House Minority Leader John Rhodes is locked in a legal wrangle with Arizona's insurance director, who has disapproved a $1.7 million insurance stock sale involving Rhodes and others.
J. N. Trimble, the state insurance chief, has charged the Arizona Republican and other large shareholders of the Farm and Home Life Insurance Co. with impropriety and illegality in connection with the sale of their stock at an inflated price not generally available to other company stockholders.
Trimble ordered the sale stopped last month. Rhodes then filed for a rehearing of the case. So did the National Western Life Insurance Co., the firm that tried to buy a controlling interest in Farm and Home.
National Western, a Colorado insurer based in Austin, Texas, offered to pay $14 to $18 a share for Farm and Home stock held by John Rhodes and James E. McNellis families and their associates. At the same time, the prevailing over-the-counter prices available to 6,000 other Farm and Home stockholders averaged $8 to $9.
In halting the sale, Trimble said Rhodes and the others "used their position" as controlling shareholders to "take unfair advantage of the other sstockholders." He also said the proposed acquistion violated state and federal securities laws.
Rhodes' attorney, Richard Snell, denied the proposed sale is in any way unlawful. He also said the terms of the sale are not unfair to other shareholders.
"I would differ that the price is too high," said Snell. "It is simply a price over a very thin market,"
Moreover, Snell said that Rhodes "several times" asked National Western to make the same highpriced purchase offer to all shareholders but that the insurance company declined to do so.
Rhodes and his family own about a 14 percent interest in Farm and Home, which Rhodes said dates to the early 1950s when he was the attorney who incorporated the company. Also involved in the stock sale are Rhodes' administrative assistant, Robert Scanlen, a former assistant, Alma Alkire, and a partner in Rhodes' former law firm, C. Max Killian.
In a report on the sale, Trimble said National Wester had a 15-year history of acquiring smaller insurance companies, merging with them and issuing shareholders class A stock which elected only one-third of the parent company's board of directors and never paid dividends.
The report siad National Western is controlled by Robert Moody and that his brother Shearn is a director and minority stockholder. It said Shearn was found guilty of criminal contempt in Alabama and was enjoined from dealing with insurance companies twice since 1972.
The report claimed that National Western "engaged in a premeditated attempt to evade and circumvent the filing and disclosure requirements" of Arizona law and that the acquistion was "inequitable to the remaining shareholders" of Farm and Home.
It accused Rhodes and the others of violating "their common-law duty to act affirmatively and openly with full disclosure so that every opportunity is given for the full protection of the minority."
The report has been turned over to state securities officials who could order a further investigation.
Trimble said he will decide within a few weeks whether to reconsider his stop-sale order.