Tulsa insurance company sues Kansas-based bank

Journal Record, The (Oklahoma City), Feb 8, 2007 by Ginger Shepherd

International Insurance Brokers Ltd. on Tuesday filed a $20 million lawsuit against Team Bank NA, Team Financial Inc., and Mystic Capital Advisors Group LLC.

International Insurance Brokers is seeking damages for conspiracy, fraud, misrepresentation and breach of contract relating to the February 2005 sale of Team Insurance Group, according to the court filing. The lawsuit also names Robert Weatherbie, chairman of the board for Team Bank, Team Financial's Chief Financial Officer Michael Gibson, and Kevin Donoghue, principal of Mystic Capital Advisors. Both Team Bank and Team Financial are located in Paola, Kan.

Team Insurance Group's purchase came about through a stock purchase agreement between International Insurance Brokers, Team Financial, Team Bank and Mystic Capital, according to the court filing. In the agreement, Team Bank made representations and warranties including the insurance group's financial condition and operating results, IIB alleges.

The bank agreed that the financial statements were correct and complete, the accounting books accurately reflected the company's assets, liabilities and business transactions, IIB told the court. All employee payments - including salary, vacation, benefits and commissions - were reflected in the books and had been paid, the plaintiff claimed.

International Insurance Brokers claims the defendant counted the same income more than once on certain unaudited statements.

"The books of TIG did not comply with general accepted accounting principles in that certain transactions were recorded which misrepresented the revenues of TIG," the plaintiff said in the filing.

The plaintiff claimed that Team Insurance Group showed it had a premium trust account when it did not. The insurance group also showed that the trust account was in balance when it was not, IIB argued.

Amounts owed to employees for wages, vacation, pension, and other benefits were not reflected in the accounting books and records, according to the filing.

"The defendants represented that the business of TIG was increasing and that new business was projected to exceed lost business by 50 percent when such representations were misleading in actuality 'budgeted lost business' had already left TIG," the plaintiff contended. "The defendants knew that the revenue growth of TIG was well below average and that TIG's revenues had actually decreased over the past 12 months."

International Insurance Brokers claim that the insurance group commingled its fiduciary funds with other operating funds and at the time of the sale closing, there was a "significant shortage of fiduciary funds," resulting in liabilities that were not identified to International Insurance Brokers.

Prior to the sale closing, five carriers notified Team Insurance Group that they were canceling their contingent arrangements, the filing said, and that 72 percent of the contingency commissions received in 2004 were lost prior to closing. The insurance group lost customers that generated at least 24 percent of its 2004 revenue.

"The defendants failed to disclose to IIB prior to closing that two key employees who had resigned controlled approximately 25 percent of TIG's entire revenue stream," the plaintiff said in the petition.

International Insurance Brokers is also claiming that agreements between them and Team Bank, Team Financial and Mystic Capital had non-interference and non-competition clauses, according to the court documents, and that those elements were breached.