Date: January 20, 2022 Contact: newsroom@ci.irs.gov Reagor Dykes Auto Group's chief financial officer, Shane Andrew Smith, was sentenced today to seven years in federal prison for his role in a $50 million wire fraud conspiracy, announced U.S. Attorney for the Northern District of Texas Chad E. Meacham. Mr. Smith pleaded guilty in June 2019 and was sentenced Thursday by U.S. District Judge Matthew J. Kacsmaryk, who also ordered him to pay $59,590,198.82 in restitution. The defendant will have to report to prison by 2 p.m. on Monday, March 28. "By the time Mr. Smith was charged in 2019, Reagor Dykes was a cesspool of criminal schemes, from check kiting to dummy flooring," said U.S. Attorney Chad Meacham. "We are proud of the work we've done to hold this defendant – and more than a dozen of his coworkers – accountable for their egregious behavior." "As a corporate executive, Mr. Smith meticulously conspired to defraud a lending institution, and the resulting loss to the industry was significant," said Matthew DeSarno, Special Agent in Charge of the FBI's Dallas Division. "One of the FBI's goals is to investigate fraud and protect public and investor confidence in our economy, and we will continue that endeavor with our partners." The defendant was given credit for testifying in the trial of his former boss, Reagor Dykes owner Bart Reagor, who was convicted in October of making false statements to an FDIC-insured bank. At that trial, Mr. Smith testified that Mr. Reagor and his partner, Rick Dykes, drew roughly $25 million out of the business for personal use, including roughly $3.3 million from a working capital bank loan intended for business use. Prior to testifying against his Mr. Reagor, Mr. Smith admitted in plea papers to defrauding the auto group's main lender, Ford Motor Credit Company (FMCC), and concealing the fraud by cross-depositing checks across several banks, a ploy known as check-kiting. In order to cover ballooning expenses, Mr. Smith admitted, he instructed Reagor Dykes accountants to engage in a practice they dubbed "dummy flooring." At his direction, accounting staff dug through records for vehicle identification numbers (VIN) of cars Reagor Dykes had already sold, then submitted new loan applications to FMCC using the old VINs – falsely indicating that the company was seeking a loan in order to repurchase the vehicle for resale. Instead of re-buying the car, however, Reagor Dykes used the ensuing loan to cover other expenses. "Whatever it takes, we need to floor anything and everything we can even think of to cover payoffs each day," Mr. Smith wrote in an email quoted in his factual resume. To disguise the shortfall from the dummy flooring scheme, Mr. Smith and his employees engaged in check-kiting, artificially inflating the company's bank account balances by cross-depositing insufficient checks. Vendor and payroll checks that should have bounced were instead cleared during banks' float time, the period between the deposit in the recipient account and the deduction from the payer's account. "The deposits we do each do [sic] will most likely cover the checks we write each other," Mr. Smith wrote in an email. Reagor Dykes also routinely violated a clause in its loan agreements that required them to repay FMCC within seven days of selling the vehicle for which the loan was issued, Mr. Smith admitted. Rather than cop to the delay, Reagor Dykes accountants created false paperwork, which they referred to as "dummy shucks," in order to make it appear that the car had been sold more recently. Mr. Smith is the fifteenth RDAG employee sentenced to more than 37 years combined in federal prison for the dummy flooring and check kiting scheme. Reagor Dykes employees previously sentenced include: Diana Urias, an office manager in Reagor Dykes' used car mall in Levelland, pleaded guilty to conspiracy to commit bank fraud and was sentenced to 2 years in federal prison and ordered to pay $19,335,901.10 in restitution, joint and severally. Sheila Miller, an RDAG group controller, pleaded guilty to conspiracy to commit bank fraud and was sentenced to 27 months in federal prison and ordered to pay $19,335,901.10 in restitution, joint and severally. Paige Johnston, an office manager in Reagor Dykes' Chevrolet store in Floydada, pleaded guilty to conspiracy to commit wire fraud and was to 27 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Lindsay Williams, and RDAG group accounting manager, pleaded guilty to conspiracy to commit bank fraud and was sentenced to 27 months in federal prison and ordered to pay $19,335,901.10 in restitution, joint and severally. Sherri Wood, an office manager at Reagor Dykes' Ford store in Plainview, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 30 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Pepper Rickman, an accounting controller at Reagor Dykes' Toyota store in Plainview, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 4 years in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Brad Fansler, an RDAG group administrative director, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 42 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Ashley Dunn, executive assistant to the CEO, pleaded guilty to conspiracy to commit bank fraud and was sentenced to 30 months in federal prison and ordered to pay $19,335,901.10 in restitution, joint and severally. Whitney Maldonado, an office manager at Reagor Dykes' Mitsubishi store in Lubbock, pleaded guilty to conspiracy to commit wire fraud was sentenced on 27 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Elaina Cabral, an office manager at Reagor Dykes' Toyota store in Plainview, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 27 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Mistry Canady, an office manager at Reagor Dykes' Ford store in Lamesa, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 2 years in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Wesley Neel, RDAG Safety & Compliance Manager, pleaded guilty to conspiracy to commit wire fraud and was sentenced to 30 months in federal prison and ordered to pay $40,254,297.72 in restitution, joint and severally. Andrea Kate Phillips, an accounting associate and office manager at Reagor Dykes Ford Store in Plainview, pleaded guilty to misprison of a felony and was sentenced to four years' probation and ordered to pay $40,254,297.72 in restitution, jointly and severally. Steven Reinhart, RDAG Legal Compliance Director, pleaded guilty in February 2021 to misprision of a felony and was sentenced to 6 months in federal prison and ordered to pay $40,254,297.72, jointly and severally. Bart Reagor is still awaiting sentencing. The Internal Revenue Service - Criminal Investigation Division and Federal Bureau of Investigation conducted the investigation. Magistrate Judge Lee Ann Reno presided over the plea. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Amy Burch are prosecuting the case.
