Dealer Group CFO Admits to Floor Plan Fraud Featured

By Staff Writer June 21, 2019

The chief financial officer of a Texas dealership group pleaded guilty to wire fraud in a scheme to defraud one of the group’s main floor planners.

Reagor Dykes Auto Group’s Chief Financial Officer, Shane Andrew Smith, outlined the $50 million scheme against Ford Motor Credit Co. (FMCC), and concealing the fraud via check-kiting. 

In order to cover ballooning expenses, Smith admitted that he instructed Reagor Dykes accountants to engage in a practice they dubbed “dummy flooring.”

At his direction, accounting staff dug through records for vehicle identification numbers of cars Reagor Dykes had already sold, then submitted new loan applications to FMCC using the old VINs. This made it seem the company was seeking a loan in order to repurchase the vehicle for resale. 

Instead of re-buying the car, however, Reagor Dykes used the ensuing loan to cover other expenses.

To disguise the shortfall from the dummy flooring scheme, Smith and his employees kited checks, artificially inflating the company’s bank account balances by cross-depositing insufficient checks.

Vendor and payroll checks that should have bounced were instead cleared during banks’ float time, the period between the deposit in the recipient account and the deduction from the payer’s account.

Reagor Dykes also routinely violated a clause in its loan agreements that required them to repay FMCC within seven days of selling the vehicle for which the loan was issued. 

Rather than cop to the delay, Reagor Dykes accountants created false paperwork, which they referred to as “dummy shucks,” in order to make it appear that the car had been sold more recently.

Smith now faces up to 20 years in federal prison. His plea agreement requires he pay a mandatory restitution of more than $50 million, equal to the total amount of loss suffered by FMCC and victim banks.

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Last modified on Friday, 21 June 2019 12:36

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