LUBBOCK, TX — A year ago, Bart Reagor was on top of the world. As the CEO and partner of the Reagor-Dykes Auto Group, his 20 dealerships spread across nine west Texas cities from his Lubbock headquarters, generated $780 million in sales annually.
Then Ford Motor Credit Company (FMCC) dropped a bomb on his company in July 2018. Reagor, who until now was told by his lawyers to remain silent, said July 26, 2018 was the day his life was changed and ruined by something he had no clue was happening.
“Just 16 days before they (FMCC) destroyed my company, they came in here and said ‘thank you,’” Reagor said. His company was subjected to audits from FMCC every quarter and of he had no knowledge that anything was wrong.
Earlier that same month, after a Ford audit, Ford proclaimed, “These results are fantastic, and your entire organization should be commended for their hard work and their efforts‼” according to Nexstar’s TV station in Lubbock, EverythingLubbock.com.
Then suddenly 16 days later, on July 26, 2018, FMCC called their note on RDAG, sending the company into bankruptcy. This led to criminal charges against the dealership’s Chief Financial Officer Shane Smith after an FBI investigation.
Court documents reveal that Reagor’s dealerships were engaged in selling vehicles “out of trust.” Financiers like banks and affiliated financing arms of the major car manufacturers, like FMCC, loan car dealerships money to purchase new vehicles to display on their car lots. As each car is sold, the dealership is supposed to repay that car’s portion of the loan, called a “floor plan.” If the dealership keeps the money, then the sale was made “out of trust.” Usually this is against the terms of the floor plan financing agreement.
The selling cars “out of trust” problem often snowballs into greater and greater amounts owed to a point that the dealership doesn’t generate enough cash flow to repay the loan.
“Dealership groups that default on floor plan loans may have grown too quickly or had poor cash management strategies, experts say. In some cases, dealers may let a few vehicle sales go out of trust, thinking they can make it up the following week. But the situation often spirals,” reported Melissa Burden at AutoNews.com.
When Reagor Dykes declared bankruptcy a year ago, it owed $844 million.
Reagor and his partner Rick Dykes personally guaranteed much of the floor plan. Ford sued the partners for over $110 million. In April, Dykes agreed to repay FMCC $58 million.
The former Chief Financial Officer of Reagor-Dykes, Shane Smith, pleaded guilty last week to one count to commit wire fraud by obtaining money through false documents. He will be sentenced in October and faces up to 20 years in prison and a fine up to $250,000 along with restitution. The FBI investigation revealed an elaborate floor plan documentation scheme that inflated the RDAG bank accounts, according to KCBD in Lubbock.
Then there was Reagor’s partner, Rick Dykes.
“Dykes was the money guy,” journalist Wayne Dolcefino said of the partnership. He had the assets to repay the note. Reagor, on the other hand, was the face of the dealerships. He was the marketing and sales talent. He was ordered to repay Ford $46 million. That amount is increasing by $7,000 each day, according to KCBD.
Today, Dykes is working with the bankruptcy courts to reorganize RDAG under Chapter 11. KCBD reported that Dykes is personally paying six employees at the dealerships to maintain them through the reorganization. The latest report is that the dealership could re-open by the end of 2019.
Reagor, on the other hand, has heard nothing of what is happening to the dealerships he once oversaw.
“I have not run this company since the day I left this company on July 22 (2018),” Reagor said. He has not been in communication with Dykes, Dolcefino said.
Now Reagor, through Dolcefino, is going public. “This is the first of many videos we’ll produce,” promised Dolcefino. “Reagor believes a lot of people profited off him and set him up.”
What to look for in the weeks ahead? Dolcefino was vague, but offered some hints. “The FBI is still investigating. What were Shane Smith’s connections with FMCC? We’re curious Dykes made a large settlement for $58 million so quickly. Did the banks take advantage of Mr. Reagor?” Dolcefino asked.
Dolcefino was hired by Reagor to defend his name in the public square.
“I built this company out of my heart. I wanted to make it the best place to do business, the best place to work in the car business, and to be an integral part of the communities where we worked,” Reagor said.
What about what the future holds for Bart Reagor? “I’m not done by a long shot,” he promised.
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