SC Administrative Law Court Decisions

This matter is before the Administrative Law Judge Division (Division) pursuant to the request of the Respondent, Thomas A. Cuttino, for a contested case hearing pertaining to the decision of the Petitioner, South Carolina Department of Insurance (Department), to revoke Respondent's insurance agent's license.

The hearing was held before me on December 18, 1997, at the Administrative Law Judge Division Offices, Columbia, South Carolina. Present at the hearing were Adelaide D. Kline, Esquire, representing the Department, along with two witnesses for the Department, Alicia Clawson and Reginald Martin. Also present were the Respondent and his attorney, Marvin E. McMillan, III, along with Respondent's witnesses, Van Hobbs, Jr., Robert Galiano and Jeannie Galiano.

The Department issued a notice of revocation of Respondent's insurance license following his guilty plea to nine counts of forgery in the Court of General Sessions for the Third Judicial Circuit in Sumter, S.C. on September 4, 1997. Respondent has not contested that said guilty pleas were entered, and in fact, stipulated to this fact. The general background leading up to the guilty pleas is as follows:

In the spring of 1996, a young Sumter County Sheriff's Deputy, Charles Kubala, was tragically killed in the line of duty. Some months after his death, a group of community leaders in Sumter, including the Respondent, organized a golf tournament fund-raiser for the purpose of establishing a trust fund in Deputy Kubala's memory. The fund proceeds were to be used to provide financing for the education of the children of deceased law enforcement personnel. The Respondent was one of the chief organizers of the golf tournament and also served as a trustee for the Kubala trust. Additionally, the Respondent was a co-signatory, along with Deputy Bobby Richardson, for the trust fund's checking account. During the latter part of 1996, over approximately a 4-week period, the Respondent forged Deputy Richardson's signature on nine checks, thereby obtaining approximately $8,000 for the Respondent's own personal use.

Following a SLED investigation in February 1997, the Respondent was arrested and charged with nine counts of forgery and one count of breach of trust (which charge was subsequently dismissed). On the date of his arrest, Respondent confessed to the SLED agents that he had taken the funds from the trust account. Within a few days of his arrest, Respondent made partial restitution in the amount of $5,570.00, and within another few weeks made complete and full restitution with an additional amount of $2,375.00. On September 4, 1997, Respondent entered a plea of guilty to the nine counts of forgery and was sentenced to five years, suspended to three years probation, 500 hours of community service and continued psychological counseling.

Do sufficient grounds exist to support the revocation of the Respondent's insurance agent's license, and has the Department met its burden of proof to establish such grounds?

Having carefully considered all evidence presented at the hearing in this matter, I find, by a preponderance of the evidence, the following facts:

1) Notice of the date, time, place and subject matter of the hearing was timely given to all parties.

2) The Respondent has been a licensed insurance agent since 1981. At that time he joined his father's established agency, the General Insurance Agency, which later merged with the Sumter Insurance Group in 1993. Respondent has been employed constantly with the General Insurance Agency, and then the Sumter Insurance Group from 1981 until March 1997.

3) According to the Department's files, Respondent has had an exemplary record as an insurance agent, with no complaints, sanctions, reprimands or other concerns reflected in the Respondent's file from 1981 until 1997.

4) Had any complaints, sanctions, reprimands, or concerns been investigated or issued by the Department, this information would be reflected in the Department's file.

5) Although the Respondent has held as many as twenty or more licenses in recent years, the Department's files indicated that there had recently been a slight decline in the number of licenses held by the Respondent.

6) There is no evidence in the record that suggests that the recent decline in licenses was the result of any disciplinary activity taken by any insurance company. In fact, the only evidence in the record suggests that the decline in the number of licenses held was due to the Respondent's voluntary resignation from his insurance job and subsequent failure to renew those licenses.

7) On September 4, 1997, the Respondent pled guilty to nine counts of forgery in the Court of General Sessions for the Third Judicial Circuit in Sumter, South Carolina. Respondent received a sentence of five years, suspended to three years probation, 500 hours community service and continued psychological counseling. Respondent is currently serving his community service in the Family Court in Sumter.

8) While the Respondent admitted there was no excuse or justification for taking funds which did not belong to him, he did explain that during that period of time he had been under significant strain from severe financial problems which he had attempted to conceal from his family and friends. He readily acknowledged that taking the money was wrong, but apparently succumbed to the temptation because the funds were "within his own control," and that he thought he could replace the monies. He testified that he had not and would not ever try to misappropriate any insurance premiums in his suggestion, and there is no evidence in the record to suggest that he has ever done so. In fact, the only evidence in the record is that he had been entrusted with insurance premiums on occasion, and that such insurance premiums were properly handled by the Respondent.

9) Respondent has no prior criminal record, before the September 1997 guilty plea.

10) Within a few days after Respondent's arrest, he voluntarily left the insurance business in an effort to maintain the confidence of insurance consumers who were clients of the Sumter Insurance Group, where the Respondent had previously been employed.

11) Respondent went to work in a Sub-Station II in Florence, South Carolina, several weeks after leaving his employment at the Sumter Insurance Group. He continues to work at the Sub- Station II in the position of store manager.

12) Since his arrest and subsequent guilty plea, the Respondent has lost his job, has suffered severe marital problems, has lost his standing in the community, has suffered shame and disgrace, has lost his reputation, has given up involvement in a long history of many community service activities in which he had been involved for many years, and testified that he has gone from "holding his head up to having to wear a hat and sunglasses in public." Respondent's shame and remorse is apparent to the Court.

13) Respondent's employers are Robert Galiano and Jeannie Galiano, the owners of the Florence Sub-Station II franchise, who are also former insureds of the Respondent.

14) Mr. and Mrs. Galiano testified that they trust the Respondent completely, that there has never been any problem with cash register receipts associated with Respondent's employment at the Sub-Station II and that revenues have increased since Respondent began managing the store. They further testified that Respondent was the best insurance agent they had ever had and they would definitely do business with him again in the event his license is restored.

15) Van Hobbs, Jr., testified that he was a lifelong friend of the Respondent and also a former insured. He further testified that he had given insurance premiums to Respondent on several occasions and that there had never been any delay or concern about his coverage. He also testified that he would absolutely do business with the Respondent again in the event his license is restored.

16) The Department's chief investigator, Reginald Martin, investigated the Respondent's case for the Department. He testified that his duties as an investigator could include making phone calls, talking to an agent's employers, talking to an agent's insureds, talking to the agent himself, talking to a complainant, in essence, gathering background information about the agent and charges being investigated.

17) Investigator Martin's investigation of Respondent's case did not include any conversation with the Respondent, his employers, the SLED agents who had investigated the criminal charges, the Deputy whose name had been forged, the father of Deputy Kubala, anyone who had attended the guilty plea, or anyone who had any knowledge of the facts and circumstances surrounding the criminal case.

18) Investigator Martin testified that his investigation had been limited to contacting the Clerk of Court's office in Sumter and obtaining copies of the guilty pleas and sentencing sheets, the public records maintained in the office of the Clerk of Court. He did not request, nor has he seen a transcript of the guilty plea.

19) There is no evidence in the record to suggest that Respondent has ever dealt unfairly with any insurance consumer, or has ever violated any statutes or requirements specifically regulating the insurance industry.

1) This Division has personal and subject matter jurisdiction.

2) S.C. Code Ann. § 38-43-130 (Supp. 1997) provides in pertinent part:

The director or his designee may revoke or suspend an agent's license after ten days' notice or refuse to reissue a license when it appears that an agent has been convicted of a crime involving moral turpitude, has violated this title or any regulation promulgated by the department, or has wilfully deceived or dealt unjustly with the citizens of this State. . . . "[C]onvicted" includes a plea of guilty. . . . If, after notice of a hearing before the Administrative Law Judge Division. . . the director or his designee finds that one or more grounds exist for the revocation or suspension of, or the refusal to issue or reissue a license, the director or his designee, in his discretion, in lieu of revocation, suspension, or refusal, may impose upon the agent or applicant an administrative penalty as provided in Section 38-2-10 for each offense or ground. . . .

(Emphasis added).

4) Forgery is recognized by the Courts of this state as a crime of moral turpitude. State v. Johnson, 271 S.C. 485, 248 S.E.2d 313 (1978). Accordingly, a conviction of forgery constitutes a ground for administrative sanctions against an insurance agent's license pursuant to S.C. Code Ann. § 38-43-130.

5) For violation of the insurance laws of the State of South Carolina, where the violator is a person, other than an insurer or health maintenance organization, licensed by the director or his designee, the violator may be fined in an amount not to exceed two thousand five hundred dollars, or suspend or revoke the license of the person, or both. If the violation is wilful, the violator may be fined in an amount not to exceed five thousand dollars, or suspend or revoke the license of the person, or both. S.C. Code Ann. § 38-2-10(2) (Supp. 1997).

6) The Department has presented no evidence or offered no reason for the revocation of the Respondent's license, other than the existence of the guilty plea and the fact that revocation is an available penalty pursuant to S.C. Code Ann. § 38-43-130 when an insurance agent is convicted of a crime of moral turpitude.

7) It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E.2d 266 (Ohio 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W.2d 835 (Mo. App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W.2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 1`43 (Vt. 1992); City of Louisville v. Milligan, 798 S.W.2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A.2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A.2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A.2d 14 (Pa. 1994).

Prior to the enactment of Act No. 181 of 1993, commonly known as the "Restructuring Act," most state agencies exercised combined legislative, prosecutorial, investigative, and adjudicatory functions. A commission or commissioner, sitting in its adjudicatory capacity, imposed penalties for violations of statutory provisions its agency administered. In his capacity as the fact-finder, the Chief Insurance Commissioner would conduct an adjudicatory hearing pursuant to the Administrative Procedures Act for all contested cases arising under Title 38 of the South Carolina Code, and would render an order containing findings of fact and conclusions of law. See, e.g., S.C. Code Ann. § 38-43-130 (Rev. 1989). As the fact-finder, it was the Commissioner's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). With the advent of restructuring and the abolition of the Insurance Commission, however, many of the adjudicatory functions of the Commissioner (now Director) are now vested in the Administrative Law Judge Division. In all instances in which the Commissioner heard and decided a contested case as a single hearing officer, the Division now hears and decides those cases. S.C. Code Ann. §§ 1-23-600(B) (Supp. 1997); 38-43-130 (Supp. 1997). The administrative law judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. Parties to a contested case are entitled to present evidence on all issues involved in the case. S.C. Code Ann. § 1-23-320(e) (Supp. 1997). Therefore, the tribunal responsible for conducting the contested case proceedings as mandated by the legislature must have the authority to decide the issues based on the facts presented and make the final decisions on all the issues, including the appropriate penalty, where the penalty is not statutorily mandated.

8) Although I do not condone the Respondent's wrongful actions, I am mindful of the fact that the purpose of a professional disciplinary action is to protect the public at large rather than to punish the licensee. See, e.g., Wilson v. State Bd. of Medical Examiners, 305 S.C. 194, 406 S.E.2d 345 (1991). The Department presented no evidence that the Respondent has committed any violations of the insurance laws with respect to the conduct of his insurance business, or that the insurance consumers with whom he has dealt in the past have been injured in any way by his conduct. In fact, several of Respondent's former customers indicated that they would not hesitate to do business with him in the future. Moreover, the Respondent has made full restitution of the money misappropriated from the trust fund, and is performing community service and undergoing psychological counseling pursuant to the sentence imposed in General Sessions Court on September 4, 1997. Finally, the Respondent has already suffered a great deal of punishment for his wrongful actions. Under these circumstances, the revocation of Respondent's license would not serve the purpose of protecting the public, but would merely punish the Respondent. Accordingly, based upon a careful review of all the evidence in this case, I find and conclude that the appropriate penalty in this case is the suspension of Respondent's insurance agent's license for a period of One Hundred and Eighty (180) days, retroactive to September 4, 1997, and the imposition of a fine in the amount of Two Thousand Five Hundred & no/100 ($2,500.00) Dollars.

Based upon the foregoing Findings of Fact and Conclusions of Law,

IT IS HEREBY ORDERED that the insurance agent's license of the Respondent, Thomas A. Cuttino, is hereby suspended for a period of One Hundred and Eighty (180) days, retroactive to September 4, 1997.

IT IS FURTHER ORDERED that the Respondent, Thomas A. Cuttino, shall pay to the Department a fine in the amount of Two Thousand Five Hundred and no/100 ($2,500.00) Dollars within thirty (30) days of the date of this Order.

AND IT IS SO ORDERED.

_______________________________

Marvin F. Kittrell

Chief Judge

Columbia, South Carolina

March 30, 1998