AMARILLO, Texas (KAMR/KCIT) — After a jury convicted Reagor-Dykes Auto Group co-founder Bart Reagor on one count of making false statements to a bank, as well as finding him not guilty for two counts of bank fraud during an October trial, Reagor’s defense team is fighting back. In recent days, the defense made a motion for Reagor to be acquitted for the charge, or for Reagor to receive a new trial.
According to previous reports by MyHighPlains.com, Reagor’s week-long trial consisted of jury members hearing from numerous witnesses, including former Reagor-Dykes Auto Group Chief Executive Officer Shane Smith as well as Steven Reinhart, the auto group’s former legal compliance director. Both Smith and Reinhart are expected to appear in court on Dec. 21 for their sentencing hearings after pleading guilty to their respective charges in the auto group’s fraud scheme.
After hearing the case presented, the jury deliberated for approximately a day and a half, resulting in multiple notes to District Judge Matthew J. Kacsmaryk, the federal judge overseeing Reagor’s trial, stating that the jury was deadlocked. After Kacsmaryk invoked a modified Allen Charge, the jury brought forward the verdict the afternoon of Oct. 15.
According to court documents, officials with the defense stressed that the “evidence submitted at (the) trial was insufficient to sustain Mr. Reagor’s conviction,” precisely referring to the unclear definition of “working capital” the prosecution gave throughout the course of the trial.
During the trial, members of the prosecution’s counsel outlined their case, stating that Reagor has a “secret” plan of taking $1,766,277.77 out of a $10 million capital loan from the International Bank of Commerce (IBC) and using it for personal gain after officials told the bank that it was solely to be used for the growth of the auto group. The prosecution referenced an email outlining the plan to Smith and co-founder Rick Dykes, who also took a distribution, outlining the plan to use the funds in this way.
In the acquittal motion, Reagor’s defense stated that “no government witness could agree on any definition of “working capital” based on the language of the loan agreement” between the auto group and IBC.
Within the motion, the defense referenced a number of the government’s witnesses, including Steve Dawson, a certified public accountant, and certified fraud examiner, who stated that ‘working capital’ is not defined within the loan agreement.
The defense also referenced the testimony of IBC President and Chief Executive Officer William Schonacher, who said during his testimony that the definition of ‘working capital,’ per the Generally Accepted Accounting Principles (GAAP) is “the differential between current assets and current liabilities.” The defense claims in its motion that the GAAP definition “does not bar the use of working capital to make distributions.”
Through the defense’s set of witnesses during the trial, officials state in the motion that they testified that owner distributions are common uses of the working capital funds under the loan agreement’s language, as well as “accepted industry standards” of the term.
During his testimony, Franklin Snyder, a professor of law at the Texas A&M University School of Law, said that working capital can be used for any business purpose of the company.
“And when I say ‘business purpose,’ paying the owners of the company for their investment is one of the recognized legitimate business purposes for using working capital,” Snyder said in his testimony, which was printed in the motion. “All distributions, any distribution like any other payment comes out of working capital.”
In its acquittal motion, the defense also references a conversation Schonacher had with Reagor discussing the loan, stating that the definition of ‘working capital’ was not defined in that meeting, giving the auto group the ability to give the distributions to both Reagor and Dykes.
The defense outlined that the term ‘working capital’ is ambiguous, and an individual’s understanding of the term “could have easily included using the money for owner distributions.” The defense claims that the prosecution should have proved that Reagor knew the plan was outside the scope of the ‘working capital’ definition, but the defense states that no proof of that evidence was given.
“One thing was proved at this trial beyond all doubt, namely, that knowledgeable people disagree on the definition of working capital – so much so that one expert commented that the only way to clarify what the term means in any particular transaction is to define the term in the contract, or loan agreement, involved. This was not done here,” the documents read. “The government presented no evidence that Reagor knowingly misled the bank when he allegedly told them he planned to use the loan proceeds as working capital. In light of the varying definitions of the term, that proof is crucial. Without it, there was insufficient proof on the critical element of the offense that Mr. Reagor made a knowingly false statement in applying for a working capital loan from IBC.”
As of Tuesday, there has been no response to the defense’s motion for acquittal for a new trial.
Reagor Forfeiture Update
According to court documents filed earlier this month surrounding the prosecution’s motion regarding forfeiture, Kacsmaryk released an order, establishing that there will be a preliminary forfeiture hearing for both the prosecution and the defense at 10 a.m. Feb. 9, 2022.
According to previous reports, the prosecution initially made the motion for the forfeiture on Nov. 2, requesting that Reagor forfeit $1,760,000 obtained as a result of the false statement to a bank that led to his guilty verdict.
After the prosecution’s motion, Reagor’s defense team urged the Court in its response to deny the motion and conduct its own forfeiture hearing after both the prosecution and the defense had access to the transcript from the trial “with sufficient time to review it.”
Officials with Amarillo Federal Court previously stated that Reagor is scheduled to be sentenced at 1:30 p.m. Feb. 24, 2022, and faces up to 30 years in federal prison, according to the United States Department of Justice.
This story is developing. Check with MyHighPlains.com for updates