story by Kim Souza
ksouza@thecitywire.com
Former Arvest Bank President Dennis Smiley admitted in his guilty plea filed in federal court last week (Aug. 25) that he forged his father’s name in desperation and he falsified his own financial statements in order to obtain a loan for $245,126 on Feb. 20, 2014 from Delta Trust and Bank.
This was the final straw in what turned out to be a complex web of fraud involving 23 Arkansas banks who made 55 loans to Smiley totaling more than $6.3 million over a 10-year period. The losses that resulted from these loans exceed $5.282 million, according to the plea agreement.
Smiley, 52, admitted in the plea that he had lived beyond his means for at least a decade and masked that fact by borrowing and extending loans using falsified financial statements. Many of the loans were backed by the same collateral, his restricted Arvest Bank retirement stock, which was not eligible collateral, according to Arvest Bank officials.
Smiley also admitted that he signed and directed some of his subordinates and other bank executives to sign various documents that falsely assured the lending banks that the collateral was unencumbered and would available to satisfy the loan upon default.
The criminal probe by the Federal Bureau of Investigation into Smiley’s loan fraud began in March 2014 about the time he was forced to resign his post as president of Arvest Benton County and the loan defaults began to domino. Over the next 17 months the FBI obtained records from the various banks where Smiley had borrowed and still owed money. That investigation uncovered that Smiley’s loan scheme had been in place for several years, and each time a bank required more collateral, Smiley would falsify records regarding his collateral. He also never disclosed the prior loans outstanding with other banks.
Following is a list of the loans Smiley fraudulently obtained.
Bank of Arkansas: $150,000 loaned, $150,000 lost
Bank of Fayetteville: $639,847 loaned, $516,123 lost
Bank of Ozarks: $161,000, $149,438 lost
Benefit Bank: $357,119, $322,524 lost
Chambers Bank: $175,000, $165,361 lost
Community First Bank: $572,113, lost $273,070
Delta Trust and Bank: $245,126, lost $245,126
First Bank: $180,000, $178,797 lost
First Federal Bank: $265,000, $250,599 lost
First National Bank Fort Smith: $194,258, 194,258 lost
First Security Bank: $300,000, $279,700 lost
First State Bank of DeQueen: $632,550, 630,770 lost
First State Bank of Lonoke: $366,000, $278,147
First State Bank of NWA: $363,313, $236,500 lost
First State Bank of Russellville: $150,000, $145,148 lost
First Western Bank: $210,986, $196,359 lost
Iberia Bank: $50,000: $33,057 lost
Integrity First Bank: $185,589, $159,781 lost
Legacy National Bank: $100,000, $100,000 lost
Liberty Bank: $173,298, $145,096 million lost
Signature Bank: $528,500, $428,034 lost
Simmons First: $115,075, $84,816 lost
Summit Bank: $185,000, $120,116 lost
ARVEST BANK INFLUENCE
Arvest Bank, Smiley’s employer, was not listed among the lenders showing losses with regards to this fraud case. Arvest Bank did make several loans to Smiley according to civil cases it has filed against Smiley in Benton County Circuit Court.
Benton County Court records show that Arvest Bank made or extended 11 loans totaling more than $73,000 to Smiley over a four year period, but there is no reference to any of these loans in the 15-page criminal plea.
Arvest Bank recently asked the Benton County Court for civil judgments against Smiley totaling $386,254.27 from unpaid loans made between December 2009 and February 2014, less than a month before Smiley’s sudden resignation. In another suit against Smiley, Arvest has asked for a $181,782 judgment for an unpaid consumer loan made to Smiley and his wife in April 2012. Another suit is pending over $81,700 owed by Smiley for two more loans made to him and his wife for their business Design for the Home, now bankrupt.
Smiley went to his friends and family first for loans, even borrowing in his father’s name — Henry Dennis Smiley Sr., a 73-year-old bank chairman at First State Bank of DeQueen.
Smiley used his position as an influential Arvest Bank executive as well as his father’s reputation as board chairman of the First State Bank of DeQueen to get the loans he needed to support the lifestyle he and wife Cynthia Smiley were living. Banking consultants John Dominick and Phillip Knight said Smiley used his influence in the banking community to get loans that would not have been made to many consumers.
His longtime friend and fellow banker Gary Head at Signature Bank also made loans to Smiley and has two civil lawsuits against Smiley pending in Washington County Circuit Court. Dominick, a banking professor at the University of Arkansas and a director in Signature Bank, recently told The City Wire that the institutions making the loans bear some responsibility in allowing Smiley to accumulate so much unsecured personal debt. He said there was a certain lack of due diligence among many of the banks lending to Smiley.
“They knew him and given his prestigious position at Arvest perhaps they let those things cloud their better judgment,” Dominick said.
CRIMINAL PLEA
In Smiley’s criminal plea he waived a Grand Jury indictment, but also gave up his right to a jury trial. Smiley’s sentencing has not yet been scheduled. Court officials expect a sentencing date will occur in early 2016 following a pre-sentencing report by the U.S. Attorney’s office.
Smiley agreed to pay full restitution which will be ordered by the court and may include all of the losses which resulted from Smiley’s fraudulent lending activities, which exceed $5.2 million. The guilty plea in federal court does not prevent any of the victims from suing Smiley in civil court if they so chose.
Smiley was released on a $10,000 bond until his sentencing date. He was asked to surrender his passport and cannot travel outside the Western District of Arkansas without permission from the U.S. Probation Pretrial Services Offices. He must also continue to work or seek employment and he many not create any new debt without court approval.
HELP FROM FRIENDS
Insiders close to Smiley recently told The City Wire that the former banker is working with a longtime personal friend, David Slone, owner of the Superior Automotive Group.
His wife, Cynthia Smiley, works for Lindsey & Associates and the couple has been residing in a home in Rogers provided for John David Lindsey, according to Cynthia Smiley’s bankruptcy records. At the time of her bankruptcy (October 2014), the couple was not paying rent, with the understanding that when they could afford to so, they would begin paying rent and utility costs.
Cynthia Smiley’s bankruptcy was discharged in January. She walked away from more than $2.29 million owed at the time. Arvest, who had a civil cases against the couple, absolved Cynthia from the debt and reopened their cases against Dennis Smiley, only.