$1.8 million involved in broker’s alleged scheme
By Sparta Live | January 9, 2007 12:00 am
Kim Swindell Wood
A Smithville insurance broker who served clients in White County has been indicted by the U.S. Department of Justice on 15 counts of wire fraud.
B. Don James, whose client list covered White and surrounding counties, was indicted Dec. 27, 2006, on 15 counts of wire fraud. The case first came to light when several creditors of B. Don James attempted to force him into involuntary bankruptcy after he had allegedly lost several thousand dollars of their money through an investment deal.
According to area news sources, a petition was filed Jan. 13, 2005, by a Nashville attorney who represented the creditors. More than 70 individuals had been notified their funds in James’ investment operation were gone.
Then, in March 2006, a Putnam County jury ruled in favor of investors who had lost their funds through James’ alleged investment schemes. However, these investors sued M. Douglas Hodges and Evelyn H. Hodges, the partners of Affiliated Investors, LP, for profiting from an alleged “Ponzi” scheme allegedly perpetrated by James. The scheme is named after 1920’s conman Charles Ponzi. The legal victory was for those who had invested after May 6, 2001, and was granted under Tennessee Securities Act.
Among other charges, the suit stated M. Douglas Hodges and Evelyn H. Hodges new James’ insurance premium finance business was not a legitimate business venture. The awarded judgment was approximately $8.1 million.
Investors filing the lawsuit were Dorothy Albertson, Nell Beshearse, Michael Braswell, Carol Hearn (power of attorney for Lucille Buterbaugh, Zeb Caldwell, Charles and Helen Cantrell, Clamon Cantrell, Deana Ruth Cantrell, Jerry Lee Cantrell, Phillip W. Cantrell, Bill Cobb, Ronnie Davis, Dan A. Fuson, Lewis H. Fuson, Susan Green, Joyce Ann Hale, Opal Hale, William Hale, Norris and Bobbye Harrison, Haskel Hawkins Jr., Carol Hearn, Wanda Hendrix, Jackie Howell, William and Margurite Jones, Lewis Knowles, Betty Lattimore, Amy Leonard, Sara Leonard, Emogene R. Magness, Wayne Measles, Hoyte Odom, Ann and Donald Pack, Trent Donnette Pack, Robert J. and Hilda R. Patrick, Paris and Rhonda Pelham, Bettye and Jim Pollard, David Hl Redmon, Billie and Edd Rogers, Marjorie and Darryl Rowland, Darrell J. Russell, Hugh and Carol Rutledge, Linda and Fred Stanley, Jewell Barney Stinson, Merle and Cheryl Stralow, Larry Sykes, John H. Thweatt, Dean Thweatt, Bonnie L. Turner, Alfred Vanderpool, Genevieve and Jimmie D. Vickers, Spencer Walden, Gordon Warfel, Carl Lee and Ann Webb, Allen Wilkens, V.L. and Callie Wilson, Aaron Wilson Young, Alyssa Ann Young, Kara Elizabeth Young, Nancy Young and James Ronnie Young.
On Dec. 27, 2006, James was indicted by U.S. Department of Justice, Middle District of Tennessee.
The charges stem from James’ participation in a scheme to defraud investors in insurance premium financing contracts. According to a press release from Craig S. Morford, U.S. attorney, insurance premium financing occurs when an individual purchasing an insurance policy elects to pay the premiums over an extended period. When the insured individual makes that election, that individual typically pays an additional amount beyond the cost of the premium that would be due had the insured made the payment in full at the time that insurance coverage went into effect.
Because of this payment, there is a market where insurance companies sell the contracts for extended payment policies to third parties. The third party makes the premium payment to the company at the time the coverage policy begins and receives both the premium and the additional amount in payment from the insured individual, thereby permitting the outside investor to profit from the arrangement, the insured individual to pay over an extended period, and the insurance company to receive the full premium payment at the beginning of the coverage.
“The indictment charges James with representing to investors that their funds would be used to purchase insurance premium financing contracts when, in fact, James knew that he would not use the funds in that manner,” said Morford, in the press release.
The indictment alleges James told the investors the only way for them to lose their money was if he stole it.
The indictment specifically alleges 15 instances where James told investors he would place their funds in insurance premium financing contracts when he had no intention of doing so. The total involved in these 15 instances is more than $1.8 million.
The investigation was led by Federal Bureau of Investigation. Sam Williamson, assistant U.S. attorney, is leading the investigation.
According to Judge Griffin’s courtroom minutes, James was released on his “own recognizance” after he was arrested on Dec. 27, 2006.
James’ arraignment is set for noon, Jan. 11, 2007, at the U.S. Courthouse, Eighth and Broadway, in Nashville. Magistrate Judge Juliet Griffin will preside. J. Hilton Conger, Smithville attorney, is representing James.