RALEIGH - Agents at four local family-owned insurance agencies have presented evidence disputing state regulators' fraud allegations while challenging the methods and motives of the investigation, according to N.C. Department of Insurance records released last week.

The agents are Will Honaker and his wife, Tiffany, who own Smithfield Insurance; Heather Richardson, who owns Clayton Insurance; and Holly Cooper, who owns Selma Insurance and Affordable Choice Insurance & Tax Service in Wendell with her husband, Arthur "Brad" Cooper.

Will Honaker, Richardson and Holly Cooper are the children of Bill and Karen Honaker, who own Premium Service of Smithfield, which the four agencies use to finance policies for their customers.

At meetings with regulators in late October, they submitted signed documents from customers, copies of checks and written statements from friends to dispute state auditors' findings that the agents "knowingly" quoted and charged insurance premiums to policyholders in excess of the actual premiums by a total of $131,261.

"Agent Brad Cooper helped our company out when nobody else would during our financial difficulty," says a statement with the signature of Gayle Strickland, a customer. "I am happy with Mr. Cooper and the service he gives me. I wish Mr. Cooper the best during the audit."

Several other similarly typed statements with customers' signatures were included in the DOI files released last week. The Department of Insurance cannot comment on ongoing investigations, spokeswoman Kerry Hall has said.

Brad Cooper and Heather Richardson also were alleged in DOI audits to have forged customers' signatures, which they have denied, DOI files show.

While declining to comment for this report, each agent disputes the allegations.

In Will Honaker's DOI file, an unsigned letter to state regulators claims that auditors influenced the interviews.

"After conversation with all of our insureds that were interviewed it is obvious that auditors used the power of suggestion to color the results of each interview," the letter says. "(Auditors) would ask very specific questions regarding amounts paid or items signed that occurred one or two years ago. When the insured did not know the answer or could not remember, they were immediately told that they had been overcharged."

The letter, which is not signed, singles out state auditor Cathy O'Connor.

It says: "Ms. O'Connor was not there (in interviews with customers) to do an objective collection of data. She was there as a prosecutor to win her case. She put words into the mouths of our insureds and interpreted any uncertain response as a failure on our part."

The letter does not name specific customers. The files do not contain letters from customers complaining about the auditors.

Other allegations

Meanwhile, Susan Robbins, a friend of Cooper, claims in an affidavit that Charlotte Kelly - who in 2010 sold Cooper the Wendell and Selma agencies - told her she "had a friend in the Department of Insurance" and that Kelly was going to make sure the DOI "went after him."

Robbins could not be reached for comment.

Kelly denies Robbins' allegations, saying, "I'm even sadder ... that my friend wouldn't do the right thing and instead write this letter full of lies."

Robbins' letter reflects Cooper's claim to state regulators that the investigation into his businesses is an effort by Kelly - and a former employee, Kimberly Jackson - to "sabotage" the Coopers' business.

Kelly and Jackson denied Cooper's accusation.

"He's made his bed, now he's got to sleep in it," Jackson said. "He's trying to blame everyone else for what he's done."

Hall in October estimated that state regulators would rule on the case by mid-November.

Now she doesn't expect a ruling until December.

State regulators could recommend that no action be taken, a settlement agreement be reached, or that an administrative hearing be called, Hall has said.

An administrative hearing requires a DOI officer to make a final decision on regulatory action in which the revocation of insurance licenses is considered.