Print

Email story

Comment

Email editor

Family circus

The son of concessionaires, Duke Smith spent his young life on the carnival circuit, later forming his own carnival. But when he created an insurance empire serving carnivals and other amusements, he became a rich man with a company valued at no less than $10-million. When he died a new kind of circus developed over his inheritance.

By WILLIAM R. LEVESQUE
Published April 24, 2006

	[Courtesy of Carolyn Patterson]
	Paul "Duke" Smith at his desk in his insurance office. Date unknown.
	[Undated family photo]
	Smith with daughter Debby Melody Angelo.
	[Times photo: Scott Keeler]
	Duke's daughter Donna Brent in court this month.

TREASURE ISLAND - A few years ago, a friend suggested that Paul "Duke" Smith sell his beloved company, Allied International Holdings Inc.

Smith had built the insurance company from nothing in 1983 by providing coverage to the amusement and entertainment industries, from carnivals to big-time performers such as Hank Williams Jr. and Alabama.

The company was wildly successful, paying Smith a $1.2-million salary and bonuses in 2001.

Smith told his friend Allied was worth up to $150-million, a figure he certainly exaggerated. Nonetheless, Smith would have nothing to do with selling. He told his friend, "Sell my empire? Are you crazy?"

After Smith died at age 69 in 2002, the true value of Treasure Island-based Allied has become the focus of litigation over his estate. The battle pits his son David Smith against his three daughters: Debby Melody Angelo, Donna Brent and Dale Cremeans.

Tragedy clouds the case. David Smith died of brain cancer at age 48 in 2004; Angelo died of cancer at 46.

The family contest became so bitter that a dying David Smith left instructions that neither his sisters nor a younger brother be allowed to attend his funeral.

At the heart of the dispute is a mysterious agreement that some say never existed.

Before he died, Duke Smith signed a stock redemption agreement, Allied lawyers say, that would have allowed the company to buy Smith's controlling 75.9 percent stake of Allied stock upon his death. The price: a deeply discounted $550,000.

The Internal Revenue Service values the controlling stake at $10-million.

David Smith's two minor children stand to win control of Allied through that stock redemption agreement. Without proof of the agreement, however, Duke Smith's two surviving daughters could inherit the company as beneficiaries of their father's estate.

Allied encountered one small problem on the way to redeeming that stock, a problem that had bedeviled efforts of its attorneys to control the company.

Someone lost the agreement.

The son of West Virginia carnival concessionaires, Duke Smith was brought up in the 1930s and '40s traveling the carnival circuit of Ferris wheels and carousels that were as much part of his life as his name.

Carolyn Patterson, Smith's fiancee when he died, said carnival gypsies gave Smith the nickname "Little Duke." And Smith would one day own a carnival.

Eventually, Smith got out of the carnival business and into the insurance trade. He formed Allied in the early 1980s after watching an insurance man with a snazzy Cadillac collect $10,000 in a paper bag as Smith's carnival was mired in mud.

Smith's insurance company thrived, in part, Patterson said, because Smith cultivated his contacts in the carnival business.

"I knew we understood very well the amusement business," Smith told Amusement Business magazine in 1993. "I knew what those people have to go through and I knew it was a tough business."

Duke Smith could be a difficult man for which to work. Family members and co-workers described him as an alpha male who ran his company with an iron fist.

Even David Smith called his father "Mr. Smith" while working with him at Allied.

"Duke was Allied, and Allied was Duke," Patterson said.

By 1995, Smith's health had taken a turn for the worse. That year, he underwent a kidney transplant. He was a diabetic.

Smith's younger son, Dean Smith, later told lawyers that Allied officials began searching for the elusive stock agreement even before his father died. They didn't find it.

On June 14, 2002, Patterson returned from a trip to the home she shared with Duke Smith and found him dead in their bedroom. The death certificate said he died of natural causes.

The search for the lost document intensified.

Bill Gregory, Allied's former general counsel, said in pretrial testimony that he and Allied expended considerable time after Smith's death looking for the lost stock redemption agreement, to no avail.

Allied officials think it is possible someone with access to Smith's records took the document.

"Duke Smith kept records at his house," said Jay Fleece, an attorney representing Allied. "Lots of people came and went to his house who may have had access to those records."

Every employee of Allied was asked to look for the agreement, David Smith said in testimony.

Soon, Gregory and another Allied executive visited Patterson in their search.

"It was the first time I had ever heard of a stock redemption agreement," she said.

Allied officials, however, were certain Patterson had the document. They were so sure they offered Patterson $1-million to give it to them.

Patterson said the offer shocked her.

"I really thought what they wanted me to do was create one," she said in an interview. She doubted the document existed.

Fleece, however, said detailed financial statements at Smith's bank and several other documents at Allied refer to the existence of a stock redemption agreement. Gregory testified that he prepared the document and saw Smith sign it.

"You take all that evidence, and it's pretty compelling the document existed," Fleece said.

After a fruitless search, David Smith decided by the fall of 2002 to move forward. He would buy back his father's stock whether or not the redemption papers were found.

Duke Smith left his sons out of his will because he thought the two were taken care of by Allied, Fleece said. David owned 24.1 percent of Allied's stock and Dean Smith was receiving $3-million from company shares he had sold to Allied.

Gregory, Allied's general counsel, had been appointed as personal representative of Duke Smith's estate and served on Allied's board of directors.

In this dual role, Allied sent him a letter demanding that he transfer Duke Smith's stock back to the company.

Allied paid Duke Smith's estate $550,000 in September 2002, as required under the terms of the lost agreement, and Gregory transferred the stock to the company.

He told neither the judge nor the parties involved in the probate fight.

Asked later why he didn't tell the court, Gregory said, "I felt that was the right thing to do. Duke Smith wanted shares redeemed. He set a price back in 1987, and that's what was done."

In February 2003, Allied sued in Pinellas-Pasco Circuit Court to re-establish the lost document, after the stock had been transferred back to Allied.

After lawyers for the estate discovered the stock transfer, they conceived a plan to take Allied out of David Smith's hands and bring it back into Duke Smith's estate and in his daughters' control.

They didn't tell the court they planned a takeover of Allied, the company says.

One of those lawyers was Patrick O'Connor, who was appointed personal representative of the estate after Gregory resigned in early 2003.

Soon after his appointment, O'Connor filed a petition with the court to transfer the stock back to the estate. Without inviting Allied lawyers, he scheduled a hearing with Pinellas-Pasco Circuit Judge George Greer to argue that the transfer of the stock should never have occurred. The judge agreed and ordered the stock transferred back to the estate.

After the March 2003 hearing, O'Connor returned to his office and immediately prepared minutes of a special meeting of the stockholders of Allied - Duke Smith's daughters.

O'Connor, Allied said in court papers, terminated the directors of Allied and elected a board "consisting solely of his friend and former law partner," Sandip Patel .

Patel elected a new manager as Allied's president.

Just before 5 p.m., O'Connor appeared at Allied's headquarters with a sheriff's deputy and 10 armed private security guards to serve David Smith with papers showing he had lost control of Allied.

Smith and other top officers of Allied were put on paid administrative leave. The new management group changed the locks to the building, altered computer passwords and made quick attempts to find and gain control of Allied banking accounts.

Allied lawyers in a court filing accuse O'Connor and others involved of possibly trying to loot the company, which they denied.

On the next Monday, Allied's lawyers persuaded Greer to reverse his order, allowing David Smith to regain control of Allied.

After the takeover, Allied lawyers and paralegals searched Gregory's papers. They found two draft copies of the stock redemption agreement, providing, they say, proof the document was real.

About a year ago, a special master appointed by Greer searched up to 70 boxes of Gregory's papers and found no trace of the lost document. But Fleece said the draft copies had been found and removed.

O'Connor insists the drafts are fakes and says a hired expert can prove ink on one draft didn't exist the year it was created.

Today, Allied's future remains in limbo until a trial decides whether the stock agreement existed. A trial date has not been set.

"It's such a bizarre story," Patterson said, "it sounds like fiction."

William R. Levesque can be reached at levesque@sptimes.com or 813 226-3436.

PAUL "DUKE" SMITH: Patriarch and founder of Allied International Holdings; died in 2002.

DAVID SMITH: Duke Smith's older son.

DEBBY MELODY ANGELO, DONNA BRENT AND DALE CREMEANS: Duke Smith's daughters.

CAROLYN PATTERSON: Duke Smith's fiancee when he died.

DEAN SMITH: Duke Smith's younger son.

BILL GREGORY: Allied's former general counsel.

JAY FLEECE: Attorney representing Allied.

PATRICK O'CONNOR: Represented Duke Smith's estate after Gregory resigned.

SANDIP PATEL: O'Connor's former law partner.

PINELLAS-PASCO CIRCUIT JUDGE GEORGE GREER: Overseeing the Smith case.

[Last modified April 22, 2006, 17:20:04]