Lenders, Bank Regulators Continue Investigation in Bonds Sold by Kevin Lewis

by George Waldon  on Monday, Dec. 6, 2010 4:31 pm  

Lenders and bank regulators are still trying to sort out details in a string of questionable rural improvement district bonds handled by Kevin Lewis of Little Rock.

First Southern Bank of Batesville invested about $22 million in bonds that may be fraudulent. Other Arkansas banks bought the suspect bonds through Lewis, pushing the total to more than $30 million and possibly much higher.

According to bank sources, the problem at First Southern was uncovered during a routine audit by bank regulators more than a month ago. Questions about proper documentation associated with the bonds led to unsettling discoveries.

Chief among the concerns are allegations that some of the bonds are all but worthless and that some of the improvement districts exist only on paper.

Lewis is described as an indirect stockholder in First Southern Bank of Batesville through his family's stake in PA Alliance Trust, which holds a 53.3 percent stake in the bank. Exactly how much of the trust is owned by Lewis is unclear.

The trust entered the ownership picture at First Southern last year in a $9.2 million acquisition, half of which was financed by First State Bank of Lonoke.

Lewis, a lawyer, grew up and did business in Searcy before moving to Little Rock.

"This has just thrown me for a loop," said one insider at First Southern, who has done business with Lewis for years.

PA Alliance Trust bought its stake in First Southern from a number of investors, dominated by stockholders associated with Lonoke's First State Bank, Fidelity National Bank of West Memphis and Cross County Bank of Wynne.

The three east Arkansas banks, through their respective holding companies, helped launch First Southern in 2005.



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