OAH 16-1005-21231-2
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF COmmerce
|
In the Matter of the Insurance
Producer’s License, the Real Estate Closer License, and the Notary Commission
of Cynthia T. Strand |
FINDINGS OF FACT,CONCLUSIONS OF LAW,AND RECOMMENDATION |
This matter came on before Administrative Law Judge Manuel
J. Cervantes (ALJ) pursuant to a Notice for Hearing and Order to Show Cause,
filed April 7, 2010.
Michael J. Tostengard, Assistant Attorney General, represents
the Department of Commerce (Department).
Cynthia T. Strand (Respondent or Respondents) appeared on behalf of
herself and Strand Closing Services, Inc.
By letter dated April 28, 2010, Ms. Strand requested a
continuance in order to obtain private legal counsel. Her request was granted without objection.
On August 24, 2010, Mr. Tostengard informed the ALJ
that Ms. Strand had been charged criminally in District Court alleging conduct
similar in nature as alleged in the Department’s Notice for Hearing and Order
to Show Cause. He requested that the
hearing scheduled for September 16, 2010 be utilized for the purpose of
verifying the current status of this matter rather than proceeding to an
evidentiary hearing as scheduled. The
ALJ granted the Department’s request in a Scheduling Order, dated August 26,
2010.
On September 26, 2010, Mr. Tostengard appeared on
behalf of the Department as scheduled.
Ms Strand did not. In a letter,
dated September 23, 2010, the Department moved for default judgment.
Because it was not clear from the ALJ’s Scheduling Order
of August 26, 2010 that failure to appear on the part of the Respondent could
result in default judgment, the ALJ declined to enter default judgment at that
time. Instead, the matter was continued
to October 15, 2010 for hearing.
On October 15, 2010, prior to the start of the hearing,
the Respondents and the Department’s counsel entered into a stipulation whereby
the Respondents would not admit the allegations set forth in the Statement of
Charges nor would she contest them. The Respondents
reserved the right to make argument directly to the Commissioner of Commerce
regarding the appropriate sanction to be imposed against her under the
circumstances.
STATEMENT
OF ISSUES
1.
Did Respondents
violate of Minn. Stat. § 60K.32 (2008) by soliciting, negotiating or
selling insurance in
2.
Did Respondents
violate Minn. Stat. § 60K.43, subd. 1(4) (2008) by improperly withholding,
misappropriating, or converting money received in the course of doing insurance
business on at least 42 transactions;
3.
Did Respondents
violate Minn. Stat. §§ 45.027, subd.
7(4), 60K.43, subd. 1(4) and (8), and 72A.20, subd. 18 (2008), and
4.
Is Respondents
in violation of Minn. Stat. § 60K.43, subd. 1(2) (2008) by violating
numerous insurance laws and regulations;
5.
Did Respondents
violate Minn. Stat. § 60K.43, subd. 1(5) (2008) by misrepresenting the terms of
an actual or proposed insurance contract or application for insurance;
6.
Did Respondents
violate Minn. Stat. §§ 45.027, subd. 7(a)(4), 60K.43, subd. 1(8), and
82.35, subd. 1(b) and (f) (2008) by using fraudulent, coercive, or dishonest
practices, or demonstrating incompetence, untrustworthiness, or financial
irresponsibility;
7.
Did Respondents
violate Minn. Stat. § 60K.43, subd. 1(10) (2008) by
forging another’s name to an application for insurance;
8.
Did Respondents
violate Minn. Stat. § 60K.43, subd. 1(17) (2008) by performing residential
mortgage activity regulated under Minn. Stat. ch. 58, thereby violating
standards of conduct;
9.
Did Respondents
violate Minn. Stat. § 60K.49, subd. 2 (2008) by failing to obtain an
appointment with an insurer before engaging in the business of insurance;
10.
Did Respondents
violate Minn. Stat. § 72A.20, subd. 18 (a)(b) (2008) by improperly withholding,
misappropriating, or converting money belonging to a policyholder, beneficiary,
or other person when received in the course of the insurance business and
engaging in a fraudulent, coercive, or dishonest practice in connection with
the insurance business, constituting an unfair method of competition and an
unfair and deceptive act or practice;
11.
Did Respondents violate
Minn. Stat. § 72A.03 (2008) by fraudulently procuring payment or an obligation
for the payment of insurance premiums;
12.
Did Respondents
violate Minn. Stat. § 82.35 1(b) and (f) (2008) by engage in a fraudulent,
deceptive, or dishonest practice;
13.
Did Respondents
violate Minn. Stat. § 82.41, subd. 13(b)(11) and (12) (2008) by failing
within a reasonable time to account for or remit any money coming into the
licensee’s possession which belongs to another and comingling property trust funds
of another held by the licensee;
14.
Did Respondents
violate Minn. R. 2795.1000 (2009) by failing to observe high standards of
commercial honor and just and equitable principles of trade in the conduct of
the agent’s insurance business?
15.
If so, are Respondents
subject to discipline and/or a civil penalty?
Based
upon all the files records, and proceedings herein, the ALJ makes the following
FINDINGS OF
FACT
1.
On April 7, 2010, the Department served a Notice of and Order for
Hearing, Order to Show Cause, Order for Summary Suspension, and Statement of
Charges in this matter upon Cynthia T. Strand and Strand Closing Services, Inc.
2.
During the course of these proceedings, the matter was scheduled for a
hearing on October 15, 2010.
3.
On October 15, 2010, counsel for the Department and Respondent Ms. Strand
notified the ALJ that they had reached a stipulation. Under the stipulation, Respondents do not
admit the allegations in the Statement of Charges nor will she contest those
allegations. The parties also stipulated
that the Respondents reserve the right to make argument to the Commissioner
regarding the appropriate sanction to be imposed against her. As a result, the hearing was cancelled.
4.
Based upon the stipulation entered into between the Department and
Respondents, the allegations contained in the Statements of Charges and
reiterated below are not admitted or contested.
The Respondent reserves her right to present argument to the
Commissioner regarding what sanctions should be imposed.
Introduction
5.
Respondent
Cynthia T. Strand is currently licensed as a real estate closer (No. 20122534)
and as a notary (No. 6132423). The
Respondent is also currently licensed as a title insurance producer (No.
20017292). That license was acquired on
April 4, 2009. She had previously been
licensed as an insurance producer but the license became inactive on November
1, 1997.
6.
At all material
times, the Respondents operated a real estate closing services business known
as Strand Closing Services, Inc., in Forest Lake, Minnesota. After receiving a complaint concerning the
Respondents’ activities, the Department attempted to conduct an investigation
of the Respondents’ business activities.
A search warrant was ultimately executed when it became apparent that
the Respondent might have been destroying business documents.
RBank
Complaint
7.
On October 19,
2009, the Department received a complaint from PBT, an attorney, representing
RBank. The complaint involved a loan for
an 8-plex rental property (“rental property”) located at 1009 S.E.
8.
On January 22,
2007, Respondent, through Strand Closing, closed on the refinancing of the
property. That same day Respondent
deposited RBank’s $600,000.00 loan amount into Strand Closing’s disbursement
account. Respondent ordered a title insurance
commitment through First Choice Title Company (“First Choice Title”) for the
benefit of RBank from First American Title Insurance Company (“First American
Title”).
9.
Respondent did
not pay off PBank for its preexisting mortgage as required by RBank or First
American’s title commitment letter. Despite
depositing RBank’s loan amount, Respondent did not pay off the preexisting
PBank mortgage on closing date or the day after. By January 24, 2007, Respondent Closing’s
disbursement account balance was $471,252.76, less than the $507,494.29 owed to
PBank for the mortgage.
10.
From February
2007 through September 2009, Respondent made simultaneous monthly mortgage payments
to both PBank and RBank for the mortgages each bank lent to SAS Rental. During this time, Respondent was delinquent on
both PBank’s and RBank’s mortgages. Both
banks submitted notices to and called Respondent, ensuring that she was aware
of both delinquencies.
11.
While conducting
an audit, RBank discovered that Respondents had not recorded its mortgage
against the Rental Property. RBank also
discovered that Respondents had not paid off PBank’s preexisting mortgage and those
Respondents, through SAS Rental, had modified its mortgage with PBank for the
Rental Property. RBank discussed the
problem with Respondent who stated that she did not know why RBank’s mortgage
had not been recorded, but that it should have been. RBank also discussed the problem with First
American Title and First Choice Title. RBank
was told that because no premiums had been remitted to First American Title and
the terms of the title commitment letter were not executed, no title insurance
policy had been issued.
12.
As of December
8, 2009, Respondent has not repaid RBank the balance of its loan. Further, RBank has no secured claim against
the Rental Property. Finally, PBank has
initiated foreclosure against the Rental Property and has the only secured
claim. Additionally, Respondent
misrepresented in a bankruptcy filing with the United States Bankruptcy Court
for the District of Minnesota that RBank is a secured creditor.
13.
The minimum
amount of funds in RBank/SAS Rental transaction that Respondent allegedly
improperly withheld, misappropriated, or converted for personal use, total
approximately $594,000.
14.
Shortly after
the Department started its investigation into RBank’s complaint, it received
numerous complaints alleging that funds brought to real estate closings at
Strand Closing had not been paid, including payoffs for property purchased by
the City of Forest Lake.
City
of
15.
The City of
Forest Lake pursued buying two adjacent properties for a road project. The closings occurred simultaneously with
Charles P. Robinson, City Administrator (“Robinson”), representing
C.
Transaction
Seller: J. and J. C.
Buyer: City of
Subject
Property:
County:
Closed: October 13, 2009
|
Contract sales price |
167,000.00 |
|
|
|
City of |
|
|
|
|
·
Closing fee to
|
·
200.00 |
|
Paid
to |
|
·
Title Exam fee
to First American Title |
·
150.00 |
|
Not
paid by |
|
·
Title
insurance fee to First Choice Title |
·
603.00 |
|
Not
paid by |
|
·
|
·
60.00 |
|
Not
paid by |
|
·
Name search
fee to First American Title |
·
15.00 |
|
Not
paid by |
|
·
Recording fee
to |
·
46.00 |
|
Not
paid by |
|
·
State tax/deed
fee to |
·
551.10 |
|
Not
paid by |
|
·
Recording
service/review fee to Strand Closing |
·
25.00 |
|
Services
not performed |
|
County Taxes 10/13/09
to 12/31/09 |
300.27 |
|
Paid
to Seller |
|
Total Settlement
Charges Not Paid |
1,650.10 |
|
|
|
Gross from Borrower |
168,950.37 |
|
Check
#75420 Deposited
— 10/13/09 Cleared
— 10/14/09 |
|
Gross
amount due to seller (C.) |
167,300.27 |
|
|
|
C’s
Settlement charges |
|
|
|
|
·
Closing fee to
|
·
325.00 |
|
Paid
to |
|
·
Abstract/Title
search fee to First American Title |
·
275.00 |
|
Not
paid by |
|
·
Assessment
search fee to First American Title |
·
30.00 |
|
Not
paid by |
|
·
Recording fee
to |
·
46.00 |
|
Not
paid by |
|
·
Conservation
fee |
·
5.00 |
|
Not
paid by |
|
·
Recording
service/review fee to Strand Closing |
·
25.00 |
|
Services
not performed |
|
·
Courier/service
fee to Strand Closing |
·
25.00 |
|
Services
not performed |
|
Payoff
first mortgage |
158,820.45 |
|
Not
paid by |
|
2009
second half taxes |
685.00 |
|
Not
paid by |
|
Total
Settlement Charges |
731.00 |
|
|
|
Cash
to seller |
7,063.82 |
|
Paid
— check #44342 Cleared — 10/15/09 |
16.
Robinson brought
a check in the amount of $168,950.37 to the closing. This amount represented
the gross amount due from the purchaser. On October 13, 2009, Respondent deposited
the money collected and credited it to the Strand Closing disbursement account
at PBank. At closing on October 15,
2009, Respondent remitted $7,063.82 to C.
17.
Respondent was
to pay off the first mortgage loan with JP Morgan Chase (“Chase”) in the amount
of $158,820.45. Respondent never
remitted a check for the first mortgage. Robinson received a call from C. informing him
that Chase had not received the payoff.
18.
The Department’s
investigation further revealed that Respondent collected fees to record the
deed with
19.
Fees collected
at closing by Respondent were never paid to
|
$551.10 |
State deed tax |
|
5.00 |
Conservation fee (paid from sellers’ funds
initially) |
|
46.00 |
Recording fee |
20.
The minimum
amount of funds in the City of
W. Transaction
Seller:
Buyer: City
of
Subject Property:
County:
Closed: October 13, 2009
Contract
sales price |
172,000.00 |
|
|
|
Moving
allowance |
3,500.00 |
|
|
|
City
of |
|
|
|
|
·
Closing fee to
|
·
200.00 |
|
Paid
to |
|
·
Title Exam fee
to First American Title |
·
150.00 |
|
Paid
to |
|
·
Title
insurance fee to First Choice Title |
·
542.70 |
|
Paid
to |
|
·
|
·
60.00 |
|
Paid
to |
|
·
Name search
fee to First American Title |
·
15.00 |
|
Paid
to |
|
·
Recording fee
to |
·
46.00 |
|
Not
paid by |
|
·
State tax/deed
fee to |
·
567.60 |
|
Not
paid by |
|
·
Recording
service/review fee to Strand Closing |
·
25.00 |
|
Services
not performed |
|
Total
Settlement Charges |
1,606.30 |
|
|
|
County
Taxes 10/13/09 to 12/31/09 |
275.29 |
|
|
|
Gross
from borrower |
177,381.59 |
|
Check
#75419 Deposited—
10/13/09 Cleared
— 10/14/09 |
|
Gross
amount due to seller (W.) |
175,775.29 |
|
|
|
Seller’s
Settlement Charges: |
|
|
|
|
·
Closing fee to
|
·
325.00 |
|
Paid
to |
|
·
Abstract/Title
search fee to First American Title |
·
366.00 |
|
|
|
·
Assessment
search fee to First American Title |
·
30.00 |
|
|
|
·
Recording fee
to |
·
46.00 |
|
Not paid by |
|
·
Conservation
fee |
·
5.00 |
|
Not paid by |
|
·
Recording
service/review fee to Strand Closing |
·
50.00 |
|
Services not
performed |
|
·
Courier/service
fee to Strand Closing |
·
25.00 |
|
Services not
performed |
|
·
Additional
Recording fee to |
·
46.00 |
|
Not paid by |
|
Total Seller’s Settlement Charges |
893.00 |
|
|
|
Payoff first mortgage |
40,541.86 |
|
|
|
|
|
|
|
|
2009 second half taxes |
628.00 |
|
Not paid by |
|
Cash to seller |
133,712.43 |
|
Check #44349 Clear – 10/16/09 |
The gross amount of
$177,381.59 due from the City of Forest Lake on the W. transaction was credited
to the same account as the C. transaction. At the time of both of these deposits, the
disbursement account was already overdrawn by $50,083. Since the account was overdrawn there were not
enough funds in the disbursement account and Respondent was unable to
completely pay the financial obligations of the
21.
Respondent was
to pay off the first mortgage loan on the W. property with Citibank in the
amount of $40,541.86; however, there is no evidence that payment was ever
remitted. According to Forest Lake, the
nonpayment to the mortgage company came to light when Ms. W. had a conversation
with her neighbor, C., who explained the problem he had with Respondent not
sending payment to his mortgage company to pay off his loan. This prompted Ms. W. to inquire as to her
mortgage payoff which is when she learned that Respondent had not remitted the
payment Respondent collected at closing. The City of Forest Lake has since sent full
payment to Citibank for the W. mortgage.
22.
The Department’s
investigation further revealed that Respondent collected fees to record the
warranty deed with
23.
Fees collected
at closing by Respondent and again paid by the City of Forest Lake subsequent
to the October 13, 2009 closing total the following:
|
State
deed tax |
$551.10 |
|
Conservation
fee (paid from sellers’ funds initially) |
5.00 |
|
Recording
fee |
46.00 |
|
Payoff
sent to Citibank (a little less than noted on line 504 of HUD) |
40,175.44 |
|
2009
second half taxes (amount on line 506 of HUD plus interest and/or late fee) |
665.68 |
24.
As noted in the
table above, subsequent to the October 13, 2009 closing, when the City learned
that Strand had not sent payment to
25.
The minimum
amount of funds in the City of
W./G.
Transaction
Seller: C. and M. G.
Buyer: A. and J. W.
Subject
Property:
County:
Pine
Closed: October 6, 2009
26.
On October 6,
2009, A. W. and J. W. purchased a property located at
27.
The purchase
price of the property was $130,000 and the W.’s were told by their lender they
needed to bring a down payment of $13,000 (10% of loan amount) to the closing
as well as an additional $1,766.60 for the associated fees, charges, and taxes.
The closing occurred on October 6, 2009
at Strand Closing Services, Inc. in
28.
Respondent also
failed to pay $269.10 to the Pine County Treasurer for recording the well
certificate, $545.00 for the second half of 2009 taxes, $92.00 for recording
fees and $429.00 for the seller’s deed tax.
29.
The minimum
amount of funds in the W./G. transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $80,302.
L.
C. Refinance
30.
On October 8,
2009, Respondent closed the refinance of a property located on
31.
The prior lender
was owed $126,206.34 for its first mortgage and $17,409.54 for its second
mortgage, for a total of $143,615.88.
32.
As of November
18, 2009, when the Respondent’s disbursement account was closed, no check had
cleared, leaving the prior lender with an unsatisfied obligation of $17,409.54.
33.
Additionally,
there are other payments due in connection with the L.C. refinance which Respondent
did not make. Respondent failed to make
payments of $345.00, $5.00
and $46.00 to
34.
Despite the
non-payments to other payees, on October 14, 2009, Respondent cashed a check
for $392.00 made payable to Strand Closing for closing services. She deposited the payment into the company’s
account.
35.
Respondent
further issued a falsified closing protection letter (“CPL”). The CPL protects the lender from, among other
things, fraudulent actions by the agent.
The CPL purportedly covered the L.C. transaction, was actually a forged
document copied from a different transaction.
36.
Upon information
and belief, and because it was in the closing file prepared by Respondent, it
is believed that Respondent prepared or directed the manufacture of the forged
CPL and fraudulently presented it as true.
37.
The minimum
amount of funds in the L.C. transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $17,409.
S./G.
Transaction
38.
On May 5, 2009, Respondent
closed a sale of a property located on
39.
The prior lender
was owed $154,150.94 for its mortgage. Respondent
failed to provide this payment to the prior lender.
40.
Respondent also
issued a $1,144 check to Strand Closing in connection with the transaction but
it did not correspond with any amount on the HUD-1. The check cleared although it is unclear why a
check was issued in June rather than May when the transaction occurred.
41.
Finally, Respondent
did not record the change of title.
42.
The minimum
amount of funds in the S./G. transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $158,255.74.
C.P. LLC./C.L. Company LLC
Transaction
43.
On January 25,
2010, the Commerce Department received information concerning a real estate
transaction that occurred on November 4, 2008. The transaction involved C.P., LLC purchasing
a property on
44.
Additionally, an
escrow in the amount of $115,000.00 was set aside at closing because of the
possibility of contaminants on the property. The escrow agreement indicated that these
funds were to be transferred to a title insurance company until completion by
the seller of any Minnesota Pollution Control Agency (“MPCA”) requirements. In November 2009, the MPCA issued a letter to
C.L. Company, LLC indicating that “your investigation and/or cleanup has
adequately addressed the petroleum tank release at the site” and the file was
being closed. In January 2010, a letter
was sent to the parties involved in the transaction requesting release of the
finds held in escrow. Respondent,
however, had never transferred the funds.
45.
The minimum
amount of funds in the C.P., LLC/C.L. Company, LLC transaction that
B.N.
Refinance
46.
On September 24,
2009, Respondent closed a refinance for B.N. On September 29, 2009, Strand Closing received
$195,989.84 from the refinancing lender into the disbursing account to fund the
refinance.
47.
The prior lender
was owed $116,379.76 for its first mortgage and $35,370.28 for a second
mortgage, for a total of $151,750.04. N.’s
ex-wife, S.N., was owed $40,000.00 for a marital lien against the property. N. was also owed $597.80 as reimbursement for
overpayment on the refinance. There were
also other obligations totaling $7,652.16. However, Strand Closing’s disbursement account
did not have adequate finds to make these payments.
48.
At the close of
September 29, 2009, the disbursement account balance was $136,768.26, or
$55,579.58 less than monies owed in connection with the refinance. This is because Respondent had used funds
from B.N.’s refinance to pay off liens associated with another transaction.
49.
Respondent
issued several checks in connection with this transaction which were returned
for insufficient funds and, in addition, issued a fraudulent CPL copied from
another transaction.
50.
The minimum
amount of funds in the B.N.’s refinancing transaction that Respondent
improperly withheld, misappropriated, and converted for personal use, total $3,092.
S.G./E.
Construction Co. Transaction
51.
On January 5,
2010, S.G. contacted the Department and filed a complaint involving Respondent.
Respondent performed a closing for S.G’s
property located on Highview Loop SE,
52.
S.G. later
discovered that the funds paid at closing for back taxes from 2007 to current
had not been paid as well as recording fees, title fees including title
premiums, and the state deed tax.
53.
Respondent also
failed to record the warranty deed. The
minimum amount of funds in the S.G./E. Construction Co. transaction that Respondent
improperly withheld, misappropriated, or converted for personal use, total $6,363.43.
K. M. Refinance Transaction
54.
On August 26,
2009, Respondent closed a refinance for K.M. Respondent received $248,317.33 from the
refinancing lender into her Disbursement Account. These funds were enough to meet all of K.M’s
refinance obligations.
55.
The prior lender
was owed $226,170.90 for its first mortgage. Respondent issued the lender a check which was
returned for insufficient funds on October 2, 2009, and ultimately failed to satisfy
all of the amounts due.
56.
The minimum
amount of funds in the K.M. refinance transaction that Respondent improperly
withheld, misappropriated, or converted for personal use, total $22,134.83.
J. and C.C./C.P. Holdings Transaction
57.
On December 23,
2009, the Commerce Department received a police report from the Forest Lake
Police Department. The complaint involves
J. and K.C., owners of J. & K. Investment Holdings, LLC, and the real
estate sale of a property located on
58.
The minimum amount
of funds in the J. and K.C./C.P. Holdings transaction that Respondent
improperly withheld, misappropriated, or converted for personal use, total $14,102.14.
R.P./M. Industries Transaction
59.
R.P. contacted
the Commerce Department to file a complaint involving Respondent, who performed
closing on a Contract-for-Deed sale to M. for a purchase price of $400,000. Respondent failed to release funds from an
escrow account for the transaction which had been created to address title
issues.
60.
The minimum
amount of funds in the R.P./M. Industries transaction that Respondent allegedly
improperly withheld, misappropriated, or converted for personal use, total $11,250.
C.A./P. Development LLC Transaction
61.
On August 31, 2009,
62.
The minimum
amount of funds in the C.A./P. Development transaction that Respondent
improperly withheld, misappropriated, and converted for personal use, total $7,454.
T.B./N.R. Transaction
63.
On June 5, 2009,
T.B. purchased property on
64.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $995.
K.B./R.O. Transaction
65.
On June 26,
2009, K.B. purchased property on
66.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,468.
T.C. /Citi
Mortgage Transaction
67.
On March 20,
2009, T. C. purchased property on
68.
The minimum
amount of funds in this transaction that Cynthia Strand improperly withheld,
misappropriated, and converted for personal use, total $1,855.87.
C & F Investments/T.C
Transaction
69.
On September 9, 2009,
C & F Investments FL, LLC, purchased property on
70.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $687.80.
C.F./J.C Transaction
71.
On August 7,
2009, C.F. purchased property on
72.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $4,735.04.
F. &
J.K./P. Development LLC Transaction
73.
On August 26,
2009, F. & J. K. purchased property on
74.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $6,189.92.
J.K./C.P. Exchange
Transaction
75.
On June 29,
2009, J.K. purchased property on
76.
The minimum
amount of funds in this transaction that
C.K./K.P. Transaction
77.
On May 29, 2009,
C.K. purchased property on
78.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,794.79.
K.K./F.N. Mortgage Association Transaction
79.
On January 28,
2009, K.K. purchased property on
80.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,131.50.
S.K./F.M. Transaction
81.
On April 24,
2009, S.K. purchased property on
82.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,649.99.
A.N./J.P Transaction
83.
On June 29,
2009, A.N. purchased property on
84.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total Respondent.
W.P./E.G. Transaction
85.
On September 18,
2009, W.P. purchased property on
86.
The minimum
amount of finds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $3,177.20.
S.R./S. Construction
Inc. Transaction
87.
On October 9,
2009, S.R. purchased the property on
88.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total Respondent.
L.S./L.B Construction, Inc. Transaction
89.
On June 25, 2009,
L.S. purchased property on 384th Trail, North Branch, MN, from L.B.
Construction, Inc., closed by Respondent.
90.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total Respondent.
W.S./T.S. Home Builders, LLC Transaction
91.
On July 17,
2009, W.S purchased property on
92.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total Respondent.
K.S./R.
Holdings, LLC Transaction
93.
On March 5,
2009, K.S. purchased property on
94.
Respondent
failed to pay off a second mortgage loan in the amount of $3,000.00. When this was discovered, Respondent forged a
check to make it look like this payment was made.
95.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, or converted for personal use, total $4,185.
C.S. Refinance Transaction
96.
On September 25,
2009, C.S. refinanced his property on
97.
The minimum
amount of funds in this transaction that Respondent improperly withheld, misappropriated,
or converted for personal use, total $2,899.41.
J.S./W.A.F. Trustee Transaction
98.
On July 8, 2009,
J.S. purchased property on
99.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $974.44.
J.A.S./J.J. Transaction
100.
On April 23,
2009, J.A.S. purchased property on
101.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $421.
G.T./C.
Estate Transaction
102.
On June 26, 2009
G.T. purchased property on
103.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,153.05.
C.W./M.M. Transaction
104.
On October 5,
2009, C.W. purchased property on
105.
The minimum
amount of funds in this transaction that Respondent improperly withheld, misappropriated,
and converted for personal use, total $1,541.35.
D.W./G.T.
Transaction
106.
On June 26,
2009, D.W. purchased property on
107.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $880.71.
C.W./D.N
Transaction
108.
On February 13,
2009, C.W. purchased property on
109.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $1,724.61.
A.Z./J.B.
Transaction
110.
On May 21, 2009,
A.Z. purchased property on
111.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $2,063.10.
V.M./L.H.
Transaction
112.
On July 29,
2009, L.H. purchased property on
113.
Funds retained
for disbursement by included title insurance ($634.00), settlement fees
($355.00), 2009 first half taxes ($1,017.45), recording fees ($46.00), and
state tax ($610.50). Respondent did not
make these payments and failed to record the warranty deed.
114.
The minimum
amount of funds in this transaction that Respondent improperly withheld,
misappropriated, and converted for personal use, total $2,662.95.
D.M. Refinancing
Transaction
115.
On January 26,
2009, D.M. refinanced his property on
116.
The minimum
amount of funds in this transaction that Respondent improperly withheld, misappropriated,
and converted for personal use, total $724.90.
Other NSF Checks
117.
Respondent
issued two other checks not referenced above which were returned for
insufficient funds. One check was for
title insurance and settlement fees for a closing in 2009. Another check in the amount of $9,280.00 was
returned for insufficient funds on November 2, 2009. Per the Disbursement Statement and “Proposal”
this check represents an escrow for septic tank on the sale of property on
Green Lake Trail,
Failing to Remit Premiums
First Choice Title Company
118.
The Department’s
investigation also revealed that Respondent had not submitted premiums
($8,238.38) and service fees ($1,980) for at least 17 transactions, totaling
$10,218.38.
Key Title, Inc.
119.
Key Title, Inc. provided
a list of insurance premiums that Strand Closing failed to remit to Key Title. In at least 18 real estate transactions, Respondent
failed to remit title insurance premiums totaling $9,357.38. Additionally,
the owner/president of Key Title, Janet Vanderbilt, states they have never
given approval for Respondent to produce any “Closing Protection Letters” or
add her name to a closing protection letter.
Centerstone
120.
Respondent also
failed to remit insurance premiums to Centerstone Title.
Numerous
Withdrawals
121.
Respondent made
numerous and fairly large cash withdrawals out of Strand Closing Service’s
General Account No. 101519. Between
January 31, 2008 and September 30, 2009, Respondent withdrew a total of
$122,750 in cash from General Account No. 101519. Also, Respondent wrote checks from her
Disbursement Account No. 101501 to herself, Strand Closing Services, SAS Rental
Properties (the business she owned with her husband), and S.A. Strand
Construction (her husband’s business). The
payments since January 1, 2007 through September 29, 2009 to Cynthia Strand or
a business controlled by the Strands totaled $1,069,471.47.
Soliciting, Negotiating, and Selling Insurance
122.
Respondent,
while acting as a real estate closer, solicited, negotiated, and sold title
insurance when she was not properly licensed to do so. Under Strand Closing Services she would
present a Notice of Availability of Owner’s Policy of Title Insurance.
Based upon these
Findings of Fact, the ALJ makes the following
CONCLUSIONS
1.
The Administrative Law Judge and the Commissioner of Commerce have
jurisdiction in this matter pursuant to Minn. Stat. §§ 14.50, 45.027, and 58.12.
2.
The Notice and
Order for Hearing, Order to Show Cause, Order for Summary Suspension, and Statement of
Charges was proper, and the Department
has complied with all relevant procedural legal requirements.
3.
Pursuant to Minn. R. 1400.6000, a contested case may be decided
adversely to a party who defaults. Upon
default, the allegations and claims set forth in the Notice of and Order for
Hearing, Order to Show Cause, Order for Summary Suspension, and Statement of
Charges may be taken as true or deemed proved without further evidence.
4.
Respondent has entered into a stipulation with the Department under
which she does not admit and does not contest the allegations set forth in the
Statement of Charges enumerated above.
Accordingly, this matter will be handled similar to a default. The allegations contained in the Statement of
Charges with respect to Respondent are taken as true.
5.
Based upon the facts set forth in the Statement of Charges enumerated
above, Respondent violated Minn. Stat. § 60K.32 (2008) by soliciting,
negotiating or selling insurance in
6.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 60K.43, subd. 1(4) (2008) by improperly
withholding, misappropriating, or converting money received in the course of
doing insurance business on at least 42 transactions.
7.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. §§ 45.027, subd.
7(4), 60K.43, subd. 1(4) and (8), and 72A.20, subd. 18 (2008), and
8.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent in
violation of Minn. Stat. § 60K.43, subd. 1(2) (2008) by violating numerous
insurance laws and regulations.
9.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 60K.43, subd. 1(5) (2008) by misrepresenting the terms
of an actual or proposed insurance contract or application for insurance.
10.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. §§ 45.027, subd. 7(a)(4), 60K.43, subd. 1(8), and
82.35, subd. 1(b) and (f) (2008) by using fraudulent, coercive, or dishonest
practices, or demonstrating incompetence, untrustworthiness, or financial
irresponsibility.
11.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 60K.43, subd. 1(10) (2008) by
forging another’s name to an application for insurance.
12.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 60K.43, subd. 1(17) (2008) by performing
residential mortgage activity regulated under Minn. Stat. ch. 58, thereby
violating standards of conduct.
13.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 60K.49, subd. 2 (2008) by failing to obtain an
appointment with an insurer before engaging in the business of insurance.
14.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 72A.20, subd. 18 (a)(b) (2008) by improperly
withholding, misappropriating, or converting money belonging to a policyholder,
beneficiary, or other person when received in the course of the insurance
business and engaging in a fraudulent, coercive, or dishonest practice in
connection with the insurance business, constituting an unfair method of
competition and an unfair and deceptive act or practice.
15.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent violated
Minn. Stat. § 72A.03 (2008) by fraudulently procuring payment or an obligation
for the payment of insurance premiums.
16.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. Stat. § 82.35 1(b) and (f) (2008) by engaging in a fraudulent,
deceptive, or dishonest practice.
17.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violate Minn. Stat. § 82.41, subd. 13(b)(11) and (12) (2008) by failing
within a reasonable time to account for or remit any money coming into the
licensee’s possession which belongs to another and comingling property trust funds
of another held by the licensee.
18.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent
violated Minn. R. 2795.1000 (2009) by failing to observe high standards of
commercial honor and just and equitable principles of trade in the conduct of
the agent’s insurance business.
19.
Based upon the
facts set forth in the Statement of Charges enumerated above, Respondent is
subject to discipline and/or a civil penalty, but has reserved the right to
make argument to the Commissioner regarding the appropriate sanction to be imposed
against her.
20.
This Order is in
the public interest.
Based upon these Conclusions, the
Administrative Law Judge makes the following:
RECOMMENDATION
The Administrative Law Judge
recommends that the Commissioner of Commerce discipline, censure, and/or impose
an appropriate civil penalty against Respondents Cynthia T. Strand and Strand
Closing Services, Inc.
Dated: November 15, 2010
s/Manuel
J. Cervantes
|
MANUEL
J. CERVANTES Administrative
Law Judge |
Reported: No Digital Recording
NOTICE
This
report is a recommendation, not a final decision. The Commissioner of the Minnesota Department
of Commerce will make the final decision after a review of the record. The Commissioner may adopt, reject or modify
the Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the final decision
of the Commissioner shall not be made until this Report has been made available
to the parties to the proceeding for at least ten 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
Glenn Wilson, Commissioner, Department of Commerce,
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.
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.