International Swindle Guts Old Southwest

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

Beneath Hackney were two corporations: International Financial Corp., with a trio of companies in Mississippi, Oklahoma and Missouri, and Franklin American, with seven companies and agencies in Tennessee and Mississippi.

Spurred by a growing fascination with the Catholic Church, Frankel formed a second leg of his insurance empire on Aug. 10, 1998: The St. Francis of Assisi Foundation. Pledged to “serve and help the poor and alleviate suffering,” the charity listed its trustee as Father Peter Jacobs, a New York priest. The trust listed addresses in Vatican City and the Virgin Islands and pledged $50.1 million in equity securities as its sole asset.

Jacobs used the Washington, D.C., law firm of Robert Strauss, the former U.S. ambassador to the Soviet Union and former chairman of the Democratic National Committee, to help convince Colorado regulators.

Tennessee Commerce & Insurance Department spokeswoman Marilyn Elam says Frankel took his Catholic charity west after Mississippi insurance regulators declared in early 1999 that church ownership of the insurance company would be illegal. They launched their investigation of the Thunor Trust.

The approach also failed in the Rockies. Ryan says a St. Francis foundation representative withdrew the Colorado application after state regulators demanded answers to 23 questions.On to Arkansas

Hackney and Franklin American signed an agreement to buy Old South-west from Moore’s Investment Co. Inc. on Dec. 11 — seven days after Colorado scared off Frankel. The company filed a formal application with the Arkansas Insurance Department on Jan. 14.

There was no mention of Frankel, the Catholic charities or the Vatican.

Arkansas officials said they reviewed the application during a hearing in February and quizzed Wade A. Willis, Franklin’s EVP and secretary.

They noted A.M. Best, the nation’s premier insurance rating house, had given Franklin American high marks and upgraded its rating in 1998.

Contacted prior to approval of the Arkansas merger, Tennessee regulators raised no questions of solvency. Like Old Southwest, Franklin American had built a healthy business selling burial packages through a network of funeral homes.

“When you compared the operations, the products and the administration of the two companies, it made a lot of sense that Franklin American was seeking to acquire a small company ... as they had done previously in many other states,” says Arkansas Deputy Commissioner Mel Anderson.

Anderson awaited a call from Old Southwest announcing plans for the final merger. That would have prompted a second review from regulators in Arkansas and Tennessee.

 

 

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