International Swindle Guts Old Southwest

by Michael Whiteley  on Monday, Mar. 31, 2014 12:00 am  

Court records filed by Virginia regulators trace nearly $45 million from Tennessee bank accounts through the Bank of New York and on to a numbered account controlled by Frankel at Banque SCS Alliance SA in Geneva, Switzerland.

Virginia Insurance Commissioner Alfred W. Gross sued on July 6, saying the insurance companies under the Thunor Trust umbrella were under regulatory scrutiny by early 1999 and Frankel’s schemes were “beginning to unravel.”

He says Mississippi alerted Thunor officials to their concerns in March —soon enough to stop the April wire transfers and alert Arkansas officials in time to prevent Old Southwest’s takeover from being finalized.

“The Thunor insurance companies, the vehicles for Frankel’s schemes, are hopelessly insolvent, with the possible exception of [Franklin American],” Gross says in the lawsuit. “Virtually every dollar these companies showed as assets disappeared.”

Steve A. Uhrynowycz, deputy receiver for Pickens’ agency, is running the burial insurance company in Jacksonville and says it could survive through the end of the year without its assets.

“We’re not selling new policies, but we’re still paying claims and bills,” he says. “If we’re not able to recover the assets, we would have to take the company into liquidation and sell the block of business to another carrier.”

Old Southwest sold “pre-need” policies and annuities to cover burial expenses. The policies carried average face values of $7,500 and were sold to about 4,000 people throughout most of Arkansas. State officials say all claims will be covered by the Arkansas Life Disability Guaranty Association insurance pool.

“Arkansas is lucky,” adds Everett Sinor, staff attorney for the Tennessee Department of Commerce & Insurance. His agency has been thrust to the center of an investigation that now includes the FBI, the U.S. Securities & Exchange Commission and Interpol.

A Tale of Two Cities

Based on records filed with regulators in Arkansas, Colorado, Tennessee and Virginia, the odyssey of Old Southwest appears almost an afterthought.

The insurance empire that news reports say began with a bank of computers piled on card tables in Frankel’s $3 million Greenwich, Conn., mansion had all but collapsed by the time entities associated with him courted life companies in Arkansas and Colorado in late 1998.

Both firms, Old Southwest Life Insurance Co. in Jacksonville and The Capitol Life Insurance Co. in Golden, Colo., had long histories in their communities and recent legacies of trouble.

 

 

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