HOT SPRINGS — Steve Standridge was emotional but conspicuously unapologetic when he explained to a federal judge why he committed the crimes for which she had just sentenced him to five years in prison.
In his version of events, he “did some things I shouldn’t have done” because he needed money to buy out the “predatory partners” who were forcing him to fire his mother and mother-in-law and to help two valued clients save their businesses as the bottom fell out of the construction industry.
It was particularly important to him, Standridge told U.S. District Judge Susan Hickey at his sentencing hearing on Dec. 5, that the federal government officially concluded that he had not personally benefited from his crimes.
In truth, no one benefited. Steve Standridge Insurance, the Mount Ida business that employed 250 people at its peak, was sold off piecemeal. Some of the friends and friendly bankers who loaned him millions have not been repaid, and the two clients he said he was trying to help lost their businesses and pleaded guilty to federal crimes. One of them died after just a few weeks in prison.
The public record paints a picture of Standridge, now 58, as a self-made success story — a former policeman and schoolteacher who built one of the largest insurance agencies in the state and was honored as the National Professional Insurance Agents Association’s Agent of the Year before his 50th birthday.
But he was also a sloppy operator who took advantage of the company that invested in his business. And that was long before 2009, which began with an ill-advised acquisition, escalated into bank fraud and ended in a desperate, exhausting and breathtakingly dishonest search for cash in a futile effort to keep the plates spinning.
Standridge ultimately pleaded guilty to two of 35 felony counts and agreed to pay $7.1 million in restitution — money that, to hear him tell it, was almost in his grasp.
“You’ve never had anyone stand before you who was closer to having this thing resolved,” Standridge told Judge Hickey.
Earlier that week, Standridge said, an unidentified company that he’d been involved with was sold to a publicly traded company, also unidentified. If he weren’t going to prison, he said, he would be able to pay the restitution by March, but he won’t be able to follow through from behind bars.
Although he offered no apologies to his victims, he told the judge that paying his debts was his priority.
“My cardiologist has told me over and over that I won’t survive,” the 6-foot-9 Standridge said. “… In my current physical condition, what you do to me is not the most important thing.”
The sentencing hearing in Hot Springs concluded two federal criminal cases against Standridge. The first, a 12-count indictment, originated in August 2012 with a grand jury in Little Rock, in the Eastern District of Arkansas. It was transferred to the Western District, where a separate indictment handed down in October 2013 added 23 charges.
Hickey accepted a plea agreement that Standridge and his attorney, Tim Dudley of Little Rock, struck in July with both sets of prosecutors: 60 months in prison, plus restitution, to be served concurrently in exchange for dropping 33 of the 35 counts pending against him.
Under the terms of the deal, the government would not have objected if Standridge had tried to get a sentence as short as 36 months had he been able to pay at least 80 percent of the restitution — almost $5.68 million — before his sentencing date rolled around.
Dudley’s request to delay the sentencing, filed the previous day, did not convince Judge Hickey that giving Standridge more time would result in the victims being made whole.
“I question that,” she said. “And I question that because in the past six months … no restitution has been made to the victims in this case, not even a token amount. And that gives me pause.”
She told him to report to federal prison on Jan. 14. After serving his time — federal prisoners typically serve 87 percent of their sentences — he’ll spend another three years on supervised release.
In the Beginning …
Standridge went into the insurance business in 1982 and opened his own agency in Mount Ida in 1986. But in 2001, he sold a 90 percent interest in Steve Standridge Insurance to BroadStreet Capital Partners, then a wholly owned subsidiary of State Auto Property & Casualty Insurance Co. of Columbus, Ohio.
The BroadStreet investment allowed SSI to accelerate its growth, eventually operating 18 offices in the western half of the state.
State Auto was one of the carriers the independent agency represented, and SSI was repeatedly recognized as one of the biggest producers of premium for State Auto. That might help explain why, after Standridge’s business imploded, an investigation by the Arkansas Insurance Department found that State Auto had repeatedly ignored blatant procedural violations. SSI had a habit of issuing financial guarantee bonds that had not been submitted for review by State Auto’s underwriters.
State regulators eventually fined State Auto $45,000 for failing to report nine separate violations by SSI, including several cases of premium finance fraud that would be the basis of federal charges that originated in the Eastern District. Essentially, Standridge would help clients borrow money to pay large commercial insurance premiums, but the policies would either never be issued or would quickly be canceled. Either way, the borrowed money would be used for some other purpose.
Despite such friendly treatment by the parent company of SSI’s majority owner, Standridge was not happy with the partnership. His voice broke as he told Judge Hickey why: Despite early assurances that this would never happen, Standridge said, BroadStreet insisted that all SSI employees over age 65 be fired — including Standridge’s own mother and mother-in-law.
“I can’t emphasize how inaccurate a statement that is,” Rick Miley, BroadStreet’s president and CEO, told Arkansas Business last week. “We are a company that’s been around for a long, long time, and we have many employees who are 65 or older.”
According to Miley, Standridge gave a more fundamental reason for wanting to buy out BroadStreet’s interest, which by then was 80 percent: “He felt that he could be more profitable and grow faster on his own, and we didn’t have any problem with that.”
Standridge told the judge that he went to his friend, Danville banker Johnny Chambers, for a $10 million loan “to buy out these predatory partners of mine.”
Deeper in Debt
Standridge bought out his investment partners on April 23, 2009; it was his second multimillion-dollar purchase of the year.
In January, he — actually, a newly formed company called SASSA LLC — had spent $4 million to buy and recapitalize a small, troubled workers’ compensation carrier in Little Rock called Gibraltar National Insurance Co.
Jay Bradford, the insurance commissioner who approved the sale in hopes of saving Gibraltar from insolvency, had every reason to believe that Standridge had $4 million handy. More than a year would pass before he learned that the two $2 million certificates of deposit designated as Gibraltar’s new capital were already securing a personal loan to Standridge and his wife, Debbie, from First Service Bank of Greenbrier.
Between the Gibraltar purchase and the buyout of BroadStreet, Standridge also participated in his first known case of premium finance fraud. He was joined by Danny Wood of Idabel, Oklahoma, owner of Wood Lumber Co. of Camden and Wood Lumber Westside in Idabel.
Dudley, Standridge’s defense attorney, confirmed that Wood was one of the two clients whose businesses Standridge was trying to help save.
That first fraudulent premium finance loan, $350,000 from the Bank of Delight in southwest Arkansas, was followed in May, June and August 2009 by similar loans from Chambers Bank and the Bank of Star City.
The Insurance Department found that Standridge had guaranteed the Bank of Star City loan to Wood Lumber and made payments on it for several months. Standridge and his lawyer would later tell the court that he was financially strapped in part because he was making the payments on other people’s loans.
Dudley also told Arkansas Business that Standridge personally loaned Wood $9 million, but that could not be independently confirmed. Danny Wood did not respond to messages left with a family member.
When Wood pleaded guilty to bank fraud in March 2012, he agreed to pay restitution of $3.2 million to Chambers Bank and $125,000 to the Bank of Delight.
“My adult life has been lived trying to obey the laws of the land and be good in this world and prepare for the life to come,” Wood said in a written statement to the federal court.
“However, my better judgment became clouded with my determined intent to keep over 100 employees employed during tough economic times — I sacrificed honesty in the process.”
Wood also pleaded guilty to wire fraud in Texas for filing false loan documents in order to get loans totaling $1.82 million from Lone Star Production Credit of New Boston, Texas. He served concurrent sentences and was released from the federal prison at Fort Worth, Texas, earlier this year.
Standridge told Judge Hickey that Wood’s family had somehow managed to keep the Bank of Delight loan from going into default. The Bank of Star City sued when its $500,000 premium finance loan went into default in early 2010, and Standridge came up with the money to pay it in full.
Quest for Cash
Meanwhile, Standridge was also offering his special brand of assistance to client Gregory A. Hunt, owner of Quest Construction Co. of Russellville.
In August 2009, Standridge arranged a premium finance loan for Hunt from Chambers Bank. It, too, was fraudulent, and Hunt would draw a 33-month sentence for defrauding Chambers Bank out of $1.3 million. He entered the federal correctional institute near Memphis in January 2013 and died the next month at age 46.
As the millions of dollars in bank loans started to pile up, Standridge struck upon another scheme to raise big money: putting the touch on friends and friends of friends.
On the last day of 2009, Hot Springs dentist Steve Baldwin borrowed $250,000 from Simmons First Bank of Hot Springs (now part of Simmons First National Bank) and combined it with almost $1.1 million in cashiers’ checks from his friend Dr. Edward Cooper, a Hot Springs oral surgeon. Baldwin was a friend and client of Steve Standridge, but Cooper didn’t even know the insurance agent.
Baldwin gave the total to Standridge to help him purchase the Bailey Insurance Agency in Mountain Home with the understanding that Regions Bank at Harrison would be refinancing the $5 million deal on Jan. 15, 2010.
The entire thing was a lie, according to the indictment that came out of the Western District. There was no deal to buy the Bailey agency. Regions Bank wasn’t on board. Even the signatures of the agency owners, Ben Bailey and Joseph Bailey, were forged.
When the banks reopened on Monday, Jan. 4, 2010, the cash fronted by Baldwin and Cooper was deposited into Standridge’s personal account at Chambers Bank, which had been overdrawn by approximately $1.3 million.
On Jan. 15, as promised, Standridge wrote Cooper and Baldwin checks repaying their entire loans with interest, but he apparently didn’t have the money to cover the checks until Jan. 19. (Cooper died the next month in a plane crash, along with his two teenaged daughters and another Hot Springs dentist, Martin Draper.)
The money to repay Cooper and Baldwin came from yet another friend and client, Don Gigerich, owner of Gigerich Electric Inc. of Hot Springs.
Gigerich, too, thought he was fronting the money for the purchase of the Bailey agency. Standridge had provided Gigerich with an appraisal suggesting that the business was worth more than $45 million and had promised to repay him $2.1 million when a bank loan came through on March 1.
Ten days after repaying the $250,000 that Baldwin had borrowed for him the first time, Standridge persuaded the dentist to lend him another $400,000 — this time to buy an agency in Mount Pleasant, Texas.
Baldwin approached Steve Trusty of Simmons about making another loan to then lend to Standridge, and Standridge himself sent Trusty documents indicating that Regions Bank would refinance the loan on March 5. That’s when the plates Standridge had been spinning for a year started to fall.
Trusty contacted Scott Tennyson, Harrison city president of Regions Bank, and learned that the loan commitment was a fake. Trusty denied Baldwin’s loan request and, at some point, made a report to the Arkansas State Bank Department.
Unfortunately, Don Gigerich didn’t know any of that. On Feb. 1, before getting back any of his first $2 million, Gigerich loaned Standridge another $700,000, supposedly for the purchase of the Texas agency. (It hardly matters, but the Texas agency wasn’t even in business, according to the Western District indictment.)
Of the $7.1 million in restitution Standridge was ordered to pay, $2.7 million is owed to Gigerich; $2.9 million to Chambers Bank; $1.37 million to Travelers Insurance Co.; and $122,400 to the Bank of Delight.
Chambers Bank is the beneficiary of a $9 million policy on Standridge’s life, as long as the bank continues to pay the premiums — which Standridge acknowledged in court would be very expensive as he approaches 60.
The Unraveling
On Feb. 12, 2010 — the day Danny Wood pleaded guilty to wire fraud in Texas — the Arkansas insurance regulators learned that Gibraltar National Insurance Co., the workers’ comp carrier that they thought Standridge had rescued 13 month earlier, was insolvent. Its $4 million in CDs were actually pledged as collateral on Standridge’s personal loan.
In a misguided attempt to correct that problem, Standridge on Feb. 17 withdrew the two CDs — even though he was not an authorized signatory for Gibraltar — and paid off the personal loan from First Service Bank. Then he borrowed another $4 million from First Arkansas Bank & Trust in Jacksonville and used that money to buy new CDs in Gibraltar’s name.
The insurance company’s capital was still just as encumbered, something Gibraltar’s board of directors learned the next day.
Meanwhile, Standridge had stopped making payments on the premium finance loan from the Bank of Star City. On Feb. 24, the bank president requested a meeting with AID staffers, and the Arkansas State Bank Department — possibly as a result of Trusty’s report — contacted AID to warn of suspicious activity by Standridge.
It turned out that the Baileys’ weren’t the only bogus signatures. Over the next few days, the AID learned that a document supposedly signed by SSI’s board of directors allowing the agency’s assets to be used as collateral for the purchase of Gibraltar also contained forgeries — including the signature of Rick Miley, president of BroadStreet.
Almost a year after selling its interest in SSI back to the founder, BroadStreet was blindsided by the revelations.
“We found out when the general public found out about things he was doing,” Miley said last week.
Standing before the judge in Hot Springs, Standridge sounded like it all was a big surprise to him as well. At one point, he referred to “when all this happened to me back in 2010.”
Standridge complimented officers of the federal justice system — the U.S. Attorneys’ Offices, the FBI and the courts — for handling his case with kindness and professionalism. “I told the FBI there would be no way I’d be a jerk to deal with,” he said.
And he thanked his family for sticking by him and the friends who wrote letters to the judge on his behalf.
He told Judge Hickey that he didn’t realize he could have been making partial payments on the restitution. Instead, he said, he dealt with 42 other actions that had been filed against him.
But Standridge didn’t apologize to anyone. Not even to Don Gigerich, who was sitting in the courtroom just a few yards behind him. Instead, he almost seemed to blame Gigerich, whom he said he had helped after an accident.
Gigerich, he said, asked if there was anything he could do for Standridge in return. “I should never have said yes. I believe that’s why I’m here today.”
Gigerich declined a request for an interview, just as he passed on his chance to address the court. But Kenny Elser, the assistant U.S. attorney for the Western District who prosecuted Standridge, told Judge Hickey that Gigerich felt betrayed.
“He would like Mr. Standridge to go away for a long, long time — even longer than this binding [plea] agreement,” Elser said.
Gigerich is also the beneficiary of a $3 million policy on Standridge’s life.
“Ironically,” Elser said, “Mr. Gigerich has suffered an additional loss of about $20,000” because he had to pay the premiums that Standridge’s son and daughter stopped paying when they were dropped as beneficiaries in favor of Gigerich.
Elser was also unmoved by Standridge’s talk of restitution just over the horizon. “This is not the first promise or guarantee that these victims would be paid by Mr. Standridge or his associates,” Elser said.
Standridge had reserved the right to withdraw his guilty plea if Hickey had sentenced him to more than 60 months. But she said the agreed sentence was appropriate.
“You have told me why you’ve done what you’ve done,” Hickey said. “The end result to the [victims] is they are out a whole lot of money.”