‘Vista Bank aided and abetted’ RDAG CFO’s fraud

Vista Bank CEO had luxury car ‘side deal’ with RDAG
Updated: Jan. 29, 2020 at 5:38 PM CST
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LUBBOCK, Texas (KCBD) - Court documents filed Wednesday by the court appointed Special Counsel to Debtors describe a ‘side deal’ between RDAG CFO Shane Smith and Vista Bank CEO John Steinmetz that provided Steinmetz with steeply discounted leases for luxury automobiles. While this was happening, court documents say Vista Bank was aware of RDAG check-kiting schemes.

“The two worked together, each benefiting from the other’s misconduct,” according to the documents filed by Andrew Seger, the court appointed special council. "Vista Bank President, John D. Steinmetz, personally enriched himself through kick-backs (in the form of roughly $150,000 in subsidized luxury car leases for his personal use, funded by Debtors), while at the same time he and Vista Bank at large benefited through the massive bank fees it collected and the prestige of having a ‘top shelf’ customer while pursuing a growth-at-any-cost strategy. These benefits to Vista Bank and its owners and executives proved ample consideration for merely enabling CFO Smith’s continued fraud.”

“Vista knew the nature and the extent of Shane’s fraudulent schemes. Far from stopping them, they took active measures to help Smith carry out his schemes,” according to the documents.

The following are excerpts from the court documents released today:

  • Dealerships deposited a staggering and inexplicable amount of money into three Vista checking accounts. By comparison with past annual gross sales, this amount is approximately 5.8 times larger than the three dealerships gross sales for 2016 and 5.6 times larger than the gross sales for 2017.
  • Vista Bank had advanced knowledge of when Ford Motor Credit Company audits were going to occur. On the basis of the disparity of reported sales and actual EFT Payments to FMCC, Vista also very likely knew that Smith was routinely causing vehicles to be sold out of trust. Vista and Toby Cecil knowingly assisted Shane Smith with his financial witchery by helping him conjure the monies necessary to repay FMCC that the dealerships did have and through adept used of both the check clearing process and the apparently unlimited revolving line of credit that Vista called a demand deposit account.
  • Aggregate size of deposits were significantly larger than Vista Bank itself.
  • Despite the deposits the accounts were habitually overdrawn.
  • The overdrafts were effectively short-term loans repaid with intercompany transfers. Every day, Lmitsu, RDT and RDAC would make large intercompany deposits to endeavor to cure these overdrafts so that a given account would finish the day with a positive balance.
  • ...Smith commented to Cecil that he had “[l]ots of plates spinning.” Cecil responded to Smith’s email by noting: “I don’t know how you keep them [the plates] all spinning :)” (Note: Toby Cecil is the Vista Bank Lubbock Market President.
  • Vista Bank’s computer system told Vista what Shane Smith was doing.
  • Shane Smith told Vista Bank Officers what he was doing.
  • Cecil and Luman would have tellers waiting after hours for a dealership employee to arrive with large intercompany checks to be deposited. Cecil and Luman would instruct the tellers precisely how to apply the memo-posted credits and to which accounts. Towards the end of the scheme there would multiple millions of dollars deposited via late drawer memo post and on weekly if not daily basis.
  • ...account balances appear to others as larger than they actually were.
  • #Respectthehustle: Steinmetz Seeks Help of Investment Bankers To Help Dealerships Plug The Hole. As was his practice, on or about May 7, 2018, Shane Smith sent out a quarterly business review for the first quarter of 2018 to all of the Debtor dealerships’ bankers including John Steinmetz and Toby Cecil. However, and notwithstanding these obvious signs of impending financial doom, Steinmetz responded to Smith’s update via email dated May 8, 2018 and as follows: “Incredible!! Congrats to the Greatest Auto Group in the World. #respectthehustle” It goes without saying that Steinmetz was certainly “respecting the hustle” when he received a series of luxury car leases that were heavily subsidized by Smith through direct cash payments from the dealerships.

The document describes how, “Steinmetz, for himself and his family, was able to lease the following vehicles for just 36 percent of the amount he was otherwise obligated to pay: (i) 2015 Cadillac Escalade; (ii) 2015 Chevrolet Tahoe LTZ; (iii) 2016 BMW 750i Xdrive; (iv) 2016 Infinity XQ80, and; (v) a 2016 Toyota Land Cruiser. In that regard, and from December 15, 2014, through the filing of the bankruptcy petition, the Debtors made some $146,410.02 in direct lease payments to a leasing company and for the benefit of John Steinmetz and against a liability of $228,150.”

Over the years, the vehicles increased in quality, the court documents state. “In the months which preceded the bankruptcy, Smith and Steinmetz were in active discussions regarding obtaining an Aston Martin (of James Bond fame) for Mr. Steinmetz’s use. The bankruptcy prevented the consummation of this transaction, but presumably it would have been under similar terms as the five other auto leases.”

The documents note several instances in which new leases were signed at or around the same time that large unsecured notes were approved by the bank.

“In particular it should be noted that Steinmetz obtained additional leases over the summer of 2017. The timing of the 2017 leases were especially suspect, as they occurred in close proximity to the time that Debtors Reagor Dykes Imports, L.P. (“Lmitsu”), Reagor Dykes Plainview, LP (“RDT”) and Reagor Dykes Auto Company, LP (“RDAC”) received a $3 million dollar unsecured loan from Vista Bank and at a time that its checking accounts were regularly overdrawn by hundreds of thousands of dollars. Suffice it to say, the Leases for the 2016 BMW 750i Xdrive and 2016 Toyota Land Cruiser were executed just one month before the $3 million dollar unsecured loan was approved. The Infinity QX80 was leased by Steinmetz one month after the $3 million dollar unsecured loan was approved.”

One section of the documents filed today says, “The rise of Vista Bank President, John D. Steinmetz, from his days as a junior banker with Plains Capital Bank, to Lubbock County Republican Party Chair, then as President of Vista Bank and ultimately to successive appointments as a member of the Board of Regents of the Texas Tech University System has been well chronicled. For a man forty-one years that is quite a resume. Indeed it is quite a resume for someone of any age. As was the case with Shane Smith, on the surface, Steinmetz bares all the trappings of an American success story-- right down to the shiny luxury car. But like Shane Smith, all was not as it seemed to be.”

Court documents also describe years of emails between RDAG CFO Shane Smith and bank officers regarding overdrafts and unconventional hours kept so that after-hours bank deposits could be made by RDAG suggesting a causal relationship between the favors done for Steinmetz and the bank’s habitual tolerance of RDAG overdrafts.

“And this is precisely why the transactions between Smith and Steinmetz are so important- they provide a lens through which view Vista’s subsequent conduct. And Vista’s conduct, when viewed from an objective perspective, simply cannot be explained except by the conclusion that it was a participant in Smith’s schemes.

The plaintiffs and cross claimants seek to disallow the entirety of Vista Bank’s liens, claims and causes of action in the bankruptcy case.

On Wednesday afternoon, Vista Bank officials released the following statement:

After over a year and a half in bankruptcy, three failed attempts to reorganize, and racking up over $5 million in unpaid legal fees for the Chief Restructuring Officer and his lawyers, today they filed a complaint in a last ditch attempt to shake down Vista Bank for money before their upcoming February 12, 2020 bankruptcy hearing where they face potential forced liquidation.

As conclusively established by the twelve (12) criminal felony guilty pleas (with more surely to come) in addition to the overwhelming record of the pending criminal, bankruptcy and litigation proceedings involving the Debtors:

  • the Debtors and their insiders perpetrated the frauds causing the Debtors’ insolvency and bankruptcy resulting in harm to Vista Bank as well as the Debtors’ other third-party creditors; and
  • as detailed in its filed proofs of claim, Vista Bank suffered at least $13 million in damages as a direct result of this confessed fraud.
  • Mr. Steinmetz paid over $120,000 in lease/buyout payments for the noted vehicles. Even if that was a ‘good deal,’ West Texans have too much common sense to believe Mr. Steinmetz would have sold his bank out to the tune of millions of dollars in order to save a few thousand on a couple of cars.
  • Not a single bank or banker has been implicated in any of the RDAG guilty pleas.

For the CRO’s legal counsel to file this complaint is akin to a thief robbing someone, getting caught, pleading guilty to the felony, and then suing the victim to pay for it all.

Vista Bank refuses to be extorted by the criminals who ran Reagor-Dykes. For that reason, last month Vista Bank sued RDAG to preemptively defeat its frivolous claims. Attached is a copy of Vista Bank’s lawsuit. Vista Bank looks forward to disproving all of Debtors’ claims and obtaining justice in court.

Andrew Seger Motion for Leave to Amend Complaint Exhibit b by amber stegall on Scribd

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