Reflecting on Arkansas

A number of business improprieties, some resulting in convictions, have dotted Arkansas in recent years. Here are some examples:

• Jody Davis, who did business as First American Mortgage Securities of Arkansas in Siloam Springs, was the subject of a cease-and-desist order issued March 12 by the Arkansas Securities Department for brokering mortgages between March and September 2002 without being registered with the department as required by state law.

Davis has until April 9 to request a hearing.

• M. David Howell Jr., 54, the former Springdale and Fayetteville banker turned Little Rock freelance investment banker, killed himself in a Beverly Hills hotel room in October, a week after the Arkansas Securities Department blew the whistle on an investment scheme he masterminded.

Eventually more than $80 million in claims, many of them from financial sophisticates like Dallas Cowboys owner Jerry Jones and Hot Springs bank owner Richard T. Smith, were filed against Howell’s estate. His estate is fighting back, accusing Smith, Jones and others of helping Howell recruit investors and run his scheme.

• Southmark Inc. of Tulsa, an SEC-registered brokerage firm which operates a Bentonville office, reached a settlement in November after the SEC accused Southmark of defrauding more than 400 mostly elderly investment clients.

The SEC said Southmark lured investors with the promise of high-yielding certificate of deposits then aggressively pitched high-load mutual funds.

Wendell D. Belden, the former owner of Southmark and its SEC-registered investment adviser Southmark Advisory Inc., was permanently barred from having any affiliation an investment adviser or brokerage.

The settlement included no admission of wrongdoing by Belden or Southmark and no financial penalty. But it also stipulated that neither Belden or the firm could “make public statements denying any” of the SEC’s allegations or even “create the impression that the complaint is without factual basis.”

• Jason Self of Little Rock, the former owner of VSM Delivery Co., in February pleaded guilty in U.S. District Court in Memphis to two counts of defrauding Union Planters National Bank in Memphis.

Twenty-two other counts handed down by a grand jury in August were dismissed in a plea agreement, and sentencing is scheduled for May 16.

Self was accused of defrauding Union Planters through a $1.5 million check-kiting scheme that also involved Metropolitan National Bank of Little Rock and Madison Bank & Trust of Kingston.

His indictment cleared up the mystery, first reported in Arkansas Business, of why VSM suddenly shut down in May 2000, weeks after Self claimed $9.6 million in annual revenue and 90 employees in five Arkansas cities.

• H.G. “Jack” Frost was found guilty in December 2001 of stealing $1.8 million from the Jones Trust in Springdale, four years after the Northwest Arkansas Business Journal and Arkansas Business first reported irregularities. Frost was a trustee of the charitable trust established by Bernice Jones, the widow of trucking magnate Harvey Jones, and had been the couple’s personal accountant since 1954.

Frost, 71, was sentenced to 70 months in prison, a sentence that he is expected to start serving soon since the 8th U.S. Circuit Court of Appeals in St. Louis rejected his appeal earlier this month. He was also ordered to repay $1.575 million, none of which has been paid.

• Golf Entertainment Inc., the Springdale penny stock now known as Sienna Broadcasting Corp., has been embroiled in at least seven legal battles since August, when Business Journal and Arkansas Business reported a laundry list of irregularities in the company’s activities and reporting. The Arkansas Securities Department in September ordered Golf/Sienna and its primary shareholder, Genesis Trust, to stop trading stock in Arkansas. Securities regulators have also sought to intervene in a federal lawsuit involving both Golf/Sienna and Genesis Trust.

To read the cover story related to this issue, click here.

To read what Arkansas Attorney General Mike Beebe says about white collar crime, click here.