MARLENE CARIDE, COMMISSIONER, NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE VS. RANDOLPH A. FISHER, JR. (NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5327-17T4
MARLENE CARIDE,
COMMISSIONER,
NEW JERSEY DEPARTMENT
OF BANKING AND
INSURANCE,
Petitioner-Respondent,
v.
RANDOLPH A. FISHER, JR.,
KEVIN G. MADDEN and REGAL
FINANCIAL GROUP, LLC,
Respondents-Appellants.
_______________________________
Argued September 16, 2019 – Decided October 2, 2019
Before Judges Sabatino and Geiger.
On appeal from the New Jersey Department of Banking
and Insurance, Agency Docket No. OTSC E16-12.
Richard Daniel DeVita argued the cause for appellants
(DeVita & Associates, attorneys; Richard Daniel
DeVita, on the briefs).
Ryan Shawn Schaffer, Deputy Attorney General,
argued the cause for respondent (Gurbir S. Grewal,
Attorney General, attorney; Melissa H. Raksa,
Assistant Attorney General, of counsel; Ryan Shawn
Schaffer, on the brief).
PER CURIAM
Appellants Randolph A. Fisher, Jr., Kevin G. Madden, and Regal
Financial Group, LLC (Regal) appeal from the final agency decision of the
Commissioner of the Department of Banking and Insurance (the Department)
imposing monetary penalties and revoking Fisher and Regal's insurance-
producer licenses, for violating the New Jersey Insurance Producer Licensing
Act of 2001 (IPLA), N.J.S.A. 17:22A-26 to -57, and related regulations. We
affirm.
I.
Fisher and Madden were each fifty-percent owners of Regal. In October
2006, Fisher and Madden, on behalf of Regal, began to promote and sell an
investment plan offered by National Foundation of America (NFOA), a
Tennessee corporation not registered to do business, or authorized to se ll
insurance, in New Jersey. Fisher and Madden collectively met with four sets of
prospective purchasers: J.K. and M.K., W.B., G.B. and M.B., and D.C. 1 Each
1
We use initials to protect the privacy of the purchasers.
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prospective purchaser was over eighty years old and planned using lifetime
savings to purchase the plans. All four sets of clients signed an NFOA
installment plan agreement. NFOA's application for 26 U.S.C. § 501(c)(3)
status as a nonprofit charitable organization was pending before the Internal
Revenue Service (IRS) when the meetings took place.
In May 2007, the Tennessee Commissioner of Commerce and Insurance
(Tennessee Commissioner) notified the Department of a pending investigation
of NFOA. In July 2007, a Tennessee court entered an order appointing the
Tennessee Commissioner as a receiver of NFOA. That same month, a court-
appointed special deputy receiver requested and received reimbursement from
Regal of all commissions associated with the sale of the NFOA investment
plans. The refunded commissions totaled $37,489.75. In March 2013, Richard
Olive, the president of NFOA, was convicted in federal court of mail fraud, wire
fraud, and money laundering. He was sentenced to a thirty-one-year prison term
and ordered to pay nearly $6,000,000 in restitution to approximately 190 NFOA
plan purchasers.
In January 2011, the Department of Enforcement at the Financial Industry
Regulatory Authority (FINRA) filed a disciplinary proceeding against Fisher
relating to his sale of NFOA investment plans. In March 2012, FINRA issued
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3
an order accepting an offer of settlement that suspended Fisher from associating
with FINRA members for six months and required him to pay a $15,000 fine
and restitution totaling $47,258.90.
The Department asserted Fisher, Regal, and Madden violated IPLA and
related regulations. Among other things, it claimed Fisher failed to conduct
adequate due diligence prior to recommending the purchase of NFOA
investment plans to the four sets of Regal's clients. The Department contended
the NFOA product was always "too good to be true," adequate investigation
would have revealed NFOA was not granted Section 501(c)(3) status, and NFOA
was not authorized to sell insurance products in New Jersey. The Department
alleged presenting the product as investment-worthy amounted to
misrepresentation that harmed the elderly purchasers.
In February 2016, the Department issued a seventeen-count order to show
cause (OTSC), which sought to revoke appellants' insurance produce licenses
and impose civil monetary penalties for conduct violating IPLA and related
regulations. More specifically, counts one, four, seven, and ten alleged Fisher
and Regal breached their fiduciary duty by selling NFOA installment plans to
the victims at a time when it was not approved as a charitable non-profit
organization by the IRS.
A-5327-17T4
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Count two, five, eight, and eleven alleged Fisher and Regal presented
untrue, deceptive, and misleading information to the purchasers in violation of
various statutory provisions. Counts three, six, nine, and twelve alleged Fisher
and Regal acted as an agent for or represented an insurer not authorized to
transact insurance in New Jersey.
Count thirteen alleged Fisher failed to timely report the FINRA
disciplinary proceeding to the Department. Count fourteen alleged Fisher failed
to timely notify the Department of the FINRA settlement order. Count fifteen
alleged Fisher did not timely provide a statement to the Department describing
his involvement with NFOA. Count sixteen alleged Fisher did not timely
provide a statement to the Department describing his annuity solicitation and
sales.
Count seventeen alleged Madden, as designated responsible licensed
producer for Regal, failed to properly supervise Fisher and Regal's insurance-
related conduct, in violation of N.J.S.A. 17:22A-40(a)(2) and N.J.A.C. 11:17A-
1.6(c).
Appellants disputed the charges, so the Department transmitted the matter
to the Office of Administrative Law as a contested case. The Administrative
Law Judge (ALJ) denied the Department's motion for summary decision,
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proceeded to conduct a two-day hearing, and issued a twenty-nine page Initial
Decision.
The ALJ characterized the "thrust of the dispute" as whether "Fisher
conducted adequate due diligence prior to suggesting the NFOA product to four
clients, and how much harm, if any, was done." The Department contended
proper investigation would have revealed the investment plans were always "too
good to be true," and Fisher, Regal, and Madden's conduct harmed elderly
clients.
Appellants argued they had researched NFOA, made reasonably prudent
choices, the investment plan was offered to only four clients to meet their
specific financial challenges, two clients received benefits they could not have
received elsewhere, and the other two clients sustained no harm. Fisher pointed
out that even though the IRS never approved Section 501(c)(3) charitable status
for NFOA, J.K. and M.K. actually received $30,000 in income tax benefits in
2006 and 2007. In addition, the timing of customers' sales of General Electric
stock to fund the NFOA purchase was highly favorable because, shortly
thereafter, the value of the stock plummeted sixty percent and never recovered.
As to counts one, two, and three, involving sales to J.K. and M.K., the
ALJ found, based on the exhibits and "Fisher's credible testimony," that "Fisher
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did conduct some research on the NFOA, which at the time appeared to have
both a legitimate Tennessee incorporation and pending charity application at the
IRS." The ALJ further found the IRS did not warn Fisher "that the charitable-
donation tax benefit would be yanked away from his client for the time it was
pending and not approved, and, indeed, it was not. For two tax years, J.K. and
M.K. were allowed to take the charitable deduction." The ALJ also found
talking to a NFOA competitor was a legitimate investigation technique. In
addition, the tax benefit and two liquidation payments left J.K. and M.K. whole,
even before FINRA added the restitution payment.
Notwithstanding these findings, the ALJ concluded that "on the company
side of [NFOA's] ledger, the plan made no financial sense." The plan "involved
three ways for the NFOA to lose money, with no compelling explanation of how
it could turn a profit, which is why it wound up in receivership. By its nature,
[the plan] was risky, and the Department's position is that insurance is not risky."
The ALJ stated, "selling what turns out to be a fraudulent product is at least
incompetent if not itself a fraudulent act." The ALJ determined the Department
proved selling NFOA plans "violated the prohibition against incompetence and,
in turn, against breaking the insurance laws." Selling a product that was "too
good to be true" breached the fiduciary duty owed to prospective purchasers.
A-5327-17T4
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As to counts four, five, and six, involving the sale to W.B., the ALJ found
Fisher presented a plan that would return $111,770.78 over ten years for an
investment of $111,258.05. It would also yield a tax deduction of $43,312,
resulting in tax savings of $10,828. This reduced W.B.'s gross income enough
to maintain her eligibility for Pharmaceutical Assistance to the Aged and
Disabled (PAAD) benefits. W.B. received an $18,000 payment from NFOA in
2007, and payments totaling $80,585.97 from the bankruptcy receiver, for a total
of $98,585.97. The value of an annuity that was transferred to NFOA was
$122,351.02. The 2012 FINRA settlement required Fisher to repay $15,896.25
to W.B. Thus, W.B. "was still out $15,896.25 from her original annuity" until
the FINRA settlement payment was made.
As to counts seven, eight, and nine, involving G.B. and M.B., the ALJ
found the Department made the same set of allegations against Fisher and Regal
as raised in the previous counts. G.B. and M.B. signed a contract with NFOA
to transfer $108,161.26 from an insurance policy in return for deferred payments
beginning in May 2022. "However, the shutdown of the NFOA occurred before
any funds were transferred, so no financial loss was sustained by" G.B. and M.B.
The ALJ found the Department proved all three counts.
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The ALJ noted counts ten, eleven, and twelve, involving D.C., "repeat the
allegations of breach of fiduciary duty, providing untrue and misleading
information, and representing an insurer not authorized to transact such
insurance in New Jersey." The ALJ found in favor of the Department.
The ALJ determined the Department had not proven counts thirteen,
fourteen, fifteen, and sixteen by a preponderance of the evidence.
Count seventeen alleged Madden failed to properly supervise Fisher and
Regal. Based on Madden's credible testimony, the ALJ found that Fisher and
Madden "offered the NFOA plan only after W.B. had turned down two other
ideas; that Madden relied on Fisher's accurate representation that [NFOA] was
licensed as a Tennessee corporation, . . . had an IRS charitable-tax status
application pending[,] and that Fisher had made attempts at other confirmation."
The ALJ also found "Madden directly participated in the recommendation of the
product without conducting independent due diligence on it." The ALJ
concluded the Department proved Madden failed to properly supervise Regal
and was vicariously liable for the acts of its partners, officers, and directors .
A-5327-17T4
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The ALJ then considered the seven Kimmelman 2 factors with respect to
imposing a penalty. She concluded "Fisher erred, but his mistake did not rise to
bad faith." His ability to pay monetary penalties was "very limited" based on
his 2015 income tax return. Fisher realized no profit from the sales because the
commissions were repaid to NFOA in 2007. As to injury to the public, the ALJ
found "the public is harmed when faith in the insurance markets is damaged by
illegal activity." The duration of the improper conduct was only five months.
The case did not involve criminal activity by Fisher, Regal, or Madden. FINRA
imposed a $47,258.90 restitution obligation, a $15,000 fine, and a six-month
suspension against Fisher. Madden was not named in the FINRA proceeding.
Fisher, Regal, and Madden had no past violations.
The ALJ recommended imposing an aggregate $4000 monetary penalty
on counts one, four, seven, and ten; an aggregate $6000 monetary penalty on
counts two, five, eight, and eleven; a $500 monetary penalty on count two; an
2
Kimmelman v. Henkels & McCoy Inc., 108 N.J. 123, 137-39 (1987). The
Kimmelman factors may be summarized as follows: (1) the good or bad faith
of the defendant, (2) the defendant’s ability to pay, (3) the amount of profits
defendant gained as a result of the illegal activity, (4) the injury to the public,
(5) the duration of the conspiracy or scheme, (6) whether criminal or treble
damages actions have been filed, and whether "[a] large civil penalty may be
unduly punitive if other sanctions have been imposed for the same violation of
the [same statute]," and (7) whether past violations occurred. Id. at 137-40.
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aggregate $400 monetary penalty on counts three, six, nine, and twelve; and a
$2000 monetary penalty on count 17. Fisher and Regal were made jointly and
severally liable for the monetary penalties on counts one through twelve,
totaling $10,900. Madden was made individually liable for the $2000 monetary
penalty on count seventeen. Finally, the ALJ concluded license revocation was
not warranted, and license suspension should be imposed only if Fisher, Regal,
or Madden "fail to comply with the payment of penalties within a reasonable
time."
The Department filed written exceptions to the ALJ's Initial Decision
regarding proof of certain allegations, the amount of the monetary penalties
imposed, and the determination not to revoke or suspend Fisher's insurance
producer license. Appellants opposed those exceptions, but did not seek to
overturn the ALJ's recommendations.
The Commissioner adopted the findings that the Department met its
burden of proof as to counts one through twelve and seventeen but not counts
fifteen and sixteen. The Commissioner rejected the finding that the Department
failed to prove counts thirteen and fourteen.
Count thirteen alleged Fisher failed to timely notify the Department of the
FINRA disciplinary proceeding in violation of N.J.S.A. 17:22A-47(c). The
A-5327-17T4
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statute also requires the notification to "include a copy of the order, consent
order or other relevant legal documents." Ibid. The Commissioner found the
Department had no record of any such notification and Fisher "failed to provide
any written communication to the Department as proof that he complied with
the notification requirement." The Commissioner also concluded that any
purported oral notification is insufficient to satisfy the reporting requirement.
Similarly, count fourteen alleges Fisher violated N.J.S.A. 17:22A-
40(a)(19) by failing to timely notify the Department of the disposition of the
FINRA disciplinary proceedings and the March 2012 settlement order. The
Commissioner noted the Department had no record of such notification and
Fisher "failed to provide any written communication to the Department as proof
that he complied with the notification requirement." Although she found the
record unclear whether oral notification was provided, the Commissioner again
concluded oral notification did not satisfy the reporting requirement .
The Commissioner then considered the sanctions to be imposed. She first
addressed the appropriate monetary penalties to be imposed by application of
the Kimmelman factors.
As to the first factor, addressing the good or bad faith of the violator, the
Commissioner noted that under the IPLA, "bad faith need not be proven by
A-5327-17T4
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actual intent or malice because the Act does not require proof of intent.
Moreover, after the fact attempts to 'cure' the results of the improper conduct are
not dispositive." (Citations omitted). The Commissioner emphasized the
following findings by the ALJ:
Fisher, as an experienced insurance producer, did not
reasonably conduct due diligence regarding the NFOA
or their product prior to recommending it to his elderly
clients. These elderly clients, upon Fisher's
recommendation, took their life savings from legitimate
insurance products and transferred those monies to a
company that had not been properly vetted, despite
numerous "red flags," jeopardizing their financial
futures.
The Commissioner rejected applying the so-called "rule of reason" test,
because it "should not be applied in consumer protection oriented cases where
noncompliance would directly injure the public and is only appropriate in
matters that are inherently business or competition oriented." The
Commissioner noted, "producer misconduct—like selling impermissible
insurance products that cannot provide the benefits promised elderly clients —
can directly injure consumers." The Commissioner concluded the "rule of
reason" test should not be applied to licensed insurance producers because they
"are held to a higher standard of conduct." The Commissioner found appellants
"did not conduct sufficient due diligence into the legitimacy or legality of this
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product or the NFOA as was their duty as licensed insurance producers under
the insurance laws of this State." Although the Commissioner found that
appellants' "cooperation with regulatory bodies and repayment of commissions
after the fact is commendable, it does not excuse their reckless behavior, nor
does it demonstrate that [their] actions were not undertaken in bad faith." The
Commissioner found "Fisher and Regal's conduct rose to bad faith and that this
factor weighs in favor of a significant monetary penalty."
As to the second factor, the Commissioner agreed with the ALJ that Fisher
provided proof of a limited ability to pay fines. She noted, however, that "an
insurance producer's ability to pay is only a single factor to be considered in
determining an appropriate fine and does not obviate the need for the imposition
of an otherwise appropriate monetary penalty."
The third factor addresses the amount of profits obtained or likely to be
obtained from the unlawful conduct. The Commissioner noted the penalty must
be proportional to the potential profits resulting from the illegal conduct to have
a deterrent effect, citing Kimmelman, 108 N.J. at 138. She found the
commissions would have been far higher than the $37,489.75 stated in the Initial
Decision if the Tennessee regulatory authorities did not intercede. Absent such
intervention, "there is no evidence that Fisher and Regal would have stopped
A-5327-17T4
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recommending this product to their clients." The Commissioner found this
weighed in favor of a significant monetary penalty.
The fourth factor addresses injury to the public. The Commissioner
emphasized that licensed producers are fiduciaries. The Commissioner must
"protect the public welfare" and "instill public confidence in both insurance
producers and the insurance industry." "[T]he public's confidence in a
producer's honesty, trustworthiness and integrity is of paramount concern."
Breach of fiduciary duties, fraudulent conduct, and unfair trade practices
financially harm insurance consumers and erode public confidence in the
insurance industry. The Commissioner determined a significant monetary
penalty was warranted because Fisher and Regal's conduct resulted in a
substantial harm to their clients and the public.
"Fisher's reckless incompetence put his clients in jeopardy of losing their
life savings and deprived his clients of their ability to use their money as they
saw fit. When his clients were repaid, they were not made whole for several
years and were repaid without interest." The Commissioner found Fisher and
Regal's conduct harmed their elderly clients, the public's confidence in insurance
producers, and the public's perception of the profession as a whole. She found
this factor weighed heavily in favor of a significant penalty.
A-5327-17T4
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The fifth factor addresses the duration of the misconduct. The
Commissioner found appellants' conduct was of relatively short duration,
occurring during five nonconsecutive months spread over two years.
The sixth factor addresses criminal penalties and other sanctions imposed
against the violator. Here, appellants were not criminally prosecuted. The
Commissioner determined that the $15,000 fine, $47,258.90 in restitution, and
a six-month suspension imposed by FINRA did not weigh in favor of mitigation
or negate the need for a substantial monetary penalty.
The seventh factor concerns prior violations. The Commissioner agreed
with the ALJ that appellants had no past violations. Thus, this factor weighed
in favor of mitigation.
Based on this analysis of the Kimmelman factors, the Commissioner
determined that the nature of appellants' violations warranted substantially
higher monetary penalties than those imposed by the ALJ. The Commissioner
increased the aggregate penalty assessment on counts one through twelve to
$60,000 against Fisher and Regal, for which they were jointly and severally
liable. She imposed an aggregate $5000 penalty against Fisher individually on
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counts thirteen and fourteen. The penalty against Madden on count seventeen
was increased from $2000 to $5000. 3
The Commissioner concluded the record compelled the revocation of
Fisher's producer license. She found his "pattern of misrepresentation" related
to over $800,000 in sales of annuities to senior citizens over eighty years old.
Fisher induced four clients "to divest their life savings from legitimate financial
products and invest that money in a product that Fisher had failed to vet prior to
his recommendation." He promoted a product that "he should have known" was
"too good to be true," yet "was not troubled enough by these enchanted promises
to investigate any further." He solicited sales of "an annuity without knowing
what it was he was selling to his elderly clients." His misconduct only ceased
upon intervention by Tennessee regulatory authorities. His misbehavior was
aggravated by his sale of products that were not permitted to be sold in New
Jersey by an insurer that was not permitted to do business in this State. Fisher's
testimony "indicates that he did not concern himself with the ramifications of
recommending elderly clients to invest in a product that could jeopardize their
3
Appellants have not briefed the issue of the sanctions imposed against
Madden. We have authority to deem the issue waived. See Sklodowsky v.
Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011) ("An issue not briefed on
appeal is deemed waived."). In any event, based on the record and the applicable
law, we discern no reason to disturb the sanctions against him, either.
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life savings." The Commissioner determined Fisher's breach of trust and
fiduciary duties through "gross incompetence" "constitut[ed] a gross deviation
from the standard of care required of insurance producers."
The Commissioner also found revocation of Regal's insurance producer
license was appropriate, since it was vicariously liable for Fisher's actions under
N.J.S.A. 17:22A-40(c).
This appeal followed. Appellants argue: (1) the penalties imposed are so
punitive and disproportionate to the offenses as to shock the sense of fairness
and reasonableness; (2) the penalty of revocation is at odds with the trial
testimony and exhibits, appellants' clean record, the ALJ's findings and decision,
case law, and other enforcement actions and settlements; and (3) the final
decision misapplied the Kimmelman factors.
II.
Established precedents guide our task on appeal. Our scope of review of
an administrative agency’s final determination is limited. In re Herrmann, 192
N.J. 19, 27 (2007). "A strong presumption of reasonableness attaches to the
actions of administrative agencies." In re Vey, 272 N.J. Super. 199, 205 (App.
Div.1993), aff’d, 135 N.J. 306 (1994). The burden is upon the appellant to
demonstrate grounds for reversal. McGowan v. N.J. State Parole Bd., 347 N.J.
A-5327-17T4
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Super. 544, 563 (App. Div. 2002). "However, we are not bound by the agency’s
interpretation of a statute or resolution of a question of law." In re Carroll, 339
N.J. Super. 429, 437 (App. Div. 2001) (citing In re Taylor, 158 N.J. 644, 658
(1999)).
Thus, we will "not disturb an administrative agency’s determinations or
findings unless there is a clear showing that (1) the agency did not follow the
law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the
decision was not supported by substantial evidence." In re Application of
Virtua-West Jersey Hosp. Voorhees, 194 N.J. 413, 422 (2008).
An agency has "broad discretion in determining the sanctions to be
imposed for a violation of the legislation it is charged with administering. " In
re Scioscia, 216 N.J. Super. 644, 660 (App. Div. 1987) (citation omitted). It is
not our place to second-guess or substitute our judgment for that of the agency
and, therefore, we do not "engage in an independent assessment of the evidence
as if [we] were the court of first instance." Taylor, 158 N.J. at 656 (quoting
State v. Locurto, 157 N.J. 463, 471 (1999)). An appellate court "may not vacate
an agency determination because of doubts as to its wisdom or because the
record may support more than one result," but it is "obliged to give due deference
to the view of those charged with the responsibility of implementing legislative
A-5327-17T4
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programs." In re N.J. Pinelands Comm’n Resolution, 356 N.J. Super. 363, 372
(App. Div. 2003).
Applying these principles, we discern no basis for disturbing the
Commissioner’s reasoned determination. We affirm substantially for the
reasons set forth in the Commissioner’s comprehensive written decision. We
add the following comments.
The Commissioner's power to impose sanctions is broad in scope. The
Commissioner has the discretion to "place on probation, suspend, revoke, or
refuse to issue or renew an insurance producer's license or may levy a civil
penalty," N.J.S.A. 17:22A-40(a), "not exceeding $5000 for the first offense, and
not exceeding $10,000 for each subsequent offense," N.J.S.A. 17:22A-45(c).
Such sanctions are properly imposed, in part, to deter similar conduct in the
future by the violator and those similarly situated. Sanctions serve to protect
consumers from conduct that violates the fiduciary obligations, high standards,
and expertise required of insurance producers.
Our deferential standard for reviewing agency actions "applies to the
review of disciplinary sanctions as well." Herrmann, 192 N.J. at 28. Thus, our
"review of an agency's choice of sanction is limited." In re License Issued to
Zahl, 186 N.J. 341, 353 (2006). "Deference is appropriate because of the
A-5327-17T4
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‘expertise and superior knowledge’ of agencies in their specialized fields and
because agencies are executive actors[.]" Ibid. (citations omitted) (quoting
Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)). A
reviewing court:
will modify a sanction only when necessary to bring the
agency’s action into conformity with its delegated
authority. The [c]ourt has no power to act
independently as an administrative tribunal or to
substitute its judgment for that of the agency. It can
interpose its views only where it is satisfied that the
agency has mistakenly exercised its discretion or
misperceived its own statutory authority.
[Id. at 353-54 (quoting In re Polk License Revocation,
90 N.J. 550, 578 (1982)).]
We review administrative sanctions to determine "whether such
punishment is so disproportionate to the offense, in light of all the
circumstances, as to be shocking to one’s sense of fairness." Herrmann, 192
N.J. at 28-29 (quoting Polk, 90 N.J. at 578).
Applying those principles of deference to the facts in this case, we hold
the Commissioner was within the bounds of her statutory authority and
discretion by imposing the civil penalties and license revocations.
The Commissioner found appellants breached the fiduciary duty they
owed to their clients through their reckless and incompetent conduct. They sold
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expensive fraudulent investment plans to their elderly clients without
conducting even rudimentary investigation of NFOA, a company that had not
received Section 501(c)(3) approval from the IRS and was not authorized to sell
the investment plan in New Jersey. This placed their clients at risk of suffering
an $800,000 loss of lifetime savings upon which they depended for financial
security. While the commissions were refunded, it took years for the restitution
to be paid, which did not include interest.
The Commissioner noted that an insurance producer's "honesty,
trustworthiness and integrity are of paramount concern, since an insurance
producer acts as a fiduciary to both the consumers and insurers they represent. "
Consequently, "a producer is held to a high standard of conduct." The
Commissioner found Fisher "engaged in a pattern of misrepresentation related
to sales of annuities to senior citizens amounting to just over $800,000 over the
course of five months." The Commissioner noted his sales of the fraudulent
plans only ceased upon notification by Tennessee regulators that NFOA was
under investigation.
The Commissioner may revoke a producer's license for any violation of
IPLA. N.J.S.A. 17:22A-40(a). Thus, revocation may be based on conduct other
than fraud, such as "incompetence, untrustworthiness or financial
A-5327-17T4
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irresponsibility in the conduct of insurance business." N.J.S.A. 17:22A-
40(a)(8).
The Commissioner found that revocation of Fisher's producer license was
appropriate and necessary due to "Fisher's breach of his fiduciary duties through
his gross incompetence" that "constitutes a gross deviation from the standard of
care required of insurance producers in this State." The Commissioner
concluded "the egregiousness of [Fisher's] misconduct [was] aggravated by his
sale of products that were not permitted for sale in New Jersey and from an
unauthorized insurer that was not permitted to do business in New Jersey. "
Those findings and conclusions are fully supported by the record.
Pursuant to N.J.S.A. 17:22A-40(c), Regal is vicariously liable for the
actions and inactions of Fisher and Madden, its sole members and owners. The
Commissioner found Fisher's conduct and Madden's failure to supervise the
actions of Fisher and Regal, made it necessary and appropriate to revoke Regal's
producer license. We find no basis to disturb that finding.
Appellants contend the Commissioner erred by not expressly considering
the Kimmelman factors in determining license revocation was warranted. We
disagree. Kimmelman involved per diem monetary penalties, not license
suspension or revocation. The Kimmelman factors are utilized in determining
A-5327-17T4
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whether any particular fine is appropriate, not to determine if an insurance
producer's license should be suspended or revoked. See Kimmelman, 108 N.J.
at 137 (noting it was the Court's "first decision relating to the calculation of civil
penalties" and "delineat[ing] some of the factors that courts should consider in
setting civil penalties"). Appellants provide no published precedent to the
contrary. In any event, even if the Kimmelman factors were legally pertinent to
licensure suspension and revocation issues, much of the analysis of those factors
in the Commissioner's decision logically and substantially pertain to the non-
monetary sanctions in this case.
Finally, Fisher and Regal argue the fines imposed were excessive. 4 We
disagree.
Administrative penalties "must be tested for reasonableness as applied to
the specific facts involved." In re Garay, 89 N.J. 104, 115 (1982). Aside from
consideration of the Kimmeman factors, the Commissioner may also consider
the need for deterrence when determining the appropriate monetary penalty.
Kimmelman, 108 N.J. at 129; In re Midland Ins., 167 N.J. Super. 237, 256 (App.
Div. 1979).
4
As we have already noted, appellants did not brief the alleged excessiveness
of the monetary penalty imposed on Madden. See supra note 3.
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The insurance industry uniquely affects the public interest and the
Commissioner is charged with the duty to protect the public welfare. See, e.g.,
Sheeran v. Nationwide Mut. Ins., 80 N.J. 548, 559 (1979). Civil monetary
penalties are an effective enforcement device that "deter future unlawful
behavior by the [violator] and those similarly situated." Kimmelman, 108 N.J.
at 129 (citing Colin S. Diver, The Assessment and Mitigation of Civil Money
Penalties by Federal Administrative Agencies, 79 Colum. L. Rev. 1435, 1456
(1979)).
The Commissioner carefully considered and weighed each of the
Kimmelman factors and determined appellants should pay a substantial
monetary penalty for each violation they committed. The Commissioner's
findings were based upon substantial, credible evidence in the record. With all
due respect to the ALJ's evaluation of sanctions, the Commissioner has the final
word as regulator and did not misapply her authority in strengthening them.
Although these were appellants' first violations, they jeopardized the lifetime
savings of elderly investors through purchasing investment plans that were
nothing more than part of a large scale Ponzi scheme. The decision to impose
substantial monetary sanctions was reasonable given the nature of the violations,
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the magnitude of the investments involved, and the need for deterrence.5 We
discern no abuse of discretion.
In sum, the Commissioner's final decision is consistent with the law and
was not arbitrary, capricious, or unreasonable. The monetary sanctions and
license revocations were statutorily authorized and are not "shocking to [our]
sense of fairness." Herrmann, 192 N.J. at 29 (quoting Polk, 90 N.J. at 578). We
therefore affirm the revocation of Fisher and Regal's insurance producer licenses
and the monetary penalties imposed.
Affirmed.
5
In their brief, appellants refer to the Department's settlement offer they had
rejected in support of their argument that the sanctions were excessive or unduly
punitive. Settlement offers do not constitute an admission and are not
admissible. N.J.A.C. 1:1-15.10. Disclosing a settlement offer in an appellate
brief is ordinarily "highly inappropriate." Vastano v. Algeier, 178 N.J. 230, 242
(2003) (citing N.J.R.E. 408). Accordingly, we do not consider the settlement
offer.
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