Frank Whitbeck Pleads Guilty to Mail Fraud

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

Ex-insurance executive Frank B. Whitbeck avoided a criminal trial scheduled for May 27 in a plea bargain agreement with federal prosecutors.

In exchange for admitting to one count of mail fraud - his plea in U.S. District Court was scheduled for last Thursday, after this issue went to press - Whitbeck won't have to contend with three counts of making false statements to the Arkansas Insurance Department.

"The sentencing issues will be dealt with at a later date," said Assistant U.S. Attorney George Vena, who prosecuted Whitbeck. The statutory limit for the mail fraud charge is 20 years in prison and a $1 million fine.

Whitbeck's trial had been scheduled four times since a federal grand jury last year handed down a four-count fraud indictment against Whitbeck. The charges are related to 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 charges are linked with Signature Life's annual statements for 2001, 2002 and 2003 filed with the state Insurance Department.

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 of public record, which made the debt unsecured.

Whitbeck shed little light on his motives during a deposition with Steve Niswanger, attorney for the Insurance Department.

Niswanger: "And none of these mortgages were actually recorded in the real estate records?"

Whitbeck: "No."

Niswanger: "Why not?"

Whitbeck: "It was my belief that these mortgages would not be in existence a very long time."

Niswanger: "And why is that a reason for not filing a mortgage?"

 

 

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