Posted 4/23/2014 01:43 pm
Updated 7 months ago
Three more banks have joined the growing litigation surrounding the alleged serial loan fraud by former Arvest Bank executive Dennis Smiley.
Loans from Integrity First Bank of Mountain Home, First State Bank of Russellville and First Security Bank of Searcy were secured by common collateral: Smiley's financial interest in an Arvest stock account.
The Integrity and First State loans were made to Smiley, his wife, Cynthia, and their Design For The Home LLC. First Security didn't specify any monetary claims or file any supporting paperwork related to its loans to Smiley.
All three filed their responses Monday in Benton County Circuit Court.
Integrity First Bank claims $159,781 is still owed on a July 13, 2012, loan of $150,000 and a June 24, 2013, loan of $40,100.
Integrity also alleges that Arvest misrepresented collateral backing the loans and breached a contract acknowledging its security interest in the 3,940.74 shares of "Arvest common stock."
As part of its response, Integrity filed a copy of a letter dated July 11, 2012, allegedly signed by Euva Phillips, Arvest senior vice president. Integrity was known as First National Bank at the time.
The letter states that Arvest will make a market for the stock, purchase it and deposit the cash in the assigned account in the event Integrity First requests repayment of the loan.
"The proceeds will not be released by Arvest without your consent," the letter states. In addition to Phillips, the letter bears the acknowledging signature of Dennis Smiley.
First State Bank claims $145,965 owed on a $150,000 loan made on Sept. 21, 2012.
The Russellville bank alleges fraud against Smiley, breach of contract against Smiley and his wife and their Design For The Home, and breach of contract against Arvest.
First State also filed paperwork allegedly signed by Phillips that protected its claim on the Arvest stock account. Copies of control agreements bearing her signature dated Sept. 21, 2012, acknowledged the Russellville bank's secured interest in the account.
First State made a claim on that collateral in a letter dated March 17 - four days after Smiley resigned as CEO of Arvest’s operations in Benton County - and asked that Phillips liquidate the account and remit the proceeds by March 21.
Sorting It Out
Benton County Circuit Judge John R. Scott is tasked with sorting out the various civil claims against Smiley. Sources connected to the case expect a hearing date for the end of May or early June. Some banks want a nonjury trial, and others want a jury trial.
The bank filings come after Arvest Bank issued two cashier’s checks in Smiley’s name that liquidated the scandal-tainted account. In an interpleader filing on April 2, Arvest asked the court to take the checks and determine which banks were entitled to the money. Arvest also said Smiley was not permitted to pledge the assets of the account under the terms of the Arvest Bank Group Inc. stock and option plans.
Smiley has not been charged with any crime, although Arkansas Business sources confirm a federal criminal investigation of his borrowing habits. Neither Smiley nor the Fayetteville attorney believed to be representing him have returned calls for comment.
As Arkansas Business has previously reported, some of Smiley’s lenders filed Uniform Commercial Code claims, others obtained documentation securing what they thought was legal control of Smiley’s Arvest account, and some took both actions to protect their loans.
Based on UCC filings, First Western Bank of Booneville could be in the best position to recover money from Smiley. The $302 million-asset lender was the first to file a UCC statement, on Feb. 3, 2011.
Still, other banks with loans to Smiley and his interests have gotten in line with responses to Arvest’s interpleader.
Delta Trust, chartered in Parkdale (Ashley County) but based in Little Rock, was the first to file a lawsuit against Smiley interests on March 25, claiming $245,126 owed. Bank of Fayetteville filed a $479,177 claim on April 7.
On April 11, First National Bank of Fort Smith sued HDS Holdings LLC, Smiley, and his father, Henry Dennis Smiley of De Queen, to collect on two loans with a combined outstanding balance of $196,093.
Simmons First National Bank of Pine Bluff sued HDS Holdings and Henry Dennis Smiley of De Queen to collect on two loans with combined outstanding balance of $85,974.
And First State Bank of Lonoke sued Smiley Jr., his wife Cynthia and their Design for the Home LLC to collect on three loans with a combined outstanding balance of totaling $159,085.
So far, only three banks that filed UCC claims haven’t responded to Arvest’s interpleader: First Western Bank, Chambers Bank of Danville and Today's Bank of Huntsville, which changed its name from First State Bank of Northwest Arkansas on March 31.