Arkansas Razorbacks Football Coach John L. Smith's $40 Million Mistake

by Mark Friedman  on Monday, Nov. 5, 2012 12:00 am  

Another investor in Terra Landis was John R. Mason, a senior vice president of Republic Bank & Trust Co. of Louisville. Mason and Smith were neighbors in the Louisville suburb of Prospect. Mason declined to comment.

Smith told The Associated Press in July that he started dabbling in real estate with one investment in one subdivision.

“It was a situation where we all made a little and said, ‘Well, that’s good. Let’s see if we can make a little more,’” Smith told the AP.

More Investments

Thanks to his 0.661 winning percentage at Louisville, Smith landed another head coaching job at Michigan State University in Lansing. After his first season in 2003, when he went 8-5, Smith started losing.

During the next three seasons, he compiled a 14-21 record, and Michigan State didn’t want him back for the 2007 season. reported that Smith’s contract, which had been paying $1.35 million a year, had been bought out for $1.5 million.

While Smith struggled on the football field, he increased his real estate investing. Smith didn’t create or get involved in any new companies in 2003 or 2004, but starting in 2005, he became involved in four separate LLCs as an investor with developer Canfield back in Kentucky.

Most of the LLCs had “Terra” in their names and were tied to Canfield’s real estate or land development projects.

The real estate market was hot during 2005. In 2004, 13,901 homes were sold in Jefferson County, Ky., according to Tre Pryor, a real estate agent and editor of the LouisvilleHomeBlog. The next year, sales jumped to 15,228 and stayed almost as hot in 2006, when 15,181 homes were sold.

As with the other projects, Canfield “managed the affairs of the LLCs, and the developments they owned, solely and exclusively,” Smith said in an Aug. 13, 2011, affidavit filed as part of the lawsuit involving Dr. John Rhodes.

To become a 10 percent owner of Terra Acquisitions II LLC, for example, Smith invested $1,000. He owned larger percentages in other entities.

According to the operating agreement of Terra Acquisitions, Smith would receive 10 percent of the profits of the LLC, and Smith said he thought that also meant that he would only be responsible for 10 percent of any losses.



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