Attorneys for the Reagor-Dykes Auto Group's "special litigation counsel" claimed Friday the letter it sent to Vista Bank lining out the bankrupt estate's claims against the bank were at Vista's request, and weren't meant to extort the financial institution.
In a response letter, attorneys for Key, Terrell, & Seger LLC said Reagor-Dykes and Vista Bank representatives had a special mediation meeting in Dallas on Tuesday. The attorneys say Vista Bank insisted Reagor-Dykes's chief restructuring officer send the bank "a demand letter setting forth the nature and extent of the alleged claims of the Estates" before that settlement mediation.
The attorneys note the conference didn't end successfully, but minutes after the meeting, the attorneys say Vista Bank released "a materially inaccurate and misleading" statement.
"It is both regrettable and unseemly," the attorneys write, "that Vista Bank has decided to take otherwise confidential settlement discussions and turn them into public spectacle."
Key, Terrell, & Seger attorneys state they were hired and approved by the bankruptcy court to investigate and pursue claims against third parties Reagor-Dykes may have, including against "parties who may have been involved in alleged wrongdoing."
They call their role "to help heal the wounds inflicted on this community by maximizing monetary recovery to the Estates' legitimate creditors."
The special litigation counsel indicates it will only issue any other information about the Estates' contentions and claims against Vista Bank in court.
Late Wednesday evening, Vista Bank filed in federal bankruptcy court claiming the Reagor-Dykes restructuring effort is attempting to extort it; the bank claims the Auto Group is trying to block it from recovering losses Vista Bank incurred from the check-kiting scheme that partially led to the dealerships' collapse.
Vista claims it's holding millions of dollars in the Auto Group's bad checks; it accuses Reagor-Dykes and its chief restructuring officer of an "ongoing scheme to extort creditors like Vista who already suffered millions in damages due to Reagor-Dykes' criminal actions."
Last month, the bank claims Reagor-Dykes sent it a demand letter, claiming it helped and covered up a check-kiting scheme perpetrated by the Auto Group's former chief financial officer, Shane Smith. "Check kiting" is essentially writing checks between banks to make it appear that there were sufficient funds available, abusing the time it takes for checks to clear the banking system.
The bank claims the letter accuses it directly of conspiracy to commit fraud; Vista Bank summarizes the letter as contending Vista failed to stop the check-kiting scheme, and should therefore be liable to the Auto Group.
In a press release issued with the filing, the bank likens Reagor-Dykes's claims as "a robber breaking into a home, getting arrested, and then suing the homeowner afterward."
The bank directly accuses the Reagor-Dykes Auto Group itself of fraud. Specifically, it cites three checking accounts it claims deposited millions of dollars in uncollected bad checks that were returned as unpaid. Vista claims those same accounts still hold other deposits from third parties, totaling more than a million dollars. The bank claims its deposit agreements with Vista Bank allow it to pull money from those accounts to satisfy overdrafts, and wants the federal bankruptcy judge to allow it to use that money.
The bank cites multiple guilty pleas that state the Auto Group had an entire department dedicated to running the check-kiting scheme. Vista claims this directly led to $13 million in damages to the bank. The day after Reagor-Dykes filed bankruptcy in August 2018, the bank claims it suffered more than $5 million alone in chargebacks from other banks.
Ultimately, Vista's filing Wednesday evening asks federal judge Robert Jones to declare Reagor-Dykes knew all the material facts about the check-kiting scheme and the floor-plan financing fraud Ford Credit sued over, as well as declare Reagor-Dykes unable to sue over the money Vista Bank has pulled from its accounts in order to recoup losses.