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Opening statements begin in Bart Reagor’s bank fraud trial

Published: Oct. 12, 2021 at 2:05 PM CDT|Updated: Oct. 12, 2021 at 6:35 PM CDT
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AMARILLO, Texas (KCBD) - Jury selection began Monday morning for the former co-owner of the bankrupt Reagor-Dykes Auto Group. On Tuesday morning, at 8:19 a.m., opening statements began after the jury was called to the courtroom and was given instructions by the District Judge.

Bart Reagor is on trial for charges including bank fraud. Specifically, illegally keeping part of a business loan for himself. Federal prosecutors claim Reagor violated the loan agreement when he moved nearly $2 million out of a $10 million note into his personal account.

Reagor’s attorneys claim Reagor and co-owner Rick Dykes Dykes were using the loan to pay themselves back for their investments into the company.

U.S. District Judge Matthew J. Kacsmaryk said in court on Monday he expects the trial to go through the end of the week. The hope is for the jury to have a verdict at the end of the week. Judge Kacsmaryk questioned more than 80 potential jurors Monday.

Opening Statements from the Prosecution

The prosecution told the jury the case was about planning and a desire to keep actions secret; a businessman needed money to run his business but he took money for himself. “You will learn that Bart Reagor is that businessman,” said the prosecution.

The prosecution alleges Reagor took $1.7 million for himself and lied about his intention to take it.

The government showed the jury an email from May of 2017 before the loan was obtained. The government says it was from Bart Reagor to Shane Smith and Rick Dykes on how to manage capital. Portions of the email were in all capital letters saying that it’s “not anyone’s business,” “nobody’s,” “no bankers or anyone else,” and “our business game on.”

The prosecution reminded the jury that only Bart Reagor is on trial.

According to the government, in the Spring of 2017, IBC met with RDAG and the defendant said RDAG needed the loan because of the growth of the company and the desire to go public. IBC was not told it would be taken for personal matters.

As a loan memorandum and agreement was drafted, the prosecution says at no time was it agreed the defendant would take part of the loan for personal use or distribution.

The jury was told it would hear from Shane Smith, his fraudulent activity, and how he complied with the defendant’s orders. The jurors would also hear from Steven Reinhart, the former RDAG Legal Compliance Director, who pleaded guilty in February 2021 to the misprision of a felony. Because of his job title, he understood the loan to be for working capital and did not know until this criminal case Bart Reagor would take part for himself.

The prosecution accuses Reagor of actively concealing and omitting his intent for the loan and IBC gave the loan based on false statements.

Opening Statements from the Defense

The defense in its opening statements began by saying “there was no crime... period, full stop.” Reagor always believed he could use the funds as he did and he placed his trust in Shane Smith.

The defense gave the jury background into Reagor’s life and business history. They pointed out Reagor uses colorful language and is “Type A to the extreme.”

The defense disputed the loan was the biggest loss for IBC, and who caused the loss was not Bart Reagor.

Reagor was characterized as “no financial genius” but was good and selling cars.

The defense told the courtroom in 2018, RDAG was on pace for its biggest year and something “rotten” was Shane Smith.

In anticipation of evidence presented by the prosecution, the defense told the jury it would probably be offended by language Reagor used in meetings and was intending it for motivation.

Reagor believed and trusted in his employees and executives, the defense exclaimed. They continued by saying he invested his own funds in 2017 after an audit.

He relied on Shane Smith who the defense said was “Judas” and betrayed Reagor’s trust.

Reagor believes the disclosures and loan application was accurate and allowed him to take distributions. Shane Smith knew of plans to take personal distributions and did not advise Reagor he couldn’t do that.

They maintain it was a reimbursement for personal money invested in the company and Rick Dykes took the same loan proceeds.

The email presented by the prosecution, the defense argues, is not unusual and Reagor wanted privacy for business reasons and not criminal.

The defense said Shane Smith is the liar and is testifying in hopes of a reduced sentence.

The defense says “working capital” is not defined in the agreement.

Witnesses

Multiple witnesses have been called to the stand: William Schonacher, President and CEO of IBC; Thomas Hutchison, attorney at GableGotwals, who helped prepare the loan agreement; and William Woodring, the Vice President for commercial lending at IBC.

Shane Smith took the stand Tuesday afternoon. The prosecution questioned him first, asking about his criminal charges.

Former RDAG CFO Shane Smith told the court he still loves Bart Reagor and he is like a brother...
Former RDAG CFO Shane Smith told the court he still loves Bart Reagor and he is like a brother to him.(KCBD NewsChannel 11)

Smith pleaded guilty in 2019 to one count of wire fraud. He faces up to 20 years in prison, probation, and pay restitution of more than $50 million. He was the first person to receive a criminal conviction since RDAG filed for bankruptcy and was sued by Ford Motor Credit in August of 2018. After many delays in his sentencing, it has been scheduled for December 21, 2021, at the Amarillo federal courthouse. He and Reinhart will be the last two to be sentenced of the 15 former employees convicted.

The prosecution explained to the court Smith’s charges are not part of the Bart Reagor case, but the defense would be able to question him on those charges.

Smith told the court Bart told him in an email to distribute the money to Reagor and Dykes as a form of compensation for using their own money to sustain RDAG and other investments because they didn’t have enough working capital. A point of contention was what “working capital” means.

Smith also told the court he still loves Bart Reagor and he is like a brother to him.

The defense is now cross-examining Smith.

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