Arvest goes after Dennis Smiley with a third lawsuit

by The City Wire staff ([email protected]) 239 views 

The lawsuits against former bank president Dennis Smiley are starting to pile up, with Arvest now pursuing Smiley and his business interests for more than $800,000 owed from loans it made to Smiley.

Arvest filed its third suit against Henry Dennis Smiley Jr. and his wife Cynthia Smiley on Tuesday (Aug. 26) seeking a judgment totaling $181,782 for a consumer loan made to the couple in April 2012.

The loan made to Smiley totaled $215,000 and corresponds with the timing of the Smiley’s home purchase in Pinnacle Country Club, though the supporting documents don’t list the loan as a home mortgage. It was a 60-month balloon note with regular interest payments, according to the filing.

The personal loan was secured by 692 shares of First State Bancshares owned by the Henry Dennis Smiley Revocable Trust and assigned to Arvest Bank. The same shares were pledged in two other loans also in default to Arvest Bank in the amount of $81,718. Those two loans were made to H. Dennis Smiley Jr., wife Cynthia and their business entity Design for the Home. LLC. Arvest filed a suit regarding that delinquency in Benton County Circuit Court Aug. 18

Smiley worked as president of Arvest Bank’s flagship market, Benton County, and during that time he took out numerous loans from his employer totaling more than $800,000, according the recent lawsuits filed against him and his business interests.

First Security Bank also recently began foreclosing on his home after his $200,000 mortgage fell into default. The mortgage was recorded May 16, 2012. The amount owed as of June 26 was $191,143. In addition, Smiley took out a second loan with First Security in June 2013. That loan totaled $40,150 using the home as collateral. A third loan against the home was made by Benefit Bank for $40,000. That loan was recently assigned to Arvest Bank in a settlement reached last month between Arvest and 18 banks also seeking payment from Smiley’s retirement funds.

The amount of money Smiley was able to borrow from at least 21 known banks exceeds  $4 million, and very little of that debt was paid down according the lawsuits and requests for judgment made to date.

Smiley’s known assets were short of the money owed against them. The assets include $551,764 in retirement funds, a home valued at $568,000 with three mortgages, and 682 shares of restricted First State Bancorp stock owned by a family trust.

Banking consultants John Dominick and Phillip Knight agreed that Smiley used his influence in the banking community to get loans that would not have been made to many consumers. The paper trail of lawsuits indicates 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. His longtime friend and fellow banker Gary Head at Signature Bank also made loans to Smiley. Neither Signature Bank nor First State Bank DeQueen were part of the 18 bank settlement with Arvest.

Dominick, 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 lack of due diligence among many of the banks lending to Smiley.

“They knew him and because of his prestigious position at Arvest perhaps they let those things cloud their better judgment,” Dominick said.

Head said Signature has not filed suit against Smiley.

“Our lawyers have been working directly with Dennis and his counsel. We prefer not to kick a man when he’s down, but we will continue to pursue payment for the money we are owed and will have counsel at the hearing next month,” Head said.

Benton County Circuit Judge John Scott has ordered a hearing to sort out the remaining lawsuits and schedule trial dates or dismissals on Sept.18. The three recent Arvest suits will be reviewed at that time along with any other civil matters related to Smiley’s loans.

Criminal charges have not yet been filed, despite a federal investigation into Smiley’s borrowing habits. His father and at least three Arvest bank employees have said their signatures were likely forged on loan documents and security agreements on behalf of Dennis Smiley. Smiley Sr. has repeatedly told the court that his name was used in co-borrowing instances of which he had no knowledge, claiming he has been a victim of fraud.

Legal experts told The City Wire that federal fraud charges are likely but there is no rush  given that prosecutors will want a very thorough investigation due to the scope and high profile nature of this case.

Using federal sentencing guidelines, just one count of wire fraud involving 21 victims, unauthorized use of someone’s identification, offense against at least one financial institution with a total victim loss of $3 million would carry at sentence range between 97 and 121 months and fines up $150,000.