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 lawsuit 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 also claim Brooke did no real evaluation of the franchises’ worth and instead tried 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 insurance 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. “As a result, the plaintiffs either lost their agencies back to the Brooke entities or went deeper into debt to the defendant.”
Before filing for Chapter 11 bankruptcy protection in October, Brooke was one of the nation’s largest franchisers of property and casualty insurance agencies with 900 locations and almost 600 employees.
Founded in Phillipsburg, Kan., in 1986 by Robert Orr, the company set out to provide insurance services for small-town banks to sell to their customers. It later expanded into lending as it began selling its Brooke agency franchises, eventually moving to the Kansas City suburb of Overland Park and going public in 2003.
Its demise has left thousands of insurance agents across the United States, including many in South Central states, in limbo, with many closing up shop. In addition, dozens of lenders have been left holding Brooke’s rotten loans and securities.
A number of banks and other lenders have filed lawsuits against the company, claiming Orr and other company officials diverted millions of dollars for their own benefit and attempted to destroy the evidence.
Lawyers for Orr have denied he did anything wrong.
Was this article valuable?
Here are more articles you may enjoy.
Beryl’s Remnants Spawned 4 Indiana Tornadoes, Including an EF-3: NWS 
Viewpoint: Deepfake Fraud Is On the Rise. Here’s How Insurers Can Respond 
FM Global Rebrands As FM 
Wall Street Pushes Back After Activists Escalate Protests From This Issue
