by Gwen Moritz
Posted 12/23/2013 12:00 am
Updated 7 months ago
(This article has been changed for clarity since its original publication. See end for details.)
In the weeks before his insurance empire crumbled in early 2010, Steve Standridge of Mount Ida persuaded friendly customers to lend him millions of dollars, ostensibly so that he could buy a couple of smaller agencies.
Standridge, who already faces 12 federal felony charges related to alleged bank fraud in the Eastern District of Arkansas, was quietly arrested last month, jailed overnight at Texarkana and then pleaded not guilty to 23 additional federal felony counts.
The new charges in U.S. District Court for the Western District allege that Standridge still owes one man $2.7 million borrowed under false pretenses and that he submitted fraudulent documents to Simmons First Bank of Hot Springs when another man tried to borrow $400,000 in order to lend it to Standridge.
It’s not clear exactly what led Standridge into the financial hole described by federal prosecutors. But, taken together, the indictments paint a picture of a man desperate to raise cash in 2009 and especially during the first weeks of 2010. The new charges allege a Ponzi-like scenario in which Standridge repeatedly sought large, short-term loans, not for the business deals he claimed but to pay off earlier large, short-term loans.
His insurance license would be suspended on March 1, 2010, after state Insurance Commissioner Jay Bradford concluded that Standridge had falsified the collateral he used to purchase Gibraltar National Insurance Co. of Little Rock in early 2009.
“We take cases in which individuals abuse positions of trust in the business community to essentially steal money very seriously,” U.S. Attorney Conner Eldridge said in a statement to Arkansas Business. “As alleged, Mr. Standridge used his position in the insurance business to swindle money from clients and friends. The scheme set forth in the indictment amounts to fraud designed to obtain money under the guise of a legitimate investment. Fraud causes great harm to innocent victims. For this reason, we will continue to aggressively pursue cases such as this throughout the Western District of Arkansas.”
The indictment was issued under seal on Oct. 30 by a grand jury in Hot Springs. An arrest warrant was issued the next day, and Standridge was arrested in Little Rock on Nov. 4 by U.S. marshals who delivered him to the Miller County Detention Center. He was arraigned the next day before U.S. Magistrate Barry A. Bryant and released on a $10,000 bond.
The attorney who appeared with Standridge at the arraignment, Louis L. Loyd of Malvern, did not respond to a call and email seeking comment. Tim Dudley, the Little Rock attorney defending Standridge in the first indictment, said he may eventually take over the new case as well.
A trial has been set for April 3 in El Dorado, three months before Standridge is scheduled to stand trial in Little Rock on the earlier indictment, which was issued in August 2012.
Two of Standridge’s customers, lumber company owner Danny Wood of Idabel, Okla., and contractor Gregory A. Hunt of Russellville, pleaded guilty last year to aiding and abetting Standridge in obtaining fraudulent premium finance loans from Chambers Bank of Danville, the Bank of Star City and the Bank of Delight. Wood, 61, is serving a 30-month sentence in the federal prison at Fort Worth, Texas, and Hunt died at the federal prison in Memphis in February at age 46.
The premium finance loans were obtained between April and August 2009, according to the first indictment, but the conspiracy allegedly lasted from November 2008 to February 2010.
During the final weeks of that alleged scheme, Standridge is accused of using an entirely different tactic to raise cash from friends in Hot Springs.
Alleged Bank Fraud
In December 2009, according to the second indictment, Standridge borrowed a total of $1.3 million from Hot Springs dentist Steve Baldwin and oral surgeon Edward Cooper, part of the $4.5 million that Standridge said his Steve Standridge Insurance Inc. needed to buy the Bailey Insurance Agency at Mountain Home. Cooper's widow, Cheryl Cooper, told Arkansas Business that her husband had not previously met Standridge but was trying to help his friend Baldwin, who was friendly with Standridge. On the last day of 2009, Cooper gave Standridge cashier’s checks totaling almost $1.1 million, and Baldwin borrowed $250,000 from Simmons First in Hot Springs and then loaned the money to Standridge, both with the understanding that Regions Bank at Harrison would be refinancing the deal on Jan. 15, 2010.
By depositing the borrowed money, Standridge was able to bring the balance in his personal account at Chambers Bank into the black. The account “at the time had a negative balance of approximately $1.3 million,” according to the indictment.
When Jan. 15 rolled around, Standridge repaid both Baldwin and Cooper with interest, although prosecutors say SSI had no agreement to purchase the Bailey agency and no loan lined up with Regions Bank. Cooper died the next month in a plane crash, along with his two teenaged daughters and another Hot Springs dentist, Martin Draper.
On Jan. 25, 10 days after paying him back, Standridge allegedly asked Baldwin to lend him another $400,000 in a hurry so that he could buy an insurance agency in east Texas. After Baldwin approached Steve Trusty, CEO of Simmons First, about another loan, Standridge himself called on Trusty and then sent him documents indicating that Regions had committed to lending him $3 million to buy State First National Insurance Agency of Mount Pleasant, Texas, with the loan to close on March 5.
But when Trusty contacted the Harrison city president of Regions Bank, Scott Tennyson “told Trusty that the commitment letter was false and fraudulent and that Regions Bank had no commitment to loan money to SSI to buy State First,” according to the indictment. On Jan. 27, Trusty formally denied the loan.
And, Trusty told Arkansas Business last week, Simmons First Bank notified the Arkansas State Bank Department of the fraudulent documentation.
The federal government says there was never any deal to buy the Texas agency; in fact, federal prosecutors determined that the agency “had never conducted business or earned any income” and the signatures of the sellers were forged.
While the second loan from Baldwin didn’t materialize, Standridge allegedly used the same fictitious agency purchases to borrow $2.7 million from another Hot Springs friend, Don Gigerich, president of Gigerich Electrical Inc.
On Jan. 16, 2010, the day after he repaid Baldwin and Cooper, Standridge asked Gigerich to lend him $2 million of the $5 million he said SSI needed for a hurry-up purchase of the Bailey agency in Mountain Home. He allegedly told Gigerich that Regions would refinance the loan in early March, and he offered Gigerich $100,000 in interest — a 5 percent return — for the use of the money for about 45 days.
As collateral, Standridge offered shares of stock in SSI, a business that Standridge claimed — falsely, according to prosecutors — was then worth more than $45 million.
Gigerich took $2 million out of his Summit Bank account on Jan. 19 and gave it to Standridge.
A week later, on the same day that the prospects for a second loan from Baldwin were evaporating at Simmons First Bank, Standridge asked Gigerich for another loan to buy the Mount Pleasant agency. On Feb. 1, Gigerich took another $700,000 out of Summit Bank and gave it to Standridge.
“From February 2, 2010, until in or about October 2010, Standridge continued to make false and fraudulent promises and representations that he would repay Gigerich but as of the date of the Indictment Standridge has not repaid any of the $2.7 million fraudulently obtained from Gigerich,” according to the new charges.
Specifically, the Oct. 30 indictment accuses Standridge of eight counts of wire fraud, one count of mail fraud, two of money laundering and six counts each of bank fraud and making a false statement to a financial institution.
(Clarification, Jan. 2, 2014: The late Dr. Edward Cooper was neither friend nor client of Steve Standridge, according to his widow, but was a friend of Dr. Steve Baldwin, who enlisted Cooper's help in raising money to lend to Standridge.)