Whitbeck Owes Insurance Department $3 Million

by George Waldon  on Monday, Oct. 13, 2008 12:00 am  

Former insurance executive Frank B. Whitbeck owes about $3 million on his tab with the Arkansas Insurance Department. The debt reflects money the Little Rock businessman diverted from his Signature Life Insurance Co. of America to his Winrock Grass Farm.

"There was a lot of fraud involved in that," said Julie Benafield Bowman, Arkansas Insurance Commissioner. "Mr. Whitbeck is a very smart man and knew what he was doing and how to play the game.

"It was very difficult and continues to be a very difficult paper trail to follow. There are just a lot of holes in it and a lot of unanswered questions."

Whitbeck is scheduled for sentencing on Oct. 23 in U.S. District Court on one count of mail fraud in connection with his malfeasance. The plea agreement followed a four-count indictment and long-delayed trial.

The Insurance Department dropped a civil lawsuit against Whitbeck alleging fraud, breach of fiduciary duties and conversion in exchange for his signing a plan to financially rehabilitate Signature Life.

The money is replenishing Signature's depleted reserves after Whitbeck caused the insurance firm to make unsecured loans he claims are related to Winrock Grass Farm.

If Whitbeck doesn't make good on the payments, guaranty funds will be activated to protect policyholders, and the Insurance Department could sue to enforce the terms of the settlement.

Whitbeck was accused of diverting more than 80 percent of Signature Life's assets to himself and other companies he controlled. The charges are linked with Signature Life's annual statements for 2001, 2002 and 2003 filed with the Insurance Department.

According to insurance regulators, Whitbeck falsely described loans to his Winrock Grass Farm as residential mortgages, falsely described the loans as first liens and falsely described Winrock as an unrelated third-party borrower.

Insurance regulators said Whitbeck should have categorized the loans to Winrock Grass Farm as commercial mortgages. Other lenders already had first liens on the property, and the Signature loans to the grass farm were never filed as part of the public record, which made the debt unsecured.                                         





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