Former Insurance Agent Berry Bishop Acknowledges Fraud

Berry Bishop’s defunct Alliance Insurance Group of Arkadelphia reported $2.9 million in gross revenue in 2017. It filed for Chapter 7 bankruptcy in May 2018.

Former Hot Springs insurance agent Berry Bishop described some of his borrowings from the Bank of Prescott over the past three or four years as loan fraud.

The revelation was made during a recent bankruptcy court creditors meeting.

Bishop and his defunct Alliance Insurance Group of Arkadelphia Inc. had their insurance licenses yanked on April 17 in an emergency suspension order by state Insurance Commissioner Allen Kerr.

In that order, Kerr alleged that Bishop funneled about $1.7 million in premiums received from clients to his personal use and defrauded the Bank of Prescott of more than $1 million in phony premium finance loans.

After Kerr’s order, Alliance and Bishop were hit with several lawsuits alleging more than $3 million in fraud. As of Thursday morning, Bishop has not been charged with a crime.

Alliance, which also had offices in Hot Springs and Prescott and 21 employees, filed for Chapter 7 bankruptcy liquidation on May 30, listing $5.5 million in assets and $8.2 million in debts. Bishop also filed for personal Chapter 7 bankruptcy last month, listing just $8,650 in assets and $7.9 million in debts. Bishop personally guaranteed many of the debts from his insurance company, resulting in the same debts being listed in both bankruptcies.

In the July 13 creditors meeting, Bishop said he borrowed money from the Bank of Prescott in the name of the company but used some of that money for himself.

The proceeds from the loans, which varied from $1,000 to $10,000, went into a company account, “and then they were transferred into the operating account, or in some cases to me individually,” Bishop said.

He referred to the loans from the Bank of Prescott as “fraudulent loans” but didn’t offer many details during the bankruptcy proceeding, where for about three hours he answered questions under oath from the bankruptcy trustees and attorneys for his creditors.

“I was trying to keep the company afloat,” Bishop said, according to official recordings of the meetings that were reviewed by Arkansas Business.

Bishop also said under oath that he had spoken with “the federal prosecutor” about the money he borrowed that was then used to pay interest “on loans that were questionable.” One of Bishop’s attorneys, J. Brad Moore of Wetzel & Moore of Little Rock, declined to comment.

A spokesman for the U.S. attorney’s office for the Western District of Arkansas said he couldn’t confirm or deny that Bishop was being investigated.

Del Loy, vice president of Supermarket Operations Inc. of Natchez, Mississippi, Alliance’s longtime client, told Arkansas Business last week that it appeared Bishop was “shuffling money around” to pay off loans. The alleged fraud went back at least three years, Loy said, but the problems with the loans surfaced only this year.

Supermarket Operations is suing Bishop for fraud and breach of fiduciary duty in Garland County Circuit Court. That lawsuit, along with others against Bishop and Alliance, has been put on hold as a result of the bankruptcy filings.

The bankruptcy proceedings, lawsuits and interviews, however, give some insight into the professional collapse of Bishop, a past president of the Independent Insurance Agents of Arkansas.

Bishop “was one of our most respected presidents, and he worked his way up through the chain of command for the association,” said Executive Vice President Lynn Zeno of the IIAA. “We were shocked, as were many, when the insurance commissioner reported his findings.” Bishop began serving on a school board in Garland County in July 2011. He resigned from the Lakeside School District board on April 17, the same day Kerr issued the emergency suspension order.

“We’re not sure where he went wrong,” Zeno said. “Under the bankruptcy proceedings, it doesn’t look good.”

‘Strange Things’ Found
After 31 years as president and owner of Alliance, Bishop planned to sell his company earlier this year.

He offered to sell Alliance’s Arkadelphia and satellite office in Prescott to his son-in-law, Nathan Price, 35. Alliance’s Hot Springs office would be sold to Alliance agents Bart Newman, Ryan Browning and Ronnie Ralph.

It was Newman, however, who sounded the alarm. He discovered “strange things” in Alliance’s accounts receivable in early March, Newman told Arkansas Business in April. He then reported his suspicions to the Arkansas Insurance Department.

The AID found that Alliance and Bishop “fraudulently obtained funds from the Bank of Prescott through forgery on as many as 17 premium financing agreements,” according to the April order. They “used information from four existing customers to create non-existent insurance policies for collateral for the premium financing agreements.”

The Bank of Prescott also provided information to the AID indicating that more than $1 million “was obtained fraudulently and then transferred to bank accounts belonging to and controlled by” Alliance and Bishop. The suspension derailed the sale of Alliance, but Price and Newman moved forward by creating their own insurance agencies. (See sidebar.)

Bishop Explains
Bishop’s financial problems had been simmering for years. In the bankruptcy proceedings, Bishop said the loans from the Bank of Prescott would go into one of Alliance’s accounts and he would transfer the funds to his personal accounts or another one of Alliance’s accounts.

Alliance had three separate accounts at the bank. One was for Alliance’s Prescott office, another was the operating account for Alliance and the third was “used for different things. That is probably why we’re sitting here today,” Bishop said.

The larger loans were “used for a variety of things,” Bishop said. “We had some renovations to the house that were paid out of that in that last 12 to 18 months.” Bishop and his wife, Laura, bought their 2,721-SF home in 2006 for $510,000. (On April 10, a week before Kerr’s order was issued, Bishop forfeited the house to Southern Bancorp of Arkadelphia.) He also used about $22,000 of the proceeds for his adult son’s medical care.

Bishop said he owes Alliance about $1.5 million in a series of loans that occured over the past five years. Most of that money, Bishop said, was used to pay interest on previous loans.

“In fact, in 2017, I paid more back into the company than I took out,” Bishop said. He said he didn’t know exactly how much he transferred from his personal account to Alliance’s account.

Alliance’s gross revenue reached $3.2 million in 2015.

That amount fell to $2.87 million in 2016 then rose slightly in 2017 to $2.9 million. Bishop said the company broke even that year, when his salary was about $150,000, according to his bankruptcy filing.

Company Alleges Fraud
Supermarket Operations unveiled details of Bishop’s alleged loan fraud in its complaint filed last month in Garland County Circuit Court. Bishop had been the insurance agent for the chain of seven grocery stores for about 20 years.

During that time, the company bought insurance from Bishop using short-term loans from an Arkansas bank. That financial maneuver allowed Supermarket to receive a discount on its insurance premium by making the full payment up front.

In 2017, Supermarket borrowed nearly $325,000 from the Bank of Prescott for workers’ compensation and liability insurance. “Bishop accepted the funds, but did not apply them to [Supermarket’s] premiums,” the lawsuit said.

Instead, he kept the money for himself, the lawsuit alleged.

About a month later, in March 2017, Bishop told Supermarket that he had a better deal on insurance and needed the company to sign another loan agreement for $315,000 to pay off the first loan and get the lower price. Supermarket agreed.

It wasn’t until May 2018 that Supermarket received a letter from the bank asking for payment on the first loan, which Supermarket Operations executives believed had been refinanced.

Supermarket’s Loy said the issue with the bank has been resolved and Supermarket did have insurance coverage.

A Supermarket investigation, however, showed that Bishop had been taking out loans in Supermarket’s name for the last three years — “that we know of,” Loy said.

“And fortunately, although he would always do these bogus loans in our name, he was paying them off,” Loy said. “And it never caught up with him, or with us, until this year.”