By Moritz, Gwen
STEVE STANDRIDGE ALLEGEDLY FALsified the collateral he used to purchase Gibraltar National Insurance Co. of Little Rock last year and also defaulted on a premium finance loan that had been misrepresented to the lender, according to orders issued last week by the Arkansas Insurance Department.
Standridge, president of Steve Standridge Insurance Inc. of Mount Ida, has agreed to retire immediately from the insurance business, according to his attorney, Tom Curry of Arkadelphia. SSI claims 17 offices on its Web site, but the Insurance Department said it has 11 offices.
Standridge’s license was yanked in an emergency suspension order issued by Insurance Commissioner Jay Bradford, and Steve Standridge Insurance was placed under regulatory supervision in a separate order.
Taken together, the two orders describe a convoluted financing scheme in which Standridge and his wife, Debbie, borrowed $4 million from First Service Bank of Greenbrier to buy troubled Gibraltar from Little Rock businessman Ed Harvey.
The transaction, which saved Gibraltar from insolvency, had been approved by Bradford in January 2009. That order reflects a sale price of $2 million, and the Standridges apparently loaned Gibraltar $2 million to improve its capital reserves.
The personal loan from First Service was used to buy two certificates of deposit in the name of Gibraltar Insurance. At the time of the purchase, Standridge led insurance regulators to believe that he would collateralize the loan by pledging the assets of his existing business, Steve Standridge Insurance.
The board of SSI had supposedly approved of using SSI assets as collateral, and this arrangement was supported by documents supposedly prepared by First Service Bank and delivered to the Insurance Department during a final review of the Gibraltar sale last August. The SSI board includes two executives of State Auto Insurance Co. of Columbus, Ohio, which had helped finance SSI’s acquisition of small agencies over the past few years.
Then last month, on Feb. 12, insurance regulators discovered that the $4 million worth of CDs held in Gibraltar’s name were pledged as collateral on the First Service loan to the Standridges. How this discovery was made is not explained in the orders.
Five days later, Standridge endorsed the two CDs for withdrawal and used them to pay off the personal loan even though, according to insurance regulators, he “was not an authorized signatory as required for withdrawal of the funds.”
On the same day, SSI took out a $4 million loan from First Arkansas Bank & Trust of Jacksonville and used that money to buy more CDs in the name of Gibraltar. Standridge “then represented to Gibraltar’s board of directors that the assets of Gibraltar had been restored and were unencumbered and not pledged as collateral for any indebtedness.” The next day, Gibraltar’s board of directors learned that the new CDs were, in fact, the only collateral on the new First Arkansas loan to SSI.
The following week, insurance regulators learned of another problem with Standridge. In June 2009, Standridge arranged to borrow $856,311 from the Bank of Star City to finance premium on a commercial property policy for a company in Camden.
The bank received a copy of the premium finance agreement but never got a copy of the actual policy. If it had, it would have discovered that the policy was actually issued months earlier, on Nov. 1, 2008, and was set to expire on Nov. 1, 2009.
Standridge apparently made several monthly payments on the premium finance loan, but after some payments were missed, the bank discovered that the policy it had financed was canceled on Aug. 23. The bank has been unable to collect the approximately $430,000 still owed on the loan and filed suit in Lincoln County Circuit Court on Feb. 26.
Meanwhile, the two State Auto executives on the SSI board informed the Insurance Department that they had not signed the document consenting to the use of SSI assets as collateral on the purchase of Gibraltar.
Copyright Arkansas Business Mar 8, 2010
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