Posted 11/11/2013 12:00 am
Updated 5 months ago
Seized assets totaling $18 million linked with former One Bank & Trust CEO Layton “Scooter” Stuart remain in federal hands.
How the cash and cars are distributed among various claimants is still a point of contention, too.
Stuart’s tangled financial affairs have only grown worse since his death seven months ago.
“A lot of people ask me why I got myself into this,” said Richard Torti. “To assure comity, fair play. Scooter Stuart is dead. Bury all of his sins with him, but his family is innocent.”
Complicating matters are allegations that the seized assets are tainted by criminal self-dealing by Stuart.
Torti accepted the charge to look out for the Stuart family’s interests as a trustee and executor.
He is engaged on two legal fronts in Little Rock to exercise his authority in both roles and extricate money from federal authorities for the benefit of Stuart’s wife and two children under the trusts and Stuart’s creditors through the estate.
In Pulaski County Circuit Court, Torti is battling to perform his duties as executor of Stuart’s estate. Jerry Pavlas, Stuart’s replacement CEO at One Bank, signed off on a legal challenge to Torti acting as both trustee of the Stuart family trusts and executor of the estate.
Judge Collins Kilgore will decide whether a conflict of interest does indeed exist as claimed by One Bank.
In U.S. District Court, Torti is battling to claim assets seized by federal authorities. The biggest asset is $17.7 million from a life insurance policy on Stuart.
Federal authorities prevented the payout from flowing to the Stuart family trusts and forced John Hancock Life Insurance Co. to turn the money over to the U.S. government for safekeeping.
“It’s in everyone’s best interest to quit fighting over the money, and let’s sit down at a table and figure out how to make this thing work,” Torti said. “If they don’t want to settle, I guess it’s going to be up to a judge. And even then, any decision probably will be appealed.”
The legal bills and costs associated with the fight over the seized assets continue to mount amid talk of a global settlement. Such a settlement won’t happen if the Stuart family trust doesn’t receive some of the cash, according to Torti.
“At some point, there will be a disbursement of funds, with or without everyone’s agreement,” Pavlas said. “We would like to have something accomplished by the end of the year.”
Six months ago, a deal was in place for One Bank to receive more than $3 million from the seized assets. The money represented premium payments the bank made on Stuart’s life insurance policy.
The deal fell apart when Torti and Pavlas couldn’t find agreement when questions arose about a $500,000 line item in the flow of money between the bank and John Hancock Life.
“All I asked for was to go to a mediator to determine what this is,” Torti said. “I didn’t mind paying them any premiums owed. I just wanted documentation. It just went to hell after that.”
“We tried to deal with the trustee in good faith right from the very beginning,” Pavlas said. “It’s my job to get capital back in the bank. That’s what it’s really all about.”
Big Three Claimants
One Bank recently filed a second amended and restated claim of $18.8 million against the cash and assets seized by federal agents. (See Alleged Money Diversions at the end of this article.)
The revised claim has slight changes in the line items that totaled more than $14.3 million in September.
In addition to the bank and Stuart’s family, two other parties will have to sign off on any global settlement involving the seized assets.
BHL Financing LLC, led by Johnelle Hunt, is owed $4.6 million on a purchase of OneFinancial Corp. shares. The debt dates back to Oct. 31, 2002, and stems from Stuart’s purchase of the Hunt family’s remaining 24.8 percent stake in the holding company.
BHL Financing has additional claims on two other delinquent promissory notes totaling $10.5 million owed by Stuart’s Rivercity Energy Inc. These debts also are secured by his OneFinancial stock.
The Rivercity notes are associated with Stuart’s unsuccessful investment in a string of convenience stores in central Arkansas. Rivercity accounts at One Bank are part of the tangled financial legacy that Stuart left behind.
Ownership of the OneFinancial stock determines the owner of One Bank. On paper, Stuart’s estate owns the stock.
However, the holding company is unmanned and adrift with no one in charge. Since Stuart and other executives were jettisoned from bank operations, a series of quarterly reports for OneFinancial to the Federal Reserve Bank have gone unfiled.
If Torti is confirmed as the executor of Stuart’s estate, he could assume administrative oversight of OneFinancial Corp.
BHL Financing could take control of the holding company through its stock-secured debt claims.
Such a transfer of ownership could bring with it a transfer of TARP liability with the U.S. government.
Ownership of the OneFinancial shares also is tied to financial claims by a second creditor.
The U.S. Treasury is owed about $13.5 million on TARP funding that flowed to OneFinancial and into the bank.
The holding company has missed six TARP payments because the bank is restricted from paying dividends because of a supervisory agreement with the Office of the Comptroller of the Currency.
The regulatory restrictions didn’t help Stuart keep current on payments to BHL either.
Preserving capital was the OCC’s operational mandate to One Bank officials. Some of the TARP funds intended to bolster capital allegedly were used for other purposes.
Pavlas signed off on a claim that Stuart allegedly converted nearly $2.2 million of the original $17.3 million in TARP money for personal use.
Torti believes some of the lingering animosity and frustration with Scooter Stuart has been transferred to him.
“If we keep addressing each other with clenched fists, we’re never going to shake hands,” he said.
Alleged Money Diversions At One Bank & Trust By Layton “Scooter” Stuart
(Revised claims as of Nov. 4)
|Northwestern Mutual and Pacific Life insurance loans*||$2,938,609|
|Bank-paid personal air travel||$2,026,513|
|Payments on personal credit cards||$1,681,502|
|Payments for Stuart through Procurement Account||$1,150,119|
|Buying and renovating 32 Valley Club Circle||$894,156|
|Losses and costs of condos in Florida, Texas and Colorado||$891,519|
|Sale of bank-owned condo in Dallas||$765,130|
|Athletic donations and tickets||$514,634|
|Overbilled marketing restitution||$550,000|
|Fictitious Verizon Arena renovations||$377,132|
|Personal vehicles purchased by bank||$261,700|
|Payments for Stuart through Accounts Receivable||$205,725|
|Embezzlement restitution by fired employee||$101,003|
|Payments for Stuart through Accounts Payable||$95,876|
|Down payment on 13 Lombardy Lane & unearned salary for Kirby Stuart||$74,974|
|Consulting fees paid to Wagner Construction||$50,121|
|Shell credit cards||$14,392|
|Excess funding of health savings accounts for Stuart and his children||$6,000|
|Premium reimbursements owed to bank for maintaining $20 million life insurance policy on Stuart||$3,498,531#|
|Interest on claims||$1,822,686|
|Assets Seized by Federal Agents|
|Net death benefit on John Hancock Life Insurance policy on Stuart||$17,693,837|
|Two Bank of America accounts||$107,800|
|2013 Land Rover||$67,093##|
|2013 Lexus RX350||$46,268##|
|2011 Cadillac SRX||$45,247##|
|Net proceeds from sale of house at 13 Lombardy Lane||$25,992|
|Five One Bank accounts||$25,263|
|2008 Global Electric Motorcar||$14,633##|
*Bank-owned life insurance policies on senior management.
**Includes an alleged diversion of $561,655 for Lake Ouachita condo used by Tom Whitehead, former chief financial officer of One Bank.
#Conflicting paperwork could lower that figure to about $2.9 million.
##Reflects price paid.