The Appearance Of Wealth (Gwen Moritz Editor’s Note)

I feel compelled to make this point every year or two, since it is the most important lesson I’ve learned from two decades as your business editor: Wealth and the appearance of wealth are two different things.^{(1, 2, 3, 4)} Some people who are living large are rich, others are in precipitous debt, still others are candidates for federal prison.

That fact was driven home again on Nov. 1, when I drove to Hot Springs and sat through the sentencing hearing for Berry R. Bishop. Just five years ago Bishop was the statewide president of the Independent Insurance Agents of Arkansas; come January, he will be an inmate of the federal Bureau of Prisons.

The sentencing hearing felt strangely familiar. It was five years ago in the same federal courthouse — maybe even the same courtroom — that I watched the same federal judge, Susan Hickey, give another prominent insurance agent, Steve Standridge, the same 60-month prison sentence. And while the details were different, Bishop’s crimes and Standridge’s were similar: Both defrauded banks by taking out fraudulent loans in the names of clients.

And here’s something else they had in common: Both Bishop and Standridge asserted under oath that they didn’t truly benefit from their crimes. And that’s true in the long run, obviously; the millions they misappropriated weren’t worth ending up as a convicted felon serving prison time and obligated to hand over any assets that are left.

I suspect it’s also true in the short term. Yes, both of them were able to keep the plates spinning longer because they had money they weren’t entitled to. But the stress of living a lie — especially a lie that depends on crime — has to be overwhelming. Maybe it was my imagination, but Berry Bishop came across as relieved, even as he described himself as “a broken man.”

Defense attorney Tyler Tapp said Bishop’s crimes began “years and years ago,” when Bishop took out a fraudulent loan when his business, Alliance Insurance Group, was short of cash.

I couldn’t get Tapp to be more specific about how long ago Bishop started depending on fraudulent loans to maintain his business and lifestyle, but it seems certain that it was long before February 2015, which was the start date of the specific crimes that Bishop acknowledged in his plea agreement.

That first criminal act, Tapp said, “led to many, many more.” He described a snowball of accumulating debt that required additional fraudulent loans just to service the interest.

Federal prosecutors pointed out that Bishop treated himself to the lifestyle of a successful business owner. He had a $490,000 home plus a $250,000 property on Lake Hamilton, a 2016 Land Rover, a 2013 Chevy Tahoe and a Cobalt boat. He paid himself $150,000 a year and also personally borrowed $1.5 million from his business.

While he was defrauding bankers he considered to be friends, Bishop was also indulging in the ultimate show of financial success in Arkansas: $10,000 annual contributions to the Razorback Foundation.

But Tapp told the court that Bishop had paid “several million dollars in interest” to the Bank of Prescott, one of three victim banks. Had he taken his lumps and never taken that first fraudulent loan, Bishop’s lifestyle “could have been far, far better,” his lawyer said.

Here’s a way the Bishop and Standridge sentencing hearings were very different: Bishop apologized to everyone he wronged — bankers, clients, employees, his family — and he told Judge Hickey that he wanted to be an example of accepting responsibility.

“The guilt and shame of this is totally my fault,” Bishop said.

Standridge, as I wrote at the time, was “conspicuously unapologetic.” Standridge blamed some of his crimes on the majority investor in his agency, who didn’t want him to keep his mother and mother-in-law on the payroll. He blamed other crimes on his desire to help a couple of longtime clients by taking out fraudulent loans. (The law saw Standridge’s altruism as a criminal conspiracy. Both clients also went to prison.)

Tapp’s comment about the Bank of Prescott profiting off Bishop’s fraudulent loans was the only false note the defense struck. Collecting interest on money loaned is what banks do. Bishop exploited his relationship with the bank, not the other way around.

Exactly how much restitution Bishop will ultimately owe the Bank of Prescott is not yet clear, but the loss started out at $2.15 million and it seems to have helped push the bank to sell to Farmers Bank & Trust of Magnolia. That sale was scheduled to close last Friday.

Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.