More than 80 former insurance agents for bankrupt Brooke Corp. have sued the company’s lending arm, accusing it of civil racketeering and fraud. The lawsuit against Overland Park, Kan.-based Aleritas Capital Corp., filed in federal court in Kansas City, Kan., claims it and Brooke inflated the price of insurance agencies they sold to the plaintiffs around the country and tacked on fees for services they never provided.
The suit says Brooke bought the insurance agencies from third parties and resold them to the plaintiffs, who borrowed the money for the transactions through Aleritas.
The plaintiffs allege Brooke required the third parties selling the agencies to pay back a portion of the sales price — up to 10 percent in many cases — to Brooke but didn’t tell the plaintiffs about these payments. They claim Brooke did no real evaluation of the franchises’ worth, instead trying to inflate prices to increase revenue from a bevy of add-on fees. They believe Brooke and its subsidiaries wanted its franchisees to fail so they could sell the agencies again, resulting in another round of fees.
“The Brooke entities[‘] fraud in overstating the value of the agencies and taking kickbacks from the sellers of the agencies ensured that plaintiffs would rarely, if ever, [achieve positive] cash flow,” the lawsuit reads.
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