Bankruptcy court asked to deny debt relief to Brooke's founder

Look up the PowerRating of BXXXQ and see how it has performed over the past week as well as the current proprietary PowerRating.

Apr 09, 2009 (The Kansas City Star - McClatchy-Tribune Information Services via COMTEX) -- BXXXQ | Quote | Chart | News | PowerRating -- Two banks have accused the founder of Brooke Corp. of fraud and asked the U.S. Bankruptcy Court not to erase debts that he allegedly owes them.

In separate complaints filed in bankruptcy court Wednesday, The Bank of New York Mellon and Fifth Third Bank repeated allegations that Brooke's founder, Robert Orr, misappropriated millions of dollars pledged to them and other lenders.

Through his attorneys, Orr has denied wrongdoing, saying that he personally pledged and lost millions of dollars -- and his ownership of Brooke -- trying to save the company.

The complaints were filed the same day 75 former Brooke insurance agents filed a civil racketeering suit in federal court in Kansas City, Kan., accusing Brooke's lending arm, Aleritas Capital Corp., of fraudulent conduct.

Orr, who founded Brooke in 1986, filed for personal bankruptcy in December, after Brooke and two affiliates had sought Chapter 11 bankruptcy protection a couple of months earlier.

Brooke Corp., which franchised property and casualty insurance agencies, at one time oversaw a network of about 900 franchises in more than 30 states. A court-appointed special master is now winding down Brooke and its affiliates.

The Bank of New York Mellon originally sued Brooke and Orr in September, charging that Brooke, at Orr's direction, had misappropriated millions of dollars and then destroyed evidence to conceal its actions.

Brooke, through Aleritas, lent money to franchisees to buy or expand their agencies. Those loans were bundled and sold to "securitization entities" and other lenders. The entities and lenders, in turn, issued notes to investors -- mostly banks -- secured by the income and assets of the franchisees.

In their complaints, The Bank of New York and Fifth Third Bank say that revenue that was supposed to go into trust accounts for the benefit of the investors was diverted to accounts controlled by Brooke, including one at Brooke Savings Bank -- now Generations Bank -- in Phillipsburg, Kan. The bank used to be owned by Brooke.

Orr has pinned Brooke's troubles on Wall Street's refusal to pay past-due servicing fees that he said were owed to a Brooke affiliate, Brooke Capital. He called the allegations of misappropriation by Bank of New York Mellon and other Wall Street investors primarily the result of Brooke Capital offsetting the amounts it was owed by the amounts Brooke Capital owed to the investors.

To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.

To see more of The Kansas City Star, or to subscribe to the newspaper, go to
http://www.kansascity.com. Copyright (c) 2009, The Kansas City Star, Mo.
Distributed by McClatchy-Tribune Information Services. For reprints, email
tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax
to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave.,
Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index