LUBBOCK, Texas (KCBD) - One day after former Chief Financial Officer for the Reagor-Dykes Auto Group, Shane Smith, pleaded guilty to one count of conspiracy to commit wire fraud by getting money through false documents, the court has scheduled the sentencing for October 1 at 9 a.m.
Smith voluntarily surrendered Tuesday, June 18, but was released from police custody on the condition that he surrender his passport, according to court documents. He was released on a $20,000 bond.
With a guilty plea, Smith could now be imprisoned for up to 20 years, face probation and could pay a fine up to $250,000 along with restitution.
Court documents allege Smith and co-conspirators employed by RDAG transmitted fraudulent wire information to Ford Motor Credit Company, which cost the company an estimated $27 million.
All parties involved are said to have been in a check-kiting scheme to carry out a floor plan scheme that defrauded Ford Motor. Smith began his CFO career with RDAG in 2008 and in 2014 began working with Ford Motor Credit as a floor plan lender.
Court records state Smith provided false information to Ford that helped RDAG get additional financing and delayed other payments to the company.
Smith is said to have started with a fake floor plan scheme in which the auto group’s staff would get files from old car deals and submit the Vehicle Identification Numbers as though the company was buying them again.
During an investigation by the FBI, six automobiles were found in which vehicles were “floored” more than once.
“FBI agents learned that the registration information as of March 27, 2019, showed that these same six vehicles were all bought and sold by the Amarillo dealership months before RDAG (began) flooring them with FMCC in July 2018,” court documents state.
Registration information shows those vehicles were bought between February 2017 and April 2018 and the previous owners was Reagor-Dykes Amarillo.
With the fake floor plans in place, Smith was also able to start a check-kiting system that allowed the company to artificially inflate its bank account balance, according to court documents.
“Once bank accounts are artificially inflated, checks that would normally be returned for nonsufficient funds are, in fact, paid or honored by the issuing banks,” court documents state.
U.S. Attorneys believe this process continued through July 27, which was close to when Ford began a surprise audit on the company’s finances, according to court documents. After Ford reviewed 150 vehicle sales it found 147 of them did not match sale and/or registration dates.
There is no known date for when this fake floor plan and check-kiting system began.
Before a final audit that led up to the company filing for bankruptcy, RDAG would get word of the surprise audits, according to court documents. When managers and other employees found out about the audits they would prepare the false floor plans by creating false paperwork on vehicles that had extended floor plan loans.
“Specifically, RDAG accounting staff would falsify sale dates,” court records state.
Then office managers would provide the false paperwork to auditors, according to court documents. Staffers would submit false information by interstate wire communication to Ford to get floor plan funding, then it was applied to large payoffs to Ford credit after each audit.
After the payoffs were made, RDAG would then pay off the faked floor plans with money made from normal operations, according to court documents.
Smith and his co-conspirators are said to have electronically transmitted through interstate wire communication the fake flooring request from locations in Texas to Michigan, which is a violation of U.S. conspiracy code.
“In doing so, the subsequent revenue was not available, within the agreed seven-day payoff window, to pay off the floor plan advances associated with the actual vehicles that RDAG sold to generate that subsequent revenue,” court documents state.