Whitbeck Bankruptcy Dismissed by Exasperated Judge

by George Waldon  on Monday, Sep. 1, 2008 12:00 am  

"The facts, from my point of view, are just as I have presented them," he said during the hearing. "I'm sorry that this other situation puts me in a possibly bad light."

The "other situation" is Whitbeck's guilty plea to one count of mail fraud in U.S. District Court on May 8. He is scheduled for sentencing on Oct. 23.

The charge stems from financial dealings between Signature Life Insurance Co. of America and Winrock Grass Farm Inc., both owned by Whitbeck.

Whitbeck was accused of diverting more than 80 percent of Signature Life's assets to himself and other companies he controlled. The plea agreement allowed Whitbeck to avoid a criminal trial on three counts of making false statements to the Arkansas Insurance Department. The charges are linked with the annual statements for 2001, 2002 and 2003 that Signature Life filed with the state insurance regulators.

According to allegations, 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 in the public record, which made the debt unsecured.

Whitbeck personally guaranteed $2 million of a $3.9 million settlement to repay the Winrock debt and recapitalize the insolvent insurance company. He testified that unpaid balance is about $3.07 million.

At the end of the Aug. 22 hearing to review the amended financial statements of Winrock Grass Farms, Mixon rejected an agreement to dismiss the case and announced his intention to convert the company's Chapter 11 reorganization to Chapter 7 liquidation.

'Act Like Gentlemen'

That pronouncement prompted Jim Penick, one of Whitbeck's lawyers, to slam his briefcase on the table in frustration and Mixon to issue a contempt-of-court warning.

"Mr. Penick, don't act like that," Mixon said. "I'll hold you in contempt of court. You can go outside if you're mad. I understand you're upset. But this is a court of law, and we're supposed to act like gentlemen."

The judge earlier called out Rick Ramsay, Winrock's bankruptcy attorney, for his behavior regarding an unfavorable ruling.



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