NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE v. MICHAEL T. DOLAN

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1193-04T51193-04T5

NEW JERSEY DEPARTMENT OF

BANKING AND INSURANCE,

Petitioner-Respondent,

v.

MICHAEL T. DOLAN,

Respondent-Appellant.

______________________________

 

Argued October 25, 2005 - Decided

Before Judges Coburn, Collester and S. L. Reisner.

On appeal from a Final Decision of the New Jersey Department of Banking and Insurance, No. E04-95.

Michael T. Dolan, appellant, argued the cause pro se.

Nathan J. Buurma, Deputy Attorney General, argued the cause for respondent (Peter C. Harvey, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Mr. Buurma, on the brief).

PER CURIAM

Michael T. Dolan appeals from a final order of the Department of Banking and Insurance finding that he violated several insurance statutes and regulations and imposing penalties and costs.

Dolan was an insurance agent, licensed in New York and working for The Hartford Insurance Company (the Hartford). In 2001, the Department filed an enforcement action against Dolan for selling life insurance in New Jersey when he was only licensed in New York, for misrepresenting that the policies were signed in New York, and for defrauding a customer into buying life insurance on the false premise that he was making an investment that had tax advantages. The allegations centered around a transaction in which Dolan convinced an attorney, Frederick Nicoll, to create a Voluntary Employees' Beneficiary Association (VEBA) for Nicoll and his secretary Joan Jones. A VEBA is a federally-authorized program, which is tax exempt so long as it provides life insurance or similar benefits to its members and if "no part" of its net earnings "inures to the benefit of any private shareholder or individual." 26 U.S.C.A. 501c(9). The VEBA would enable Nicoll's sole-practice law firm to provide life insurance for Nicoll and Jones. But the Department alleged that Dolan falsely marketed the VEBA to Nicoll as an investment vehicle or retirement plan, although the Internal Revenue Code does not permit a VEBA to be used for that purpose, 26 C.F.R. 1.501(c)(9)-3(f), and that he misrepresented its alleged tax advantages. See Neonatology Associates v. C.I.R., 299 F.3d 221 (3d Cir. 2002). The Department also contended that Dolan used marketing materials that appeared to have the imprimatur of the Hartford when in fact the company had not approved them.

In a letter to the Department of Insurance, Dolan had admitted several of the violations with which he was charged, including selling life insurance in New Jersey when he was not licensed to do so, and using promotional materials that were not pre-approved by the Hartford, but he denied that he misled Nicoll into buying life insurance. The matter was not resolved and the agency proceeded to prosecute Dolan.

The case was transferred to the Office of Administrative Law (OAL) for hearing. At the first scheduled hearing the case was settled, but Dolan subsequently repudiated the settlement, and the case was rescheduled for hearing. Despite receiving multiple forms of notice, Dolan failed to appear for this second hearing, which was held in his absence. At this hearing, the prosecuting Deputy Attorney General presented testimony from the agency's custodian of records and introduced documents in evidence to support the agency's case.

The Administrative Law Judge, relying on the record custodian's testimony and on the documentation from the agency's records, found that Dolan had committed all the violations with which he was charged. He concluded that Dolan sold insurance in New Jersey without a license, used marketing materials that misrepresented the products he was selling, misled the client as to the benefits of the policy he was buying and misrepresented the location where the policies were issued. The ALJ recommended penalties of $45,000 plus costs of $1,125. Dolan did not file exceptions, and the agency adopted the initial decision.

In this appeal, Dolan contends that he did not misrepresent the VEBA to Nicoll and that he is being made a scapegoat because he refused to testify against his former employer, the Hartford. He has sought to place before us a variety of information that is not in the record. However, Dolan did not appear for the evidentiary hearing at the OAL, and on this appeal we can only consider the evidence that was introduced at that hearing.

Having reviewed the record, we are satisfied that the agency's decision was supported by substantial credible evidence. In re Musick, 143 N.J. 206, 216 (1996). The documents admitted in evidence at the OAL hearing provide ample support for the agency's conclusions. Much of this documentation is undisputed, consisting of Dolan's admissions to the agency, and his correspondence to Nicoll. It is obvious from Dolan's correspondence and accompanying promotional materials, that Dolan was marketing the VEBA as an investment vehicle rather than as an employee benefit plan and that he was misrepresenting its tax benefits. Dolan admitted marketing these insurance products to Nicoll in New Jersey, when he was not licensed to sell insurance in New Jersey, and using promotional materials that were not approved by the Hartford. His answer to the order to show cause did not contest the agency's allegation that the policy applications from Nicoll and Jones falsely indicated that they were signed in New York when they were actually signed in New Jersey. Dolan thus falsely represented to the Hartford that he was lawfully selling its insurance policies in New York, when he was unlawfully selling them in New Jersey.

Dolan's additional contentions on this appeal are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

 
Affirmed.

The agency's Order to Show Cause set forth the charges in four counts. Count 1 was soliciting and negotiating two life insurance policies in New Jersey without a license under N.J.S.A. 17:22A-3, N.J.S.A. 17:22A-17a(20), N.J.A.C. 11:17A-1.3(a), (b) and (c) and N.J.A.C. 11:17A-1.4. Count 2 was misrepresenting to the client, Frederick Nicoll, that life insurance was an incidental part of a retirement plan under N.J.S.A. 17:22A-17a(1), (4), (7) and (20), N.J.S.A. 17B:30-2, N.J.S.A. 17B:30-3, N.J.A.C. 11:2-23.4, N.J.A.C. 11:2-23.5 and N.J.A.C. 11:17A-3.1(a). Count 3 was distributing advertising materials that had the tendency to mislead or deceive under N.J.A.C. 11:2-23.4, N.J.A.C. 11:2-23.5, N.J.A.C. 11:17A-3.1(a) and N.J.S.A. 17:22A-17a(1), (4), (7) and (20) and distributing materials that had the tendency to mislead or deceive the client into believing he would receive something other than a life insurance policy under N.J.S.A. 17:22A-17a(1), (4), (7) and (20), N.J.S.A. 17B:30-2, N.J.S.A. 17B:30-3, N.J.S.A. 17B:30-4, N.J.A.C. 11:2-23.4, N.J.A.C. 11:2-23.5 and N.J.A.C. 11:17A-3.1(a). Count 4 was falsely indicating the state in which the life insurance applications were taken under N.J.S.A. 17:22A-17a(1), (4), (7) and (20).

(continued)

(continued)

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A-1193-04T5

November 9, 2005