Posted 4/2/2014 12:01 am
Updated 7 months ago
H. Dennis Smiley Jr., the former CEO of Arvest Bank's operations in Benton County, is the subject of a federal criminal investigation for loan fraud.
Smiley allegedly pledged repeatedly the same collateral worth hundreds of thousands of dollars to borrow $4.5 million or more from an estimated 18 different banks, Arkansas Business has learned from multiple sources.
One of the sources, who all spoke only on condition of anonymity, said the scam dates back to at least 2010 and was discovered only recently. The red flag was raised when a scheduled loan payment didn't clear because a Smiley account had insufficient funds to cover the draw.
This bounced payment apparently happened during the week of March 10, and Smiley resigned from his position at the state's largest bank on March 13.
Smiley did not respond to a message left on what was believed to be his home phone on Tuesday, and a Fayetteville lawyer believed to be representing him did not respond to a call for comment.
Arvest has not explained the departure of Smiley, a long-time employee.
"Mr. Smiley's reasons for resigning his position are personal in nature and we are not going to comment on his personal situation," Arvest spokesman Jason Kincy said in an email on Tuesday afternoon.
Smiley had worked for the company since 1989, was CEO of Arvest in Springdale for about 11 years and was the top executive for the Benton County operations for almost two years.
Uniform Commercial Code filings with the Arkansas Secretary of State's office indicate that Smiley used the same shares of Arvest Bank stock as collateral for multiple loans.
The banks understood that the collateral was not literal stock but a type of phantom shares contrived by Arvest Bank Group as an incentive to reward top executives based on the appreciation of real Arvest shares held by the Walton family.
Executives holding these phantom shares could, upon leaving the company, cash in the stock for a price tied to the book value of Arvest.
But until recently the banks did not know that Smiley pledged the same collateral over and over again with multiple lenders. The alleged scheme allowed Smiley to use an asset valued in February at just under $400,000 to help borrow more than $4.5 million.
Arkansas Business' sources say that the loans secured by the stock were generally in the $200,000 range and that Smiley also received unsecured loans from some of the banks.
Nine lenders filed UCC financial statements in connection with loans to Smiley secured by uncertificated Arvest stock:
- First National Bank of Fort Smith;
- First State Bank of Northwest Arkansas in Huntsville;
- First Western Bank of Booneville;
- First State Bank of De Queen, where Smiley's father, Dennis Smiley Sr., is chairman of the board;
- Integrity Bank (formerly First National Bank & Trust) of Mountain Home;
- Chambers Bank of Danville;
- The Bank of Fayetteville;
- First Security Bank of Searcy; and
- Delta Trust & Bank of Little Rock, which is being acquired by Simmons First National Corp. of Pine Bluff.
According to sources, other banks made similar loans but did not make UCC filings. Such filings aren't mandated.
The probe also is looking into allegations that Smiley used stakes in limited liability companies as part of the loan fraud scheme, according to sources.
Signature Bank of Arkansas in Fayetteville filed a UCC financial statement on a loan to Smiley, but it was linked with a 20 percent stake in HDS Holdings LLC used as collateral on a September 2009 loan.
No other UCC filing is on record in connection with his ownership of HDS Holdings. Such public filings aren't mandated with this type of collateral either.
Smiley's sudden departure has left Arvest without a local-level CEO for the Benton County market.
"We are in the process of selecting a replacement president for Arvest Bank, Benton County, and will make an announcement sometime in April," Kincy said. "Arvest has many talented individuals and we're confident our new president will be a good leader, sound banker and someone who understands and lives the Arvest culture of serving the needs of the local community."