First Western: First for Dennis Smiley Cash?

by George Waldon  on Monday, Apr. 21, 2014 12:00 am  

Of all the Arkansas banks ensnared in the alleged serial loan fraud by Dennis Smiley Jr., First Western Bank of Booneville could be in the best position to recover money from him.

The $302 million-asset lender appears to be at the front of a line of lenders with a claim to almost $552,000 from Smiley’s executive compensation account at Arvest Bank.

First Western may have perfected its security interest in the account by filing a Uniform Commercial Code Financing Statement with the Arkansas Secretary of State on Feb. 3, 2011.

That UCC filing should’ve served as a public notice to other lenders that Smiley had pledged the assets of his Arvest account as collateral on loans from First Western. However, few, if any, lenders checked the open records.

Such a fundamental step would have revealed that Smiley was pledging the same collateral over and over to what became a string of lenders.

This alleged ploy allowed Smiley to use an asset worth several hundred thousand dollars during the past few years to help borrow more than $4.5 million.

“That is just bizarre,” said a Little Rock banking lawyer. “You’re crazy if you don’t do a UCC search. You’re reckless if you don’t do a search.”

Several banking lawyers contacted agreed to talk about the Smiley controversy but only on condition of anonymity because their firms do legal work for some of the banks involved.

Some believe Smiley’s standing as a fellow bank executive helped lull lenders into a false sense of security. His knowledge of the loan system also helped him to defeat its safeguards.

“We’re taught to run all the bases, but when someone manufactures the bases, it gets really hard,” said Joe Edwards, CEO of Benefit Bank of Fort Smith. “You’re touching all the bases, but you’re dealing with someone who knows what bases you’re going to touch.

“I think we all have a similar story. We all feel like we’ve all been held up and robbed by a friend. We also feel ashamed that we couldn’t figure it out. We were so emotionally stunned by all of this it took us 24 hours to come to grips with it.”

Benefit Bank hasn’t filed a claim yet, but Edwards estimated its loss on five Smiley loans at about $300,000.

 

 

Please read our comments policy before commenting.
Search

Latest Arkansas Business Poll

Did the Fed make the right call on interest rates?