| * * * * * * * * * * * * * * * * * IN THE MATTER OF: ROLL-A-COVER, LLC MICHAEL P. MORRIS (collectively "Respondents") * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-2006-820-B |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672c of the Connecticut General Statutes, 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 (“Division”) of the Department of Banking, has conducted an investigation into the activities of RAC, its officers, agents, representatives and employees, and Morris, his agents, representatives and employees, to determine if they, or any of them have violated, are violating or are about to violate provisions of the Act.
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 by the Division, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
As a result of the investigation by the Division, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-72(a) of the Act, as amended by Public Act 06-75, which provides, in pertinent part:
Whenever it appears to the commissioner that any person or persons 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 in his discretion 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 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. |
| 5. |
As a result of the investigation by the Division, the Commissioner has the authority to impose a fine on Respondents pursuant to Section 36b-72(b) of the Act, which prior to October 1, 2006, provided, in pertinent part:
(1) Whenever it appears to the commissioner 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, or by any express delivery carrier that provides a dated delivery receipt. 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.
(2) The commissioner shall hold a hearing upon the charges made unless such person or persons fail to appear at the hearing. Such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person or persons have violated any of the provisions of sections 36b-60 to 36b-80, inclusive, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. If such person or persons fail to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. The commissioner shall send a copy of any order issued pursuant to this subsection by certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to any person or persons named in such order.
II. RESPONDENTS |
| 6. | RAC is, and at all times relevant hereto was, a Connecticut limited liability company with its headquarters at 674 Amity Road, Bethany, Connecticut 06524, and its plant operations at 36 Sargent Drive, Bethany, Connecticut 06524. |
| 7. |
Morris is, and at all times relevant hereto was, the Managing Partner and President of RAC, and a Connecticut resident whose address last known to the Commissioner is 16 Keegan Drive, Bethany, Connecticut 06524.
III. STATEMENT OF FACTS |
| 8. | Respondents sell the products, equipment, supplies and services necessary to enable a purchaser to start a business to market and sell manufactured retractable pool covers and other outdoor enclosures (“RAC Distributorship”). |
| 9. | Respondents represent to prospective purchasers that the “Distributor . . . will receive Roll-A-Cover strategy, marketing, sales, technical research and other information from Roll-A-Cover (including without limitation information regarding pricing, delivery dates and customers, and the unique sales program involving sales techniques and sales materials) . . . ”. |
| 10. |
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| 11. | At the time such offer and sale was made, the RAC Distributorship was not registered as a business opportunity in Connecticut and no registration for the RAC Distributorship as a business opportunity had been declared effective by order of the Commissioner under Sections 36b-60 to 36b-80, inclusive, of the Act, nor was the RAC Distributorship sold in conjunction with a federally-registered trademark or service mark. |
| 12. | At no time prior to the date such sale was made did Respondents provide the prospective purchaser with a written disclosure document entitled “DISCLOSURES REQUIRED BY CONNECTICUT LAW,” a disclosure document in accordance with provisions of the Federal Trade Commission’s trade regulation rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures”, or any other written disclosure document which complies with the requirements of Sections 36b-63 or 36b-65(d) of the Act. |
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IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST AND ORDER IMPOSING FINE AGAINST RESPONDENTS | |
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a. The RAC Distributorship Offered by Respondents is a Business Opportunity | |
| 13. | Paragraphs 1 through 12, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 14. | The New Jersey purchaser is a “purchaser-investor” within the meaning of Section 36b-61(3) of the Act, in that he is a “person who has purchased or is solicited for the purchase of a business opportunity”. |
| 15. | RAC is a “seller” within the meaning of Section 36b-61(4) of the Act, in that it “engaged in the business of selling or offering for sale business opportunities or any agent or representative of such person”. |
| 16. | Morris is a “seller” within the meaning of Section 36b-61(4) of the Act, in that he “engaged in the business of selling or offering for sale business opportunities or any agent or representative of such person”. |
| 17. | The RAC Distributorship consists of products, equipment, supplies and services, as more fully described in paragraph 8. |
| 18. | Respondents represented to the purchaser-investor that they will provide, inter alia, a sales program, as more fully described in paragraph 9. |
| 19. | The RAC Distributorship constitutes a “business opportunity” as defined in Section 36b-61(6) of the Act, 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 . . .”. |
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b. Violation of Section 36b-67(1) of the Act – Offer of an Unregistered Business Opportunity | |
| 20. | Paragraphs 1 through 19, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 21. | Section 36b-67 of the Act provides, in pertinent part, that “[n]o 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”. |
| 22. | Respondents offered and sold the RAC Distributorship, as more fully described in paragraph 10. The offer and sale of such a business opportunity absent registration and absent the Commissioner having declared the business opportunity effective, as more fully described in paragraph 11, 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, as amended, and for the imposition of a fine against Respondents under Section 36b-72(b) of the Act prior to October 1, 2006. |
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c. Violation of Section 36b-63(a) of the Act – Failure to Provide Written Disclosure Document | |
| 23. | Paragraphs 1 through 22, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 24. | Section 36b-63(a) of the Act provides, in pertinent part, that “[a]t least ten business days prior to the time the purchaser-investor signs a business opportunity contract, or at least ten business days prior to the receipt of any money or thing of value by the seller or any person designated by the seller to receive such money or thing of value, whichever occurs first, the seller shall provide the prospective purchaser-investor a written document, the cover sheet of which shall be entitled in at least ten-point boldface capital letters ‘DISCLOSURES REQUIRED BY CONNECTICUT LAW’. . . . When, however, the seller uses a disclosure document in accordance with the provisions of the Federal Trade Commission’s trade regulation rule entitled ‘Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures’, 16 CFR 436, as amended from time to time, the cover sheet required by this subsection shall be placed immediately after the cover sheet required under such rule of the Federal Trade Commission”. |
| 25. | Respondents signed the business opportunity contract to sell the RAC Distributorship on or about January 13, 2004, as more fully described in paragraph 10. Respondents failed to provide the purchaser-investor with a statutorily required written disclosure document, as more fully described in paragraph 12. The failure on the part of Respondents to provide the required written disclosure documents at least ten business days prior to the signing of a business opportunity contract constitutes a violation of Section 36b-63(a) 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, as amended, and for the imposition of a fine against Respondents under Section 36b-72(b) of the Act prior to October 1, 2006. |
V. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION BY THE DIVISION, THE COMMISSIONER FINDS that, with respect to the transactions described herein, Roll-A-Cover, LLC and Michael P. Morris have violated Sections 36b-67(1) and 36b-63(a) of the Act, and that further offers to sell or sales of business opportunities in Connecticut would constitute violations of Sections 36b-67(1) and 36b-63(a) of the Act.THE COMMISSIONER THEREFORE ORDERS that Roll-A-Cover, LLC and Michael P. Morris CEASE AND DESIST from directly or indirectly violating the provisions of the Act and from the further sale or offer to sell business opportunities constituting or which would constitute a violation of the provisions of the Act, including, without limitation, offering or selling unregistered business opportunities.
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-72(a) of the Act, as amended, Roll-A-Cover, LLC and Michael P. Morris will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to Roll-A-Cover, LLC and Michael P. Morris if a written request for a hearing is received by the Department of Banking, Legal Division, 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 Roll-A-Cover, LLC and Michael P. Morris 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 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 December 5, 2006, 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. At such hearing, Roll-A-Cover, LLC and Michael P. Morris 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 if Roll-A-Cover, LLC and Michael P. Morris do not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO FINE RESPONDENTS AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that Respondents have violated Sections 36b-63(a) and 36b-67(1) of the Act;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondents would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a fine not to exceed Ten Thousand Dollars ($10,000) per violation, or a maximum fine of Twenty Thousand Dollars ($20,000) on each Respondent.
NOW THEREFORE, a hearing will be held in accordance with Section 36b-72(b) (2) of the Act effective prior to October 1, 2006, and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on December 5, 2006, 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.
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondents would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a fine not to exceed Ten Thousand Dollars ($10,000) per violation, or a maximum fine of Twenty Thousand Dollars ($20,000) on each Respondent.
NOW THEREFORE, a hearing will be held in accordance with Section 36b-72(b) (2) of the Act effective prior to October 1, 2006, and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on December 5, 2006, 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 18th day of October 2006. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 18th day of October 2006, 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 Roll-A-Cover, LLC, 674 Amity Road, Bethany, Connecticut 06524, certified mail no. 70031680000085235574, and 36 Sargent Drive, Bethany, Connecticut 06524, certified mail no. 70031680000085235215; and Michael Morris, 16 Keegan Drive, Bethany, Connecticut 06524, certified mail no. 70031680000085235222.
________/s/_________
Jesse B. Silverman
Prosecuting Attorney