Former Reagor Dykes Auto Group CFO speaks out in Bart Reagor bank fraud trial
LUBBOCK, Texas (KCBD) – Bart Reagor was surrounded by lawyers and supported by his family as he sat at the end of the defense table for the first day of his criminal trial in a federal courtroom in Amarillo Tuesday. Reagor faces two counts of bank fraud and one count of making a false statement to a bank.
The prosecution led the hour-long opening statements and began presenting their case, accusing Reagor of keeping a secret his intention to embezzle $ 1.7 million from a $ 10 million working capital loan to the group. Reagor Dykes Auto from the International Bank of Commerce (IBC) to his personal bank account for personal reasons.
In opening statements, the prosecution presented one of its main exhibits, an email from Reagor to former RDAG CFO Shane Smith and RDAG co-owner Rick Dykes titled “Capital Management.” The play was repeated when Smith was called to the stand as the government’s fourth witness.
After questioning Smith about Bart Reagor’s influence on his actions as CFO, the prosecution described to the jury Smith’s role in RDAG’s check kit fraud and control scheme, in which he pleaded guilty to conspiring to commit wire fraud. Smith agreed that he was running the program, recruited other employees but did not inform Reagor or Dykes of his efforts “to keep RDAG alive”. Reagor’s defense attorney spent much of the day pointing fingers at Smith for his criminal actions, claiming he was what was “rotten” at the RDAG and calling him “Judas” for his betrayal of Bart Reagor. The defense told the courtroom that Smith was testifying only to have his sentence reduced for his guilty plea.
The prosecution turned to the IBC loan and asked Smith about the need for working capital after a March 2017 audit by Ford Motor Credit Company uncovered the floor plan fraud. Smith said Reagor asked the company to cut spending and raise capital.
A meeting in April started communication between RDAG and IBC for a loan. Smith said the meeting took place at Reagor’s offices in Lubbock with the couple and representatives from IBC, including its president and CEO, William Schonacher. The prosecution asked Smith if, in a conversation with the bank, it was said the money would be used for anything other than working capital. Smith said nothing other than the use of working capital was indicated.
Smith was briefed by Reagor on how the loan would be used ahead of the meeting, according to this email presented by the prosecution. It was sent before the loan was closed and Dykes explained how the loan was to be distributed to himself and Dykes, followed by his message to keep the confidentiality of the management of the capital, that this was “the deal.” of no one, “including” no banker or other person. ” Defense attorneys in their opening statement said Reagor kept his matters confidential and there was no criminal intent.
The defense added that the disbursement for Reagor and Dykes was for their own personal investment in the business. However, prosecutors presented personal financial statements showing Reagor owed RDAG more than $ 5 million.
Smith said he was frustrated with the email, hoping the money would be for RDAG, and he responded by saying he would make sure it was executed as written with Reagor’s approval. every step of the way. The defense pointed out that Smith’s email response began with the word “awesome” and he then thanked Reagor and apologized for his role in necessitating the loan.
Both the prosecution and the defense asked Smith to collect bonuses on two deposit loan disbursements. These bonuses amounted to $ 25,000. Smith said the bonuses were accepted by him and other employees.
In cross-examination, the defense began by rebutting an audio and video clip played by the prosecution for Smith and the jury. We hear Reagor brag about his planes, his homes, his work ethic, and getting rich by enriching others. The audio clip includes Reagor saying that he did things according to the book and that he didn’t need to cheat or lie. The video, which Smith said was a meeting with sales staff, shows Reagor talking about “OPM” or “other people’s money.” He said that when he had no money he asked others to increase his net worth and that there was “no understanding of what he had achieved.” The defense argued that there was nothing “insidious” about this.
The defense also asked Smith if he still cares about Reagor. Smith said he considered them brothers and still loved her.
The defense asked Smith if Reagor trusted him on financial matters and Smith agreed. He went on to point out Smith’s deal that he never told Reagor not to take part of the loan for his personal use and the defense asked why as CFO he didn’t. informed of this. In line with questions, Smith admitted to submitting inaccurate bank balances to Reagor in the last two or three years of the company’s existence.
The defense backed down on the floor plan fraud and kit control, listing the other employees he implicated in the scheme. Smith said he felt bad about it.
Prosecutors then asked Smith if Reagor had a good knowledge of the company’s finances, which he agreed to and said he had not provided legal advice to the company. Prosecutors ended the reorientation questioning by saying that his testimony could only reduce his sentence if it was true.
Smith was at the stand for about three and a half hours.
Before he was called, the prosecution called IBC Bank President and CEO William Schonacher, the lawyer Thomas Hutchison who drafted the IBC loan agreement, and William Schonacher to the stand. Woodring, Vice President of IBC Bank and Head of Loans for the RDAG Group.
Prosecutors and the defense analyzed the disagreeing loan agreement and memorandum on the term “working capital.” The government argued that this meant it was business expenses and the defense said it was not defined in the agreement and was only mentioned once. Reagor’s lawyer maintains that the language of the agreement did not prevent him from taking part of the loan and he always understood that it was possible and legal.
None of the three witnesses said they were aware that the loan would be used for personal reasons, and Schonacher told the courtroom that he would not have allowed the loan to be made if that had been the case. He said this was the biggest default and loss for IBC. The defense argued that Shane Smith was the point of contact for all matters relating to the loan agreement.
The jury was removed from office the day after Smith’s testimony, which ended at 5:30 p.m. Prosecutors have three other witnesses on their roster, including RDAG legal and compliance director Steven Reinhart, the former FBI agent John Whitworth and CPA Steven Dawson, before the defense begins to present his case.
The trial resumes at 8:00 a.m. on Wednesday.
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