The former chief financial officer of ReagorDykes Auto Group in Lubbock pleaded guilty Tuesday to masterminding a $50 million conspiracy that defrauded the company’s primary lender, Ford Motor Credit Co.
Federal prosecutors in the Northern District of Texas claim Shane Andrew Smith operated a “dummy flooring” and “check-kiting” scheme that allowed the auto dealer toartificially inflate its bank account balance.
U.S. Attorney Erin Cox described the scam as a “blatant, large-scale fraud.”
“We will hold Mr. Smith – and any other Reagor Dykes executives involved in this behavior – accountable for this breach of trust,” Cox said.
Under the plea agreement, Smith faces up to 20 years in prison and pay restitution to victims of the scam. The deal also requires the 45-year-old Oklahoma City University graduate to “testify truthfully in any court proceedings” in a matter that Cox said is an ongoing investigation.
According to court documents, Smith instructed his staff to submit phony loan applications for vehicles previously sold by Reagor Dykes to Ford Motor Credit, falsely implying that the auto dealer was repurchasing the cars and trucks.
Reagor Dykes used the loan money to cover other, unrelated expenses.
The fraud, however, did not end there, according to court records.
Smith and his team disguised the shortfall from the dummy flooring scheme by employing a check-kiting effort that inflated the balance of the business’ bank account.
Federal prosecutors said that Reagor Dykes accountants created fake paperwork to cover up their fraud.
Assistant U.S. attorneys Joshua Frausto, Jeffrey Haag and Sean Taylor are leading the government’s prosecution. Edwin Gerald Morris is listed as Smith’s defense lawyer.