Petition for Enforcement : Bureau of Insurance

STATE OF MAINE
BUREAU OF INSURANCE

IN RE:

MATTHEW F. JULIANO

Maine License No. PRR62443
National Producer No. 3682104

Docket No. INS-09-213

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PETITION FOR ENFORCEMENT

The Staff of the Maine Bureau of Insurance hereby petitions the Superintendent of Insurance for initiation of an adjudicatory proceeding to consider disciplinary action against Matthew F. Juliano of Limestone, Maine for violations of the Maine Insurance Code and tenets of professional conduct.

ALLEGED FACTS

Matthew F. Juliano holds Resident Insurance Producer License No. PRR62443 issued by the Bureau of Insurance to Mr. Juliano on May 17, 1999.
Since May 18, 1999, Mr. Juliano has been an appointed agent of Bankers Life and Casualty Company (“Bankers Life”), which is a licensed life and health insurance company with a headquarters in Chicago Illinois holding Maine license number LHF127 and NAIC code 61263.
Since on or about May 7, 2001, Mr. Juliano has been based at the Bangor, Maine sales branch of Bankers Life.
On or about the middle of October 2007, Mr. Juliano arranged to meet with consumer L. B. at her home in Caribou, Maine.
At that time L. B. was a 75-year-old unmarried woman who resided alone.
On or about November 8, 2007, Mr. Juliano met with L. B. at her home in Caribou.
At this meeting Mr. Juliano learned of L. B.’s various assets and accounts and details of her personal life.
Over the course of the next five weeks, Mr. Juliano, with the assistance of his unit manager, Timothy E. Farren, successfully convinced L. B. to cash out substantially all of her liquid assets and use the proceeds to purchase three separate Bankers Life deferred annuities totaling approximately $189,000.00.
Bankers Life Deferred Annuity #7878395
On the advice and under the guidance of Mr. Juliano, L. B. cashed out three separate certificates of deposit (“CDs”) to purchase Bankers Life Annuity #7878395 with a single premium of $37,530.00.
On or about November 13, 2007, L. B. cashed out a 6-month CD held at The County Federal Credit Union and received a check in the amount of $19,142.95 after paying an early withdrawal penalty of $226.51. This CD was paying an interest rate of 4.75% and would have matured on February 26, 2008.
On or about November 13, 2007, L. B. cashed out a 2-year CD held at TD Banknorth and received funds in the amount of $7,588.57 after paying an early withdrawal penalty of $148.81. This CD was paying an interest rate of 2.72% and would have matured on March 17, 2008.
On or about November 13, 2007, L. B. cashed out a 2-year CD held at TD Banknorth and received funds in the amount of $10,798.69 after paying an early withdrawal penalty of $199.60. This CD was paying an interest rate of 2.47% and would have matured on August 5, 2009.
On or about November 13, 2007, L. B. used the proceeds from these three CDs to purchase a Bankers Life single premium deferred annuity in the amount of $37,530.00.
On or about November 14, 2007, Bankers Life issued to L. B. deferred annuity #7878395, which, after the deduction of the 2% premium tax, yielded a net premium of $36,779.00.
Under the terms of the Bankers Life annuity, L. B. would be guaranteed interest rates of 6.45% for the first year, 2.50% for years two through ten, and 3.00% thereafter.
Under the terms of the Bankers Life annuity, L. B. would be subject to surrender charges for the first nine years of the annuity under a reduction schedule starting at 8.00% for the first two years and reducing one percent each year thereafter.
Mr. Juliano represented to L. B. that these transactions were in her best financial interest and recommended that she complete the purchase of the Bankers Life annuity immediately.
In recommending to L. B. that she purchase this annuity, Mr. Juliano did not have reasonable grounds for believing that the recommendation was suitable for L. B. on the basis of the information that was available to Mr. Juliano.
On or about November 15, 2007, Mr. Juliano received a commission payment on this annuity in the amount of $609.87 after having split the commission equally with Mr. Farren.
Bankers Life IRA Annuity # 7879517
On the advice and under the guidance of Mr. Juliano, L. B. rolled over a Jackson National Life Insurance Company (“Jackson Life”) IRA annuity into Bankers Life IRA annuity #7879517 with a single premium of $17,352.06.
L. B. had purchased the Jackson Life IRA annuity on November 20, 2001. The annuity had a minimum guaranteed interest rate of 3.00%.
Under the terms of the Jackson Life IRA annuity, L. B. would not have been subject to any surrender charges after November 20, 2008.
On or about December 3, 2007, L. B. surrendered her Jackson Life IRA annuity, and Bankers Life facilitated a roll-over of the proceeds and issued Bankers Life IRA annuity #7879517.
The net proceeds from the Jackson Life IRA annuity totaled $17,352.06 after L. B. paid a 1.5% surrender charge of $264.24.
Under the terms of the Bankers Life IRA annuity, L. B. would be guaranteed an interest rate of 6.20% for the first year, 2.50% for years two through ten, and 3.00% thereafter.
Under the terms of the Bankers Life IRA annuity, L. B. would be subject to surrender charges for the first nine years of the annuity under a reduction schedule starting at 8.00% for the first two years and reducing one percent each year thereafter.
Mr. Juliano represented to L. B. that this transaction was in her best financial interest and recommended that she complete the purchase of the Bankers Life annuity immediately.
In recommending to L. B. that she purchase this annuity, Mr. Juliano did not have reasonable grounds for believing that the recommendation was suitable for L. B. on the basis of the information that was available to Mr. Juliano.
On or about December 15, 2007, Mr. Juliano received a commission payment on this annuity in the amount of $195.21 after having split the commission equally with Mr. Farren.
Bankers Life Deferred Annuity # 7880094
On the advice and under the guidance of Mr. Juliano and Mr. Farren, on or about November 29, 2007, L. B. sold all of her shares of General Electric stock generating net proceeds of $150,222.57 in order to purchase a Bankers Life deferred annuity.
This sale of stock generated a capital gain in excess of $38,000.00 for the 2007 tax year.
On or about December 11, 2007, Mr. Juliano visited L. B. and collected from her a check in the amount of $135,000.00 for the purchase of the Bankers Life deferred annuity.
On or about December 13, 2007, Bankers Life issued to L. B. deferred annuity #7878395, which, after the deduction of the 2% premium tax, yielded a net premium of $132,300.00.
Under the terms of the Bankers Life annuity, L. B. would be guaranteed interest rates of 6.20% for the first year, 2.50% for years two through ten, and 3.00% thereafter.
Under the terms of the Bankers Life annuity, L. B. would be subject to surrender charges for the first nine years of the annuity under a reduction schedule starting at 8.00% for the first two years and reducing one percent each year thereafter.
Mr. Juliano and Mr. Farren represented to L. B. that this transaction was in her best financial interest and recommended that she complete the purchase of the Bankers Life annuity immediately.
Neither Mr. Juliano nor Mr. Farren advised L. B. of the tax consequences of the sale of the stock.
Neither Mr. Juliano nor Mr. Farren advised L. B. of the effects of this transaction on L. B.’s Medicare Part B premiums.
In recommending to L. B. that she perform this transaction and purchase the annuity, Mr. Juliano did not have reasonable grounds for believing that the recommendation was suitable for L. B. on the basis of the information that was available to Mr. Juliano.
On or about December 15, 2007, Mr. Juliano received a commission payment on this annuity in the amount of $4,387.50.
Purchase of Arctic Cat Snowmobile
On or about December 11, 2007 (the same day on which Mr. Juliano collected L. B.’s check for $135,000.00), Mr. Juliano asked L. B. to purchase a snowmobile for him for which he would re-pay her over time.
Mr. Juliano told L. B. that he did not want to apply for a loan to make this purchase himself because he was recently divorced and did not want his ex-wife and children to discover that he had taken out a loan for a new snowmobile.
On or about December 20, 2007, Mr. Juliano returned to L. B.’s house and convinced her to purchase a snowmobile for him and then drove L. B. to Plourde & Plourde, a certified Harley Davidson and Arctic Cat dealership located at 11 Laurette Street in Caribou, Maine, to complete the deal.
At Plourde & Plourde, Mr. Juliano instructed L. B. to purchase a 2007 Arctic Cat Snowmobile with 140 horsepower and a 795 cc engine, VIN 4UF07SNW17T125160.
Under the guidance of Mr. Juliano, L. B. applied for a loan of $7,171.50 from Sheffield Financial, LLC in order to finance the purchase.
The loan was structured as 48 monthly payments of $189.06 at an annual interest rate of 11.94% with no interest charged during the first year.
Under the guidance of Mr. Juliano, L. B. then purchased insurance for the snowmobile at a cost of $290.00 from Russell – Clowes Insurance Agency in Caribou.
The insurance policy specifically listed Mr. Juliano as a covered driver and provided bodily injury coverage of $50,000 per person and $100,000 per accident and property damage liability of $25,000 per accident.
Under the guidance of Mr. Juliano, L. B. then purchased a certificate of temporary ATV registration from the Department of Inland Fisheries and Wildlife, plate no. 55326.
Mr. Juliano then orally promised to repay L. B. for the cost of the snowmobile at a rate of $200.00 per month beginning in January 2008.
On or about April 16, 2008, on the recommendation and under the guidance of Mr. Juliano, L. B. applied for a long term care (“LTC”) insurance policy from Bankers Life.
On or about May 8, 2008, Bankers issued to L. B. LTC policy # 208,042,177 with monthly premiums of $497.14.
On or about May 15, 2008, Mr. Juliano received a commission payment on this LTC policy in the amount of $2,087.99.
On July 3, 2008, Mr. Juliano visited L. B. to make a $200.00 payment to her for the snowmobile.
At this visit, L. B. informed Mr. Juliano that she no longer desired the LTC policy and wanted to cancel it.
Upon hearing L. B.’s request to cancel the LTC policy, Mr. Juliano became upset and communicated to her that because her cancellation would cause him to lose the commission on the policy he would not give her the $200.00 check.
Mr. Juliano departed from L. B.’s residence without making the $200.00 payment to her.
ALLEGED VIOLATIONS

Pursuant to 24-A M.R.S. § 1420-K(1)(H) the Superintendent may impose disciplinary sanctions against an insurance producer for using coercive or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this State. Mr. Juliano violated 24-A M.R.S. § 1420-K(1)(H) as follows:

When on or about November 13, 2007, he advised L. B. to cash out her 6-month CD held at The County Federal Credit Union, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9-10 and 13-19 above;
When on or about November 13, 2007, he advised L. B. to cash out her 1-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9, 11, and 13-19 above;
When on or about November 13, 2007, he advised L. B. to cash out her 2-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9 and 12-19 above;
When on or about December 3, 2007, he represented to L. B. that it was in her best financial interest to roll over her Jackson National Life Insurance Company (“Jackson Life”) IRA into Bankers Life IRA annuity #7879517 as described in paragraphs 20-29 above;
When on or about November 29 to December 11, 2007, he advised L. B. to sell her entire General Electric stock portfolio, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 30-40 above;
When on or about December 20, 2007, he persuaded L. B. to purchase a snowmobile for his use as described in paragraphs 41-50 above; and
When on or about July 3, 2008, he threatened to withhold amounts owed to L. B. if she cancelled her LTC insurance policy as described in paragraphs 41-57 above.

Pursuant to 24-A M.R.S. § 1420-K(1)(B) the Superintendent may impose disciplinary sanctions against an insurance producer for violating any insurance laws. Pursuant to 24-A M.R.S. § 2155 a licensed insurance producer may not make any written or oral statement misrepresenting or making incomplete comparisons as to the terms, conditions, or benefits contained in any policy for purpose of inducing or attempting or tending to induce the policyholder to lapse, forfeit, surrender, exchange convert or otherwise affect or dispose of any insurance policy. Mr. Juliano violated 24-A M.R.S. 2155 when, on or about December 3, 2007, he represented to L. B. that it was in her best financial interests to roll over her Jackson National Life Insurance Company (“Jackson Life”) IRA into Bankers Life IRA annuity #7879517 as described in paragraphs 20-29 above.
Pursuant to 24-A M.R.S. § 1420-K(1)(B) the Superintendent may impose disciplinary sanctions against an insurance producer for violating any insurance laws. Pursuant to 24-A M.R.S. § 1445(2)(A) a licensed insurance producer may not use knowledge gained as a result of the producer’s insurance relationship with the insurance consumer for the producer’s own personal gain or use knowledge gained as a result of the relationship for the purpose of investing the insurance consumer’s money in property or assets in which the insurance producer has or will have a personal ownership interest. Mr. Juliano violated 24-A M.R.S. § 1445(2)(A) when, on or about November 8 through December 20, 2007, Mr. Juliano obtained information about L. B.’s financial circumstances and personal life that enabled him to persuade L. B. to purchase a snowmobile and extend him credit to purchase the snowmobile from her over time as described in paragraphs 4-8 and 41-57 above.
Pursuant to 24-A M.R.S. § 1420-K(1)(B) the Superintendent may impose disciplinary sanctions against an insurance producer for violating any rule or regulation of the Superintendent. Bureau of Insurance (“BOI”) Rule Chapter 917 § 6(A) requires that when recommending to a consumer the purchase of an annuity or the exchange of an annuity, the insurance producer must have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of facts disclosed by the consumer as to her investments and other insurance products and as to her financial situation and needs. Mr. Juliano violated BOI Rule Chapter 917 § 6(A) as follows:

When on or about November 13, 2007, he advised L. B. to cash out her 6-month CD held at The County Federal Credit Union, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9-10 and 13-19 above;
When on or about November 13, 2007, he advised L. B. to cash out her 1-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9, 11, and 13-19 above;
When on or about November 13, 2007, he advised L. B. to cash out her 2-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9 and 12-19 above;
When on or about December 3, 2007, he represented to L. B. that it was in her best financial interest to roll over her Jackson National Life Insurance Company (“Jackson Life”) IRA into Bankers Life IRA annuity #7879517 as described in paragraphs 20-29 above;
When on or about November 29 to December 11, 2007, he advised L. B. to sell her entire General Electric stock portfolio, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 30-40 above.

Pursuant to 24-A M.R.S. § 1420-K(1)(B) the Superintendent may impose disciplinary sanctions against an insurance producer for violating any rule or regulation of the Superintendent. Bureau of Insurance (“BOI”) Rule Chapter 917 § 6(B) requires that prior to the execution of a purchase or exchange of an annuity resulting from a recommendation, an insurance producer must make reasonable efforts to obtain information concerning the consumer’s financial status, tax status, and investment objectives, as well as such other information used or considered to be reasonable by the insurance producer in making recommendations to the consumer. Mr. Juliano violated BOI Rules chapter 917 § 6(B) as follows:

When on or about November 13, 2007, he advised L. B. to cash out her 6-month CD held at The County Federal Credit Union, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9-10 and 13-19 above without first obtaining sufficient information concerning the terms and conditions of the CD;
When on or about November 13, 2007, he advised L. B. to cash out her 1-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9, 11, and 13-19 above without first obtaining sufficient information concerning the terms and conditions of the CD;
When on or about November 13, 2007, he advised L. B. to cash out her 2-year CD held at TD Banknorth, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 9 and 12-19 above without first obtaining sufficient information concerning terms and conditions of the CD;
When on or about December 3, 2007, he represented to L. B. that it was in her best financial interest to roll over her Jackson National Life Insurance Company (“Jackson Life”) IRA into Bankers Life IRA annuity #7879517 as described in paragraphs 20-29 above without first obtaining sufficient information concerning terms and conditions of the Jackson National annuity;
When on or about November 29 to December 11, 2007, he advised L. B. to sell her entire General Electric stock portfolio, represented to her that it was in her best financial interest to use the proceeds to purchase a Bankers Life deferred annuity, and then facilitated her purchase of Bankers Life deferred annuity #7878395 as described in paragraphs 30-40 above without obtaining sufficient information concerning L.B.’s tax status and Medicare status.

REQUESTED RELIEF

The Staff of the Bureau of Insurance requests that, after opportunity for hearing, the Superintendent, in her official capacity as administrator of the Bureau of Insurance REVOKE Maine Producer License Number PRR62443 held by Matthew Juliano, as well as impose any other appropriate disciplinary sanctions as are available pursuant to 10 M.R.S. § 8003(5)(A-1) and 24-A M.R.S. §§ 12-A and 1420-K.

Dated this ______ day of ______ 2009 at Gardiner, Maine.

Respectfully submitted,

_________________________
Glenn J. Griswold
Director, Consumer Health Care