Judge dismisses suit against bankrupt Brooke Corp.

KANSAS CITY, Kan. — A federal judge has dismissed a lawsuit accusing bankrupt Brooke Corp. and its financing arm of racketeering and fraud, saying the claims are not specific enough.

Scores of insurance agents sued Overland Park, Kan.-based Aleritas Capital Corp. in April, claiming 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 plaintiffs later added six banks as defendants, alleging that the banks took over Aleritas’ loans to the agents and directed that they receive the agents’ commissions.

U.S. District Judge Carlos Murguia on Wednesday tossed out the suit, determining that the lawsuit “contains broad and conclusory language insufficient to give defendants notice of the specific conduct alleged.”

But Murguia did say the plaintiffs could fix the problems and resubmit the case.

As for the banks, the judge dismissed them from the suit, saying the plaintiffs’ claims were conclusory and not linked to Aleritas.

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.

After filing for bankruptcy, the company planned to stay in operation while it sold its insurance business to two Kansas businessmen. But the deal fell apart, as did the company.

Its demise has left thousands of insurance agents across the U.S. 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, including The Bank of New York Mellon, 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, noting that he too lost millions of dollars and his ownership of the company while trying to save it.

The Kansas City Star reported in December that the FBI was investigating the company’s finances.

Information from: The Kansas City Star, www.kcstar.com