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(Senator Mondale presiding.)
Mr. BERTOCH. As I indicated before, the installment land sales board, itself, has not had the opportunity to consider this proposal in its entirety as it now stands as amended. We do have a few comments that we would like to make in addition to our prepared remarks and in the interest of saving some time, we will submit our prepared remarks in their entirety along with our summary of our January meeting with the staff of the committee considering this proposal.
I think insofar as the sale of Florida land is a major subject of discussion in the earlier testimony
Senator MONDALE. Are you going to follow your testimony or submit that for the record ? Mr. BERTOCH. I will submit that for the record. (See p. 170.)
p. Senator MONDALE. Can you tell me who the members of your land sales board are?
Mr. BERTOCH. The chairman of the board is Elliot Mackle, who is the executive vice president of Deltona Corp.
Senator MONDALE. That is the concern that deals in this business? Mr. BERTOCH. Yes, sir. Senator MONDALE. Who else? Mr. BERTOCH. Gerald Gould, vice chairman, who is an executive officer of Lehigh Acres Development Corp.
Senator MONDALE. Are they also in this business?
Mr. BERTOCH. Yes, sir. The other industry member of the board, and our statute requires that three members of the board be in the industry itself, is Leonard Rosen, chairman of the board of the Gulf American Land Corp.
Lay members of the board are Attorney Howard Hirsch, of Miami, Fla., and H. Elmo Robinson, attorney from West Palm Beach.
Senator MONDALE. Do either of those attorneys represent any of these companies directly or indirectly!
Mr. BERTOCH. Not that I am aware of, sir.
Senator MONDALE. Or any concern which might come within the jurisdiction of the board ?
Mr. BERTOCH. Mr. Hirsch had formerly represented Gulf American Land Corp., several years ago.
Senator MONDALE. So four of the five are either involved with the concerns or representing them?
Mr. BERTOCH. At the present time, that is the composition of the board.
Senator MONDALE. Would you submit for the record any information you might have as to current representation by either lay lawyer members of concerns that are regulated by the land sales board ?
Mr. BERTOCH. I didn't follow your question, sir?
Senator MONDALE. You have two representatives on your board who are, as you put them, lay members, they are not
Mr. BERTOCH. Not members of the industry.
Senator MONDALE. That is correct. I am interested in knowing whether they now represent any concerns which are regulated by the board.
Mr. BERTOCH. Not that I am aware of, sir.
Senator MONDALE. If you determine that they are, will you submit that for the record ?
Mr. BERTOCH. Yes, sir.
Mr. BERTOCH. It was passed in the early part of 1963 and took effect September 1, of 1963.
Senator MONDALE. 1963. What type of transactions does it cover?
Mr. BERTOCH. The law keys its jurisdiction to the form of the sale and that is an installment contract. At that time, there was a special Governor's committee created to study this business, because it is a major business in the State of Florida.
Senator MONDALE. If they are sold for cash you have no jurisdiction?
Mr. BERTOCH. Well, when you say “sold for cash,” if they are offered for sale on installment terms, they would be subject to our jurisdiction.
Senator MONDALE. Whether they were later sold for cash or not? Mr. BERTOCH. That is right.
Senator MONDALE. What about advertising outside your State, do you have jurisdiction, of land for sale in your State!
Mr. BERTOCH. Yes, sir; our law is very express and you will find throughout the country on all of the advertising materials employed by registrants, an identifying AD number. This is a very unique provision in the Florida law.
Senator MONDALE. Do you clear or have some jurisdiction over what can be said by them in their sales promotion?
Mr. BERTOCH. Yes, sir. We review thousands of pieces of advertising material every year.
Senator MONDALE. Is this a piece of literature that you cleared by the Colonial Acres?
(An excerpt from the advertising material follows:)
FOR TOMORROW'S POTENTIAL PROFITS
FORTUNES HAVE BEEN MADE IN FLORIDA
COLONIAL ACRES OFFERS EXCELLENT
Huge fortunes have been made by investors who purchased land in the path of Florida's fabulous growth. These investors have been successful because they purchased good land in good locations -- land that showed profit potential. According to a recently published report of the Comptroller of the State of Florida, the 35 million acres known as Florida have increased in value nearly 1,000% since 1916. Today, Florida's land and the improvements on it are valued at nearly $30 billion. As a matter of fact, even while you are reading this is.portant message, land values are ever increasing. In 1945, land in Greater Miami was selling for as little as $100 an acre. Today, this some land is being sold for as much as $20,000 an ocre. It has been soid many times by many famous and wealthy people that the basis of all wealth is lond - that land is the satest possible investment you con make and nobody con take it away from you that land is the one possession thot rarely loses in value and almost invariably goes up in volue.
In any fast-growing stafe such as Florida there is a limited supply of good !ond in a prima location. Study the map below and you will see thot COLONIAL ACRES is close to developed areas and is ideally located in the poth of progress. This lond is less than 5 miles from the prosperous city of Fort Pierca, only V4 of a mile from U.S. Highway 1, and only 4 miles from the Atlantic Ocean ond beautiful becches. This is virgin land in the heert of a growing area. Roads are in front of each fract of lond - you can see your land and walk on it! This tand does not have droinage or other improvements and none ore planned. When you consider this, you can recognize the advantage of investing in COLONIAL ACRES now, for in so doing, you benefit by getting in on the ground floor. Holding your land until the population expansion demands it for growth appears to be the most effective way of securing groot profits on your original investment. We all agree that land is the source of wealra and to buy undeveloped acreage in e potential growth area is a step in the right direction.
DON'T LET THIS GOLDEN OPPORTUNITY
SLIP THRU YOUR FINGERS!
Until recently the small investor had linle opportunity to invest in on area of genuinely promising growth. Wealthy investors could purchase huge tracts of lond but small investors had no such opportunity. Now, Starrett Building Company offers you an opportunity to purchase investment tracts which appear to have a great profit potential at a price you can afford. This land is in COLONIAL ACRES, in the heart of Florida's boamir.g middle cost coost, Millions of dollars are being spent by the Federal Government ct Cape Kennedy for Space Exploration and Missile Development. This hos brought unprecedented growth and prosperity to the area. In the last 10 years Florida has had a huge increase in population and the expected increase during the next 10 years is almost unbelievable. As thousands move to Florida each month, enormous tracts of land are needed and there is less and low good land left.
Don't be the one who says
FREE WARRANTY DEED!
• NO CLOSING COSTS TO PAY!
Mr. BERTOCH. This offering has just recently been called to our attention and we are cooperating with the local county attorney in ascertaining the facts of this. To our knowledge, at the present time, two sales have been made.
Senator WILLIAMS. You don't recall that this has been cleared by
Mr. BERTOCH. That has not been cleared by our board and it is under investigation right now to determine whether or not it does come under our jurisdiction.
Senator WILLIAMS. Why wouldn't it?
Mr. BERTOCH. Because it possibly has limited its method of sale to deed and mortgage. Now this is a strange term, probably, to the committee here, but the definition of our statute exempts those persons who convey title and immediately see to it that it is recorded. The board, because of its concern over this possible loophole in our law, in fact, not possible” loophole, it is a loophole as we see it—was attempted in the 1965 session of our legislature, to amend the law to correct this problem.
Senator MONDALE. So that as the law now stands, if the promotion offers a deed as distinct from a contract for a deed or installment contract, it does not come within your jurisdiction?
Mr. MOYLE. No.
Senator MONDALE. So that if this is in fact so interpreted, this type of promotion is not within the jurisdiction of your board, and that is why you offer the amendment which did not immediately pass the session of your legislature?
Mr. BERTOCII. First, Senator, we do not know, at this moment, whether it does come under our jurisdiction or not. It is under investigation.
Senator MONDALE. What do they mean by a free warranty deed here?
Mr. BERTOCH. Apparently this is the language they are going to rely upon in claiming they are exempt from our operation and from the evidence we have seen in the transactions so far, it does appear that upon receipt of the downpayment, they are in fact issuing a deed and recording it in the public records. If there is a purchase money mortgage, executed in conjunction with the transaction, that also is being recorded. At least in the records we have seen so far, two such transactions have taken place, one for cash and one for deed and mortgage.
Senator MONDALE. What percentage of the land promotions in Florida come within the jurisdiction of your board and which, because they come within the deed exemption or the cash exemption, are not within the jurisdiction of the board ?
Mr. BERTOCH. Well, from our study of the situation, it appears that substantially all of the people who are involved in this business, in a large way, are under our jurisdiction. The legislative determination originally that the installment form of contract was the key to the question at that time. However, because there are still certain persons such as this one referred to the other day, still operating, we do want to bring them under our control.
Senator MONDALE. If information on the question of jurisdiction of your board over this concern is available to you shortly, will you submit it to the committee?
Mr. BERTOCH. Yes, sir.
Senator MONDALE. We have had extensive discussion about Golden Palm Acres in the last 2 days.
Mr. BERTOCH. Yes, sir.
Senator MONDALE. Does that come within the jurisdiction of your board ?
Mr. BERTOCH. Based upon the information developed thus far, it doesn't. Now this is a very peculiar situation because our law, by its definition, regulates those persons who are selling Florida land wherever they are situated. We have initiated investigative action and have had the only person known to us to be operating the company in the State of Florida present and have obtained a statement from him, which I will submit to this committee, if they so desire. It does appear that all the transactions, the sales activities, correspondence, and records are all in the State of New Jersey,
Senator MONDALE. Wait a minute. Even though the land is located in Florida?
Mr. BERTOCH. Yes, sir.
Senator MONDALE. If the principal officer resides in fact in another State, you do not have jurisdiction, do I understand that correctly?
Mr. BERTOCH. If they are selling by installment contract we wouldn't care whether they are in New Jersey, California, or Hong Kong, we would charge their operation as being in violation of our law.
Senator MONDALE. Then so it is not the residence of the principal officer that is the operative fact here, it is—we get back to the old question—whether a deed or installment contract.
Mr. BERTOCH. It is a determination as to whether or not the offering comes within the form of the transaction that the law has given us jurisdiction over.
Senator MONDALE. What is your determination then on this Golden Palm Acres? Is that under your jurisdiction or isn't it?
Mr. BERTOCH. Our investigation is not complete, sir.
Mr. BERTOCH. To our knowledge, just in the early part of this year. Mr. Fogarty's article appeared May 1, I think it was May 12, we had this gentleman in before us to take his statement. He invoked the attorney-client privilege which made it impossible to ascertain additional information. We probably will start further action to see if we can compel him to answer certain questions and deliver certain records to us.
Senator MONDALE. Is your power of discovery in doubt?
Senator MONDALE. Can you subpena records, and subpena the principals ?
Mr. BERTOCH. Yes, sir; no doubt about that. The question here is the invoking of the attorney-client privilege. We don't feel that it is applicable to a corporate situation.
Senator MONDALE. Do you have him scheduled to come in now?
Mr. BERTOCH. We have had him in already, sir, and his testimony is available to the committee if they so desire. I think Mr. Oriel has a copy of the transcript.
Mr. MOYLE. Senator Mondale, if you would allow us just a moment, sir, to amplify on some of these questions you are asking.
Senator MONDALE. You ought to feel free to give a full answer and if I am not giving you time to do so, by all means tell me.
Mr. MOYLE. I would appreciate it if we could further amplify. Obviously our subpena power does not go across the State lines. The principals of Golden Palms are located in New Jersey. The operation is taking place in New Jersey. We subpenaed a Florida resident agent and interrogated him in the State office building in Miami, Fla. He invoked the attorney-client relationship and we got as much information as we could out of him.
This Golden Palms situation started May 1, as a result of a news article. (Text on p. 332.). At the present time, we are trying, under our law, to come up with some type of judicial or administrative proceeding which can, and if not through proper judicial or administrative process at least through publicity, cause this type of operation to cease.
Senator MONDALE. If you have a man with promotions such as Golden Palm and he refuses to respond to the information that the Board requires, discharges his responsibility, invokes the attorneyclient privilege and perhaps seeks to avoid discovery on the grounds you can't serve process on him within the State, to prevent him from conducting business in the State.
Mr. MOYLE. Senator, a resident agent is not conducting business in the State. The business is being conducted in New Jersey and the land is located in Florida.
Senator MONDALE. The land is located in Florida. If he is uncooperative, can you prohibit the sale of land located in Florida?
Mr. BERTOCH. If we develop sufficient information in our investigation, sir, to show he comes within the purview of our law we feel we can institute some kind
of proceeding. Senator MONDALE. But he is refusing to cooperate to supply it.
Mr. BERTOCH. At this point he has created a problem because of stating he has a privilege.
Senator MONDALE. So if he is successful in frustrating your efforts to learn about his operation, he can continue to operate, is that correct?
Mr. BERTOCH. I don't believe that is true, sir, because we probably will be forced, because of his reluctance to answer these questions, to cite him for contempt for his refusal to deliver the corporation records. We do have a very serious problem, sir, and we are frank to admit it. However, the main thrust of this operation is in New Jersey.
New Jersey feels they could not do anything about it. I feel certain if we develop additional information that the advertising is misleading or fraudulent, under our other criminal provisions under false advertising, we might be able to proceed under that. That provides for penalties of $100,000 fine and 5 years in jail.
Senator MONDALE. If it is established, however, that he is proceeding through deed rather than installment contract you are without jurisdiction?
Mr. MOYLE. Senator, may I amplify on this ? Earlier you asked the same question. It is not quite as black and white as you have stated. It is not a deed and it is not based on the deed. The basic jurisdictional point is recordation of the deed in the public records. We have