AMARILLO, Texas (KAMR/KCIT) — Officials with the prosecution officially filed their appellee’s brief in the United States Court of Appeals for the Fifth Circuit on Tuesday after Bart Reagor’s team filed for an appeal last month regarding his verdict of being found guilty by a jury of making false statements to a bank and being found not guilty of two counts of bank fraud in October 2021.
According to previous reports by MyHighPlains.com, Reagor was sentenced to 168 months, or 14 years, in federal prison in March after his trial. Reagor’s legal team filed an appeal regarding the verdict after March’s sentencing, submitting their appeal brief to the court of appeals in May.
How did we get to this point?
Reagor, the co-founder of the Reagor-Dykes Auto Group, was convicted of lying to the International Bank of Commerce about his intentions of using a $10 million working capital loan, using $1,766,277.77 of the loan for personal distributions.
Multiple witnesses, including representatives from IBC Bank and former employees of the Reagor-Dykes Auto Group, testified during the trial in October 2021, stating their belief in the initial working capital agreement as well as detailing what Reagor ended up doing with the proceeds from the loan.
The trial came after the auto group’s overall fall in July 2018. According to previous reports by MyHighPlains.com, Ford Motor Credit Company filed a lawsuit against the auto group in July 2018 with accusations of floor plan fraud. At the time, various banks also accused the auto group of check-kiting practices, both of which led to the auto group’s bankruptcy in August 2018.
After the bankruptcy, 15 of the auto group’s former employees were sentenced to more than 400 months of federal prison combined related to their respective fraud charges. Reagor’s charges however were not related to that specific check-kiting and floor plan fraud schemes.
Reagor’s legal team filed their appeal brief on May 13 in the U.S. Fifth Circuit Court of Appeals. In that brief, officials questioned the confusion surrounding the definition of “working capital” within the trial as well as what Reagor thought the term meant when he took distributions from the loan.
In the brief, Reagor’s legal team continued to stress Reagor’s belief that he could repay himself for his previous investment of funds in the company. They also said there was a lack of evidence on whether or not Reagor knew that what he was doing went against the definition of “working capital.”
Officials defined “working capital” as loan proceeds that help provide for the current operations of a business or “the differential between current assets and current liabilities,” according to the Generally Accepted Accounting Principles.
“Reagor told IBC he wanted the money for working capital,” Reagor’s team’s brief reads. “He did not tell the bank that he wanted it ‘to operate his dealerships.’ There is a big difference between the two, given the cloudy meaning of working capital and the fact that it was undefined in the loan agreement.”
What does the prosecution argue in their appellee’s brief?
In their own brief, filed Tuesday, officials from the prosecution continued to stress that the evidence from the trial was sufficient enough for the jury to find that Reagor “intentionally misled” IBC bank about the purpose of the working capital loan.
Through the brief, officials from the prosecution describe why the auto group initially needed the working capital loan from IBC Bank, stating that the auto group had grown immensely over the span of 10 years by adding nearly 20 locations and employing more than 600 people. To maintain that growth, the documents state that the auto group aimed to “raise capital” by obtaining the loan from IBC Bank.
After an initial meeting between Reagor-Dykes Auto Group officials and IBC Bank officials in April 2017, officials from the auto group said they needed working capital to accommodate the growth. However, the documents stress that Reagor never let officials from the bank know that he intended to take a portion of the loan, something that the prosecution said was not a stated purpose of the working capital loan.
In the brief, as they did in the trial, the prosecution cited multiple instances where Reagor wanted to keep this distribution a secret from other members of the company. This included an email to former Reagor-Dykes Chief Financial Officer Shane Smith, stating that the way the company is going to manage the working capital loan is “100000000% confidential between us and is not ANYONE ELS’S BUSINESS!!!!!!” Officials also reference a sales team meeting in which Reagor “explained his theory of using ‘OPM’ – other people’s money – for acquiring personal wealth.”
Ultimately, the prosecution stressed in its brief that the witnesses who were involved in the IBC Bank loan transaction knew that an owner distribution would be “inconsistent with the loan’s purpose.”
“Applying the deferential standard that favors the jury verdict and resolves all factual issues in favor of that verdict, the trial evidence was more than sufficient to sustain Reagor’s conviction,” the documents read. “… On this evidence, a rational jury could easily have inferred that Reagor acted knowingly when he falsely told the bank that the $10 million would be used as working capital but intended to use a portion of the funds personally. This Court should affirm.”
According to previous reports, Reagor’s legal team previously requested that oral argument occur in the appeal, stressing that a clearer presentation of “the lack of sufficient evidence of Reagor’s guilty state of mind” would be made in that form.
However, the prosecution stresses that oral argument in the appeal is not recommended. Court documents state that because Reagor’s team only challenges the sufficiency of the evidence, the court of appeals can answer that question through the evidence presented at trial.
Reagor continues to be in custody by the Bureau of Prisons after surrendering on May 9, according to court documents.
This story is developing. Check with MyHighPlains.com for updates