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NOTICE OF INTENT TO ISSUE NOTICE OF RIGHT TO HEARING DOCKET NO. SOCF-2009-864-B |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672c of the General Statutes of Connecticut, the Connecticut Business Opportunity Investment Act (“Act”), pursuant to Section 36b-70 of the Act. |
| 2. | Pursuant to Section 36b-71(a) of the Act, the Commissioner, through the Securities and Business Investments Division of the Department of Banking, has conducted an investigation into the activities of Respondents, their officers, agents, representatives and employees to determine if any of them have violated, are violating or are about to violate provisions of the Act (“Investigation”). |
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Section 36b-71(a) of the Act provides, in pertinent part: Subject to the provisions of the Freedom of Information Act, as defined in section 1-200, the commissioner may: (1) Make such public or private investigations within or outside of this state as he deems necessary to determine whether any person has violated or is about to violate any provision of sections 36b-60 to 36b-80, inclusive, . . . or to aid in the enforcement of said sections . . . . | |
| 3. | As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
The Commissioner has the authority to issue a stop order denying effectiveness to a business opportunity registration pursuant to Section 36b-68(a) of the Act, which provides, in pertinent part:
The commissioner may issue a stop order denying effectiveness to . . . any business opportunity registration if he finds: . . . (3) that the registration of the business opportunity . . . contains any statement which was, in the light of the circumstances under which it was made, false or misleading with respect to any material fact; or (4) that any provision of sections 36b-60 to 36b-80, inclusive, . . . has been wilfully violated by any person. |
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Section 36b-68(c) of the Act provides, in pertinent part: No stop order may be entered under this section except as provided in subsection (b) of this section without: (1) Appropriate prior notice to the applicant . . . of a business opportunity; (2) opportunity for a hearing; and (3) the issuance of written findings of fact and conclusions of law by the commissioner. | |
| 5. |
As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-72(a) of the Act, which provides, in pertinent part: Whenever it appears to the commissioner, after an investigation, that any person or persons have violated, are violating or are about to violate any of the provisions of sections 36b-60 to 36b-80, inclusive, . . . or that a further sale or offer to sell would constitute a violation of said sections, . . . the commissioner may order the person or persons to cease and desist from the violations of the provisions of said sections . . . or from further sale or offering to sell business opportunities constituting or which would constitute a violation of the provisions of said sections . . . . After any such order is issued, the person or persons named in such order may, within fourteen days after receipt of the order, file a written request for a hearing. Such hearing shall be held in accordance with the provisions of chapter 54. |
| 6. |
As a result of the Investigation, the Commissioner has the authority to impose a fine on Respondents pursuant to Section 36b-72(b) of the Act which provides, in pertinent part: (1) Whenever the commissioner finds as the result of an investigation that any person or persons have violated any of the provisions of sections 36b-60 to 36b-80, inclusive, . . . the commissioner may send a notice to such person or persons by certified mail, return receipt requested . . . . Any such notice shall include: (A) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (B) a short and plain statement of the matter asserted or charged; (C) the maximum fine that may be imposed for such violation; and (D) the time and place for the hearing. Such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed. |
II. RESPONDENTS
| 7. | CC&M at all times relevant hereto was a Texas corporation with its principal place of business at 348 Miracle Strip Parkway SW, Building C, Suite 10, Fort Walton Beach, Florida 32548-5257. |
| 8. | Elite at all times relevant hereto was a Florida limited liability company with its principal place of business at 348 Miracle Strip Parkway, Suite 34, Fort Walton Beach, Florida 32548, and an affiliate and agent of CC&M. |
III. STATEMENT OF FACTS
| 9. | On September 6, 2006, CC&M filed with the Commissioner an application to register “Cuppy’s Coffee and More, Inc.” as a business opportunity. On January 29, 2007, the Commissioner issued an order making the business opportunity registration of “Cuppy’s Coffee and More, Inc.” effective on January 29, 2007, until April 30, 2007. |
| 10. | The registration of “Cuppy’s Coffee and More, Inc.” as a business opportunity was not renewed, and on April 30, 2007, the business opportunity registration of “Cuppy’s Coffee and More, Inc.” terminated. |
| 11. | From at least June 2007 through July 2007, Respondents, through their agents, sold or offered to sell to least one Connecticut purchaser-investor (“Connecticut Purchaser”) a coffee franchise that included training in marketing, industry sales techniques, personnel training, bookkeeping, accounting, inventory control, performance standards, product preparation and other areas, site selection, pre- and post-opening assistance, an advertising program, and specifications and required sources for equipment and supplies necessary to enable such prospective purchaser-investors to begin a quick service coffee restaurant (“Coffee Franchise”). |
| 12. | At the time such sale or offer to sell the Coffee Franchise was made to the Connecticut Purchaser, the Coffee Franchise was not registered as a business opportunity in Connecticut and no registration for the Coffee Franchise as a business opportunity had been made effective by order of the Commissioner under subsection (d) of Section 36b-62 of the Act. |
| 13. |
On March 5, 2008, CC&M filed with the Commissioner an application to register “Cuppy’s Coffee & More, Inc.” as a business opportunity (“2008 Application”). Doug Hibbing, President of CC&M, signed the 2008 Application and certified on behalf of CC&M, to the best of his knowledge and belief, that the statements made in the 2008 Application were true. The 2008 Application included the following questions: 14. Disclose to the State of Connecticut Securities and Business Investments Division whether any sale of business opportunities have been made within or from Connecticut prior to the date of this application. . . . |
| 14. | CC&M’s answers to questions 14 and 15 on the 2008 Application indicated that CC&M had not made any sales in Connecticut prior to the filing of the 2008 Application nor had it made any offers of the business opportunity within or from Connecticut, and that no monies had been accepted or agreements entered into prior to the filing of the 2008 Application. |
| 15. | CC&M also filed with the Commissioner a General Affidavit signed by Doug Hibbing, President of CC&M, and dated February 29, 2008 (“General Affidavit”), that stated “Cuppy’s Coffee & More, Inc. has not offered or sold any franchises or business opportunities in the State of Connecticut from April 30, 2007 to the current date.” |
| 16. | The Commissioner has not deemed the 2008 Application abandoned pursuant to Section 36b-68(e) of the Act, nor has CC&M’s business opportunity been effectively registered since the April 30, 2007 termination of its prior registration. |
IV. STATUTORY BASIS FOR NOTICE OF INTENT TO ISSUE STOP ORDER DENYING EFFECTIVENESS TO A BUSINESS OPPORTUNITY REGISTRATION, ORDER TO CEASE AND DESIST AND NOTICE OF INTENT TO FINE
| 17. | Paragraphs 1 through 16, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 18. | The Connecticut Purchaser is a “purchaser-investor” within the meaning of Section 36b 61(3) of the Act, in that the Connecticut Purchaser is a “person who has purchased or is solicited for the purchase of a business opportunity.” |
| 19. | Respondents are “sellers” within the meaning of Section 36b-61(4) of the Act, in that they are “engaged in the business of selling or offering for sale business opportunities or any agent or representative of such person.” |
| 20. | The Coffee Franchise constitutes a “business opportunity” as defined in Section 36b-61(6) of the At [sic] in that it involves “the sale or . . . offer for sale . . . of any products, equipment, supplies or services which are sold or offered for sale to the purchaser-investor for the purpose of enabling the purchaser-investor to start a business, and in which the seller represents . . . (D) that the seller will provide a sales program or marketing program to the purchaser-investor . . . .” |
| 21. | Paragraphs 1 through 20, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 22. |
Section 36b-67 of the Act provides, in pertinent part: No person shall in connection with the sale or offer for sale of a business opportunity: (1) Sell or offer for sale a business opportunity in this state or from this state unless it has first been registered with the commissioner and declared effective by the commissioner in accordance with the provisions of section 36b-62 . . . . |
| 23. | Respondents sold or offered to sell the Coffee Franchise to at least one Connecticut purchaser-investor, as more fully described in paragraphs 11 and 12. The sale or offer for sale of such business opportunity absent registration and absent the Commissioner having declared the business opportunity registration effective constitutes a violation of Section 36b-67(1) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-72(a) of the Act, and for the imposition of a fine against Respondents under Section 36b-72(b) of the Act. CC&M’s conduct also constitutes a wilful violation of Section 36b-67(1) of the Act, which forms a basis for a stop order denying effectiveness to a business opportunity registration under Section 36b-68(a)(4) of the Act. |
c. Violation of Section 36b-80 of the Act -
False or Misleading in a Material Respect
| 24. | Paragraphs 1 through 23, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 25. | Section 36b-80 of the Act provides, in pertinent part, that “[n]o person shall make . . . in any document filed with the commissioner . . . any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.” |
| 26. | CC&M filed the 2008 Application and General Affidavit with the Commissioner indicating that CC&M had not offered or sold any franchises or business opportunities in Connecticut after the business opportunity registration of “Cuppy’s Coffee and More, Inc.” terminated on April 30, 2007, as more fully described in paragraphs 10 through 15, inclusive. However, Respondents made at least one offer and sale of the business opportunity in Connecticut after the business opportunity registration of “Cuppy’s Coffee and More, Inc.” terminated, as more fully described in paragraphs 10 through 12, inclusive. The 2008 Application and General Affidavit therefore contained statements which were, in the light of the circumstances under which they were made, false or misleading in a material respect, which forms a basis for a stop order denying effectiveness to a business opportunity registration under Section 36b 68(a)(3) of the Act. In addition, the making of such statements by CC&M in the 2008 Application and General Affidavit filed with the Commissioner by CC&M constitutes a wilful violation of Section 36b-80 of the Act, which also forms a basis for a stop order denying effectiveness to a business opportunity registration under Section 36b-68(a)(4) of the Act. Furthermore, the making of such statements in the 2008 Application and General Affidavit filed with the Commissioner constitute a violation of Section 36b-80 of the Act, which forms the basis for an order to cease and desist to be issued against CC&M under Section 36b-72(a) of the Act, and the imposition of a fine against CC&M under Section 36b-72(b) of the Act. |
V. NOTICE OF INTENT TO ISSUE A STOP ORDER DENYING
EFFECTIVENESS TO A BUSINESS OPPORTUNITY REGISTRATION
AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION, THE COMMISSIONER HAS REASON TO BELIEVE that CC&M’s 2008 Application and General Affidavit contain statements that are false or misleading with respect to material facts, and that such statements form a basis for a stop order denying effectiveness to a business opportunity registration under Section 36b-68(a)(3) of the Act;
FURTHERMORE, AS A RESULT OF THE INVESTIGATION, THE COMMISSIONER HAS REASON TO BELIEVE that CC&M wilfully violated Sections 36b-67(1) and 36b-80 of the Act, and that such wilful violations form a basis for a stop order denying effectiveness to a business opportunity registration under Section 36b-68(a)(4) of the Act;
NOW THEREFORE, notice is hereby given to CC&M that the Commissioner intends to issue a stop order denying effectiveness to its business opportunity registration, subject to CC&M’s right to request a hearing on the allegations set forth above. A hearing will be granted to CC&M if a written request for a hearing is received by the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following CC&M’s receipt of this Notice. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If CC&M 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 a 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 presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on November 19, 2009, 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 General Statutes of Connecticut. At such hearing, CC&M 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 no hearing is requested within the time prescribed, the Commissioner shall issue a stop order denying effectiveness to the business opportunity registration of “Cuppy’s Coffee & More, Inc.” in Connecticut.
VI. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION, THE COMMISSIONER FINDS that, with respect to the activity described herein, CC&M and Elite have violated Section 36b-67(1) of the Act, and that further offers to sell or sales of business opportunities in Connecticut would constitute violations of Section 36b-67(1) of the Act;
AS A RESULT OF THE INVESTIGATION, THE COMMISSIONER FURTHER FINDS that, with respect to the activity described herein, CC&M has violated Section 36b-80 of the Act.
THE COMMISSIONER THEREFORE ORDERS that CC&M and Elite CEASE AND DESIST from directly or indirectly violating the provisions of the Act and from further activity which would constitute a violation of the provisions of the Act, including, without limitation, the further sale or offer to sell business opportunities constituting or which would constitute a violation of the provisions of the Act, and, in the case of CC&M, making statements in documents filed with the Commissioner that are false or misleading in a material respect;
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-72(a) of the Act, CC&M and Elite will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to CC&M and Elite, if a written request for a hearing is received by the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If CC& M and Elite 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 a 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 presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on November 19, 2009, 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 General Statutes of Connecticut. At such hearing, CC&M and Elite 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.
This Order shall remain in effect and become permanent against CC&M, if it does not request a hearing within the prescribed time period; and against Elite, if it does not request a hearing within the prescribed time period.
VII. NOTICE OF INTENT TO FINE RESPONDENTS AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of the Investigation that CC&M has violated Sections 36b-67(1) and 36b-80 of the Act;
WHEREAS, the Commissioner finds as a result of the Investigation that Elite has violated Section 36b-67(1) of the Act;
AND WHEREAS, notice is hereby given to Respondents that Section 36b-72(b)(2) of the Act authorizes the Commissioner to impose a fine not to exceed One Hundred Thousand Dollars ($100,000) per violation. The Commissioner intends to impose a maximum fine against CC&M of Two Hundred Thousand Dollars ($200,000), and a maximum fine against Elite of One Hundred Thousand Dollars ($100,000).
NOW THEREFORE, a hearing will be held in accordance with Section 36b-72(b)(2) of the Act and Chapter 54 of the Connecticut General Statutes. The hearing will be held on November 19, 2009, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut. At the hearing, Respondents will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law relating to the allegations stated herein. If any Respondent fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon such Respondent.
Dated at Hartford, Connecticut,
this 8th day of September 2009. ________/s/________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 9th day of September 2009, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Cuppy’s Coffee & More, Inc., 348 Miracle Strip Parkway SW, Building C, Suite 10, Fort Walton Beach, Florida 32548-5257, certified mail no. 7007 2680 0001 3136 7450; and Elite Manufacturing, LLC, at 548 Mary Esther Cutoff SW, Suite #334, Fort Walton Beach, Florida 32548-4064, certified mail no. 7007 2680 0001 3136 7474, and 348 Miracle Strip Parkway, Suite 34, Fort Walton Beach, Florida 32548, certified mail no. 7007 2680 0001 3136 7498.
________/s/_________
Paul A. Bobruff
Prosecuting Attorney