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Grand jury indicts former Brooke Corp. executives

By MIKE CORN

mcorn@dailynews.net

The two top executives of the now defunct Brooke Corp., first started in Phillipsburg, have been indicted on federal financial fraud charges.

Brooke founder Robert D. Orr, 59, now living in Denver, and Leland G. Orr, 50, Phillipsburg, were indicted Wednesday by a federal grand jury in Topeka.

Both Orrs were charged with a single count of conspiracy to defraud the Securities and Exchange Commission and three counts of making false statements in SEC filings. Robert Orr also was charged with two additional counts of making false statements in SEC filings and one count of bankruptcy fraud.

The Brooke Corp. was forced into bankruptcy proceedings after its lenders called a series of loans.

The Orrs and several other executives of the companies faced civil charges filed by the SEC.

Brothers, the Orrs were executives of Brooke Corp., based in Overland Park but with most of its operations in Phillipsburg. It was the community's largest employer before financial calamity struck.

The company engaged primarily in insurance franchising, insurance agency financing and banking.

The corporation included a web of companies, including Brooke Capital, Aleritas and Brooke Savings Bank.

Brooke Capital sold insurance agency franchises and provided bookkeeping and other support services for the franchises it sold.

Aleritas sold most of the loans it made to franchisees, typically remaining responsible only for loan servicing.

Robert Orr, formerly of Smith Center, was founder and former chairman of the board of Brooke Corp., former CEO and chairman of the board of Brooke Capital and former chief financial officer of Aleritas.

Through Brooke Holdings Inc., he was the largest shareholder of Brooke Corp., Brooke Capital and Aleritas.

Leland Orr was former CEO, CFO and vice chairman of the board of Brooke Corp. and former CFO of Brooke Capital.

The indictment alleges the Brooke companies in 2007 and 2008 experienced liquidity problems and declining financial health.

"In attempting to conceal financial problems, Brooke companies' management misrepresented the number of viable franchises, the health of Aleritas' loan portfolio and other material financial information to the SEC, investors and lenders," a statement from the U.S. Attorney's Office said. "They conspired to present a false aggregate picture of the Brooke companies financial condition ... to obtain money, dividend payments and case transfers for themselves."

If convicted, they face up to 20 years in prison and a fine up to $5 million on each count of making a false statement in SEC filings; and up to five years in prison and a fine of $250,000 on the other counts.