The West Covina-based Universal Bank, which has sued the Upland company after helping to finance its insurance sales, has accused Hamilton Brewart Insurance Agency's leaders of requesting more than $6 million worth of bogus loans.
The bank's lawsuit goes as far as to allege Derek Brewart, son of agency founder Hamilton Brewart, confessed to fraud during a series of meetings that took place at different Starbucks coffee houses in the San Gabriel Valley.
Derek Brewart's legal defense team, however, has filed a response denying all of Universal Bank's allegations. The defense's side of the story is that the younger Brewart inherited a catastrophic situation after the recent death of his father and spent the past several months trying to save the company.
"Derek was doing everything he could to keep this thing going," defense team spokesman Steve Lambert. "He self-reported to the insurance commissioner. He went to the bank."
The state Department of Insurance declined to comment on whether there was any investigation of the insurance agency.
Universal Bank's legal team acknowledges in its lawsuit that meetings with Derek Brewart took place following two events that took place in early May: Hamilton Brewart's death and Universal Bank's initiation of a routine audit.
Since then, a Los Angeles County judge has placed Hamilton Brewart Insurance Agency in receivership, Universal Bank and another firm have filed lawsuits against the company and a Los Angeles firm has purchased part of the Upland company's business portfolio while hiring six of its sales agents.
Whether Universal Bank's allegations prove true or false, there has been a sudden change in fortunes for a company that has been part of Upland business community since 1976 and recently considered one the United States' best insurance companies.
Insurance Journal ranked the agency as the nation's 95th best privately held property and casualty insurance company in its 2010 rankings.
Hamilton Brewart employees earned their ranking by selling policies worth $90 million in 2009.
The late Hamilton Brewart had also enjoyed a positive reputation in Upland, said Mayor Ray Musser, himself an insurance professional. Brewart donated $1,000 to help the Upland Fire Department purchase Jaws of Life tools and Musser also said he admired the elder Brewart devotion to his Catholic faith and family.
"I had always respected anybody that kept those two on a high priority," Musser said.
Universal Bank's filings, however, allege there was a darker side to the agency.
The bank's complaint reports that Derek Brewart met with Armando Carlos, Universal Bank's first vice president for its asset and investigations department, and admitted the insurance agency committed fraud against the bank.
The younger Brewart blamed his father for the alleged fraud, according to Universal Bank's complaint.
"Derek said he learned about the fraud while his father was alive and tried to convince him to stop, but Hamilton refused to do so," the report reads. "When Mr. Carlos asked Derek which premium loans were fraudulent, Derek responded `all of them."'
That meeting took place about May 23 at a Starbucks in Alhambra. A second meeting took place about a week later at another Starbucks in Walnut. Universal Bank alleges that during this encounter, Derek Brewart "apologized for the fraud and admitted that he had been complacent in the fraudulent scheme."
A third meeting took place in June. The court filing states Derek Brewart apologized a third time and repeated a promise made at the second meeting to sell Hamilton Brewart Insurance Agency and use the proceeds to reimburse Universal Bank.
Carlos, the Universal Bank executive who met with the younger Brewart, declined to make any statements beyond what the bank and its attorneys have made in legal filings.
"The complaint speaks for itself, and there is ongoing litigation and we're not in a position to comment," Carlos said.
Derek Brewart has sought legal counsel and has been advised not to speak publicly on the allegations.
"Because Mr. Brewart is actively cooperating with the receiver and the Department of Insurance to protect the best interest of the insurance customers, he is unable to comment at this time," Lambert said.
In a Monday filing, the defense team denied Universal Bank's allegations in full. The response does not outline a counter-narrative to the bank's version of the story.
Attorney David Meyer of the Los Angeles-based firm of Arent Fox, said he could not speak to Universal Bank's specific allegations but did say the younger Brewart has attempted to save the insurance company.
"He tried to restructure the company and get the company out of financial difficulty," Meyer said.
Universal Bank claims the Brewarts took advantage of the nature of the Upland company's business relationship with the West Covina bank to commit the alleged fraud.
Hamilton Brewart Insurance Agency did business as a brokerage, selling policies for other carriers. The Upland company also obtained loans, called premium financing in the insurance industry, to help their customers buy new policies.
Those customers would make good on the loans by making premium payments that could be spread over time. The bank alleges the Brewarts took advantage of the process by requesting loans for customers who obtained financing from another source or did not need loans.
The Brewarts allegedly obtained more than 80 fraudulent loans worth more than $6 million.
Universal Bank filed its lawsuit in Pomona Superior Court on Sept. 27. A judge appointed a receiver to take control of Hamilton Brewart Insurance Agency on Oct. 17.
Los Angeles-based Grosslight Insurance is the company that acquired a significant share of Hamilton Brewart Insurance Agency's business portfolio. Grosslight Insurance founder Gil Grosslight pledged in a telephone interview that he could protect the Upland firm's customers.
"If the customer is my customer, I can guarantee that they're not going to get hurt," Grosslight said.
Universal Bank is not the only company thus far to sue Hamilton Brewart Insurance Agency.
The Upland firm's own insurance provider, Endurance American Specialty Insurance Co., has filed a U.S. District Court case in California's Central District.
Endurance American's case seeks a judge's confirmation of its decision to cancel its professional liability coverage of the agency. Endurance American's filing relies on Universal Bank's allegations as evidence the Upland company failed to provide required information.
El Monte-based Nijjar Realty Inc, doing business as Pama Management Co., was a client of Hamilton Brewart and is awaiting the outcome of the lawsuit.