IMO Daniel J. Culnen

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1917-04T51917-04T5

In the Matter of the

Application of Daniel

J. Culnen for a Waiver

in Accordance with

18 U.S.C. 1033

________________________________________

 

Submitted March 15, 2006 - Decided March 29, 2006

Before Judges Conley and Sapp-Peterson.

On appeal from final administrative decision by the Commissioner of the Department of Banking and Insurance.

Calo Agostino, attorney for appellant (Beverly M. Wurth, on the brief).

Zumila V. Farber, Attorney General, attorney for respondent (Patrick DeAlmeida, Assistant Attorney General, of counsel; Karyn G. Gordon, Deputy Attorney General, on the brief).

PER CURIAM

Appellant, formerly a licensed insurance producer who was convicted in the early 1990's of mail fraud and theft, appeals the rather summary denial by the Commissioner of the Department of Banking and Insurance of his request for a waiver pursuant to 18 U.S.C.A. 1033 and N.J.A.C. 11:17E-1.1 to -1.7. We remand.

In 1992, appellant pled guilty to and was sentenced on one count of mail fraud in violation of 18 U.S.C.A. 1341. Because he cooperated with the federal authorities, a reduced one year term along with a fine was imposed, of which he served nine months. His two year "supervised release term" expired in May 1996 with all of his penal obligations satisfactorily complied with. In addition, in August 1993, appellant pled guilty to one count of theft by failure to make required disposition of property received, N.J.S.A. 2C:20-9. Restitution of $150,000 was ordered. There seems to be no question that that was paid.

The only depiction of the conduct involved in the underlying offenses is appellant's versions:

Federal

Some time during 1986 I was instrumental in having a bond sent to a client who without our knowledge photocopied the bond itself, kept a copy and returned the original to us for cancellation. Two years later claims were filed against the bond and because it had been returned to the office we declined coverage because we stated that the bond had not been executed. In retrospect it was a poor choice of words. What should have been said was that the bond had been executed but was returned for flat cancellation. Because of my correspondence the insurance company sent out six letters of denial, which is what constituted the mail fraud. I originally plead not guilty believing that the misuse of words was unintentional and therefore not a crime. I subsequently realized that it was in everyone's best interest including my own to change my plea from not guilty to guilty. I learned a great deal from this experience with regard to being very specific when letters are written and making sure that every transaction no matter how minimal follows the intent of the law covering the specific issue and point.

State

This situation occurred approximately the same time as the Federal Mail Fraud indictment. At my direction we executed a bond for a client and when we reported it the carrier decided that it did not want to be involved with this type of particular instrument, which happen[ed] to be a subdivision bond. As a result of their decision we proceeded to rewrite the obligation with another surety company. During this process we collected the premium. It took almost two months to straighten out the entire transaction but when it was finalized the new company agreed to back dating a bond to inception and at that point we paid the premium to the new carrier. During this process, which was approximately four months, the original carrier demanded the bond premium, which we of course refused to turn over because we had to pay it to the new carrier. As a result of our refusal the first carrier made a complaint to the insurance department who I believe felt that we held the funds longer than was necessary. I believe there was also an issue as it relates to their assertion that we did not have the authority to do subdivision bonds but I believe we took the position that as it was not excluded from our power it was automatically included.

We note, further, in connection with the severity of the theft offense, that in the July 1993 consent order entered into by appellant and the Department of Insurance pursuant to which appellant agreed to voluntarily surrender his producer license for five years and pay a $45,000 fine, the Department permitted appellant to plea to "engaging in negligent administrative practices concerning the issuance of surety bonds . . . ." That is consistent with the above recitation of the underlying circumstances.

These are appellant's only infractions and, at the time of his application for waiver and reinstatement of his producer license, appellant's occupation was listed as "President/Sales", Bright Equipment, seemingly a responsible corporate position. And too, appellant submitted with his waiver application a June 15, 2004, letter from the president of M. Adams & Associates, Inc., a commercial insurance brokerage, which stated:

With regard to our conversation regarding your past personal difficulties we are satisfied that you have met all penalty obligations imposed by the courts and further, that you have not given rise to any additional difficulties since that offense.

However, the position requires production responsibility and the State of New Jersey requires that all such producers hold a valid New Jersey Insurance Producers License. If you are granted an Insurance Producers License we would not have any objection to offering you a production position with our firm.

18 U.S.C.A. 1033 proscribes and criminalizes certain conduct committed by people engaged in the insurance business whose activities affect interstate commerce. Pertinent to this appeal, the act specifically permits a person who commits the proscribed conduct to be employed in the insurance business, but only "if such person has the written consent of any insurance regulatory official authorized to regulate the insurer . . . ." 18 U.S.C.A. 1033(e)(2).

Our Legislature has conferred regulatory authority over insurance producers upon the Commissioner of Banking and Insurance. N.J.S.A. 17:22A-26 to -48. Pursuant thereto, the Department promulgated N.J.A.C. 11:17E-1.1 to -1.7 to implement the federal waiver statute. In this respect, N.J.A.C. 11:17E-1.3(a) provides:

No person having been convicted of a felony involving breach of trust or dishonesty or having been convicted under 18 U.S.C. 1033 shall be employed in the business of insurance in this State in any capacity without having first obtained a waiver from the Commissioner or his or her designee in accordance with the provisions of 18 U.S.C. 1033(e)(2) and this subchapter.

See also N.J.A.C. 11:17E-1.4(d).

The regulations require, in part, that all "prohibited persons" who seek to obtain or renew an insurance producer's license must complete and file the department's "Comprehensive Form" application. N.J.A.C. 11:17E-1.4(b). Thereafter, the Department is required to investigate the application by obtaining a criminal records check, verifying the contents of the application, and "[i]nquir[ing] into any and all other matters deemed necessary." N.J.A.C. 11:17E-1.4(g)1, 3, 4.

Critically, N.J.A.C. 11:17E-1.4(h) and (i) set forth the standards that govern the Commissioner's discretion in acting upon a waiver request. They provide:

(h) Upon completion of the investigation and receipt of any additional records and documentation deemed necessary by the Department, the application shall be reviewed in accordance with the standards set forth in the Rehabilitated Convicted Offenders Act, N.J.S.A. 2A:168A-1 et seq., as set forth in (i) below.

(i) In determining whether to approve an application for waiver, the following factors shall be considered:

1. The nature and duties of the work, occupation, trade, vocation, profession, business or license or certificate for which the person is applying;

2. The nature and seriousness of the offense;

3. The circumstances under which the offense occurred;

4. The date of the offense;

5. The age of the person at the time the offense was committed;

6. Whether the offense was an isolated or repeated incident;

7. Any social conditions that may have contributed to the offense;

8. Any evidence of rehabilitation, including good conduct in prison or in the community, counseling or psychiatric treatment received, acquisition of additional academic or vocational schooling, successful participation in correctional work-release programs, or the recommendation of persons who have or have had the applicant under their supervision;

9. Evidence of a pardon or of the expungement of a criminal conviction, pursuant to N.J.S.A. 2A:164-28, or of a certificate of the Federal or State Parole Board, or of the Chief Probation Officer of a United States District Court or a county who has supervised the applicant's probation, that the applicant achieved a sufficient degree of rehabilitation to indicate that his or her proposed employment would not be incompatible with the welfare of society;

10. The full payment or continuing payment of restitution and such other fines and penalties as the court may have imposed; and

11. Such other factors as the Commissioner or his or her designee may deem appropriate.

The Commissioner denied appellant's application for a waiver for the following stated reasons:

The Petitioner's said convictions for mail fraud and theft involved, related to or arose out of his business dealings as an insurance producer and the criminal conduct evidenced by his said convictions goes directly to the heart of the responsibilities of an insurance producer. In addition, the offenses directly implicate the character-related qualifications for licensure as an insurance producer. Licensed producers are authorized to handle policyholder or insurer-owned funds and often process insurance claims on behalf of clients. These duties require a high degree of honesty and integrity. See N.J.S.A. 17:22A-32 and 17:22A-40. Thus, Petitioner's convictions directly and adversely relate to the duties of an insurance producer. Despite the length of time since the convictions, it is not in the public interest to grant Petitioner a waiver so as to re-enter the business of insurance. The public policy of this state, as expressed in N.J.S.A. 17:33A-2, is to aggressively confront the problem of insurance fraud and eliminate the occurrence of such fraud; and

. . . .

[G]iven the nature and date of his offenses, the Petitioner has not demonstrated that he has been fully rehabilitated and no longer poses a risk or threat to insurance customers or insurers . . . .

Facially, the Commissioner's rationale focuses upon the offenses. Other than the conclusory statement "[d]espite the length of time since the convictions," none of the other critical regulatory factors were addressed. Several of these would seem to weigh in favor of appellant. For example, there is no indication that the "criminal" conduct was repetitive. Although appellant was convicted of two infractions, neither was similar and the second, the "theft," was accepted by the Department as "negligent administrative practices." And too, the fact that appellant was released from his one year federal custodial sentence after only nine months would reflect good conduct in prison, which would bode well for rehabilitation. So too would his release from his "supervised release term" without further incident. No consideration, much less investigation, was made of appellant's progress since his release, either in terms of his employment or community involvement, if any. In addition, both the investigation and the Commissioner's decision ignore the fact that a licensed brokerage firm apparently views appellant to have been able to put his past behind him.

Beyond all of this, and of particular concern to us, is that while the Commissioner concluded that the offenses relate "directly to the heart of the responsibilities of an insurance producer" and "directly implicate the character-related qualification for licensure," a conclusion which forms the predicate for the denial, he did so without any depiction of what the actual conduct was, or even acknowledgment of an awareness of the underlying circumstances. If the circumstances were as depicted by appellant, we wonder how they "directly implicate the character-related qualifications for licensure" or after sixteen years, still pose a threat to the industry and to the public.

To be sure, our scope of review ordinarily is limited. But we have repeatedly observed that:

[I]t is incumbent on [an] agency to explain its decision in sufficient detail to assure us that the agency actually considered the evidence and addressed all of the issues before it. Failure to address critical issues, or to analyze the evidence in light of those issues, renders the agency's decision arbitrary and capricious and is grounds for reversal.

[Green v. State Health Benefits Comm'n, 373 N.J. Super. 408, 414-15 (App. Div. 2004).]

See In re Authorization for Freshwater Wetlands Gen. Permits, Water Quality Certification & Waiver of Transition Area for Access, 372 N.J. Super. 578 (App. Div. 2004).

The Commissioner's decision here is devoid of any analysis of the critical factors other than the "nature" of the offense and its remoteness. Even in that respect it is deficient as exactly what that "nature" is, is not articulated. Further, as to the "nature" of the offense, we reject outright the assertion in the Commissioner's appellate brief that the convictions per se require the denial. In so contending, the brief cites to N.J.S.A. 2A:168A-1 of the Rehabilitated Convicted Offender Act (RCOA), N.J.S.A. 2A:168A-1 to -6, and asserts:

The RCOA was enacted to "assist the rehabilitation of convicted offenders by removing impediments of restrictions upon their ability to obtain employment . . . based solely upon the existence of a criminal record." N.J.S.A. 2A:168A-1. However, the RCOA's policy to prevent discrimination or disqualification of those with criminal convictions by licensing authorities based solely on the fact of criminal conviction is not without limitation. By its explicit terms, the RCOA created an exception to the normal prohibition against disqualification or discrimination by a licensing authority for conviction of a crime: "unless the conviction relates adversely to the occupation, trade, vocation, profession or business for which the license or certificate is sought." N.J.S.A. 2A:168A-2 (emphasis added). Thus, if an applicant for an insurance producer license has been convicted of a crime which relates adversely to the occupation of insurance (as in the instant matter), the RCOA presents no bar to disqualification and it is permissible under N.J.S.A. 17:22A-40(a)6 for the Commissioner to deny licensure based on the conviction.

[Emphasis added.]

To be sure, the waiver regulations are patterned after the RCOA. N.J.A.C. 11:17E-1.4(h). But the RCOA does not automatically preclude resort to its remedial provisions where the prior convictions relate adversely to the occupation for which the license is sought. To the contrary, where that is the case, N.J.S.A. 2A:168A-2 is then triggered, requiring the licensing authority to "explain in writing how the following factors, or any other factors, relate to the license . . . sought":

a. The nature and duties of the occupation, trade, vocation, profession or business, a license or certificate for which the person is applying;

b. Nature and seriousness of the crime;

c. Circumstances under which the crime occurred;

d. Date of the crime;

e. Age of the person when the crime was committed;

f. Whether the crime was an isolated or repeated incident;

g. Social conditions which may have contributed to the crime;

h. Any evidence of rehabilitation, including good conduct in prison or in the community, counseling or psychiatric treatment received, acquisition of additional academic or vocational schooling, successful participation in correctional work-release programs, or the recommendation of persons who have or have had the applicant under their supervision.

[N.J.S.A. 2A:168A-2a to -h.]

These factors are encompassed in the regulatory factors the Commissioner did not consider here.

It remains for us to determine an appropriate remedy. We have, in another somewhat similar context, outright required renewal of a license. Dunston v. Dep't of Law, 240 N.J. Super. 53 (App. Div. 1990). In other instances where an agency has failed to address critical factors, we have remanded for reconsideration. In Re Authorization for Freshwater Wetlands Gen. Permits, Water Quality Certification & Waiver of Transition Area for Access, supra, 372 N.J. Super. at 598. We think that is the appropriate remedy here, in light of the Commissioner's asserted task to "aggressively confront the problem of insurance fraud and eliminate the occurrence of such fraud."

As a remand is in order, we address appellant's contention that he was entitled to a hearing. At the outset, we note that he did not request a hearing below and, thus, we might not fault the Commissioner for not referring the matter to the Office of Administrative Law (OAL). Further, the operative regulations do not provide for a hearing. On the other hand, N.J.S.A. 17:22A-40, empowering the Commissioner to deny or not renew a license, expressly provides for the right to a hearing in the OAL upon written demand. N.J.S.A. 17:22A-40b. See also N.J.S.A. 52:14B-11; In re Fanelli, 174 N.J. 165, 172 (2002). We reject the Commissioner's position that a hearing is not required because there are no disputed facts in reliance upon Contini v. Bd. of Educ. of Newark, 286 N.J. Super. 106, 120 (App. Div. 1995), certif. denied, 145 N.J. 37 (1996). First, Contini did not involve a statutory right to a hearing. Second, N.J.S.A. 17:22A-40b provides for an OAL hearing to contest the "reasonableness" of the action. At the least that is disputed here. See Christ Hosp. v. Dep't of Health & Senior Servs., 330 N.J. Super. 55, 61-64 (App. Div. 2000).

Reversed and remanded to the OAL for the matter to proceed as a contested case.

 

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A-1917-04T5

March 29, 2006