On Tuesday, First Bank & Trust sued Reagor Dykes, Bart Reagor, Rick Dykes, Shane Smith, FirstCapital Bank, Sheila Miller, Brad Burgess, and Kenneth Burgess for check kiting. First Bank also accuses Reagor Dykes of defaulting on loans.
Vista Bank was the first to make allegations of check kiting. FirstCapital was second. First Bank was the third.
Check kiting is illegal. It’s a way of making a checking account look like it has money when really it doesn’t.
First Bank along with Vista accuse Rick Dykes of participating with FirstCapital in the check kiting scheme. FirstCapital freely admits there was check kiting but claimed Tuesday in a different lawsuit that it was the victim, not the perpetrator.
First Bank’s lawsuit filed late Tuesday said Reagor Dykes owes more $1.5 million in bounced checks. First Bank also said RD owes $967,000 on a loan made to its dealership in Levelland. First Bank said RD owes roughly $2.1 million in a loan made to Reagor Dykes Imports.
First Bank made specific allegations against Rick Dykes and FirstCapital.
“Until very recently, Dykes was a member of FirstCapital’s Board of Advisors and previously served as a Director on FirstCapital’s Board of Directors,” the lawsuit said. It also said Dykes owns 375,000 shares of FirstCapital.
Just like Vista’s lawsuit in August, First Bank accuses Dykes of tipping off FirstCapital before a list of RD companies filed for bankruptcy. Also like Vista, First Bank said FirstCapital used that information to “profit” from the check kiting scheme.
“FirstCapital used Dykes’ inside information, at the direction of the Burgess Defendants, to unload over $1.5 million in losses and damages to First Bank, thereby knowingly profiting from the scheme,” First Bank said in the lawsuit.
FirstCapital, while defending itself against Vista, said it broke no laws and followed the process laid out in the Federal Reserve System for handling checks. First Bank disagreed.
“FirstCapital, however, completely deviated from this process,” First Bank said.
But that’s not all. First Bank said Reagor Dykes “double floored” a list of vehicles. When banks loan money to car dealerships specifically for vehicles, it’s referred to as a “floor plan.” To double-floor a vehicle is to borrow money on the same vehicle twice. It’s not allowed.
Ford Motor Credit Company also previously accused RD of double flooring, and Ford went so far as to accuse RD of “one of the largest floor-plan-financing frauds in the history of the United States.”
As part of the lawsuit, First Bank wants to confiscate more than $1.5 million worth of vehicles. Some RD companies filed for bankruptcy but not all of them. It’s not immediately clear if the vehicles would be exempt from seizure because of bankruptcy protections.
EverythingLubbock.com reached out Bart Reagor. If he accepts the invitation, then this story will be updated.
Tom Kirkendall, the attorney for Rick Dykes, said an answer will be filed in court.
Also on behalf of Dykes, Kirkendall said, “He will completely deny that he was involved in any check kiting scheme.”
When offered a chance to comment, Shane Smith said, “I don’t believe so.”
CLICK HERE to read the lawsuit by First Bank.
FirstCapital issued this statement Wednesday afternoon:
“This lawsuit is fundamentally flawed and without merit. Any allegation that FirstCapital Bank or its officers participated in a check kiting or other fraudulent scheme is patently untrue and will be proven as such in a court of law. At every step, we have acted in accordance with good banking practices and in the best interest of our shareholders, customers, and depositors. We will continue to do so.”
In addition to the legal wrangling involving First Bank & Trust, FirstCapital Bank issued a statement Wednesday afternoon in response to Vista Bank’s allegations.
Attorneys for Ken and Brad Burgess, Chairman and Chief Executive Officer of FirstCapital Bank of Texas, respectively, today asked the court to toss Vista Bank’s lawsuit brought related to the alleged check-kiting fraud perpetrated by Reagor-Dykes auto dealership.
This motion follows a similar motion filed yesterday to dismiss claims against FirstCapital Bank of Texas in the same lawsuit.
Today’s motion asserts that Vista Bank, in a rush to the courthouse, filed its lawsuit against Ken and Brad Burgess based on speculation and without sufficient allegations of wrongdoing.
“We trust that the court will see these allegations for what they are—frivolous allegations by Vista Bank without the necessary support for its claims,” said Sanford Brown, attorney for Ken and Brad Burgess. “This rushed and baseless lawsuit is causing personal and professional harm to Ken and Brad, who did nothing wrong.”
The motion calls for the Court to throw out Vista Bank’s lawsuit as “woefully deficient under applicable pleading standards,” and says it cannot withstand the base level of scrutiny required by Federal Rules of Civil Procedure.
The motion also calls Vista Bank’s attempt to question Ken Burgess’ responsibilities as a banking industry leader “a publicity stunt designed to detract from the fact that the lawsuit’s claims are baseless.”
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