Rick Dykes: Former Reagor-Dykes Auto Group CFO gave false financial info to Ford Credit
LUBBOCK, TX (KCBD) - Rick Dykes issued a response to the civil suit filed by Ford Motor Credit on Thursday, accusing his former CFO of providing false information about RDAG finances.
The suit was filed against three Reagor-Dykes entities, Rick Dykes and Bart Reagor.
In his response, Dykes alleges that now-former Chief Financial Officer Shane Smith admitted that he provided false financial information regarding the Reagor-Dykes dealerships to Ford Credit and to Bart Reagor and Rick Dykes.
The documents filed late Thursday say Ford Credit’s complaint is not as simple as a lawsuit to enforce guaranty agreements by Reagor-Dykes Auto Group. Dykes says the actions of Ford Credit have resulted in the bankruptcy of six of the Reagor-Dykes Auto Group dealerships, have caused the loss of hundreds of jobs and caused the destruction of substantial wealth.
Over the past 13 years, the Reagor-Dykes Auto Group steadily grew into one of the largest auto dealership operations in West Texas, generating over $780 million in revenue in 2017. As of July 28, 2018 – less than a month and a half ago – the Reagor-Dykes Auto Group employed over 700 persons in Lubbock and other West Texas communities.
The documents say Shane Smith was the Chief Financial Officer of Reagor-Dykes Auto Group for the past 11 years. During that time he “coordinated and managed all financing arrangements for Reagor-Dykes Auto Group, including the Ford Credit financing. Both Mr. Dykes (who had no day-to-day management position with Reagor-Dykes Auto Group) and Mr. Reagor (the chief executive officer of Reagor-Dykes Auto Group) relied on and trusted Mr. Smith to manage all material financial transactions of Reagor-Dykes Auto Group and to provide accurate information regarding those transactions.”
The documents also state Smith was an employee of Ford Credit, and over the past 11 years, “he maintained a close, professional and personal relationship with Gary Byrd, Jr., the Dallas Regional Manager of Ford Credit and the person primarily responsible for overseeing Ford Credit’s financing of the Reagor-Dykes Auto Group.”
In the documents, Dykes says Smith managed the on-site review that happened in late June 2018. In a letter, Ford Credit complimented Smith and Reagor-Dykes Auto Group for the smooth nature of the review and confirmed the company’s outstanding short-term indebtedness to Ford Credit was approximately $25 million.
But less than a month after the review, Ford Credit notified Smith that it was conducting an emergency on-site review of the company’s financial records. The documents say Dykes and Reagor didn’t know the emergency on-site review was because of irregularities that Ford Credit discovered in the financial information provided to Ford by Smith.
Dykes says in the documents that although Ford Credit knew Smith provided the financial information they were now questioning, Ford did not notify Dykes or Reagor of the reason for the emergency review.
When the emergency on-site review confirmed the irregularities, Smith told Dykes and Reagor that problems “had emerged.”
The next day, Ford Credit declared defaults under its agreement with Rick Dykes, Bart Reagor and the Reagor-Dykes dealerships, terminating any further financing to the Reagor-Dykes Auto Group and filed a civil action.
A day later, on Aug. 1, six Reagor-Dykes dealerships filed chapter 11 bankruptcy.
At the same time as the the Reagor-Dykes dealership chapter 11 cases were being commenced, Mr. Smith made a stunning disclosure. Mr. Smith admitted that he had provided false financial information regarding the Reagor-Dykes dealerships to Ford Credit and Messrs.
The documents say Dykes and Reagor terminated Smith at that point and informed the local United States Attorney’s Office of what Smith had admitted to them.
In the response to the civil lawsuit, Dykes states “Ford Credit’s actions improperly impaired the value of the security for the claims upon which it seeks recovery from Defendants. As a result, Defendants are entitled to setoff the amount of any such impairment against any of Ford Credit’s claims against them. Ford Credit has failed to mitigate the damages that it asserts against the Defendants.”
In a matter of days, Reagor-Dykes Auto Group has gone from being one of the largest auto dealership businesses in West Texas to desperately attempting to preserve going concern value for its creditors. The events leading to this civil action and the related chapter 11 cases have occurred with dizzying speed. As a result, there simply has not been adequate time for Defendants and their respective counsel to fully evaluate legitimate and reasonable questions regarding Ford Credit’s actions relating to the facts alleged in the Amended Complaint, particularly the nature of Mr. Byrd’s relationship with Mr. Smith and Mr. Byrd’s knowledge and actions during the period in which Mr. Smith was providing false financial information to Ford Credit and Messrs. Dykes and Reagor. Likewise, the CRO in the Reagor-Dykes dealerships chapter 11 cases has not had adequate time to confirm the amount of Ford Credit’s claims as alleged in the Amended Complaint, nor has the CRO had adequate time to arrange a sale or recaptialization of the Reagor-Dykes dealerships, the proceeds of which will substantially reduce the amount of Ford Credit’s claims in this civil action. Finally, given the immediate demands of the chapter 11 cases of the six Reagor-Dykes dealerships, the CRO has not had sufficient time even to begin investigating possible claims of the estates against third parties.
Copyright 2018 KCBD. All rights reserved.