No one likely envies the task of Benton County Circuit Judge John Scott as the web of claims and counter suits pile up against H. Dennis Smiley and his former employer, Arvest Bank.
This week three more banks filed answers and counter claims with the court seeking payment on loans they said were secured by Smiley’s Arvest bank stock, via signed control agreements and letters of verification signed by Arvest Bank executives on numerous occasions.
No hearing has yet been slated, there are still several banks with known loans outstanding to Smiley that have not filed an answer with the court regarding their claims.
Coming forward this week was First State of Russellville who filed an answer to the Arvest interpleading claiming the $150,000 loaned to Smiley and Design for the Home LLC on Sept. 21, 2012. This loan was secured by Arvest Bank stock, per control agreements signed by Arvest senior vice president Euva Phillips on Oct. 9, 2012.
In a counter claim filed Monday (April 21), First State Bank sued Arvest Bank, H. Dennis Smiley Jr., Cynthia Smiley and Design for the Home LLC for nonpayment of the outstanding loan balance $145,965 as of April 1. The bank said it sent Arvest Bank a demand for payment on March 17, based on the lien had secured against Smiley's stock account.
First State Bank notes that Arvest Bank executed control agreements with numerous lenders seeking to encumber Smiley's bank stock as collateral for loans and Arvest should have known about Smiley's fraudulent actions to repeatedly pledge the same collateral.
The filing states that Smiley's fraud and the breach of contract by Arvest have cost the bank more than $145,965 and it asked the court to award payment from the proceeds from the collateral stock that in on deposit with the court. The bank also asked for judgments against all the named defendants in the counter claim with punitive damages against H. Dennis Smiley.
Arvest Bank filed a petition April 3 in Benton County Circuit Court saying it hoped to deposit the $551,754.58 from Smiley’s stock interest into the court’s registry in exchange of for a complete discharge of liability.
Those funds are composed of $427,991.25 from the stock repurchase and $123,763.33 from stock option proceeds accrued up to the time of Smiley’s termination. In the filing, Arvest said there have been multiple claims for the money from Smiley and 20 banks he owes. The bank’s filing said Arvest “cannot determine without hazard to itself which, if any of them, is legally entitled to the proceeds.”
Arvest spokesman Jason Kincy said the bank does not comment on pending litigation, but he did verify to The City Wire that two of the people who allegedly signed the control agreements and letters of collateral verification are still employed at Arvest. He said there has been no other resignation in connection to the Smiley situation.
Integrity Bank of Mountain Home also staked its claim for payment this week with its answer to the court on the Arvest Interpleading.
Integrity notes that it is owed $160,907 secured by Smiley’s Arvest Bank stock. The bank loaned $150,000 to H. Dennis Smiley on July 13, 2012 and obtained a letter from Arvest verifying that Smiley’s 3,940 shares of Arvest common stock would be securing the loan. That letter also was signed by Arvest Bank Senor Vice President Euva Phillips and dated July 11, 2012.
Integrity Bank claims the Arvest letter misrepresented the true nature of Smiley's ability to pledge the stock for collateral. Without the signed letter verifying the collateral the bank said it would not have made the loan. On Oct. 12, 2012, Integrity Bank modified the loan balance of $145,489 in a new note for H. Dennis Smiley, Cynthia Smiley and Design for the Home LLC. The bank updated its security agreement UCC filing with the Secretary of State.
On June 24, 2013, Design for the Home, H. Dennis Smiley and Cynthia Smiley borrowed $40,100. It was modified in November 2013 to extend the date and require monthly payments, according to the filing. The loan was secured by Smiley's Arvest bank stock and the proper UCC filings were made. The bank asked Arvest for payment based on the collateralized nature of its loan to Smiley.
First Security bank also filed its answer to the Arvest interpleading stating its case for payment based on the fact it obtained signed control agreements by Arvest executives on numerous occasions regarding the Arvest Bank stock being used as loan collateral for H. Dennis Smiley. First Security did not provide the court with any monetary figures in its 11-page filing regarding the money owed by Smiley.
First National Bank of Fort Smith recently filed suit against Smiley for non-payment of debt. But in a separate filing to answer the Arvest interpleading on Tuesday (April 22), First National Bank notes the Arvest Bank's interpleader of these funds sited as collateral has breached its fiduciary duty to the lender.
First National asked the court to turn over payment. Based on the UCC filings with the Secretary of State, Smiley borrowed nearly $4.5 million over a four year period, pledging the same collateral each time, unbeknown to the lenders or Arvest Bank the agent holding the collateral.
Signature Bank, Benefit Bank, Chambers Bank, First State Bank of DeQueen and Today’s Bank (formerly First State Bank of Northwest) have yet to file an answer to the Arvest Interpleading.