LUBBOCK, Texas — A statement from federal prosecutors on Friday said Sheila Evans Miller, 52, and Diana Herrera Urias, 53, pleaded guilty to conspiracy to commit bank fraud.
The case stems from the collapse of the Lubbock-based Reagor Dykes companies. Reagor Dykes filed for bankruptcy in August 2018 amid allegations of fraud and default.
Ford Motor Credit Company accused Reagor Dykes of falsifying paperwork on automobile sales to make it look like the dealership did not owe money.
In addition, three Lubbock-area banks accused Reagor Dykes of check kiting.
Kiting is a particular form of bank fraud in which checks are written back and forth between bank accounts to make it look like an account has value when it actually does not.
Prosecutors described the case against Miller and Urias as a “$23 million ‘check kiting’ scheme.”
Former Chief Financial Officer Shane Smith pleaded guilty in June. He admitted to conspiracy to commit wire fraud. He will be sentenced in October to as much as 20 years in prison.
The statement from prosecutors on Friday said, “In fact, the company had an entire team at its headquarters specifically designated to kite checks, both women admitted.”
The three criminal cases were all filed in Amarillo where some but not all of the fraudulent transactions took place according to previous court records.
The following is a press release from the office of U.S. Attorney:
AMARILLO, Texas (PRESS RELEASE) – Two Reagor Dykes Auto Group employees pleaded guilty today [Friday] for their role a $23 million “check kiting” scheme, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Sheila Evans Miller, 52, and Diana Herrera Urias, 53, pleaded guilty to conspiracy to commit bank fraud before Magistrate Judge Lee Ann Reno in Amarillo Friday morning.
Their CFO, Shane Andrew Smith, previously pleaded guilty to conspiracy to commit wire fraud for his role in the check kiting scheme and a related floor plan fraud scheme.
In plea papers, Ms. Miller, an RDAG group controller, and Ms. Urias, an RDAG office manager, admitted that the auto group – which was struggling with ballooning expenses due to aggressive growth, above market compensation and unnecessary overhead – engaged in widespread, systematic check kiting, a ploy that involves concealing fraud by cross-depositing checks across several banks.
In fact, the company had an entire team at its headquarters specifically designated to kite checks, both women admitted.
Due to the kiting, RDAG checks that should have bounced instead cleared during banks’ float time, the period between the deposit in the recipient account and the deduction from the payer’s account, according to their plea papers.
At the instruction of RDAG Chief Financial Officer Shane Smith, Ms. Miller, Ms. Urias, and others would make up random amounts for each check to total the amount that needed to be kited for the day, often discussing the calculus over email, they said.
Ms. Miller and Ms. Urias each face up to five years in federal prison and may be required to pay at least $23 million in restitution. Mr. Smith faces up to 20 years in federal prison, and will be required to pay a mandatory restitution of more than $50 million, equal to the total amount of loss suffered by FMCC and victim banks.
The Federal Bureau of Investigation and Internal Revenue Service – Criminal Investigation Division conducted the investigation. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.