LUBBOCK, Texas — International Bank of Commerce sued Ford Motor Credit in Lubbock on Friday – making allegations related to floor plan financing fraud at the Reagor Dykes Auto Group.
IBC claims it lost a little less than $25.7 million dollars in part because of Ford.
The lawsuit said in July 2017, IBC made an agreement with D and R Acquisitions, L.L.C. (“Acquisitions”) which is part of the Reagor Dykes companies. The agreement was up to $10,000,000, as well as a refinancing up to $29,800,000, according to court records.
RDAG dealerships also had “floor plan financing” from Ford to “maintain sufficient vehicle inventory to sell,” according to court records. A floor plan is a type of loan made to auto dealerships.
Most of the RDAG entities, including the Ford-floored dealerships, were tenants of R and D Acquisitions – which was (and still is) one of the Reagor Dykes companies.
Acquisitions “in turn, made periodic payments when due to IBC” to pay back the IBC loan, according to court records.
But Ford Credit had an advantage over other lenders according to the lawsuit. Ford “enjoyed a position of knowledge of, and control over, the daily operations of the Ford-Floored Dealerships,” court records stated.
Because of that extra advantage, the lawsuit said, Ford had a “duty of care” which Ford violated.
Here’s how, according to the lawsuit. Ford had the right to audit Reagor Dykes and after a number of surprise audits consistently found RDAG had “clean audits.”
But they were not clean and not surprise audits, according to IBC’s lawsuit.
In June 2019, RDAG’s CFO, Shane Smith, pleaded guilty to one count of conspiracy to commit wire fraud “in connection with a fraudulent scheme to wrongfully obtain funds under the Floor Plan Financing.”
“The Stipulated Facts [in the Smith criminal case] reveal … RDAG would learn in advance the exact date when Ford Credit’s audits were going to take place, which notice would permit RDAG dealership controllers/office managers, with the help of other staff, to prepare for such audits by, inter alia, creating false paperwork.”
IBC’s lawsuit said Ford “employees or other agents” told Smith in advance when the audits were coming. Ford never told the officers, directors or owners about the fraud until it was too late, according to the lawsuit.
The results were “catastrophic for RDAG and its creditors, including IBC” according to the lawsuit.
Ford’s conduct was the “proximate cause” of IBC’s loss, according to the lawsuit.
IBC said in the lawsuit that Ford’s behavior was negligent and “tortuous interference.”
Ford has not yet filed its side of the story in Lubbock federal court.