Smithville insurance broker arrested on fraud charges
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According to the federal grand jury indictment, B. Don James defrauded investors of more than $1.8 million by telling them he would use their money to buy financed insurance premium contracts ? but never using the money for those purposes.
Instead, the indictment said, James would make what he called interest payments to older investors with money obtained from newer investors.
Insurers offer consumers financed premiums to make payments more affordable than a single lump sum. Companies can then sell those policies to investors to cover their costs. The investors make money by collecting the installments and other fees associated with the contracts.
The indictment alleges that James told clients they would receive fixed and guaranteed rates of return from their investment, and ?the only way that the investors could lose money … would be if James himself stole it.?
The federal indictment unsealed Wednesday says, ?? B. Don James invested almost none of his investors? funds into insurance premium finance contracts …?
Until late 2004, James was a trusted businessman in DeKalb County. Around 1993, James formed a separate company and dubbed it Investors Insurance Finance LLC.
When the company began, most commercial insurance companies required businesses to pay premiums in full upfront, said U.S. Bankruptcy Trustee John McLemore, who has been involved in the case.
James gave businesses a chance to pay in installments, charging them 18 percent interest. Investors were recruited to put the money up, and they were promised 10 percent returns on that money, McLemore said.
McLemore was appointed to oversee James? assets and debts after a group of investors forced him into involuntary bankruptcy.
One local investor who says she lost money, Nell Beshearse of Smithville, said Wednesday night she was thrilled to hear of James? arrest.
?Honey, I shouted. I was overjoyed. He needed it. He done us wrong,? Beshearse told The Tennessean. She said she invested $30,000 with James and has since recovered $5,200 of it in a separate suit. ?We always thought the world of Donnie James. But, I mean, he just lied and absolutely took us for a ride ? people wouldn?t pull him out of the fire today.?
James was released without bail Wednesday. He will be arraigned in U.S. District Court on Jan. 11. If convicted, he could face up to 20 years in prison and a $250,000 fine.