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Wednesday, December 10, 2014

Paul Bryant Jr.'s fraud-tainted insurance company was started to help hide dog-track profits from the IRS


Paul Bryant Jr.
(Photo by Glenn Baeske/The
Huntsville Times/Landov--for
Bloomberg Markets)
Did Paul Bryant Jr. start Alabama Reassurance to help provide death benefits to policyholders who had lost loved ones? Not exactly.

An investigative article at Bloomberg Markets, from its January 2014 edition, shows that Alabama Re was designed mostly to hide taxable profits from Bryant's dog-track operations. (The Web version of the story is at the link above; the print version can be viewed at the end of this post.)

Did Alabama Re conduct business in an honorable fashion? Not exactly.

Bloomberg Markets showed that the company had reached an agreement to help underwrite policies for a firm owned by a Philadelphia entrepreneur named Allen W. Stewart. The document limited Alabama Re's liability at a certain figure and stated that there were no other agreements between the parties. But on or about the same day, records show, the two reached a side agreement that reduced Alabama Re's liability even more. A federal jury would later find this constituted fraud, and it was cited in nine counts that helped send Stewart to prison for 15 years.

Can Paul Bryant Jr. and his fellow members of the University of Alabama Board of Trustees be believed when they say they had nothing to do with last week's decision to kill the UAB football program--that it was campus president Ray Watts who pulled the trigger all on his own? We don't know what words would accurately describe all members of the UA Board--we hope a few of them might actually be "trustworthy"--but the Bloomberg Markets article leaves the distinct impression that "greedy," "cheap," and "dishonest" could apply to Bryant.

With that in mind, it seems safe to say that Bryant played a significant role in killing UAB football. And we aren't the only ones who apparently think so. Kyle Whitmire, a columnist for al.com, said Watts "looks like a stooge from his absentee masters in Tuscaloosa." That almost certainly was a reference to Bryant.

Should the public expect Bryant to conduct his trustee affairs in an honorable fashion when he clearly has not done that in the business world? We suggest the answer is no.

How dishonest can Bryant be? Bloomberg Markets shows that Alabama Reassurance was an insurance company pretty much in name only. Its primary purpose was to serve as a tax dodge. Here is what  reporters Anthony Effinger and John Helyar wrote about a Mississippi Department of Insurance examination of Alabama Re in the 1990s:

“They were propping up broke companies for a fee,” says Tom Gober, who was examiner-in-charge at the Mississippi Insurance Department in the early 1990s. “Companies knew they could call on Alabama Re because Alabama Re had to offset dog track profits.”

Bryant’s enterprises are all units of a holding company called Greene Group Inc., which Gober says allows the firm to consolidate its tax liabilities and offset profits from other enterprises with insurance write-offs.

Alabama Re intentionally worked with troubled insurers in a way that deceived the public--and the markets:

The company made a business out of propping up troubled insurers with reinsurance that appeared to reduce liability, says W.O. Myrick, a retired Alabama state insurance examiner. The contracts carried little, if any, risk to Alabama Re, he says. One client, Inter-American Insurance Co. of Illinois, went into liquidation in 1991, according to Cook County court documents.

“Historically, Alabama Re has entered into contracts to assume liabilities from problem insurers to help them appear to be in better financial condition than they actually are,” Myrick says in a telephone interview.

That's how Alabama Re came to be involved with Allen W. Stewart's Fidelity General Life Insurance Co.--and that's what helped lead to a multi-state federal investigation that involved prosecutors and forensic-accounting experts from Alabama:

The owner of one imperiled insurer, Philadelphia lawyer Allen W. Stewart, was convicted by a Philadelphia jury in 1997 on 135 counts of racketeering, wire fraud and money laundering and sentenced to 15 years in prison.

Nine of those counts concerned a reinsurance agreement with Alabama Re. In 1991, Stewart’s Fidelity General Life Insurance Co., facing insolvency, paid Alabama Re $412,500 to take on $15 million of its liabilities, according to the indictment. Regulators in California and Arizona rejected the agreement, saying it didn’t really shift the liability. Fidelity and Alabama Re then signed a new agreement in March 1993, which included a clause saying there were no other “understandings” between the parties.

Yet on or around that same day, a side agreement was signed with Fidelity’s parent company, Summit National Life Insurance Co., the indictment says, limiting Alabama Re’s possible losses to $481,250, guaranteeing that Alabama Re would suffer little or no loss.

Translation: Alabama Re wanted to take Fidelity's money, but it didn't want to take on much of its liabilities. Alabama Re sidestepped the purpose of the entire agreement, leaving numerous beneficiaries with life-insurance policies that were pretty much worthless.

Also, the public should remember these words from the Stewart case--racketeering, wire fraud, and money laundering. Paul Bryant Jr.'s company was deeply connected to all of that; the public record shows that's how Paul Bryant Jr. does business.

And the public is supposed to believe he was not involved in the decision to kill UAB football?


4 comments:

Anonymous said...

Isn't it strange that a man who would become head trustee of a public university didn't want to pay his fair share of taxes, which go to support things like public universities?

legalschnauzer said...

Excellent point, @12:10. Of course, tax dollars tend to promote the greater good of a broad society--and Bryant probably has no interest in such things.

Anonymous said...

I bet Bloomberg pulled their punches on this and left a lot of stuff out.

Anonymous said...

UAB should be the University of Birmingham, with its own board of trustees.