DOB: Diversified Investment Services, Inc., Notice of Intent to Refuse to Renew Broker License, Issue Order to Cease and Desist, Impose Civil Penalty

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IN THE MATTER OF:

DIVERSIFIED INVESTMENT
SERVICES, INC.

    ("Respondent")


 

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NOTICE OF INTENT TO REFUSE
TO RENEW BROKER LICENSE

NOTICE OF INTENT TO ISSUE
ORDER TO CEASE AND DESIST

NOTICE OF INTENT TO IMPOSE
CIVIL PENALTY

AND

NOTICE OF RIGHT TO HEARING


I.  LEGAL AUTHORITY AND JURISDICTION

The Banking Commissioner (“Commissioner”) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534c, inclusive, of the Connecticut General Statutes, “Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators”, and Sections 9 and 19 to 21, inclusive, of Public Act 09-209.
 
Pursuant to the authority granted by Section 36a-17 of the Connecticut General Statutes, the Commissioner, through the Consumer Credit Division (“Division”) of the Department of Banking, has investigated the activities of Respondent to determine if it has violated, is violating or is about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner.
 
Section 36a-17(a) of the Connecticut General Statutes provides:
The commissioner, in the commissioner’s discretion, may make such public or private investigations or examinations within or outside this state, concerning any person subject to the jurisdiction of the commissioner, as the commissioner deems necessary to carry out the duties of the commissioner.
Subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes provides, in pertinent part, that:
(a)  The commissioner may . . . refuse to renew any license issued by the commissioner under any provision of the general statutes by sending a notice to the licensee by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the licensee on the earlier of the date of actual receipt or seven days after mailing or sending.  Any such notice shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . involved; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that the licensee may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice. . . .
(b)  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless the licensee fails to appear at the hearing.  After the hearing, the commissioner shall . . . refuse to renew the license for any reason set forth in the applicable licensing provisions of the general statutes if the commissioner finds sufficient grounds exist for such . . . refusal to renew.  If the licensee does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner shall . . . refuse to renew the license.
Section 36a-52(a) of the Connecticut General Statutes provides, in pertinent part, that:
Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the person on the earlier of the date of actual receipt, or seven days after mailing or sending.  Any such notice shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . alleged to have been violated; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice, unless the person fails to appear at the hearing.  After the hearing, the commissioner shall determine whether an order to cease and desist should be issued against the person named in the notice.  If the person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner shall issue an order to cease and desist against the person.  No such order shall be issued except in accordance with the provisions of chapter 54.
Section 36a-50(a) of the Connecticut General Statutes provides, in pertinent part, that:
(1)  Whenever the commissioner finds as the result of an investigation that any person has violated any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the person on the earlier of the date of actual receipt or seven days after mailing or sending.  Any such notice shall include:  (A) A statement of the time, place, and nature of the hearing; (B) a statement of the legal authority and jurisdiction under which the hearing is to be held; (C) a reference to the particular sections of the general statutes . . . alleged to have been violated; (D) a short and plain statement of the matters asserted; (E) the maximum penalty that may be imposed for such violation; and (F) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.
(2)  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless such person fails to appear at the hearing.  After the hearing, if the commissioner finds that the person has violated any such provision, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by law, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.  If such person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner may, as the facts require, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.
(3)  Each action undertaken by the commissioner under this subsection shall be in accordance with the provisions of chapter 54.
Section 4-182 of the Connecticut General Statutes provides, in pertinent part, that:
(b)  When a licensee has made timely and sufficient application for the renewal of a license . . . , the existing license shall not expire until the application has been finally determined by the agency . . . .
(c)  No revocation, suspension, annulment or withdrawal of any license is lawful unless, prior to the institution of agency proceedings, the agency gave notice by mail to the licensee of facts or conduct which warrant the intended action, and the licensee was given an opportunity to show compliance with all lawful requirements for the retention of the license.
 
II.  MATTERS ASSERTED

1.
Respondent is a Connecticut corporation with an office at 4133 Whitney Avenue, 1-A, Hamden, Connecticut (“Hamden Office”).
2.
On December 30, 2008, Respondent requested renewal of its mortgage broker license on the Nationwide Mortgage Licensing System (“NMLS”) for the January 1, 2009 through December 31, 2009 renewal period.
3.
Subsequently, NMLS posted a “Returned ACH – Renewals” deficiency in connection with Respondent’s renewal request, as more fully described in paragraph 2 above, indicating that the application fee submitted by Respondent had been returned.
4. On March 5, 2009, the Town of Hamden, Connecticut, issued a personal property tax warrant against Respondent.  According to the Town of Hamden, the personal property taxes remain outstanding.
5. On March 6, 2009, Respondent submitted a financial statement to the Division establishing a net worth of less than $50,000.  The financial statement did not refer to the personal property tax warrant issued against Respondent, as more fully described in paragraph 4 above.
6.
On May 6, 2009, pursuant to Section 4-182(c) of the Connecticut General Statutes, the Division sent a letter to Respondent by certified mail, return receipt requested, identifying the deficiencies in Respondent’s renewal request as more fully described in paragraphs 3 through 5, inclusive, above and giving Respondent an opportunity to show compliance with all lawful requirements for retention of its mortgage broker license in Connecticut.
7.
The May 6, 2009, letter described in paragraph 6 above was returned to the Division on May 28, 2009, marked “Return to Sender – Refused”.
8. On June 9, 2009, an examiner from the Division attempted to conduct an examination of Respondent, but Respondent failed to grant such examiner access to Respondent’s office or to respond to the examiner’s attempts to contact him.
9. On October 22, 2009, the Division sent Respondent a second compliance letter by certified mail, return receipt requested, identifying deficiencies pertaining to the renewal application, as more fully described in paragraphs 3 through 5, inclusive, above and providing Respondent with an opportunity to show compliance with all lawful requirements for retention of its license.  Respondent received the letter on November 3, 2009.
10.
To date, the Division has received no response from Respondent regarding the deficiencies identified in the October 22, 2009, compliance letter as more fully described in paragraph 9 above.
 

III.  STATUTORY BASIS FOR ORDER TO CEASE AND DESIST, REFUSAL TO
RENEW MORTGAGE BROKER LICENSE AND IMPOSITION OF CIVIL PENALTY

Section 36a-494 of the Connecticut General Statutes, as amended by Public Act 09-209, provides, in pertinent part, that:

(a)(1)  The commissioner may . . . refuse to renew any . . . mortgage broker license or take any other action, in accordance with the provisions of section 36a-51, for any reason which would be sufficient grounds for the commissioner to deny an application for such license under sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] or if the commissioner finds that the licensee, any control person of the licensee, the qualified individual or branch manager with supervisory authority, trustee, employee or agent of such licensee has . . . (C) violated any of the provisions of this title . . . .

(b)  Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any of the provisions of sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] . . . the commissioner may take action against such person or licensee in accordance with sections 36a-50 and 36a-52.

Section 36a-489(a)(2)(B) of the Connecticut General Statutes, as amended by Public Acts 09-207, 09-208 and 09-209, provides, in pertinent part, that “[t]he license of a . . . mortgage broker failing to satisfy the minimum standards for license renewal shall expire”.
 
At the time Respondent submitted its renewal request in December 2008, Section 36a-491(a)(1) of the Connecticut General Statutes provided, in pertinent part, that:

[E]ach applicant for . . . [a] renewal license as a mortgage broker shall pay to the Nationwide Mortgage Licensing System any required fees or charges and a license fee of four hundred dollars, provided . . . each mortgage broker who was a licensee on June 30, 2008, who submits a renewal application shall, at the time of making such application, pay to the Nationwide Mortgage Licensing System any required fees or charges and a license fee of four hundred fifty dollars.

Section 36a-489(a)(2)(A) of the Connecticut General Statutes, as amended by Public Acts 09-207, 09-208 and 09-209, provides, in pertinent part, that:

The minimum standards for license renewal for a . . . mortgage broker shall include the following:  (i) The applicant continues to meet the minimum standards under subdivision (1) of this subsection; . . . and (iii) the . . . mortgage broker has paid all required fees for renewal of the license.

Section 36a-489(a)(1) of the Connecticut General Statutes, as amended by Public Acts 09-207, 09-208 and 09-209, provides, in pertinent part, that:

The commissioner shall not issue an initial license for a . . . mortgage broker unless the commissioner, at a minimum, finds that:  (A) The applicant meets the requirements of subsection (a) of section 36a-488 . . . .

Section 36a-488(a) of the Connecticut General Statutes, as amended by Public Act 09-209, provides, in pertinent part, that:

(1)  The commissioner shall not issue a . . . mortgage broker license to any person unless such person meets the following tangible net worth . . . requirements . . . :  (A) . . . (ii) on and after March 2, 2009, fifty thousand dollars . . . .

(2)  Each licensee shall maintain the net worth required by this subsection.

The minimum standards for renewal of a mortgage broker license under Sections 36a-489(a)(2)(A)(i) and 36a-489(a)(1) of the Connecticut General Statutes, as amended, also include a requirement that the commissioner find that:

[T]he applicant demonstrates that the financial responsibility, character and general fitness of the applicant . . . are such as to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] . . . .

Section 36a-489(a)(1)(C) of the Connecticut General Statutes, as amended.

 Section 8(c) of Public Act 09-209 provides, in pertinent part, that:

For purposes of . . . [Section 36a-489] [a] determination that a person has not shown financial responsibility may include, but is not limited to:  . . . (2) current outstanding tax liens or other government liens and filings . . . .

Section 36a-17 of the Connecticut General Statutes provides, in pertinent part, that:

(d)  Any person who is the subject of any such investigation, [or] examination . . . shall make its records available to the commissioner in readable form; . . . provide copies or computer printouts of records when so requested; furnish unrestricted access to all areas of its principal place of business or wherever records may be located; and otherwise cooperate with the commissioner. . . .

(f)  As used in this section, “records” includes, but is not limited to, books, papers, correspondence, memoranda, agreements, diaries, logs, notes, ledgers, journals, visual, audio, magnetic or electronic recordings, computer printouts and software, and any other documents.

1.
Respondent’s failure to pay the fees required by the then applicable Section 36a-491(a)(1) of the Connecticut General Statutes in connection with its renewal application, as more fully described in paragraph 3 of the Matters Asserted, constitutes a failure to meet the minimum standards for renewal set forth in Section 36a-489(a)(2)(A)(iii) of the Connecticut General Statutes, as amended.  Such failure to meet minimum standards constitutes sufficient grounds for the Commissioner to refuse to renew Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Section 36a-494(a)(1) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes.
2.
Respondent’s failure to establish and maintain a tangible net worth in the required statutory amount, as more fully described in paragraph 5 of the Matters Asserted, constitutes:  (1) a violation of Section 36a-488(a)(2) of the Connecticut General Statutes, as amended; and (2) a failure to meet the minimum standards for renewal of a license under Sections 36a-489(a)(1)(A) and 36a-488(a)(1)(A)(ii) of the Connecticut General Statutes, as amended.  Such violation and failure to meet the minimum standards constitutes sufficient grounds for the Commissioner to refuse to renew Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Sections 36a-494(a)(1) and 36a-494(a)(1)(C) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes.  The violation of Section 36a-488(a)(2) of the Connecticut General Statutes, as amended, forms a basis to issue an order to cease and desist pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes.
3.
Respondent’s failure to pay personal property taxes resulting in the issuance of an outstanding tax lien demonstrates that the financial responsibility of Respondent will not “command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] . . . .” and constitutes an additional ground for the Commissioner to refuse to renew Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Sections 36a-494(a)(1), 36a-489(a)(2)(A), and 36a-489(a)(1)(C) of the Connecticut General Statutes, as amended, Section 8(c) of Public Act 09-209, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes.
4. Respondent’s refusal to permit the Division’s examiner entry into Respondent’s office or otherwise respond to the examiner’s attempts to contact Respondent for such purpose constitutes a violation of Section 36a-17(d) of the Connecticut General Statutes.  Such conduct constitutes sufficient grounds for the Commissioner to refuse to renew  Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Section 36a-494(a)(1)(C) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and forms a basis to issue an order to cease and desist pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-50(a) of the Connecticut General Statutes.  Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation.  The Commissioner intends to impose a civil penalty upon Respondent not to exceed Ten Thousand Dollars ($10,000), subject to Respondent’s right to a hearing on the allegations set forth above.
5.
Respondent’s refusal to permit the Division’s examiner entry into Respondent’s office or otherwise respond to the examiner’s attempts to contact Respondent for such purposes, Respondent’s refusal to claim certified mail sent to Respondent by the Division, and Respondent’s failure to respond to certified mail sent from the Division and received by Respondent together demonstrate that Respondent does not possesses the “character and general fitness . . . such as to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] . . . .” and constitutes an additional ground for the Commissioner to refuse to renew Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Sections 36a-494(a)(1), 36a-489(a)(2)(A) and 36a-489(a)(1)(C) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes.
 

IV.  NOTICE OF INTENT TO REFUSE TO RENEW MORTGAGE BROKER LICENSE,
NOTICE OF INTENT TO ISSUE ORDER TO CEASE AND DESIST,
NOTICE OF INTENT TO IMPOSE A CIVIL PENALTY
AND NOTICE OF RIGHT TO HEARING

WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct which constitutes sufficient grounds for the Commissioner to refuse to renew Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office pursuant to Sections 36a-494(a)(1), 36a-494(a)(1)(C), 36a-489(a)(2)(A) and 36a-489(a)(1)(C) of the Connecticut General Statutes, as amended, Section 8(c) of Public Act 09-209 and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes;
 
AND WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct which constitute violations of Section 36a-488(a)(2) of the Connecticut General Statutes, as amended, and Section 36a-17(d) of the Connecticut General Statutes, which form a basis to issue an order to cease and desist against Respondent pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty not to exceed one hundred thousand dollars per violation pursuant to 36a-50(a)(2).
 
NOW THEREFORE, notice is hereby given to Respondent that the Commissioner intends to REFUSE TO RENEW Respondent’s license to act as a mortgage broker in Connecticut from the Hamden Office and issue an order requiring Respondent to CEASE AND DESIST from violating Section 36a-488(a)(2) of the Connecticut General Statutes, as amended, and Section 36a-17(d) of the Connecticut General Statutes and impose a CIVIL PENALTY upon Respondent as set forth herein, subject to Respondent’s right to a hearing on the allegations set forth above.
 
A hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, Consumer Credit Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following receipt of this Notice of Intent to Refuse to Renew Mortgage Broker License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing as set forth in subsections (a) and (b) of Section 36a-51 and Sections 36a-52(a) and 36a-50(a) of the Connecticut General Statutes.  This Notice of Intent to Refuse to Renew Mortgage Broker License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing shall be deemed received on the earlier of the date of actual receipt, or seven days after mailing or sending.  The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address.  If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”.  Once a written request for hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a hearing officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies.  If a hearing is requested, the hearing will be held on February 23, 2010, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
 
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes, unless Respondent fails to appear at the requested hearing.  At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
 
If Respondent does not request a hearing within the time prescribed, the Commissioner will issue an order refusing to renew Respondent’s license to act as a mortgage broker in Connecticut from 4133 Whitney Avenue, 1-A, Hamden, Connecticut, which license shall be deemed expired, issue an order that Respondent cease and desist from violating Section 36a-488(a)(2) of the Connecticut General Statutes, as amended, and Section 36a-17(d) of the Connecticut General Statutes, and may order that the maximum civil penalty of Ten Thousand Dollars ($10,000) be imposed upon Respondent.



So Ordered at Hartford, Connecticut
this 21st day of December 2009.                ________/s/_________
                                                            Howard F. Pitkin
                                                            Banking Commissioner

 

CERTIFICATION

I hereby certify that on this 21st day of December 2009, the foregoing Notice of Intent to Refuse to Renew Mortgage Broker License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent To Impose Civil Penalty and Notice of Right to Hearing was sent by registered mail, return receipt requested, to Diversified Investment Services, Inc., Attention:  Donald A. Moses, President, 4133 Whitney Avenue, 1-A, Hamden, Connecticut 06518, registered mail no. RB028036827US; and Donald A. Moses, Agent, Diversified Investment Services, Inc., 774 Orchard Street, New Haven, Connecticut 06511, registered mail no. RB028036835US.

                                                            ________/s/_________
                                                            Stacey Valerio
                                                            Prosecuting Attorney



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