Three more banks filed counter complaints against former bank executive H. Dennis Smiley in Benton County Circuit Court on Friday (April 11).
Smiley was the president of Arvest Bank Benton County until he resigned on March 13. Following his resignation, 20 Arkansas banks have been trying to get repaid the $4.5 million they lent Smiley over the past seven years.
Simmons First National, First State Bank (Lonoke) and First National Bank of Fort Smith are the latest to stake their claims against Smiley and his business interests, alleging fraud and deception to the tune of $440,000. This is on top of the $480,000 being sought by the Bank of Fayetteville, who counter-sued Arvest and Smiley on April 7.
FIRST NATIONAL BANK
First National Bank’s counter-suit filed Friday also names Arvest Bank and Smiley’s father, Henry Dennis Smiley Sr., as co-defendants claiming they are jointly and severally liable for the debt.
The filing submitted by First National Bank included a Securities Entitlement Control Agreement dated Dec. 4, 2013. This agreement pledged Smiley’s Arvest stock account as collateral and was signed by Smiley, the debtor, and Arvest EVP Chad Evans as Arvest’s intermediary. Rob Husong, regional president for First National Fort Smith, signed for the lender.
The documents included a signed letter (Dec. 4, 2013) by Evans on Arvest letterhead that states: “This letter is to acknowledge the first and priority security position of First National Bank on the 4,262.33 shares of Arvest common stock, listing attached ... The Arvest stock has a value equal to the value of the company and would be able to be sold at that price. The valuation as of Sept. 30, 2013 is $393,384.33. The proceeds will not be released by Arvest without your consent.”
Jason Kincy, spokesman for Arvest Bank, said there have been no other resignations related to the Smiley situation. He declined further comment on pending litigation.
The counter claim filed by Simmons First National named HDS Holdings LLC., and Henry Dennis Smiley Sr. of DeQueen as co-defendants. Simmons claims it lent $85,000 to HDS Holdings in May 2008. The debtor was to make 9 monthly payments beginning in June 2008. That loan was extended on March 2009 with $85,000 still owed. It was extended again on April 28, 2010 with $76,744 still owed.
Again in May 2011 and May 2012 the loan was extended with $65,000 still owed each time. The final extension was granted in December 2013 in the amount of $56,936, with quarterly payments required.
Simmons made HDS a second loan for $30,750 in May 2013. Monthly payments were due beginning January 2014. This loan went into default in March and demand for full payment was made.
Simmons asked the court for judgments against HDS Holdings and Henry Dennis Smiley Sr., jointly and severally for $84,816 plus interest.
FIRST STATE BANK
Henry Dennis Smiley Jr., Cynthia Smiley and Design for the Home LLC were each named as defendants in the counter fraud claim filed by First State Bank.
Three different loans were made to Smiley by the bank between December 2011 and 2013. The first loan made in December 2011 was for $65,000. The bank required collateral for the loan to which Smiley pledged 3,940 shares of Arvest Bank stock.
An Assignment of Investment Securities document was signed on Dec. 2, 2011, by Smiley as the debtor, with Euva Phillips signing on behalf of Arvest Bank as the senior vice president of operations. Phillips is still employed by Arvest Bank, according to Kincy.
On March 17 there was still $40,450 owed on this loan. The bank has asked the court for judgments in that amount against all three defendants.
One more time Smiley went back to the well and got $76,000 loaned to him in April 2012. This loan became delinquent in March with $38,336 still owed. Again the stock was pledged and a judgment has been sought.
Smiley was able to borrow more money from First State Bank in October 2012 —$87,300. The bank again asked for a collateral pledge of the Arvest shares, which they got. This loan defaulted in March with $80,298 still owed. The bank asked the court for a judgment in that amount.
Count IV in this suit alleges fraud against Smith and his wife Cynthia. The bank said it asked for personal financial statements before the each loan was granted. The Smiley’s estimate their net worth in excess of $1.6 million. In 2012, Smiley told the bank his contingent liabilities were $1.739 million and his assets were $2.467 million. In 2013, the couple reported liabilities of $1.075 million against assets of $3.259 million, according to the filing.
“The Smiley defendants knew they had more liabilities than they represented to the First State Bank in their financial statements. Smiley also knew he did not possess (free and clear) the collateral pledged in all three loans,” the filing states.
DELTA BANK & TRUST
More fraud claims were raised by Delta Bank & Trust in their answer filed with the court on April 11. Delta Bank was the first to file against Smiley Jr. and Sr. for loan default.
The bank has since said “Dennis Smiley Sr. did not sign any of the subject loan documents. Upon information and belief, an individual other than Henry Dennis Smiley Sr. signed his name without his knowledge,” the filing states.
Legal experts told The City Wire that if federal fraud charges are filed these complaints could be consolidated into the federal court system. There have been no criminal charges filed at this time, but it has been widely reported that a federal investigation is ongoing. Sources believe there is enough evidence to waive a grand jury seating, moving straight to a plea bargain with the U.S. Attorney’s Office.
Acts of individual employee fraud can protect companies to a certain extent. But, the Federal Deposit Insurance Corporation notes in its regulations that bank management is responsible for preventing and detecting fraud and insider abuse.
“The primary responsibility to prevent fraud and insider abuse rests with the board of directors and senior management.”
Smiley was senior management, but the FDIC states there should be checks and balances in place to circumvent and detect suspicious activities at the executive level.