submitted to out-of-state lenders
                                                                                                   totaling $8,300,000. Four “straw buyers” also pled guilty to money laundering charges.
     60%                                                                                           Jacksonville: Thomas Cuomo was arrested in March for mortgage fraud and conducting
                                                                                                   an organized scheme to defraud. Cuomo w as previously arrested for mortgage fraud and money
     40%                                                                                           laundering in February 2007 as a result of a prior investigation conducted by the Bureau. In the latest
                                                                                                   charges, investigators allege that after his fir st arrest, Cuomo obtained 4 mortgages totaling
                                                                                                   $252,000 and engaged in a scheme to defraud lenders by misrepresenting his income on loan
                                                                                                   Miami: Progressive Real Estate 2000, Inc. - In March, Adrienne McSweeney, Curt Francis and
                                                                                                   Tashina Latouche were arrested and charged w ith one count of Organiz ed Scheme to Defraud. These
             % of documented violations referred for   % of referrals that result in enforcement
                           action                                        action                    arrests were the results of a joint investigation with the Ft. Lauderdale Police Department involving 2
                                                                                                   mortgage brokers and 2 mortgage loan processors who were part of a alleged mortgage fraud ring. This
                                      Standard    Results 3rd Quarter                              investigation focused on 3 real estate transactions on properties located in Dade and Broward counties.
                                                                                                   Mortgages were illegally obtained using false HUD-1 statements, fraudulent verif ications of
                                                                                                   employment, and other fraudulent documents.
                                                                                                   Orlando: Creative Financial Solutions – In March, the principal of Creative Financial, a title agency
                                                                                                   employee and an individual alleged to have acted as a straw buyer were arrested and charged
                                                                                                   with multiple counts of grand theft. The defendants allegedly perpetrated a scheme to fraudulently obtain
                OPEN INVESTIGATIONS BY TYPE                                                        mortgage loans valued at over $2.9 million, most of whic h are now in foreclosure. Investigators believe
              Securities -
                         492 CASES
           Unregistered, 188
                                                                                                   approximately $425,000 w as misappropriated to the personal benefit of defendants.
                                                                                                   Tampa: Trans Continental Airlines, Inc. - In March, Lou Pearlman, former president of Trans
                                                                                                   Continental Airlines (TCA), entered a guilty plea in the United States District Court to conspiracy, money
                                                                                                   laundering, and making false claims during bankruptcy proceedings. Pearlman accepted responsibility for
                                                                        Finance - Licensed,
                                                                                                   masterminding a fraudulent $300 million investment scheme know n as the Employee Investment Savings
                                                                                                   Account program. From 1989 through January 2007, Pearlman falsely represented to several hundred
    Securities -                                                                                   investors their investments were insured by the Federal Deposit Insurance Corporation (FDIC) and/or
   Registered, 3                                                                                   Lloyds of London, and TCA w as a successful company. Pearlman also admitted he had falsified financial
                                                                                                   statements to obtain over $100 million in bank loans to finance his various entities and keep his Ponzi
                                                                                                   scheme alive. Pearlman faces a possible 25 year prison sentence.
                                                                                                   West Palm Beach: Melissa Miranda/Fagan – In March, Melissa Miranda pled guilty to 1 count of
                                                                                                   Organized Scheme to Defraud. The charges stem from various mortgage frauds committed in connection
       Assists &                                                                                   with property in Hialeah, West Palm Beach and Port St. Lucie. Miranda and 5 co-defendants defrauded
                                                                                                   lenders by preparing false loan documents to include HUD-1s, appraisals and verif ications of
  Investigations, 120                                                      Finance -
                                                                                                   employment. Co-defendant, Arturo Ildefonso, was recently sentenced to 18 months in state
                                                                        Unlicensed, 111
                                                                                                   prison. Miranda was sentenced to 3 years in prison, followed by 10 years probation, and $1.4 million in
                                                                                                   restitution. Miranda w as banned from the real estate business and ordered to pay investigative and
                                                                                                   prosecution costs.
As of 3/31/08
                                    Important Statistics for January 1 – March 31, 2008
                                                                      Financial Institutions

                        Licensing & Chartering                                                                                           Number of Institutions - March 31, 2008

35                                                                                                                   250
                                     31                                                                                                                              215

20                                                       18

15                                                                                                                   100           84

10                              9
                                               6                                                                                                       41
                                                   5                            5                                     50
 5                                                                                     4
                        3                                                3
     2   2                                                                                                                                                                              13

 0                                                                                                                     0
     Acquisition            Branch        New Applications                    Merger                                           Credit Union    Foreign Bank Office   Bank          Trust Company

         Pending (as of 3/31)             Approved                     Complete

                                                                       Financial Data (as of December 31, 2008)





                                                       18.5                                         15.8
                                          20                                               15.6

                                          10                                                                                             7.8
                                                              Assets                              Deposits                     Capital

                                                                          Credit Unions       Foreign Bank Offices     Banks
                                   Important Statistics for January 1 – March 31, 2008
               Securities Regulation                                                         Finance Regulation
  Licenses Approved: 44,715                                              Applications Received: 5,569
  Denied/Withdrawn: 344                                                  Licenses Approved: 6,455
  Licensed w/Restrictions: 34                                            Denied/Withdrawn: 438
  Firm and Branch Renewals Processed: 286,696
                                                                                            Bureau of Finance Regulation
                   Bureau of Securities Regulation                                         (Excluding Money Transmitters)
150                  132                                          1000                                                       809
125                                                                800                                                                      674
100       86
 75                                           62
                                                                   200            90           59
  0                                                                  0
           Examinations                            Complaints                      Examinations                                  Complaints
                          Opened          Closed
                                                                                               Opened                       Closed

      Bureau of Financial Investigations
  Investigations Opened:       37                                                      Bureau of Money Transmitter Regulation
  Investigations Closed:       35                                                 49           48
  Enforcement Actions: 10 Cases Closed with
    Actions                                                         40
  37.8 Years Imprisonment and 26.3 Years Probation                  30
                                                                    20                                                  15
    Imposed                                                                                                                            11
  $10.2 Million in Restitution – Court Ordered and                  10
    Voluntary                                                        0
                                                                                 Examinations                           Complaints
                                                                                            Opened                          Closed

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