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Court Appoints Former LR Mayor Special Administrator in Scooter Stuart Case

5 min read

A new player has entered the fray between Little Rock’s One Bank & Trust and the estate of its former controlling owner and CEO, Layton “Scooter” Stuart.

Tom Prince, former Little Rock mayor and one-time executive and legal counsel at Worthen Banking Corp., has been appointed as independent special administrator.

“I will be exceedingly independent because I don’t know much about what’s going on,” said Prince, who moved back to the Little Rock area a year ago after working as a securities lawyer in St. Louis for a dozen years.

“I’ve got some time since I’m retired. I hope I can add value and not create discord. Things need to settle down at that bank.”

Financial troubles at One Bank exploded into a criminal investigation into self-dealing and the jettisoning of its top three executives: Stuart, CFO Tom Whitehead and EVP Gary Rickenbach.

The position of special administrator was authorized by court order more than eight months ago but not filled until Oct. 6. Prince said he agreed to the assignment months ago and was unaware that his new role had only recently become official.

One Bank’s pregnant pause in making the appointment of Prince happen added juice to the already contentious relationship between Jerry Pavlas, Stuart’s replacement as CEO of One Bank, and Richard Torti, executor of Stuart’s estate.

Torti approved the selection of Prince earlier this year and is glad to finally see his appointment come to pass.

“I think Tom will work fairly and honestly with both sides,” Torti said. “He has a fiduciary responsibility to the bank and he has a fiduciary responsibility to the estate. And it’s going to be interesting.”

The special administrator position in the probate of Stuart’s will is a compromise. Officials at the $375 million-asset bank agreed to drop their opposition to Torti holding the dual roles of trustee of the Stuart family trust and executor of Stuart’s estate if he would agree to a special administrator.

Competing Claims

The only asset of the family trust was a $20 million life insurance policy on Stuart, who died in March 2013. After loans against the policy and other liabilities were repaid, $14.7 million remains from the payout, held by the government amid claims on it by the U.S. Treasury, One Bank and the Stuart family trust.

On paper, the most significant asset of the estate is a 99.9 percent ownership stake in OneFinancial Corp., the parent company of One Bank & Trust. However, OneFinancial is laden with $21 million of TARP debt and burdened with $8 million worth of trust-preferred shares.

Standing with a first-in-line claim of more than $10 million secured by Stuart’s OneFinancial stock is BHL Financing LLC, led by trucking heiress Johnelle Hunt. Her family sold the bank to Stuart and helped finance the transaction. Their final 24.8 percent stake in OneFinancial was sold to Stuart for $5 million in October 2002.

As special administrator, Prince will have sole authority on behalf of Stuart’s estate concerning:

  • All matters involving One Bank and OneFinancial, including the stock and management of both.
  • The investigation and pursuit of any claim Stuart’s estate may have against the Stuart insurance trust, any of its assets or any settlement.

“I want to be a facilitator and not a decision-maker,” said Prince, who joined the Little Rock board of directors at Centennial Bank last year. “At the end of the day, the parties have to make a decision, but they need someone to help get them to the table. I consider my role to be that of a mediator.”

The latest disagreement: Torti claims that Pavlas is exercising control over holding company assets with no accountability and that One Bank is collecting income from stock and real estate that rightfully belongs to OneFinancial, adrift for nearly two years.

Its corporate charter is revoked, its registered agent, Scooter Stuart, is dead, and its last biannual report required by bank regulators was filed Dec. 31, 2012.

The assets in dispute are the $700,000 Parker Building in Maumelle and $1.2 million worth of trust-preferred shares issued by West Tennessee Bancshares Inc., the holding company for a bank that has endured wild swings in profitability.

The valuations of those assets appear to be listed on the OneFinancial balance sheet dated June 30, 2012. But those separate line items for “securities” and “other assets – OREO” are zeroed out in the holding company’s financial statement dated Dec. 31, 2012.

During that six-month window, Stuart was removed from his leadership positions as chairman, president and CEO at One Bank under order of the Office of the Comptroller of the Currency, and Pavlas was installed as his replacement.

“The bank has always had ownership of the stock and the property,” Pavlas said. “We’re just being a good custodian.”

Real estate records indicate One Bank owns the Parker Building, a 7,200-SF office building at 4 Country Club Circle.

The project was forfeited to the bank in lieu of foreclosure in June 2009 by Parker Rental Properties LLC, led by Toby Parker. The 0.82-acre development was financed with an April 2006 loan of $790,500 from the bank.

West Tennessee Bancshares is the holding company for Bank of Bartlett, a seven-branch, $352.7 million-asset lender operating in the eastern suburbs of Memphis.

The bank recorded a loss of $237,000 through the first six months of 2014 after annual profits of $793,000 last year and $12.2 million in 2012. Those profits followed four consecutive years of losses totaling almost $24 million in 2008-11.

The bank was deemed undercapitalized and put under a “prompt corrective action” order in October 2011, but the PCA was terminated in March 2013 and the regulator-ordered suspension of payments on its trust preferred shares was lifted.

Unlike One Bank, Bank of Bartlett is only working through loan problems. West Tennessee Bancshares resumed making payments on its preferred shares, and One Bank recently received more than $260,000, according to court filings.

OneFinancial is another matter. The holding company is insolvent, according to recent filings by One Bank in the Stuart probate case. One Bank officials claim the OneFinancial stock is of no value to the Stuart estate because of its overwhelming liabilities.

But whoever owns OneFinancial owns One Bank. And for now, OneFinancial is owned by the Stuart estate, and Tom Prince will oversee the holding company’s affairs.

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