Standridge Falsified Collateral, Insurance Department Alleges

Steve Standridge allegedly falsified the collateral he used to purchase Gibraltar National Insurance Co. of Little Rock last year and also defaulted on a premium finance loan that had been misrepresented to the lender, according to orders issued by the Arkansas Insurance Department on March 3.

Standridge, president of Steve Standridge Insurance Inc. of Mount Ida, has agreed to retire immediately from the insurance business, his attorney, Tom Curry of Arkadelphia, told ArkansasBusiness.com. (SSI’s Web site claims 17 offices, including one each in Rogers, Fayetteville and Fort Smith, but the Insurance Department order estimated the number of offices at 11.)

Standridge’s insurance license was yanked in an emergency suspension order and SSI was placed under regulatory supervision in a separate order. The two orders describe a scheme in which Standridge and his wife, Debbie, borrowed $4 million from First Service Bank of Greenbrier to buy troubled Gibraltar from Ed Harvey, the Little Rock businessman who owned Continental Express trucking company and is the father-in-law of U.S. Sen. Mark Pryor.

The transaction had been approved by Bradford in January 2009. That order indicates the sale price was $2 million, although it also refers to a $2 million “surplus note” from Gibraltar to the Standridges.

The personal loan from First Service was used to buy two certificates of deposit in the name of Gibraltar. At the time of the purchase, Standridge led insurance regulators to believe he would collateralize the loan by pledging the assets of his existing business, SSI. The board of SSI had supposedly approved of using SSI assets as collateral, and this arrangement was supported by documents supposedly prepared by First Service Bank and delivered to the Insurance Department during a final review of the sale last August.

On Feb. 12, insurance regulators discovered the $4 million worth of CDs held in Gibraltar’s name were pledged as collateral on the First Service loan to the Standridges. How this discovery was made is not explained in the orders. On Feb. 17, Steve Standridge endorsed the two CDs for withdrawal and instructed First Service to use them to pay off the personal loan even though, according to insurance regulators, he “was not an authorized signatory.”

SSI also took out a $4 million loan from First Arkansas Bank & Trust of Jacksonville and used that money to buy more CDs in the name of Gibraltar. Standridge “then represented to Gibraltar’s board of directors that the assets of Gibraltar had been restored and were unencumbered and not pledged as collateral for any indebtedness.” The next day, Gibraltar’s board of directors learned the new CDs were the only collateral on the new First Arkansas loan to SSI.

On Feb. 24, insurance regulators of another problem with Standridge. In June 2009, Standridge had approached the Bank of Star City about financing insurance premium for some SSI clients. Although the Bank of Star City received an executed copy of the premium finance agreement signed by the unnamed client, as debtor, and by Standridge, as guarantor, the bank never got a copy of the actual policy.

The bank has been unable to collect the approximately $430,000 still owed on the $499,288 loan and filed suit in Lincoln County Circuit Court on Feb. 26.