Two Reagor Dykes Auto Group employees pleaded guilty this week to participating  in the auto group’s floor plan fraud scheme, following an investigation by the Federal Bureau of Investigation’s Dallas Field Office, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.

Elaina Marie Cabral, a 30-year-old Reagor Dykes office manager who worked at RDAG’s Toyota store in Plainview, and Whitney Erin Maldonado, a 44-year-old Reagor Dykes office manager who worked at RDAG’s Mitsubishi store in Lubbock, pleaded guilty Wednesday to conspiracy to commit wire fraud before Magistrate Judge Lee Ann Reno in Amarillo.

Their colleague, executive assistant to the CEO Ashely Nicole Dunn, 34, pleaded guilty to conspiracy to commit bank fraud in a related Reagor Dykes check kiting scheme last Wednesday.

They are three of eleven employees who have confirmed their roles in the $50 million Reagor Dykes scam. Admitted coconspirators include Reagor Dykes Chief Financial Officer Shane Andrew Smith and employees Sheila Miller, Lindsay Williams, Diana Urias, Paige Johnston, Pepper Rickman, Sherri Wood, and Brad Fansler.

In plea papers, Ms. Cabral and Ms. Maldonado admitted the company engaged in a practice they called “dummy flooring.”

Employees routinely dug through records for vehicle identification numbers (VIN) of cars Reagor Dykes had already sold, then submitted new loan applications to Ford Motor Credit Company using the old VINs – falsely indicating that the company was seeking a loan in order to repurchase the vehicle for resale, the pair admitted. After acquiring the new floor plan funding, instead of re-buying the car, Reagor Dykes used the ensuing loan to cover other expenses.

Ms. Dunn admitted in her plea papers that Reagor Dykes also engaged in systematic check kiting, a ploy that involves concealing fraud by cross-depositing checks across several banks.

Ms. Cabral and Ms. Maldonado each face up to five years in federal prison and may be required to pay approximately $27 million in restitution. Ms. Dunn also faces up to five years in prison and may be required to pay  approximately $23 million in restitution.

The Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation Division conducted the investigation. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.

An eighth defendant in the Reagor Dykes Auto Group fraud case has pleaded guilty, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.

Brad William Fansler, 41, an RDAG Group Administrative Director, pleaded guilty to conspiracy to commit wire fraud before Magistrate Jude Lee Ann Reno in Amarillo Monday morning.

In plea papers, Mr. Fansler admitted that the auto group routinely sold vehicles “out of trust” – meaning that they failed to repay lenders within seven days of selling the vehicle financed by that lender.

Just before the lender conducted audits, Mr. Fansler admitted, the auto group would create what they called “dummy shucks,” falsifying vehicles sales dates on official paperwork to make it appear as though the vehicle had sold within the prior seven days and was not yet out of trust.

In order to make payments following these audits, the auto group would then engage in a process they called “dummy flooring,” digging through records for vehicle identification numbers (VIN) of cars Reagor Dykes had already sold, then submitting new loan applications to lenders using the old VINs – falsely indicating that the company was seeking a floor plan loan in order to repurchase the vehicle for resale. After acquiring new funding, instead of purchasing the cars, the company would use the money to pay off the old loans.  

Eventually, Mr. Fansler acknowledged, dealers ran out of VINs to re-floor, and began using cars pledged as collateral to other lenders, a process they dubbed “double flooring.”

Mr. Fansler is the eighth defendant to admit involvement in the $50 million scheme. Admitted coconspirators include Reagor Dykes Chief Financial Officer Shane Andrew Smith and employees Sheila Miller, Lindsay Williams, Diana Urias, Paige Johnston, Pepper Rickman, and Sherri Lynn Wood.

Mr. Fansler faces up to five years in prison and may be required to pay at least $27 million in restitution.  

The Federal Bureau of Investigation Dallas Field Office and Internal Revenue Services - Criminal Investigation Division conducted the investigation.  Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.

Two Reagor Dykes Auto Group employees pleaded guilty today for their role in the auto group’s floor plan fraud scheme, following an investigation by the Federal Bureau of Investigation’s Dallas Field Office, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.

Pepper Laray Rickman, 47, and Sherri Lynn Wood, 53, plead guilty to conspiracy to commit wire fraud before Magistrate Jude Lee Ann Reno in Amarillo Friday morning.

Rickman and Wood are two of seven employees who have confirmed their role in the $50 million Reagor Dykes fraud. Admitted coconspirators include Reagor Dykes Chief Financial Officer Shane Andrew Smith and employees Sheila Miller, Lindsay Williams, Diana Urias, and Paige Johnston.

In plea papers, Rickman, accounting controller at Reagor Dykes Plainview LP (a Toyota store in Plainview, Texas), and Wood, office manager at the Reagor Dykes Auto Company LP (a Ford store in Plainview), admitted the auto group participated in a fraudulent floor plan fraud scheme. 

In a practice accounting staff dubbed “dummy flooring,” “fake flooring,” or “re-flooring,” employees dug through records for vehicle identification numbers (VIN) of cars Reagor Dykes had already sold, then submitted new loan applications to Ford Motor Credit Company using the old VINs – falsely indicating that the company was seeking a loan in order to repurchase the vehicle for resale, Rickman and Wood said in plea papers. After acquiring the new floor plan funding, instead of re-buying the car, Reagor Dykes used the ensuing loan to cover other expenses.

The company’s accounting staff submitted the false information via interstate wire communication, the defendants admitted.

Rickman and Wood each face up to five years in federal prison and may be required to pay at least $27 million in restitution.  

The Federal Bureau of Investigation and Internal Revenue Services - Criminal Investigation Division conducted the investigation.  Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.

Two Reagor Dykes Auto Group employees pleaded guilty today for their role a $23 million “check kiting” scheme, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox. 

Sheila Evans Miller, 52, and Diana Herrera Urias, 53, pleaded guilty to conspiracy to commit bank fraud before Magistrate Judge Lee Ann Reno in Amarillo Friday morning.

Their CFO, Shane Andrew Smith, previously pleaded guilty to conspiracy to commit wire fraud for his role in the check kiting scheme and a related floor plan fraud scheme.

In plea papers, Ms. Miller, an RDAG group controller, and Ms. Urias, an RDAG office manager, admitted that the auto group – which was struggling with ballooning expenses due to aggressive growth, above market compensation and unnecessary overhead – engaged in widespread, systematic check kiting, a ploy that involves concealing fraud by cross-depositing checks across several banks.

In fact, the company had an entire team at its headquarters specifically designated to kite checks, both women admitted.

Due to the kiting, RDAG checks that should have bounced instead cleared during banks’ float time, the period between the deposit in the recipient account and the deduction from the payer’s account, according to their plea papers. 

At the instruction of RDAG Chief Financial Officer Shane Smith, Ms. Miller, Ms. Urias, and others would make up random amounts for each check to total the amount that needed to be kited for the day, often discussing the calculus over email, they said.

Ms. Miller and Ms. Urias each face up to five years in federal prison and may be required to pay at least $23 million in restitution. Mr. Smith faces up to 20 years in federal prison, and will be required to pay a mandatory restitution of more than $50 million, equal to the total amount of loss suffered by FMCC and victim banks.

The Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation Division conducted the investigation. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.

Reagor Dykes Auto Group’s Chief Financial Officer, Shane Andrew Smith, pleaded guilty today to conspiracy to commit wire fraud, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.

“From ‘dummy flooring’ to check-kiting, this was blatant, large-scale fraud,” said U.S. Attorney Nealy Cox. “We will hold Mr. Smith – and any other Reagor Dykes executives involved in this behavior – accountable for this breach of trust. The investigation is ongoing.”

“One of the goals of the FBI is to protect the financial services industry, and by extension, the economy. To that end, the FBI will continue to target those with an intent to defraud businesses and erode the public’s confidence,” said Matthew DeSarno, Special Agent in Charge of FBI’s Dallas Division.

In plea papers, Mr. Smith, 45, outlined the $50 million scheme, which involved defrauding the auto group’s main lender, Ford Motor Credit Company (FMCC), and concealing the fraud by cross-depositing checks across several banks, a ploy known as check-kiting. 

In order to cover ballooning expenses, Mr. Smith admitted, 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 (VIN) of cars Reagor Dykes had already sold, then submitted new loan applications to FMCC using the old VINs – falsely indicating that 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.

“Whatever it takes, we need to floor anything and everything we can even think of to cover payoffs each day,” Mr. Smith wrote in an email quoted in his factual resume. 

To disguise the shortfall from the dummy flooring scheme, Mr. Smith and his employees engaged in check-kiting, 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.

“The deposits we do each do [sic] will most likely cover the checks we write each other,” Mr. Smith wrote in an email.

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, Mr. Smith admits. 

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.

Mr. 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, and testify truthfully in any court proceedings.

The Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation Division conducted the investigation. Magistrate Judge Lee Ann Reno presided over the plea. Assistant U.S. Attorneys Joshua Frausto, Jeffrey Haag, and Sean Taylor are prosecuting the case.