Vista Bank sues FirstCapital for $6 million, claims Dykes helped perpetrate check kiting scheme
Vista Bank is suing FirstCapital Bank, its CEO and its chairman claiming more than $6 million in damages because Reagor-Dykes owner Rick Dykes provided advance notice of Ford Motor Credit's legal action and impending bankruptcy proceedings. Vista claims a check kiting scheme was carried out.
Vista Bank is suing FirstCapital Bank, its CEO and its chairman claiming more than $6 million in damages because Reagor-Dykes owner Rick Dykes provided information that allowed it to act ahead of Reagor-Dykes companies' filing for bankruptcy protection. Vista claims a check kiting scheme was carried out at its expense.
The suit states Dykes served as a member of FirstCapital's board of advisors until a few days ago, and previously held a seat on its board of directors. The filing claims FirstCapital "transitioned Dykes from a Director to its Board of Advisors to avoid banking regulatory scrutiny and potentially to increase the amount FirstCapital could lend Reagor-Dykes. Further, Dykes is a large FirstCapital shareholder, holding more than 350,000 of FirstCapital shares." Vista claims FirstCapital now hides its history with Dykes by removing any mention of him from its website.
Vista's filing claims a scheme of "deposits and fraudulent float credit survived only as long as Reagor-Dykes maintained the volume and speed of its deposit cycle to keep ahead of the check clearing and cash letter process; however, a disruption such as Reagor-Dykes filing bankruptcy would cut the cycle, reveal the fraud, and lead Vista to immediately freeze its Reagor-Dykes accounts.
"Vista would return the items Reagor-Dykes wrote on its Vista accounts and initiate returns on the FirstCapital checks Reagor-Dykes deposited to prevent unauthorized credit advances. And that's exactly what happened -- except that FirstCapital found a way to use its insider access to Dykes to channel over $6,000,000 in losses and damages to Vista, allowing FirstCapital to knowingly profit from the scheme."
The suit names FirstCapital CEO Brad Burgess and Chairman Kenneth Burgess.
Vista Bank claims Dykes met with Brad and Kenneth Burgess on Tuesday, July 31, warning Ford Motor Credit was going to file its lawsuit against Reagor-Dykes companies, severe financial problems within Reagor-Dykes and the company's planned bankruptcy filing. Ford Motor Credit filed suit July 31. On Aug. 1 some, but not all, entities named in Ford Credit's suit filed for bankruptcy protection.
"Lacking FirstCapital's insider access, Vista learned of the Reagor-Dykes bankruptcy through local Lubbock news reports and word of mouth," Vista's filing states. The document continues, "Acting on the damning inside information FirstCapital received from Dykes on July 31st, FirstCapital blew up the standard process and "worked all night" in a greedy attempt to return items onto Vista". The court document claims Dykes admitted to Vista counsel that FirstCapital's team did, in fact, work late July 31 and early Aug. 1 to accelerate the process.
Vista alleges that "of all of Reagor-Dykes banking institutions, including at least FirstCapital, IBC Bank of Oklahoma, AIM Bank and Vista, (i) only FirstCapital submitted an ongoing return cash letter on August 1st, the date Reagor-Dykes filed bankruptcy; and (ii) only FirstCapital attempted to charge back July 27, 2018 Reagor-Dyke items."
Vista is claiming gross negligence because it acted "with knowledge and a conscious indifference to the extreme degree of risk of harm that Vista would inevitably incur. Accordingly, Vista asserts a claim for gross negligence and punitive damages."
Vista requests the case go to a jury trial.
RELATED THURSDAY: Bankruptcy court allows Reagor-Dykes continued use of cash collateral, hiring of CRO
WEDNESDAY: Reagor-Dykes Auto Group issues written apology
TUESDAY: Loss of Reagor-Dykes Chevrolet in Floydada a potential financial pitfall for city
TUESDAY: Vehicle auction company claims Reagor-Dykes owes it $687,000
TUESDAY: Ford Credit claims Reagor-Dykes is not following court orders; court grants extension to file docs
MONDAY: U.S. Trustee opposes Reagor-Dykes request to hire chief restructuring officer
AUG. 10: Ford Credit: Reagor-Dykes fraud may be among largest of its type in U.S. history; GM files to terminate Floydada dealership
AUG. 9: Reagor-Dykes questions former CFO’s actions; Contractor claims $700,000 due now
AUG. 7: Former Reagor-Dykes employees claim they were not paid
AUG. 6: Customers concerned over Reagor-Dykes 'unwinding' process
AUG. 6: Ford suit against Reagor-Dykes on hold while bankruptcy case proceeds
AUG. 3: Judge approves Reagor-Dykes employee pay
AUG. 2: Mayor: Downtown Lubbock growth to remain strong regardless of Reagor-Dykes future
INITIAL STORY: Ford Motor Credit sues Reagor-Dykes; R-D files for chapter 11 bankruptcy
Below is the suit filed in the 99th Judicial District Court: