LUBBOCK, TX (KCBD) - Rick Dykes has issued a new witness statement in the form of a timeline after Vista Bank again amended their lawsuit against FirstCapital Bank, Brad Burgess and Kenneth Burgess Jr. to recover more than $6 million in damages. They’re claiming FirstCapital had insider information they obtained through their close relationship with Rick Dykes. According to attorneys for Vista Bank, Dykes’ witness statement caused Vista Bank to file a fraudulent claim against FirstCapital Bank.
Senior United States District Judge Sam R. Cummings granted Vista Bank’s motion to amend its lawsuit against FirstCapital Bank on Friday afternoon.
A news release from Vista Bank’s attorneys says, “Based on newly discovered evidence, Vista Bank filed a motion to amend its complaint to add factual allegations and a claim for fraudulent transfer against FirstCapital Bank. Vista Bank originally sued FirstCapital Bank and its CEO and Chairman of the Board of Directors for illegally using inside information from its Advisory Director, Rick Dykes, to wrongfully return millions of dollars in hot checks to other banks. A recently obtained sworn witness statement from Rick Dykes establishes that right after Mr. Dykes informed FirstCapital Bank about the impending Reagor-Dykes Auto Group bankruptcies last July, FirstCapital also demanded over $7 million dollars in extra collateral from Mr. Reagor and Mr. Dykes in exchange for a promise to provide $2.1 million in additional floor-plan financing. According to Mr. Dykes, securing the additional financing was an attempt to save Reagor-Dykes Auto Group from financial ruin and preserve the jobs of hundreds of employees.”
The news release goes on to say, “Both Mr. Reagor and Mr. Dykes, along with their wives, signed the pledge agreements to provide FirstCapital with the additional collateral, but FirstCapital Bank never provided the promised additional financing. Instead, FirstCapital put the pending acquisition of Fidelity Bank and its own profitability first by fraudulently taking the additional collateral in exchange for a false promise to provide additional help to Reagor-Dykes. By doing so, FirstCapital sealed the demise of the Reagor-Dykes Auto Group and ensured that hundreds of West Texans would lose their jobs, and other creditors, like Vista Bank, would be deprived of recovering damages.”
Rick Dykes, a co-owner of Reagor-Dykes Auto Group, served as a member of FirstCapital’s Board of Advisors until early August 2018. Dykes also previously held a seat as a Director on FirstCapital’s Board of Directors. Court documents in the first lawsuit say, “In fact, FirstCapital transitioned Dykes from a Director to its Board of Advisers to avoid banking regulatory scrutiny and potentially to increase the amount FirstCapital could lend Reagor-Dykes. Further, Dykes is a large FirstCapital shareholder, holding more than 350,000 of FirstCapital shares.”
The lawsuit says Reagor-Dykes Auto Group “perpetrated a multi-million dollar check-kiting scheme and conspired with FirstCapital to impose the resulting losses, totaling over $6,000,000.”
The news release also says, “The complaint temporarily dismisses FirstCapital’s co-defendant, First Bancshares of Texas, Inc., the holding company of Defendant FirstCapital and Ken Burgess, in exchange for its agreement to respond to discovery. Discovery is in its infancy, and Vista Bank reserves the right to join Defendant First Bancshares of Texas, Inc. back into the lawsuit if facts prove liability.”
In his witness statement, Dykes claims he learned of corruption, secrets, and affairs since he found out about the check-kiting and double flooring that was happening within his company Reagor-Dykes Auto Group.
Dykes denied having insider information about the flow of money between Reagor-Dykes and FirstCapital, claiming that he was misled by false statements from CFO Shane Smith.
Dykes also claims that an RDAG staffer working for Shane Smith was having an affair with one of the outside auditors for Ford Credit, and received advance notice of upcoming audits.
The amended lawsuit filed today states, “Rick Dykes and Bart Reagor owe Vista significant sums of money, arising from the facts making the basis of this lawsuit, making Vista a creditor of Rick Dykes and Bart Reagor. Between about August 2, 2018 to August 7, 2018, Rick Dykes transferred approximately $7,500,000 to FirstCapital, allegedly in exchange for FirstCapital agreeing to extend $2,100,000 in additional capital to the Reagor-Dykes Entities.”
The amended lawsuit says, “Therefore, the transaction is voidable due to FirstCapital’s failure to provide bargained for consideration under the circumstances, and under the Texas Uniform Fraudulent Transfer Act “TUFTA”), Rick Dykes’ and Bart Reagor’s transfers to FirstCapital are fraudulent transfers, because the transfers were made to an insider, an affiliate, or not in exchange for reasonably equivalent value.”
Vista also wants to amend the lawsuit because officials recently discovered new information about the timing of relevant events in this case, such as meetings between FirstCapital Bank and Rick Dykes, and the alleged fraudulent transfers.
Vista is also alleging FirstCapital paid Bart Reagor and Shane Smith, the former RDAG CFO, millions of dollars in loan funding after the check kiting was publicly disclosed. They say after the first round of RDAG entities filed for bankruptcy, FirstCapital gave Reagor and Smith millions of dollars in home equity financing, even though FirstCapital knew the “Reagor-Dykes empire was collapsing, and Smith was recently fired after being accused of helping to mastermind the fraud."
The amended lawsuit says, "These loans defied all common sense and safe and sound banking practices, unless (FirstCapital) were rewarding Reagor and Smith for past services rendered in their business relationships, and/or attempting to buy their silence. Reagor and Smith have already pleaded their Fifth Amendment rights when interrogated under oath.
FirstCapital issued this response on Thursday afternoon, in response to Vista Bank:
STATEMENT FROM FIRSTCAPITAL BANK OF TEXAS REGARDING VISTA BANK’S AMENDED FILING
It is easy to make allegations; it is hard to prove them. Vista Bank is finding that out.
Vista Bank filed suit in August alleging that FirstCapital had an advantage on Vista Bank in returning bad Reagor-Dykes checks. The evidence reveals that Vista Bank and FirstCapital returned checks on the same day. Thus, neither bank had an advantage over the other.
Vista Bank, through its recently-filed motion is backtracking on many allegations it made when suit was filed in August.
· Vista Bank originally insisted that FirstCapital was in a meeting with Rick Dykes on July 30th, presumably giving FirstCapital an additional 24-hours head start. Vista Bank now seeks to drop that allegation because the evidence proves there was no such meeting.
· Vista Bank originally brought fraud claims against FirstCapital. It now seeks to drop those.
· Vista Bank originally sued Kenneth Burgess, FirstCapital’s board chairman, and it now seeks to drop him from the suit.
· Vista Bank originally sued FirstCapital’s parent company. It now seeks to drop the parent company.
Contrary to Vista Bank’s most recent allegations, in the weeks following the Reagor-Dykes bankruptcy filings, Rick Dykes agreed to pledge additional collateral to FirstCapital because of uncertainties regarding the various Reagor-Dykes debts owed to FirstCapital that he guarantied and in consideration for the release of millions of dollars of cash to Rick Dykes out of his account at FirstCapital in which the bank had a lien. In addition, FirstCapital agreed to loan Reagor Auto Mall $2.1 million dollars as a part of the existing floorplan line of credit to help fund the operations of Reagor Auto Mall, but FirstCapital was instructed by counsel for Reagor Auto Mall to not fund the additional money. FirstCapital honored Reagor Auto Mall’s request. None of this is new information to Vista Bank and Vista Bank has known the details of all of this since early August from the depositions taken early in the bankruptcy proceeding. Notwithstanding this knowledge, Vista Bank distorts the facts in a desperate attempt to keep alive a failing lawsuit against FirstCapital.
In regard to the home equity financing, in one instance FirstCapital advanced additional funds to complete construction of a house in order to protect FirstCapital’s collateral position. In another instance, it combined two existing loans into one and did not advance additional funds.
Instead of relying on the court of law to decide the facts, Vista Bank wishes to try this case in the court of public opinion.
"My name is FRANKLIN ANDREW “RICK” DYKES. I reside in Lubbock, Texas. I am over the age of eighteen (18) years and of sound mind and have personal knowledge of the following facts. I am fully competent to make this Declaration. The following are my recollections of what happened in connection with the bankruptcy filing on August 1, 2018 of the Reagor-Dykes Auto Group (“RDAG”) dealerships that were subject to Ford Motor Credit Company (“Ford Credit”) financing.
"I am a fifty percent co-owner in the Reagor-Dykes businesses. Normally, I came in Tuesdays after lunch and worked 1-4 p.m. and 2-4 p.m. on Thursday. If I was needed for a meeting, I was called and would attend. During this time, I also monitored my interest in other companies, including Raider Rentals, Fast Technology, Sabino Star, Caprock Health Care, and Fibertech.
"I was previously a director for FirstCapital Bank (“FCB”), and then transitioned to advisory director. I had many loans outstanding at the time Brad Burgess asked me to move to an advisory director position. My understanding is that Regulation O was the primary reason for the transition. I attended board meetings about eight times a year. After transition to advisory board member, nothing changed in terms of my participation with FCB’s board of directors.
"At this time, Shane Smith was reporting Reagor-Dykes bank account balance information each Friday to Bart Reagor. I received Excel spread sheet reports from him via Bart Reagor with bank balance information. I never saw bank statements. Shane Smith’s misinformation was also passed along to Reagor-Dykes’ CPA. Shane Smith would text me to come by and sign documents as needed. Bart received weekly reports from Shane Smith, and then sent them to me. Shane Smith made a base salary of approximately $200,000 and was on track for a 2018 bonus of up to $500,000, based on the performance of the companies. Mr. Reagor and I were generally paid approximately $25,000- $30,000 per month in regular compensation. Mr. Reagor and I were paid larger periodic distributions relating to injection of capital and guaranteeing additional debt for Reagor-Dykes.
"Reagor-Dykes has been banking with FCB before it began banking with Vista Bank (Vista).
"I have some personal notes which I relied on to help make this statement. I have no voice recordings or video recording of any person with knowledge of relevant facts.
"Reagor-Dykes received audited financial statements for 2015 and 2016, but not for 2017, from the same auditing firm for both years. I have signed personal financial statements with FCB, Vista, Aim Bank, First Bank and Trust (“FBT”), and Liberty Bank. Reagor-Dykes was floor plan financed by Ford Motor Credit, FBT, FCB, and Liberty Bank.
"I do not suspect that Reagor-Dykes employees working with Shane Smith assisted with his fraud, based upon his confession and the information I have at this time. However, I have come to learn that several employees had some information about Shane Smith’s actions. Tim Connor, a RDAG in-house accountant, related his concerns about the company’s financials with Steve Reinhart, our in-house legal counsel. Tim was seeing overdrawn accounts, and that triggered his belief that something was going on, so he went to Steve Reinhart, and Steve and Tim confronted Shane Smith. Shane Smith explained everything away to Mr. Conner and Mr. Reinhart’s satisfaction at the time. I did not learn about this meeting between Tim, Steve and Shane until after August 1, 2018.
"Bart Reagor, myself, Shane Smith and others own RD7 Investments, LLC (“RD7”). RD7 owns our downtown headquarters building. Shane Smith was supposed to, but did not, transfer the title of several classic cars over to RD7. Each member owns 1/9th of RD7. The other members are Joe Landin, Jarod Hoel, Eddie Ashburn, Randon Blacklock, David Thomas, and Darin Epley. The classic cars are titled in the name of a Reagor-Dykes entity. Reagor Auto Mall paid for the classic cars.
"Bart Reagor was publicized in the Lubbock Avalanche Journal as saying that in March 2017, $25 million was immediately due to be paid to Ford Motor Credit as a result of one of Ford Credit’s quarterly audits. I became aware of this problem immediately after Bart was notified by Shane of the amount due Ford. Bart exaggerated the amount due, because most of the deficit was paid through Reagor-Dykes simply catching up on the processing of inventory sales. However, Bart and I raised and invested approximately $11.5 million in additional capital in March-May, 2017. We then undertook a second phase in which we raised and injected in Reagor-Dykes over $10 million in additional capital from June 2017-March, 2018.
"I did not know about the July 2018 audit until Shane called me on July 26, 2018. I was surprised because I knew that Ford Credit had recently completed one of its quarterly audits on the RDAG Ford Stores less than a month before, at the end of June, 2018. My understanding was that Ford Credit found no problems with that audit and had been complimentary of RDAG’s performance in the audit. After the July 2018 audit, I later learned that Pepper Rickman, one of Shane Smith’s direct reports, was having an affair with one of the outside auditors for Ford Credit. I later learned that Pepper Rickman received advance notice of upcoming audits from the person she was having a relationship with at Ford Credit.
"I have not spoken to the FBI yet. I understand that Pepper Rickman, Mr. Connor, Mr. Fansler, Mr. Kyle Fields, and Lindsey Williams have spoken with the FBI.
Thursday July 26, 2018
"My wife and I were at our lake house about an hour from Lubbock at Lake Alan Henry. Shane Smith, RDAG’s chief financial officer, contacted me by telephone in the mid-afternoon to inform me that Ford Credit had undertaken a surprise audit of the RDAG dealerships to which Ford Credit provided financing (collectively, “the RDAG Ford Stores”) and that the audit was not going well. As CFO, Mr. Smith was responsible for preparing the financial information that Ford Credit required in connection with its periodic audits of the RDAG Ford Stores.
"Brad Burgess mentioned to me on a couple of occasions in 2017 that Shane Smith was allowing some Reagor-Dykes’ accounts to become overdrawn. I asked Shane Smith about it, and Shane Smith said they were overdrawn temporarily, but the negative balances were replenished by deposits made by 10 a.m. the following day. Mr. Burgess later told me that Shane was doing much better in regard to having negative balances in Reagor-Dykes accounts at FirstCapital. I took that to mean that Mr. Burgess considered his concern regarding overdrawn accounts to be resolved.
"Ford Credit’s June 28, 2018 quarterly audit of Reagor-Dykes proceeded without incident and Ford Credit complimented Reagor-Dykes regarding its cooperation with the audit. I did not participate in the audits. Shane Smith never mentioned whether audit processes were going good or bad. After each audit, I got an email from Ford Credit about the audits, from Gwen Schmucker. Gary Byrd was the only other person I talked to from Ford Motor Credit. I received no emails from Gary Byrd. I have seen Gary Byrd approximately four or five times. He would come out if a new program was coming out in terms of floor planning. He might have also come out for a hail claim. I knew Shane Smith and Byrd were very good friends. At this point, I have no evidence of embezzlement by Shane Smith from Reagor-Dykes, and so far, only minimal forensic accounting has been performed because the focus of the bankruptcy case of Reagor-Dykes has been to sell assets or recapitalize the dealerships for the benefit of creditors.
"In our phone call on Thursday, July 26, 2018, Mr. Smith indicated to me that the main problem was that many of the people on his staff were on vacation and unavailable to help with the audit. He did not indicate any other problems with the audit at that time. I told Mr. Smith that I would return to Lubbock the next morning.
Friday July 27, 2018
"I returned to Lubbock and went directly to RDAG’s downtown office. It was obvious that the audit was going poorly, but I still didn’t have any details from Shane Smith on the nature of the problems in the poor audit. Shane Smith was stressed. There was tension in the air. I am not aware if Gary Byrd was getting any kickbacks from Shane Smith, and I have not settled any claims with Shane Smith.
"Gary Byrd of Ford Credit was directing Ford Credit’s audit in RDAG’s offices. Mr. Byrd was working out of Shane Smith’s office. I spoke briefly to Mr. Byrd on Friday in greeting him but did not talk to him about the problems with the audit. Mr. Smith reiterated to me that the main problems with the audit were resulting from his inability to respond because of the number of his financial staff that were on vacation.
"After several hours at the office, I left and tended to my other business interests before returning home that evening, including going to Remax and then to a house or two that were being remodeled. I also went to Caprock Health plans, a company I have an ownership interest in.
Saturday July 28, 2018
"I again went to RDAG’s downtown office that morning. Mr. Byrd was still working out of Shane Smith’s office and I offered him the use of my RDAG office, which he accepted. He began working at the conference table in my office. At this time, Mr. Smith had still not advised me of the nature of the problems with the audit.
"While Mr. Byrd was working in my office, Mr. Byrd stated to me, “Y’all have some big problems.” Mr. Byrd did not go into specifics initially but indicated to me for the first time that RDAG was seriously out of trust with regard to sales of inventory that secured Ford Credit’s floorplan financing.
"Later that morning, Mr. Byrd told me that one of the “red flags” that alerted Ford Credit that there were problems at RDAG was that RDAG was “loading” (i.e., reporting) a disproportionately large number of sales of RDAG inventory in the week immediately preceding each Ford Credit quarterly audit of RDAG’s Ford Stores.
"When Mr. Byrd informed me of this, I was shocked. “How long has this (the reporting of disproportionately large inventory sales) going on?” I asked Mr. Byrd.
“For quite a while,” replied Byrd. “Why weren’t Bart (Reagor) and I notified about those sales?” I asked. Mr. Byrd looked at me with a blank expression on his face and did not immediately respond to my question. After a pause, he then replied: “Well, I did tell Shane.”
"I just shook my head and did not say anything in response to the futility of Mr. Byrd notifying the person at RDAG who was responsible for creating the red flags that alerted Ford Credit of problems at RDAG. The tone of his voice indicated he knew how long the problem was going on.
"Late that afternoon, I was in Mr. Smith’s office while he was the phone with Bart Reagor, who was returning to Lubbock from a vacation. Mr. Smith was explaining the bad audit to Mr. Reagor, but Mr. Smith still was not taking any responsibility the problems that were arising in the audit.
"At this time, Pepper Rickman, one of Mr. Smith’s assistants on the RDAG financial staff, came into the office.
"At this time, Pepper Rickman, one of Mr. Smith’s assistants on the RDAG financial staff, came into the office. “Pepper, what is going on?” I asked her while Mr. Smith was still on the phone.
"Ms. Rickman informed me for the first time that vehicles had been – as she put it – “doublefloored” – that is, the same vehicle had been pledged as collateral more than once in order to receive multiple advances under Ford Credit’s floor-plan financing facility.
"I was shocked. “Why would anybody do that?” I asked Pepper.
“I knew you didn’t know about this,” Pepper replied as she began to cry and become quite emotional.
"I left the room, as she was getting very upset and emotional.
"Mr. Reagor’s combative telephone call with Mr. Byrd occurred that evening after Mr. Reagor’s phone call with Mr. Smith. At the time of that call, Mr. Smith still had not disclosed to either Mr. Reagor or me the truth about the problems that were arising in Ford Credit’s audit of the RDAG Ford Stores.
"Mr. Byrd called me after his telephone call with Mr. Reagor. Mr. Byrd was upset and told me that Mr. Reagor had threatened him. I tried to calm Mr. Byrd down by assuring him that Mr. Reagor did not mean what he had said and that he was simply upset over the reports of an ongoing bad audit that he knew little about. Mr. Byrd replied: “No one threatens me.” Gary Byrd said he was going to do another audit on Monday. Bart Reagor told Mr. Byrd he would resist this additional audit. Mr. Reagor returned to Lubbock that night and he immediately came to RDAG’s office to meet with Mr. Smith and me. It was about 11:30 p.m.
"During that meeting, for the first time, Mr. Smith became extremely apologetic and said “I am sorry” multiple times to Mr. Reagor and me. However, he still did not elaborate to us on the nature of the problems in the audit. He then left for the night.
"After Mr. Smith left, Mr. Reagor and I met with Pepper Rickman and she reiterated what she had told me earlier - that RDAG had pledged vehicles multiple times to obtain multiple advances on the same vehicles under the Ford Credit floor-plan financing facility.
Sunday July 29, 2018
"I went to Reagor-Dykes offices and met with Bart, Shane Smith, and Tim Pridmore, who was one of Reagor-Dykes’ lawyers. Shane Smith was initially reluctant to admit that the amount of the default was as large as Ford Credit was alleging. But as the day wore on, Shane began to admit that there may be a bigger problem than he originally thought. But he was still not admitting that he had intentionally caused the default.
"I went to David Langston’s home on Sunday afternoon and alerted him that we needed to engage his firm’s services. I then met with Bart Reagor and Tim Pridmore that evening at Bart’s house so that Shane Smith was not around so that we could have a candid discussion about Shane’s possible involvement in the default to Ford Credit. Later, I worked all night on a proposed settlement agreement with Ford Credit. The proposal called for a large immediate cash payment (approximately $5 million) followed by substantial cash payments in the near term.
Monday July 30, 2018
"Tim Pridmore, RDAG’s lawyer, presented my settlement proposal to Ford Credit on Monday morning. Ford Credit rejected it and did not make a counter-offer.
"As a result of Ford Credit’s rejection of the settlement proposal, we met at David Langston’s office to start preparing the bankruptcy cases. Mr. Langston, Mr. Pridmore, Brad Odell (Mr. Langston’s partner), Mr. Reagor, and I were present at the meeting.
"Among numerous other topics, we discussed that it would not be necessary to place Reagor Auto Mall (“RAM”) into bankruptcy at that time because Ford Credit did not provide floor-plan financing for RAM. FirstCapital Bank (“FirstCapital”) and First State Bank & Trust (“First Bank”) provided most of the floor-plan financing for RAM.
"This was important because RAM was quite profitable, and we could use the profits from RAM to defray some of the administrative expenses of the bankruptcy cases of RDAG’s Ford Stores. We all agreed that it would be a good idea for Mr. Langston to call Brad Burgess, FirstCapital’s chief executive officer, to set up a meeting for the purpose of making sure that FirstCapital would continue to provide floor-plan financing for RAM.
"That afternoon, Mr. Smith and a group of about a dozen Reagor-Dykes employees met in the company’s 5th floor conference room. Mr. Reagor and I were also there. There were two meetings. The first included accounting staff, including Sheila Miller, Pepper Rickman, and others. The second group included Randon Blacklock, and Joe Landin and others. Mr. Smith emotionally admitted to the group that he was responsible for the problems that Ford Credit had uncovered in the audit of the RDAG Ford Stores and that neither Mr. Reagor nor I knew anything about the nature of the problems.
"Mr. Smith later signed and delivered an affidavit to one of RDAG’s lawyers, Dan Hurley, that stated the same thing that he disclosed during the meeting. I do not have a copy of the Mr. Smith’s affidavit, but I have read it at Mr. Hurley’s office.
Tuesday July 31, 2018
"During the day, I continued to meet with Mr. Langston and Mr. Pridmore regarding preparations for a possible bankruptcy case and continued settlement negotiations with Ford Credit. Mr. Langston called Brad Burgess and arranged a meeting for that evening at FirstCapital’s offices.
"During the day, Shane Smith admitted that the problems extended to other lenders of Reagor-Dykes and was not limited to the default with Ford Credit. I was stunned at the extent of the problems that Shane had created and covered up.
"That evening, Mr. Langston, Mr. Pridmore, and I met with FirstCapital representatives Brad Burgess, Tracy Bacon, and Mike Cannon (by telephone) at FirstCapital’s offices on Indiana Avenue. We disclosed that several of the RDAG dealerships were probably going to have to file bankruptcy in the next day or two because of Ford Credit’s termination of their floorplan financing. We emphasized that continuation of FirstCapital’s floor-plan financing to RAM was key to RDAG, because RAM’s continued operations would allow RDAG to retain key personnel and generate profits that could be used in the bankruptcy cases of RDAG’s Ford Stores. The FirstCapital representatives advised us that they would review the situation, discuss it internally, and would provide an answer to us at a meeting the next morning.
"This meeting began around 7:30 p.m. or 8:00 p.m. and lasted about 15 minutes. FCB asked about potential bankruptcy questions and how that might affect the floor plan. Tim Pridmore asked if he could represent Reagor-Dykes, because he also had represented FCB, and FCB said no. Discussion of that conflict issue took up a substantial portion of the meeting. Mr. Langston talked about bankruptcy and what it might look like going forward and how it might affect Reagor-Dykes and FCB. FCB was the only bank I notified of Reagor-Dykes’ financial problems before the bankruptcy filings.
"I have known Brad Burgess since 1995, when he worked at American State Bank. We are friends and took two trips together. We also hunted and fished together occasionally.
Wednesday August 1, 2018
"First thing that morning, I learned that Ford Credit had filed a lawsuit in federal district court against the RDAG dealerships, Mr. Reagor, and me while we were meeting with FirstCapital the previous evening. Ford Credit’s lawsuit sought recovery of over $40 million in alleged damages and a court order to obtain possession of Ford Credit’s collateral.
"Next, I returned to FirstCapital for our meeting that we had scheduled during the meeting the evening before. I believe the participants in the meeting were the same as the meeting the evening before, except Mr. Cannon did not participate. There may have been other FirstCapital representatives involved in this meeting.
"When I arrived, I learned that FirstCapital had frozen all of my personal bank accounts and some FirstCapital stock that I owned. I immediately hand-wrote and turned in my letter of resignation as an advisory board member of FirstCapital. On that day, FCB would not let me cash a check from an insurance company for a hail claim. The FirstCapital representatives advised me and the others that the bank had not yet decided whether it would provide floor-plan financing to RAM going forward. The meeting lasted about 30 minutes and we left.
"Mr. Langston’s firm filed the bankruptcy cases for each of RDAG’s Ford Stores. RDAG also formally terminated Mr. Smith’s employment. Mr. Reinhart, our in-house counsel, went in and fired him and gave him a letter written by Mr. Langston.
Thursday August 2, 2018
"On this day, I spent time in David Langston’s office working on the bankruptcy cases.
Friday August 3, 2018
"I met with Tim Conner, RDAG’s in-house accountant, and he explained to me for the first time that Mr. Smith had been rotating negative balances at various banks – sometimes dozens of times a month – to generate short term credit for RDAG. Mr. Conner advised me that Mr. Smith’s actions amounted to check-kiting, which is a concept that I did not understand prior to my meeting with Mr. Conner. Mr. Conner noted that in hindsight, he suspected some of Shane Smith’s problems, but Shane had persuaded Mr. Conner that such problems were typical business transactions between Reagor-Dykes and certain of its banks.
August 2-7, 2018
"In a series of three pledge agreements, I pledged an additional $7.5 million in collateral to FirstCapital, approximately $2.75 million in cash and $4.7 million in FirstCapital stock (260,302 shares). In return, FirstCapital agreed to provide an additional $2.1 million in floor-plan financing for RAM in addition to the approximate $9.5 million that it had advanced under its existing floorplan financing facility with RAM.
"On August 6, 2018, a letter from Mr. Massouh, an attorney for FCB was sent to Mr. Langston to set forth a proposed pledge on additional assets for Mr. Reagor and me in exchange for $2.1 million in additional floor plan financing. FCB stopped floor plan financing Reagor-Dykes on Monday, July 30. Mr. Reagor, myself, and our wives signed the pledge agreement. Bart also pledged some mutual funds to FCB.
"Brad Burgess and I were in David Langston’s office when Bart Reagor, me, and our wives all signed the pledge agreements.
"FirstCapital has not advanced any Reagor-Dykes entity any of the additional $2.1 million in floor-plan financing, despite our additional pledge of collateral. August 4, 2018.
"In a conference call between Mr. Langston, Ford Credit’s lawyers, my lawyer (Tom Kirkendall), and me a few days after the filing of the bankruptcy cases of the RDAG stores, I proposed that the RDAG Ford Stores retain an independent chief reorganization officer in the bankruptcy cases in effort to restore trust in the financial management and reporting of the RDAG Ford Stores. The Bankruptcy Court approved the appointment of Robert Schleizer of BlackBriar Advisors, LLC of Dallas as the as the chief reorganization of the RDAG Ford Stores on August 17, 2018.
"Every statement contained herein is within my personal knowledge and is true and correct to the best of my recollection.
"I declare under penalty of perjury that the foregoing is true and correct.
“Executed in Lubbock County, State of Texas, on the 27th day of February, 2019.”
Signed Franklin Andrew “Rick” Dykes, Declarant
Reagor seemed to back up Dykes’ statement with his own. When asked if he disagreed with any of Dkyes’ answers, Reagor said, “I can’t think of anything right offhand.”
When asked about the cause of the RDAG bankruptcies, Reagor asserted his Fifth-Amendment right not to respond “on the advice of counsel.”