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A cold welcome for a new player in life insurance.

A Cold Welcome For New Player In Life Insurance

Memories being short in our racetrack world, you may not remember the United Arkansas Corporation.

It is a would-be life insurance company being organized by a Texas man by the name of Wayne Ahart. It got some bad publicity more than a year ago when it was reported that Ahart had lined up leading state legislators and a leading lobbyist to sit on his board and buy ground-level stock for low, low prices -- considerably less than what subsequent and less-connected investors would pay.

Regulators, insurance industry officials and sagacious media commentators said it was reminiscent of the insurance scams that were rampant in the state in the 1950s and 1960s, perpetrated by political insiders with the acquiescence of supposed regulators.

This time, state Securities Commissioner Beverly Bassett imposed severe restrictions on the stock offering. All proceeds had to be placed in escrow until $3 million was raised, with refunds required if the minimum capitalization was not achieved. Ground-level stockholders must keep their equity in escrow for five years, pre-empting a quick and profitable turnover.

Well, this is to inform you that United Arkansas Corporation has met those requirements and -- the recession be damned -- apparently is about to go into the life insurance business, pending a couple of details.

Believe it or not.

In October, United Arkansas Corporation achieved the $3 million goal. Escrow was closed a couple of weeks ago at First Commercial Bank. A license was simultaneously granted by the state Insurance Department.

The regulators and securities and insurance officials have done all that could be asked of them. All reasonable safeguards are in place. In fact, it seems to me that the regulators have done their level best to keep this enterprise from ever getting off the ground. But we are near the point at which the United Arkansas Corporation and its investors must be released to take their best shot at being an insurance company. This is America, home of free enterprise.

The corporation's board includes Tom Landry. It also includes Knox Nelson of Pine Bluff, who no longer will be in a position to assist the fledgling firm with a conflict of interest on the Senate Insurance and Commerce Committee. But it also includes Reps. John Miller of Melbourne and Dick Barclay of Rogers, as well as Cecil Alexander, the lobbyist for the Arkansas Power and Light Company.

Their clout, connections, names and prominence -- all were used to persuade investors.

The who's who of ground level investors won their positions on the board by purchasing 13.5 million shares of common stock at 4 cents per share. Among them, the 23 risked $506,250 -- about $22,000 apiece. The bulk of the bucks came from everyone else.

Regular investors paid exponentially higher prices -- $10 for a unit of stock, that unit being two shares of common stock at a par value of 2 cents and one share of preferred stock at a par value of $2, convertible to two shares of common stock at any time until six months after completion of the offering.

The Securities Department monitored the stock offering closely. Not one customer complaint was received, either by the Department or in the complaint file that United Arkansas was required to maintain.

A second-level group of insiders, consisting of legislators, leading state commissioners such as Highway Commissioner Ron Harrod and prominent local businessmen, constitute an advisory council. These advisers are supposed to promote the company. In return, they are to receive a percentage of profits.

One of these advisers was to have been Mike Kinard, an outgoing state senator, but he made a public display of resigning after the negative publicity began to hit.

Lee Douglass, the acting state insurance commissioner, sees the percentage of profit as a commission, which means the advisers are tantamount to insurance agents, which means they must secure licenses. At this writing, Walter Davidson of Little Rock, the attorney for United Arkansas, was resisting that interpretation. That was the primary detail left unsettled, but after selling $3 million in stock and enduring regulatory and press scrutiny, it is hard to imagine the undertaking being stymied at this time on that point.

The other unattended detail is an examination by Insurance Department auditors of the fledgling concern's bank accounts.

I find it little short of amazing, actually, that $3 million was raised in Arkansas at this time for this purpose.

It looks as though Arkansas will soon have a new life insurance company, one with vested friends in high places.
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Title Annotation:United Arkansas Corporation
Author:Brummett, John
Publication:Arkansas Business
Date:Jan 7, 1991
Words:759
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