Allison: Smiley Situation Shocking and Very, Very Sad

People who did not want to be publicly quoted have said it over and over: Dennis Smiley, the former president and CEO of Arvest Bank Benton County, lived beyond his means.

He was leveraged. He ran with the big dogs.

He might have made a great salary at Arvest, the state’s oldest and largest bank where he’d worked for 25 years, they said, but that still wasn’t enough to bankroll the lavish life he craved.

An exact price tag has yet to be put on what Smiley ultimately tallied over a five-year timeframe — from Feb. 2009 to Feb. 2014 — when, according to public records, he repeatedly pledged the same Arvest stock to obtain loans from as many as 19 banks.

But there is a clue. In February, when the last of the Smiley loans was taken out, he pledged 4,264.33 shares of stock to obtain a $245,126 loan from Delta Trust and Bank, according to a March 25 suit in Benton County, filed by Delta. The bank alleged Smiley and his father, Dennis Smiley Sr., took out the loan but failed to make the first scheduled payment on March 20.

If the Delta loan is consistent over the course of the entire 19-bank issue, then that’s $4.6 million — enough, for example, to pay for a luxurious trip to Italy and to own a 3,000-SF home in the glitzy Pinnacle Country Club area of Rogers.

While he is at the center of at least two civil suits in Benton County, the U.S. Attorney for the Western District of Arkansas would neither confirm nor deny there is a case involving Smiley. He has already been replaced by longtime Arvest Fort Smith executive Craig Rivaldo.

Arvest spokesperson Jason Kincy said he is not aware of any further resignations related to Smiley, who himself resigned on March 13 and shortly thereafter dropped his nonprofit board positions and put his Pinnacle Country Club home up for sale.

 

Phantom Stock

Though much of the background talk has been about Smiley and his fondness for the good life, the bigger discussion has been about the various banks that signed off on the loans. And at least one of the state’s most important banking leaders said the lending community should have known better than to allow Smiley’s stock to be used as collateral.

Johnny Allison, chairman of Conway-based Home BancShares Inc., the parent company of the state’s second largest bank, Centennial Bank, said the Smiley deal reeks, and not just because of what Smiley allegedly did.

Pointing to the fact that Arvest is private and not public, Allison said it would have been difficult, if not impossible, for loan officers to determine exactly how much the Arvest stock was worth back when all the transactions were being made.

More importantly, however, Allison said the loan officers should have known that the stock was “phantom stock,” meaning it was not supposed to be used as collateral — an assertion confirmed by an interpleader petition recently filed by Arvest in Benton County.

“I don’t know how any kind of value was determined,” Allison said, referring to the stock. “I don’t think it would have flown at our bank because there’s no way to establish value.”

Centennial Bank was not included in the list of Uniform Commericial Code reports tied to H. Dennis Smiley Jr. or his HDS Holdings LLC. However, Centennial Bank is listed as a creditor in the Arvest interpleader, filed April 2, in which Arvest asks the court to put the value of Smiley’s stock and stock options — $551,754.58 — into a registry to be divvied up by the 19 creditors.

What is not known is if the Centennial loan was first issued through Liberty Bank, which Centennial purchased last year for $280 million.

For the sheer novelty of Smiley’s alleged transgressions, Allison had this to say: “A man in his position — if it’s true — then it shocks the whole financial community. It’s uncharacteristic of a gentleman in his place in life.”

Allison said he was a bit surprised when scuttlebutt first started making the rounds, but by the time the story broke, he and plenty of others knew what was coming.

“I’d heard it before it hit the news,” he said. “It circulated through the banking community.”

Reflecting the sentiment of sources here in Northwest Arkansas, Allison said that if what’s being alleged is true, then it’s “shocking and very, very sad.”

Smiley, however, didn’t just use Arvest stock to obtain loans. In at least one case in 2009, he pledged his interest in NWA Holdings LLC, an entity that owns one of the top retail locations on Sunset Avenue in west Springdale — The Shoppes at Har-Ber Lakes — to obtain a loan from the Bank of Fayetteville for HDS Holdings, according to UCC records. In another instance, Smiley pledged all the stock in HDS Holdings, the company at the heart of his troubles, in 2009 to gain a loan from Fayetteville-based Signature Bank of Arkansas, according to UCC filings.

When news broke that Smiley might be in deep with the banks, City Title
& Closing owner Blake Hanby, who has a stake in NWA Holdings and who manages the LLC, said he pulled
the UCC records and saw that
Smiley had pledged his shares in the company.

“We’re aware of it,” Hanby said, but would not speak further on the issue.