A circuit court judge on Wednesday approved a petition to place a Sioux Falls company that insures and services student loans into liquidation.
ReliaMax Surety Co. will have all remaining assets liquidated by the South Dakota Division of Insurance, which filed the petition in Hughes County Circuit Court on June 12. Dawn Dovre, a spokeswoman for the division, said the state moved to liquidate ReliaMax because the company is insolvent.
The order allows the Division of Insurance to take possession of the company’s property and conduct business in the interim while winding down its affairs.
“The next step of the process includes notifying policy holders, claimants and other interested parties of the liquidation status and providing established procedures to file claims,” Division of Insurance Director Larry Deiter said in a release.
Mark Payne, the company’s president, did not return a message left at his office.
Founded in 2006, ReliaMax initially provided insurance to banks and other lenders in the private student loan industry. By 2014, the company insured $2 billion worth of student loans.
Meta Financial Group, the holding company for Meta Bank, announced to shareholders that ReliaMax insured nearly $190 million worth of the bank’s student loan portfolio.
“ReliaMax and its predecessor companies have been providing private student loan insurance for over 25 years, and we are disappointed to learn of their pending insolvency,” Meta Financial Group Chairman and CEO J. Tyler Haahr said in a release. “While we expect to ultimately recover a substantial portion of our unearned premiums, the timing and amounts are unclear at this time.”
Although ReliaMax announced in 2014 that its line of business was expanding, behind the scenes there were problems. The Division of Insurance conducted a market conduct examination and found the company was violating state law by transacting business in states where it had no license. The state fined the company $25,000.
The company and its founder and CEO, Michael VanErdewyk, were also sued by former employees who said they were swindled out of their investments into ReliaMax, including one employee who took out a second mortgage on his home to invest $50,000. VanErdewyk, the lawsuit said, had claimed to be a business guru who had built successful companies. But, the lawsuit said, he had “a pattern of raising money from investors and then losing money; and paying himself very well regardless of the success or failure of the company.”
The lawsuit alleged that behavior continued after ReliaMax was formed.
“VanErdewyk has squandered company assets, used them for non-business purposes, demanded and received compensation that reflects neither his actual talent nor the company’s actual profits, and has generally treated the assets and income of ReliaMax as ‘his’ money to do with as he pleased,” the lawsuit claimed.
The lawsuit settled, and the terms were confidential.
The last time the state liquidated an insurance company was in 2012, when the state liquidated Northern Plains Insurance Co. of Watertown, Dovre said.