FBI Investigating Bankrupt Brooke Corp. " I am now trying to contact the FBI investigators to let them know that a group is now illegally manipulating the stock. hopefully they can catch them as well"
OVERLAND PARK, Kan., Dec 17, 2008 (A. M. Best via COMTEX) -- Agents from the Federal Bureau of Investigation have seized files from Brooke Corp. and are combing through the bankrupt insurance agency franchiser's financial records, the special master appointed to oversee the bankruptcy confirmed.
The specific nature of the investigation, and whether U.S. Justice Department officials are planning to bring charges against Brooke (OTC:BXXXQ) have not yet been disclosed, according to Albert Riederer, appointed by a federal court in September as part of a suit filed by the Bank of New York Mellon. Riederer told BestWire the bureau had made an informal request for documents, but did not share details of the investigation.
"Looking over how things have been done over the past several years, I see a lot of things that could have been done differently, but that's about all I could say," said Riederer, a former judge and prosecutor.
Attempts to reach the FBI for comment were not immediately successful.
Last month, the Missouri Department of Insurance confirmed it was investigating the "financial stability" of Brooke, which filed for Chapter 11 bankruptcy protection Oct. 28. In the bankruptcy filing, Riederer described a chaotic and hollowed-out corporate shell at Brooke with no employees left who have management experience (BestWire, Oct. 29, 2008).
"As we see it, our focus here is to try to save the company, and to land it as gently as possible, now that it's in bankruptcy," Riederer said.
An effort to sell off Brooke's insurance operations failed last month, with Lysle Davidson, owner of Western Shelter Insurance of Johnson, Kan., a member of a partnership involved in negotiations, telling BestWire the group had withdrawn its letter of intent (BestWire, Nov. 4, 2008).
Previously one of the fastest-growing insurance franchisers, with more than 900 agencies across the United States, Brooke provided start-up loans to insurance agencies through its Brooke Credit Corp. unit. In 2007, the company came under the scrutiny of the Louisiana Department of Insurance over allegations by certain franchisees that it rushed applicants through the complex loan and franchising process with the goal of forcing franchisees to forfeit their businesses back to the corporation.
The Louisiana department cleared the company in an August 2007 market conduct examination, with regulators saying they found Brooke's marketing materials, publications, Web site and Uniform Franchise Offering Circular to be clear and accurate in describing the company's operating structure, franchise agreements, fees and costs, and the structure of its debt obligations (BestWire, Aug. 13, 2007).
