Brooke Fines Don’t Match Pain Franchiser Caused

The Securities and Exchange Commission last month charged six executives of Kansas-based Brooke Corp. and its subsidiaries with hiding critical information from investors and conducting financial fraud. The SEC says five executives have agreed to settle the charges that were filed in U.S. District Court in Kansas City, Kan.

They include Robert D. Orr, founder and former chairman of the board of Brooke Corp. and former chief financial officer of Aleritas; Leland G. Orr, former CEO, CFO and vice chairman of the board of Brooke Corp. and former CFO of Brooke Capital; Michael S. Lowry, former CEO and a member of the board of Aleritas; Michael S. Hess, former CEO and member of the board of Aleritas; and Travis W. Vrbas, former CFO of Brooke Corp. and Brooke Capital.

Lowry will pay $413,504, Hess $250,000 and Vrbas $130,000. The court hasn’t said how much the Orrs will owe.

Lenders and investors lost hundreds of millions of dollars as a result of the scheme.

“It’s kind of a moral victory,” said John Fowler, president of First State Bank of Burlingame in eastern Kansas.

Brooke sold insurance services for small-town banks to sell to their customers. As it grew to 30 states, it spun off Brooke Capital Corp., responsible for franchising insurance agencies, and Aleritas Capital Corp., the lender for insurance agency franchises.

Brooke declared bankruptcy in late 2008. Hundreds of franchises failed. Lawsuits persist as finances remain in question.

Geoffrey Gobble is a former Brooke franchisee and now a with Boulevard Insurance in Overland Park. “The fines weren’t that big compared to what they drug hundreds of people through,” Gobble said. “You had people going bankrupt and losing everything.”

Larry Case, of the Missouri Association of Insurance Agents, dealt with agents desperate to stay afloat. “I had no idea it was as bad as it was until it really collapsed,” he said. “It had to be horrible. They were doing everything in good faith, and they weren’t getting compensated. It was a very difficult situation.”