MARLENE CARIDE, COMMISSIONER, NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE VS. CATARINA YOUNG (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NOT FOR PUBLICATION WITHOUT THE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-5419-17T4
MARLENE CARIDE, COMMISSIONER
NEW JERSEY DEPARTMENT OF
BANKING AND INSURANCE,
Petitioner-Respondent,
v.
CATARINA YOUNG,
Respondent-Appellant,
and
ELITE BENEFITS CORPORATION,
Respondent.
_________________________________
Submitted September 25, 2019 – Decided October 25, 2019
Before Judges Koblitz, Gooden Brown and Mawla.
On appeal from the New Jersey Department of Banking
and Insurance, Agency Docket Nos. E15-44.
Law Office of Jarred S. Freeman, LLC, attorneys for
appellant (Hamill R. Patel, on the brief).
Gurbir S. Grewal, Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Ryan Shawn Schaffer, Deputy
Attorney General, on the brief).
PER CURIAM
Respondent Catarina Young appeals from a June 11, 2018 order of the
Commissioner of the New Jersey Department of Banking and Insurance (the
Department), affirming with modifications the decision of the Administrative
Law Judge (ALJ) and assessing penalties of $299,8651 for defrauding an
employee health care plan. We affirm in part and reverse in part, vacating the
penalties imposed for fraudulent activity that occurred outside the ten-year
statute of limitations.
Respondent was a designated responsible license producer and part owner
of Elite Benefits Corp. (Elite),2 which managed and brokered health care plans
for the Multi-Skilled Employees and Employers Welfare Trust Fund (Fund).
Horizon Blue Cross and Blue Shield (Horizon) provided health insurance.
Under the policy, only employees and their dependents were eligible for
coverage. From 2006 through 2008, respondent enrolled her parents, who were
1
We round all monetary amounts to the nearest dollar.
2
Elite is not a party to this appeal.
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neither employees nor dependents of employees. As a result, the Fund paid
premiums and Horizon honored claims on behalf of respondent's parents. In
addition, from 2003 through 2006, respondent stole almost one-half million
dollars from the Fund.
In 2014, respondent was convicted after a jury trial of theft of $462,342
from the Fund. The following year, the Department filed an order to show cause
alleging that respondent and Elite violated the New Jersey Insurance Producer
Licensing Act of 2001, N.J.S.A. 17:22A-26 to -57 (Producer Act) and the New
Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -34 (Fraud Act).
The Department alleged that respondent and Elite illegally enrolled respondent's
parents in the health insurance policy, and respondent misappropriated $462,342
from the Fund by 102 separate transactions. The ALJ granted summary decision
in favor of the Department and imposed a total civil penalty of $39,865. The
Commissioner adopted the ALJ's decision, with modifications, increasing the
civil monetary penalty to $299,865.
On appeal, respondent argues that the Department's claims were barred by
the statute of limitations; the Commissioner erred in granting summary decision
because respondent presented an issue of fact; and also erred in imposing
excessive fines.
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The Commissioner determined that under the Producer Act, a $2500
penalty was appropriate for each of respondent's 102 misappropriations of Fund
money, even though forty-one of these checks fell outside the ten-year statute
of limitations period. In addition to ordering respondent to pay the penalty of
$255,000, the Commissioner adopted the ALJ's recommendation and imposed
$22,865 in attorney fees. The Commissioner modified the $2000 Fraud Act
surcharge to impose $1000 against respondent, and $1000 against Elite,
individually. The Commissioner also adopted the ALJ's recommendation to
revoke respondent's and Elite's producer licenses.
I. Factual background.
During 2006, 2007, and 2008, Horizon provided health insurance to the
Fund's members and their dependents. In June 2006, respondent improperly
enrolled her father in the policy as an employee and her mother as her father's
dependent.
Respondent admitted that she enrolled her parents in the Fund's health
insurance program, but claimed it was with the permission of the trustees and
attorney of the fund. She maintained that "many" who were not eligible
employees or dependents of employees were enrolled in the fund. Respondent
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did not contest the revocation of her license. As for the misappropriation of
$462,342, respondent admitted the convictions and stated:
I was incarcerated for [thirteen] months; [four] months
at Middlesex County Jail and [nine] months at Edna
Mahan Correctional Facility. I am currently home on
ISP.[3]
....
I am opposing the fines because all the transactions that
took place were done with the approval of at least one
of the trustees. [The criminal court] requested an
affidavit from the employer trustees stating how much
money was missing from the fund and never received
anything. That was the basis of [the criminal court] not
ordering restitution.
II. ALJ findings.
The ALJ found that respondent and Elite violated the Fraud Act when
respondent enrolled her parents in the Fund's health insurance plan. As a result
of respondent's misconduct, the Fund paid $12,197 in health care premiums, and
Horizon paid $13,893 in claims, on behalf of her parents.
The ALJ also found that both respondent's and Elite's conduct violated the
Producer Act because it "violated their fiduciary duty to the Fund," and for the
3
ISP refers to the Intensive Supervision Program. R. 3:21-10(b).
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Fund to pay "insurance premiums for [respondent's] parents was tantamount to
fraud in the conduct of insurance business . . . ."
The ALJ determined there was no factual dispute that respondent took
money from the Fund because she was convicted of second-degree theft by
unlawful taking of $462,342, N.J.S.A. 2C:20-3, and second-degree
misapplication of entrusted property, N.J.S.A. 2C:21-15. Respondent also
violated the Producer Act by being convicted of serious crimes. N.J.S.A.
17:22A-40(a)(6), (8) and (16).
The ALJ then considered what civil penalties would be appropriate under
Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123 (1987). In Kimmelman,
our Supreme Court established seven factors for courts to consider when
imposing civil penalties: (1) "[t]he good or bad faith of respondent";
(2)"[d]efendant's ability to pay"; (3) the "[a]mount of profits obtained from
illegal activity"; (4) any "[i]njury to the public"; (5) the "[d]uration of the
conspiracy"; (6) the "[e]xistence of criminal or treble damages actions"; and (7)
any "[p]ast violations." 108 N.J. at 137–39.
The ALJ found the following aggravating Kimmelman factors: respondent
took $462,342 from the Fund in bad faith and the lengthy duration of
respondent's conduct.
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With regard to mitigating factors, the ALJ found that respondent did not have
sufficient assets to pay the more than one million dollars sought by the
Department. The ALJ also found insufficient proof that respondent profited by
stealing from the Fund or that respondent's misappropriation injured the public.
The ALJ found respondent had been punished by being criminally convicted,
incarcerated, and fined for her actions; and she had no prior violations. The ALJ
determined that the Department was entitled to $39,865: $10,000 for two
violations of both the Producer Act and the Fraud Act (the illegal enrollment);
$5000 for respondent's misappropriation of money for her personal benefit (the
misappropriation); a $2000 Fraud Act surcharge; and $22,865 in attorney fees.
III. Commissioner's findings.
The Commissioner adopted the findings of the ALJ, with modifications.
The maximum fines that may be imposed under the Fraud Act are $5000 for the
first violation, $10,000 for the second violation, and $15,000 for each
subsequent violation. N.J.S.A. 17:33A-5(a) and (b). The Commissioner may
also order restitution, costs, and attorney fees. Under the Producer Act, the
Commissioner may impose maximum penalties of $5000 for the first offense
and $10,000 for each subsequent offense. N.J.S.A. 17:22A-45(c).
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The Commissioner concurred with the ALJ's findings that summary
decision was appropriate against both respondent and Elite for the illegal
enrollment, and against respondent alone for misappropriation. The
Commissioner modified the ALJ's findings to specify that respondent violated
N.J.S.A. 17:22A-40(a)(2) ("violating any insurance laws"); N.J.S.A. 17:22A-
40(a)(4) ("improperly withholding, misappropriating or converting any monies
or properties received in the course of doing insurance business"); and N.J.A.C.
11:17A-4.10 ("an insurance producer acts in a fiduciary capacity in the conduct
of his or her insurance business").
The Commissioner found that the record was "more than sufficient to
support the ALJ's recommendation" that respondent's and Elite's licenses be
revoked. The Commissioner determined that it was appropriate to impose
penalties under both the Fraud Act and Producer Act because both had been
violated. As for respondent's misappropriation of Fund money, the
Commissioner found that each of the 102 thefts was "a separate
misappropriation; and thus, a separate violation of the Producer Act." She found
that "[s]eparate civil penalties should be assessed for each act . . . ."
Proceeding to the Kimmelman factors, the Commissioner noted that the
ALJ found respondent lacked the ability to pay based on a single tax return,
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stating that respondent did "clerical work as an independent contractor," earning
approximately $10,000 per year. The Commissioner attributed the low income
on respondent's 2015 tax return to her incarceration. The record did not contain
any other information regarding respondent's ability to pay. The Commissioner
found that ability to pay provided only "limited mitigation."
The Commissioner disagreed with the ALJ, finding respondent profited
and injured the public when she took $462,342 from the Fund. The
Commissioner determined that just because the criminal court did not order
restitution did not mean the Fund did not suffer a loss. Respondent's claims that
she made loans to the Fund in 2002 did not explain why she misappropriated
$462,342 between November 2003 and December 2006, given that she provided
no loan or other accounting documentation to support her claim.
The Commissioner determined that respondent "caused actual harm" to
the Fund and "the unions and members who comprised the Fund" when she took
the money. The Commissioner also considered "less tangible forms of harm"
such as the costs of the insurance companies' investigations being passed to "the
insurance buying public," and the "erosion of the continued confidence of the
public in the integrity of insurance producers . . . ." The Commissioner found
that the duration of illegal activity, "weigh[ed] strongly in favor of a significant
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penalty." Respondent's conduct "demonstrated a pattern and practice of
misconduct."
As for whether imposing a civil penalty for respondent's criminal actions
would be unduly punitive in light of other punishments imposed by the criminal
process, the Commissioner reasoned that the lack of criminal punishment for
fraudulently enrolling respondent's parents in the policy "weigh[ed] in favor of
a more significant civil penalty because the respondent cannot argue that . . . she
has already paid a price for . . . her unlawful conduct." The Commissioner did
find, however, that respondent's criminal sanctions for the misappropriation of
the Fund's money "weigh[ed] in favor of mitigating the severity of the sanctions
imposed in this matter."
Finally, the Commissioner found that respondent had no prior criminal
history, and there was no evidence that respondent or Elite previously violated
the Fraud Act or Producer Act.
Based on her analysis of the seven Kimmelman factors, the Commissioner
imposed $10,000 for the Producer Act violations and $10,000 for the Fraud Act
violations, for the illegal enrollment of respondent's parents in the health
insurance policy. The Commissioner then imposed a $255,000 penalty against
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respondent, $2500 "for each of the 102 thefts from the Fund . . . ." The
Commissioner explained:
These penalties are fully warranted, not excessive or
unduly punitive as the criminal matter imposed no
monetary sanctions and did not order restitution, and
are necessary to demonstrate the appropriate level of
opprobrium for such egregious and extended
misconduct by a licensed producer in this State.
Moreover, these penalties take into consideration the
limited proofs of an inability to pay and [respondent's]
criminal conviction for 102 misappropriations. Here,
[respondent's] misconduct was egregious because it
involved 102 separate invasions of the Fund's monies
and therefore warrants imposition of a significant fine.
This is significantly less than the maximum fine of
$1,0[20],000 [that the Department had requested] for
these 102 misappropriations under N.J.S.A. 17:22A-
45(c).
The Commissioner also awarded the Department $22,865 in attorney fees,
shared jointly and severally between respondent and Elite. The Commissioner
agreed with the ALJ that the $2000 Fraud Act surcharge under N.J.S.A. 17:33A-
5.1 was appropriate, but modified the ALJ's decision so that $1000 was imposed
against respondent, and $1000 was imposed against Elite, individually.
IV. Legal discussion.
Our review of an administrative agency's decision is limited. Circus
Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9 (2009).
This court "does not substitute its judgment of the facts for that of an
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administrative agency." Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 587
(2001). Rather, we "defer to matters that lie within the special competence" of
the administrative agency. Balagun v. Dep't of Corr., 361 N.J. Super. 199, 202
(App. Div. 2003). "However, a reviewing court is 'in no way bound by [an]
agency's interpretation of a statute or its determination of a strictly legal issue.'"
Allstars Auto Grp., Inc. v. N.J. Motor Vehicle Comm'n, 234 N.J. 150, 158 (2018)
(alteration in original) (quoting Dep't of Children & Families, DYFS v. T.B.,
207 N.J. 294, 302 (2011)).
"Ordinarily, an appellate court will reverse the decision of the
administrative agency only if it is arbitrary, capricious or unreasonable or it is
not supported by substantial credible evidence in the record as a whole." Mejia
v. Dep't of Corr., 446 N.J. Super. 369, 376 (App. Div. 2016) (quoting Henry v.
Rahway State Prison, 81 N.J. 571, 579–80 (1980)).
A. Statute of limitations.
Respondent argues that the decisions of the ALJ and Commissioner should
be reversed because the Department's claims were barred by the statute of
limitations. Pointing to N.J.S.A. 2A:14-1.2, which sets a ten-year statute of
limitations, respondent argues that any check or wire transfer she may have
made to herself from the Fund between November 17, 2003 and April 25, 2005
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may not be considered because the Department did not file its first order to show
cause until April 28, 2015. 4
A ten-year statute of limitations governs this action. N.J.S.A. 2A:14-
1.2(a) (stating that unless otherwise provided by statute, "any civil action
commenced by the State shall be commenced within ten years next after the
cause of action shall have accrued"); Cumberland Cty. Bd. of Chosen
Freeholders v. Vitetta Grp., P.C., 431 N.J. Super. 596, 603 (App. Div. 2013)
(stating that N.J.S.A. 2A:14-1.2 "is a statute of limitations governing civil
actions commenced by the State or its political subdivisions").
In the criminal context, "when a respondent engages in a course of conduct
or single scheme to obtain property of another by deception from one or several
persons, that conduct is a continuous offense for purposes of the statute of
limitations." State v. Diorio, 216 N.J. 598, 619 (2014). A course of conduct or
"continuing offense" is one that "involves conduct spanning an extended period
of time and generates harm that continues uninterrupted until the course of
conduct ceases." State v. Twiggs, 233 N.J. 513, 528 (2018) (quoting State v.
Jones, 445 N.J. Super. 555, 568 (App. Div. 2016)). When the jury found
4
The Department concedes that respondent raised the statute of limitations issue
administratively, but posits that it was not addressed in either decision because
"it apparently did not merit discussion by either the ALJ or the Commissioner."
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respondent guilty of these crimes, it aggregated the amount of money involved,
finding that she unlawfully stole $462,342. As a result of this finding,
respondent was sentenced for second-degree crimes. N.J.S.A. 2C:20-2(b)(1)(a);
N.J.S.A. 2C:21-27(a).
Reviewing the facts in the civil context, both the ALJ and Commissioner
viewed respondent's thefts as 102 "separate conversion[s] of monies" or
"separate violations of the Producer Act." In imposing a penalty, the
Commissioner stated numerous times that each of the 102 thefts from the Fund
was a separate offense. Because the Commissioner treated respondent's
behavior as 102 separate thefts, the Department is barred from seeking civil
monetary penalties for forty-one of the thefts, which occurred outside of the
statute of limitations window.
The Department argues it should receive the benefit of the "discovery
rule." The discovery rule, "provides that in an appropriate case a cause of action
will be held not to accrue until the injured party discovers, or by an exercise of
reasonable diligence and intelligence should have discovered that he may have
a basis for an actionable claim." Lopez v. Swyer, 62 N.J. 267, 272 (1973). "The
discovery rule is essentially a rule of equity" that allows a plaintiff relief from a
statute of limitations bar. Id. at 272–73. The Department failed to demonstrate
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"harsh results" if respondent is not penalized for the forty-one thefts that fall
outside the limitations period. See Vispisiano v. Ashland Chem. Co., 107 N.J.
416, 426 (1987) ("The essential purpose of the [discovery] rule is to avoid harsh
results that otherwise would flow from mechanical application of a statute of
limitations.").
B. Summary decision appropriate.
Respondent argues that the Fraud Act and Producer Act were not at issue
during her criminal proceedings because she was charged with theft by unlawful
taking and misapplication of entrusted property. Respondent maintains that a
hearing should therefore have been held. But respondent's underlying
admissions and convictions constitute violations of those two acts.
A summary decision "may be rendered if the papers and discovery which
have been filed, together with the affidavits, if any, show that there is no genuine
issue as to any material fact challenged and that the moving party is entitled to
prevail as a matter of law." N.J.A.C. 1:1-12.5(b). This standard is similar to
the rule governing a motion for summary judgment. R. 4:46-2(c).
Respondent admitted in her answer that she enrolled her parents, who
were not eligible employees, in the policy, and her defense that others were
doing the same was rejected. As for the misappropriation of Fund money,
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respondent also admitted in her answer that she was criminally convicted of
second-degree theft by unlawful taking or disposition and second-degree
misapplication of entrusted property.
The jury verdict sheet states:
[B]etween on or about November 17, 2003 and on or
about December 26, 2006 . . . [respondent] knowingly
and unlawfully [took] or exercise[ed] unlawful control
over the movable property of another in an amount of
$75,000 or more . . . in an amount of approximately
$462,34[2]belonging to [the Fund], with the purpose to
deprive [the Fund].
The rule against hearsay includes the following exception for judgments
of a previous conviction of a crime: "[i]n a civil proceeding, except as otherwise
provided by court order on acceptance of a plea, evidence of a final judgment
against a party adjudging the party guilty of an indictable offense in New Jersey
[is admissible] . . . against that party, to prove any fact essential to sustain the
judgment." N.J.R.E. 803(c)(22).
C. Fines appropriate.
Respondent argues the monetary sanctions were overly harsh. She
contests the Commissioner's findings concerning the Kimmelman factors.
Respondent asserts that she did not act in bad faith because "[s]he received
permission from the two [F]und trustees and the [F]und attorney to enroll her
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parents in the [F]und." The Commissioner rejected this explanation. With
regard to stealing from the Fund, she claims she was reimbursing herself for
money she had lent the Fund. The criminal jury, however, found to the contrary.
The Commissioner had substantial credible evidence in the record as a whole to
make her Kimmelman factor determinations.
Respondent also argues that the Commissioner's penalties violated
N.J.S.A. 17:33A-5(b) and (c) which set the maximum penalties of "not more
than $5,000 for the first violation, $10,000 for the second violation and $15,000
for each subsequent violation." The Commissioner assessed $2500 for each
violation, consistent with this statute. Respondent points to the criminal statute,
N.J.S.A. 2C:20-2(b)(4), which allows for the consolidation of theft offenses, to
argue that her misconduct should only constitute one act instead of 102 acts.
Respondent maintains that her "offense involved adding her parents to Horizon's
health plan and every event that followed was part of one plan or scheme." We
do not accept this argument for civil sanctioning purposes. It conflicts with the
determination that forty-one of the acts were outside the statute of limitations.
The Commissioner had the authority to view each transaction as a separate
violation.
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This court's review of an agency's sanction decision is limited. In re
License Issued to Zahl, 186 N.J. 341, 353 (2006). "Courts generally afford
substantial deference to the actions of administrative agencies . . . ." Ibid. This
is because agencies have "expertise and superior knowledge" of their specialized
fields, and because they are "executive actors." Ibid. (quoting Greenwood v.
State Police Training Ctr., 127 N.J. 500, 513 (1992)). Courts "ha[ve] no power
to act independently as an administrative tribunal or to substitute its judgment
for that of the agency" unless they are "satisfied that the agency has mistakenly
exercised its discretion or misperceived its own statutory authority." In re Polk,
90 N.J. 550, 578 (1982). "[T]he test in reviewing administrative sanctions is
'whether such punishment is "so disproportionate to the offense, in the light of
all the circumstances, as to be shocking to one's sense of fairness."'" Ibid.
(quoting Pell v. Board of Educ., 34 N.Y.2d 222, 233 (1974)).
The Commissioner imposed a total penalty of $299,865, 5 less than the
$462,342 respondent illegally took from the Fund. The Department sought
$1,020,000 for the 102 misappropriations. The Commissioner's total penalty
was not "so disproportionate to the offense, in the light of all the circumstances,
5
On remand the penalty will be decreased by the $102,500 imposed for the
forty-one incidents that fell outside the statute of limitations.
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as to be shocking to one's sense of fairness." Ibid. (quoting Pell, 34 N.Y.2d at
233).
Affirmed in part, reversed in part, and remanded to the Commissioner to
vacate the penalties imposed for the forty-one transactions that occurred prior
to the statute of limitations window. We do not retain jurisdiction.
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