LUBBOCK and AMARILLO, Texas — Court records that were filed Tuesday and made publicly available on Friday showed the FBI’s Amarillo office began an investigation into Reagor Dykes on February 1, 2018.
In August 2018 Reagor Dykes filed for bankruptcy one day after Ford Credit Motor Company went public with allegations of fraud and default.
On Friday, federal prosecutors released a statement saying former Reagor Dykes employees Sheila Evans Miller, 52, and Diana Herrera Urias, 53, pleaded guilty to conspiracy to commit bank fraud. They did so in front of a federal magistrate in Amarillo, according to prosecutors.
Miller’s plea deal calls for no more than five years in prison and restitution of roughly $23 million. Urias’ plea deal calls for the same terms.
Their former boss, Shane Smith, pleaded guilty on a conspiracy charge in June and will be sentenced at a later date to more than 20 years in prison. He agreed to be responsible for $50 million of restitution. Smith was the Chief Financial Officer.
Court records said Miller, Urias and Smith were running “an extensive check-kiting scheme.” Check kiting is a form of trading checks between bank accounts to make it look like the accounts have money when they do not.
Court records said the check kiting was done by Reagor Dykes at FirstCapital Bank, Aim Bank, FirstBank and Trust, IBC Bank, Liberty Capital Bank, Peoples Bank, Vista Bank, and Branch Banking & Trust Company.
“The FBI learned in its investigation that the check-kiting scheme grew over time and, just prior to the collapse on June 26, 2018, RDAG had an entire team at its headquarters designated to kite checks,” newly released court records said.
Employees under Smith’s supervision would every day make up random dollar figures on checks until they totaled the amount needed to cover each negative balance.
The court records quoted emails dating back to October 2, 2017 wherein Smith was communicating openly with other employees about how much money needed to be covered. They referred to these checks as “blue checks.”
The amount needed, for example on October 2, 2017, was $280,000 or more, according to court records.
By July 2018, the amount of daily checks was more than $5.4 million – although the court records said some of these were possibly legitimate. “Most were not,” court records said.
The newly released court records do not say why the case came to the FBI’s office in Amarillo rather than Lubbock where Reagor Dykes was based.
The newest court records also do not reveal why the fraud continued until Ford discovered a problem during an emergency audit in the last week of July 2018. Ford’s initial discovery, according to previous court records, was floor-plan fraud – not check kiting.
A floor-plan is a particular kind of loan to cover automobiles at a dealership. Ford said Reagor Dykes falsified sales records to put off or avoid paying money that was owed on the floor plan.
What’s left of Reagor Dykes remained in bankruptcy on Friday. A plan has been proposed to sell the locations and pay off some of the debts.