LUBBOCK, TX (KCBD) - Attorneys for Ken and Brad Burgess, Chairman and Chief Executive Officer of FirstCapital Bank of Texas have asked the court to toss Vista Bank’s lawsuit brought related to the alleged check-kiting fraud perpetrated by Reagor-Dykes auto dealership, according to officials with FirstCapital Bank.
This motion follows a similar motion filed Tuesday to dismiss claims against FirstCapital Bank of Texas in the same lawsuit.
Today’s motion states 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.”
Vista Bank is suing FirstCapital Bank, Brad Burgess and Kenneth Burgess Jr. to recover more than $6 million in damages. It claims FirstCapital inflicted the damages on Vista through inside information they obtained through their close relationship with Rick Dykes. Dykes is an insider of both Reagor-Dykes and FirstCapital. The documents say the inside information allowed FirstCapital to benefit from the Reagor-Dykes' check kiting scheme at Vista’s expense.
The documents filed in mid August say Rick Dykes, a co-owner of Reagor-Dykes Auto Group, served as a member of FirstCapital’s Board of Advisors until just a few days ago. Dykes also previously held a seat as a Director on FirstCapital’s Board of Directors. The court documents say, “In fact, FirstCapital transitioned Dykes from a Director to its Board of Advisors 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 "perpetrated a multi-million dollar check kiting scheme and conspired with FirstCapital to impose the resulting losses, totaling over $6,000,000."
The lawsuit claims Reagor-Dykes wrote multi-million dollar checks from FirstCapital accounts, deposited these checks into Vista accounts and then issued payments from the Vista accounts to cover obligations or make deposits to their accounts at another financial institution.
Vista says the scheme was revealed when Reagor-Dykes filed bankruptcy, cutting the cycle and revealing the fraud. Vista then immediately froze its Reagor-Dykes accounts.
The court documents say, "Vista would return the items Reagor-Dykes wrote on its Vista accounts and initiate returns on the FirstCapital checks Reagor-Dykes deposited to prevent unauthorized credit advances. And that's exactly what happened—except that FirstCapital found a way to use its insider access to Dykes to channel over $6,000,000 in losses and damages to Vista, allowing FirstCapital to knowingly profit from the scheme. "
Vista says "prior to Dykes providing FirstCapital key insider information on the Reagor-Dykes fraud, bankruptcy planning and related insolvency, FirstCapital timely cleared and paid Reagor-Dykes items deposited with Vista during normal hours, in normal volume, with no chargebacks or anomalies. On July 31, 2018, FirstCapital took Dykes' information and systematically targeted Vista with a flood of irregular returned and unpaid Reagor-Dykes items."
The court documents say, "Acting on the damning inside information FirstCapital received from Dykes on July 31st, FirstCapital blew up the standard process and "worked all night" in a greedy attempt to ram return items onto Vista."
"In essence, FirstCapital weaponized the check clearance process and systematically foisted over $6,000,000 in damages onto Vista to FirstCapital's and the Burgess Brother Defendants' benefit."
Vista is demanding a trial by jury on all issues and also asking the court to set a case for trial.