OAH 11-1004-21714-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF COMMERCE

In the Matter of the Application for an Insurance Producer’s License of Sharon Schwartz

FINDINGS OF FACT,

CONCLUSIONS AND

RECOMMENDATION

This matter came on for hearing before Administrative Law Judge Barbara L. Neilson at 9:30 a.m. on January 20, 2011, at the Office of Administrative Hearings, 600 North Robert Street, St. Paul, Minnesota.

Michael J. Tostengard, Assistant Attorney General, appeared on behalf of the Minnesota Department of Commerce (Department). Sharon Schwartz (Applicant) appeared on her own behalf without counsel.

After the hearing concluded, the Applicant filed additional documents on January 25, 2011. The OAH record remained open until February 4, 2011, for receipt of a response from the Department. No further response was received.

STATEMENT OF ISSUES

1. Has the Applicant been convicted of crimes involving moral turpitude, in violation of Minn. Stat. § 60K.43, subd. 1(6)?

2. Did the Applicant provide misleading or incomplete information on an application or file an untrue application, in violation of Minn. Stat. §§ 45.027, subd. 7(1)(3) and (4), or 60K.43, subd. 1(1)?

3. If so, should her application for an insurance producer’s license be denied?

Based upon all of the files, records and proceedings herein, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1. The Applicant, Sharon Schwartz, was a licensed Minnesota resident insurance producer in 2003 and 2004.[1]

2. In April of 2004, a criminal Complaint was filed against the Applicant in Ramsey County District Court. The Complaint charged the Applicant with one felony count of theft by swindle. The Complaint alleged that the Applicant arranged for the refinancing of her father-in-law’s (J.S.) home and obtained a loan on his property in the amount of $16,200.97 without his consent or knowledge. The Complaint stated that the Applicant had contacted Ameriquest Mortgage and informed them that J.S. was unable to speak or care for himself and that she was handling all of his financial affairs. The Complaint stated further that the Applicant instructed the lender to send the loan check to her address and that the Applicant deposited the entire loan amount of $16,200.97 into her own account after forging J.S.’s signature on the back of the check to reflect his endorsement making it payable to her. The Applicant depleted most of the funds by the time she was criminally charged. According to the Complaint, J.S. never authorized the Applicant to refinance his home or to apply for a loan.[2]

3. In June of 2004, a second criminal Complaint was filed against the Applicant in Ramsey County District Court. The Complaint charged the Applicant with four felonies: one count of identity theft, one count of theft by swindle, and two counts of financial transaction card fraud. The Complaint alleged that in February 2003, the Applicant applied for an American Express credit card using the name, date of birth and social security number of a former neighbor, who was also a former insurance client. At the time of the Complaint, the neighbor (S.M.B) was confined to a hospital bed, had no use of her hands, and was unable to turn her head. The Complaint alleged that the Applicant wrote on the application that she was signing the application for S.M.B. as S.M.B.’s financial advisor and that S.M.B. had no feeling in her hands. The Complaint further indicated that the Applicant stated that the account was to be a business account using the name TWN Mnistry [sic] International, Inc, and that bills were to be sent to Applicant’s home address at that time. At the same time, the Applicant allegedly applied for a supplemental credit card in her own name, but with S.M.B. as the primary accountholder responsible for payment. According to the Complaint, the Applicant charged more than $7,976 to the supplemental credit card between March 2003 and June 2003, and a total amount of $8,471 including delinquency charges was due as of September 2003 when the account was closed. S.M.B. reported the situation to the St. Paul Police Department after receiving a call from American Express in September 2003 that she had an overdue balance.[3]

4. The Complaint also alleged that S.M.B. had paid the expenses for two trips for herself and the Applicant to see faith healers in Iowa and New York; S.M.B. had been forced to refinance her home for $85,000 to pay off the bills relating to these trips; the Applicant had set up the mortgage loan; S.M.B. had given the Applicant several other checks payable to the TWN Mnistry in a total amount exceeding $6,600 after the Applicant told her that she owed “back tithes” to the Lord; and the Applicant had deposited those checks into her bank account.[4]

5. On July 30, 2004, the Applicant pled guilty to one count of theft by swindle in connection with the April 2004 Complaint, and one count of identity theft in connection with the June 2004 Complaint.[5]

6. On September 13, 2004, the Applicant was sentenced to 90 days in the workhouse. Imposition of her sentence was stayed and the Applicant was placed on supervised probation for a period of 10 years for the theft by swindle conviction and 20 years for the identity theft conviction. The Applicant was also ordered to pay restitution in the amount of $8,850 in connection with the identity theft conviction. The remaining criminal charges were dismissed.[6]

7. In November 2004, the Applicant and the Department entered into a Consent Order under which the Applicant’s insurance producer license was revoked as of November 17, 2004. The Consent Order was based upon allegations by the Department that the Applicant had, “among other things, pled guilty to a crime involving moral turpitude and engaged in dishonest practices thereby demonstrating untrustworthiness in the business of insurance and making her unqualified to be an insurance producer.”[7]

8. By Order dated January 8, 2009, Ramsey County District Court discharged the Applicant from the probation ordered in connection with her identity theft conviction for having complied with all the terms and conditions of probation. The Court also ordered that her identity theft conviction be deemed a misdemeanor.[8]

9. On February 4, 2009, Ramsey County District Court discharged the Applicant from the probation ordered in connection with her theft by swindle conviction based on her compliance with all the terms and conditions of her probation. The Court also ordered that her conviction for theft by swindle be deemed a misdemeanor.[9]

10. In June of 2009, the Applicant earned a Master of Arts degree in Education (Instructional Leadership) from Argosy University, Phoenix, an on-line learning institution. She is currently taking on-line graduate level courses in education at Capella University.[10]

11. On October 11, 2010, the Department received the Applicant’s application for a new insurance producer’s license. The Applicant answered the questions relating to criminal convictions and administrative proceedings as follows:

Question: Have you ever been convicted of a crime, had a judgment withheld or deferred, or are you currently charged with committing a crime? “Crime” includes a misdemeanor, felony or a military offense. You may exclude misdemeanor traffic citations or convictions involving driving under the influence (DUI) or driving while intoxicated (DWI), driving without a license, reckless driving, or driving with a suspended or revoked license and juvenile offenses. “Convicted” includes, but is not limited to, having been found guilty by verdict of a judge or jury, having entered a plea of guilty or nolo contendere, or having been given probation, a suspended sentence or a fine. If you answer yes, you must attach to this application: a) a written statement explaining the circumstances of each incident, b) a copy of the charging document, c) a copy of the official document, which demonstrates the resolution of the charges or any final judgment.

Answer: Yes.

Question: Have you ever been named or involved as a party in an administrative proceeding regarding any professional or occupational license or registration? “Involved” means having a license censured, suspended, revoked, canceled, terminated; or, being assessed a fine, a cease and desist order, a prohibition order, a compliance order, placed on probation or surrendering a license to resolve an administrative action. “Involved” also means being named as a party to an administrative or arbitration proceeding, which is related to a professional or occupational license. “Involved” also means having a license application denied or the act of withdrawing an application to avoid a denial. INCLUDE Any business so named because of your actions, in your capacity as an owner, partner, officer, director, or member or manager of a Limited Liability Company. You may EXCLUDE terminations due solely to noncompliance with continuing education requirements or failure to pay a renewal fee. If you answer yes, you must attached to this application: a) a written statement identifying the type of license and explaining the circumstances of each incident, b) a copy of the Notice of Hearing or other document that states the charges and allegations, and c) a copy of the official document, which demonstrates the resolution of the charges or any final judgment.

Answer: No.

12. After reviewing the Applicant’s application, Cheryl Costello, a senior investigator with the Department, requested additional information from the Applicant regarding her criminal convictions.[11]

13. On January 18, 2011, the Applicant provided Ms. Costello with copies of her criminal complaints, sentencing orders, and a written explanation of the circumstances surrounding her convictions. In her explanation, the Applicant characterized her criminal convictions as “disputes” based on “personal grievances” and motivated by “animosity” on the part of her in-laws and her neighbor. The Applicant further noted that the violations did not involve conduct connected to her licensure and she therefore questioned the relevance her convictions had to her license application.[12]

14. The Department indicated its intent to deny the Applicant’s license application and the Applicant requested a contested case hearing.

15. On November 19, 2010, the Department issued an Order Denying License Application, Notice and Order for Hearing, and Statement of Charges in this matter. The contested case proceeding followed from that Order.

Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:

CONCLUSIONS

1. The Administrative Law Judge and the Commissioner of Commerce are authorized to consider the charges against Applicant under Minn. Stat. §§ 14.50, 45.027, subd. 7(b), and 60K.43, subd. 2(a).

2. The Applicant received due, proper, and timely notice of the charges against her, and of the time and place of the hearing. This matter is, therefore, properly before the Commissioner and the Administrative Law Judge.

3. The Department has complied with all relevant procedural legal requirements.

4. The burden of proof in this proceeding is on the Applicant to show by a preponderance of the evidence that she should be granted a license. [13]

5. The Commissioner may restrict, censure, suspend, revoke, or refuse to issue or renew an insurance producer’s license or may levy a civil penalty if the applicant or licensee pleads guilty or is convicted of a felony, gross misdemeanor, or misdemeanor involving moral turpitude, including, but not limited to, assault or similar conduct.[14]

6. Moral turpitude is defined as an act of “baseness, vileness or the depravity in private and social duties which man owes to his fellow man, or to society in general, contrary to accepted and customary rules of right and duty between man and man,” and an “[a]ct or behavior that gravely violates moral sentiment or accepted moral standards of (the) community.” In a criminal context, moral turpitude refers to the “quality of a crime involving grave infringement of moral sentiment of the community …”[15]

7. The Commissioner may restrict, censure, suspend, revoke, or refuse to issue or renew an insurance producer’s license or may levy a civil penalty if the applicant or licensee provides incorrect, misleading, incomplete, or materially untrue information in the licensing application.[16]

8. The Applicant’s convictions of felony theft by swindle and felony identity theft are crimes involving moral turpitude within the meaning of Minn. Stat. § 60K.43, subd. 1(6), and demonstrate that she is untrustworthy or otherwise unqualified to act under the authority granted by the commissioner.[17]

9. Based on the deceptive, fraudulent, dishonest, and exploitative acts that formed the basis of her felony theft by swindle and felony identity theft convictions and that are detailed in the Findings above, the Applicant has engaged in conduct that is untrustworthy and financially irresponsible and that conduct constitutes grounds for imposition of disciplinary action.

10. The Applicant provided incomplete or misleading information on her license application in violation of Minn. Stat. § 45.027, subd. 7(3) and (4), by failing to disclose the past administrative action that resulted in the revocation of her insurance license pursuant to the terms of a November 2004 Consent Order.

12. Minn. Stat. § 45.027, subd. 10, specifies that “Chapter 364 [relating to rehabilitation of those convicted of crimes] does not apply to an applicant for a license … where the underlying conduct on which the conviction is based would be grounds for denial of the license.”

13. The underlying conduct on which the Applicant’s convictions of felony theft by swindle and identity theft was based demonstrates that the Applicant is untrustworthy or otherwise incompetent or unqualified to act as an insurance producer, and that it would be in the public interest to deny the Applicant’s license application. To the extent that the application denial is based upon the Applicant’s prior criminal conviction, that conviction relates directly to the occupation for which the license is sought under Minn. Stat. § 364.03, subds. 1 and 2, due to the nature of the crime and the relationship of the crime to the ability, capacity, and fitness required to perform the duties and discharge the responsibilities of the occupation. The occupation of a resident insurance producer (agent) requires trustworthiness, especially in matters involving the handling of client properties and money. Theft by swindle and identity theft are acts demonstrating untrustworthiness and lack of fitness to handle the money and property of others.

11. Denial of the Applicant’s insurance producer’s license application is in the public interest.

Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMENDATION

IT IS RECOMMENDED: that the Commissioner of the Department of Commerce AFFIRM the denial of Sharon Schwartz’s application for a insurance producer’s license.

Dated: March 7, 2011.

/s/ Barbara L. Neilson

BARBARA L. NEILSON

Administrative Law Judge

Reported: Digitally Recorded

No transcript prepared

NOTICE

This Report is a recommendation, not a final decision. The Commissioner of Commerce will make the final decision after reviewing the record and may adopt, reject or modify these Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the Commissioner’s decision shall not be made until this Report has been available to the parties to the proceeding for at least ten (10) days. An opportunity must be afforded to each party adversely affected by this Report to file exceptions and present argument to the Commissioner. Parties should contact Emmanuel Munson-Regala, Deputy Commissioner, Market Assurance Division, Minnesota Department of Commerce, 85 Seventh Place East, Suite 500, St. Paul, MN 55101, to ascertain the procedure for filing exceptions or presenting argument to the Commissioner.

If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes. To comply with Minn. Stat. § 14.62, subd. 2a, the Commissioner must then return the record to the Administrative Law Judge within 10 working days to allow the Judge to determine the discipline to be imposed.

Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.

MEMORANDUM

The Department alleges that the Applicant is not entitled to a resident insurance producer’s license because she was convicted of felony theft by swindle and felony identity theft. The Department contends that these convictions disqualify the Applicant because they involve “moral turpitude.” As noted above, Minn. Stat. § 60K.43, subd. 1(6), specifies that the Commissioner of Commerce may deny an application for a resident insurance producer’s license if the Commissioner finds that it is in the public interest to do so and the applicant has “pled guilty . . . or been convicted of a felony . . . involving moral turpitude, including, but not limited to, assault or similar conduct.”[18]

Moral turpitude is not defined in the statutes or rules governing licenses issued by the Commissioner of Commerce. Black’s Law Dictionary defines “moral turpitude” as an “[a]ct of baseness, vileness or the depravity in private and social duties which man owes to his fellow man, or to society in general, contrary to accepted and customary rules of right and duty between man and man,” and as an “[a]ct or behavior that gravely violates moral sentiment or accepted moral standards of (the) community.” In a criminal context, moral turpitude refers to the “quality of a crime involving grave infringement of moral sentiment of the community . . . .”[19]

Chapter 364 of the Minnesota Statutes declares that “it is the policy of the state of Minnesota to encourage and contribute to the rehabilitation of criminal offenders and to assist them in the resumption of the responsibilities of citizenship” and notes that the “opportunity to . . . engage in a meaningful and profitable . . . occupation . . . is essential to rehabilitation and the resumption of the responsibilities of citizenship.”[20] Chapter 364 generally states that a person cannot be disqualified from pursuing a licensed occupation due to prior conviction of a crime unless the crime directly relates to the occupation for which the license is sought.[21] If the crime is, in fact, directly related to the occupation for which a license is sought, the person cannot be disqualified if he or she can show competent evidence of sufficient rehabilitation and present fitness to perform the duties of the occupation.[22]

Neither insurance licenses nor occupations licensed by the Department of Commerce are expressly exempted from Chapter 364.[23] Minnesota Statutes § 45A.027, subd. 10, states, however, that Chapter 364 does not apply to an applicant where the underlying conduct on which the conviction was based would be grounds for denial of the license. Although this language is somewhat unclear, it appears to reflect legislative intent that an applicant for Commerce Department licensure who has committed a crime that directly relates to the licensed occupation cannot provide evidence of rehabilitation to overcome a disqualification from licensure.

The Applicant provided very little information or explanation at the hearing regarding the circumstances of her criminal convictions. Instead, she pointed out that the conduct occurred seven years ago, that she complied fully with the terms and conditions of her probation, including paying restitution, and that she has since been discharged from probation and her civil rights restored. The Applicant also noted that she has been taking graduate level coursework online, helping homeless people, and making efforts to “work towards integrity.” The Applicant said little else about the circumstances of her crimes except to say that she used poor judgment and was “blind-sided” by people she trusted.

The Applicant pled guilty to felony theft by swindle and felony identity theft in 2004. The conduct underlying these crimes was particularly egregious. According to the criminal complaint on the identity theft charge, the Applicant used the identity of a bed-ridden disabled neighbor and former insurance client to obtain a credit card and then proceeded to charge more than $8,000 on the account. The victim was unaware of the theft until contacted by the credit card company. With respect to the theft by swindle charge, the criminal complaint indicates that the Applicant refinanced her father-in-law’s home without his consent or knowledge. She then obtained a home loan of over $16,000, which she deposited into her own account after forging her father-in-law’s signature. Her father-in-law never authorized the Applicant to refinance his home or to apply for a loan.

Both victims of these crimes were highly vulnerable and both were in positions of trust with the Applicant. Moreover, the Applicant continues to minimize the seriousness of the crimes. In the written explanation she submitted to the Department on January 18, 2011, the Applicant described the crimes as “disputes” motivated by “personal grievances against [her]” and she suggests that the crimes have no relevance to her license application.[24]

The Administrative Law Judge concludes that Applicant’s crimes involved moral turpitude and that her underlying conduct directly relates to the financial integrity and trustworthiness required of an insurance producer.[25] Although the Applicant completed the terms and conditions of her probation, she has not shown that she comprehends the seriousness of her actions and that she has failed to demonstrate that she is fit to perform the duties of a licensed insurance producer. The Applicant also failed to disclose on her license application that she was the subject of a prior administrative proceeding that resulted in the revocation of her insurance license pursuant to the terms of a Consent Order. Due to the explanatory language on the application form, the Applicant’s testimony at the hearing that she did not believe the Consent Order fell within the scope of the question was not credible. By providing incomplete or materially untrue information on her application, the Applicant violated Minn. Stat. §§ 45.027, subd. 7(3) and (4), and 60K.43, subd. 1(1).

For all of these reasons, the Administrative Law Judge recommends that the Commissioner affirm the denial of Sharon Schwartz’s application for an insurance producer’s license.

B.L.N.

[5] Register of Actions submitted by Applicant after the hearing.

[6] Ex. 4 and Order of the Court Discharging Probationer (post-hearing submission of Applicant).

[8] Order of the Court Discharging Probationer (post-hearing submission of Applicant) dated January 8, 2009.

[9] Order of the Court Discharging Probationer (post-hearing submission of Applicant) dated February 4, 2009.

[12] Ex. 6 (The Applicant wrote: “I was blindsided on (sic) the animosity of my in-laws and neighbor and former employee about negative communications about me. I never had any violations from any license insurance standpoints; the disputes were personal grievances against me. Therefore for my licenses to be affected I am not even sure if it is relevant.”)

[15] Black’s Law Dictionary (6^th Ed. 1990), at 1008-09. The term is not defined in the statutes and rules governing licenses issued by the Commissioner of Commerce. In In re Application for Discipline of Bunker, 294 Minn. 47, 199 N.W.2d 628 (Minn. 1972), the Minnesota Supreme Court cited with approval a Wisconsin case (State v. McCarthy, 255 Wis. 234, 38 N.W.2d 679 (Wis. 1949)) setting forth similar definitions of “moral turpitude.”

[16] Minn. Stat. §§ 45.027, subd. 7(3); 60K.43, subd. 1(1).

[17] Although the Department did not allege in the Notice and Order for Hearing that the Applicant’s conduct violated Minn. Stat. §§ 45.027, subd. 7(a)(5), and 60K.43, subd. 1(8), it appears that she also violated those provisions by engaging in untrustworthy and dishonest acts.

[19] Black’s Law Dictionary (6^th Ed. 1990), at 1008-09. In In re Application for Discipline of Bunker, 294 Minn. 47, 199 N.W.2d 628 (Minn. 1972), the Minnesota Supreme Court cited with approval a Wisconsin case (State v. McCarthy, 255 Wis. 234, 38 N.W.2d 679 (Wis. 1949)) setting forth similar definitions of “moral turpitude.”

[23] See Minn. Stat. § 364.02, subd. 3 (defining the term “license” to include all licenses issued by the state of Minnesota before a person can engage in any occupation and defining the term “hiring or licensing authority” to mean state agencies or departments), and 364.09 (exempting the licensing process for peace officers, private detectives, school bus drivers, special transportation services, commercial driver training instructors, emergency medical services personnel, physicians, taxicab drivers, juvenile corrections employment, and teachers, and specifying that the Chapter does not apply to law enforcement agencies, fire protection agencies, and school districts).

[25] Although the Department did not allege in the Notice and Order for Hearing that the Applicant’s conduct violated Minn. Stat. §§ 45.027, subd. 7(a)(4) and 60K.43, subd. 1(8), it appears that she also violated those provisions by engaging in untrustworthy and dishonest acts.