story by Kim Souza
ksouza@thecitywire.com
Arvest had plenty of reasons to settle claims with 18 of 20 banks who were owed money by former Arvest group president Dennis Smiley. The Fayetteville-based Arvest Bank reached private settlements with all but two of the banks staking claim to Smiley’s retirement funds.
Banking consultant Phillip Knight said it was “wise for Arvest to settle and to stop the long, arduous legal battle that had begun between many banks across the state.” He said from a publications relations standpoint, a sealed settlement that allowed Arvest to contain the publicity and offer the banks even pennies on the dollar makes more sense than letting each of the individual claims languish in the court system with legal meters running.
Arvest chose not to comment on the settlement or any of the conversations that led to that action or the pending cases to be heard on Sept. 18 in Benton County Circuit Court by Judge John Scott.
Tim Tarvin, banking expert with University of Arkansas Law School, said Arvest’s decision to settle makes sense on a number of levels.
“Arvest’s decision to button up the matter with a settlement made sense given the high profile nature of the employee involved. This is positive for rebuilding public image and could help to restore relationships with sister banks,” Tarvin said.
BANK CLAIMS
It will likely never be known what the 18 settling banks got in the deal, or if Arvest paid more than the $551,764 from Smiley’s retirement account. Banking insiders agree the total outstanding debts were relatively small for an institution as large as Arvest.
The claims filed with Benton County Court totaled more than $2.2 million:
Delta Trust Bank $245,100
First Bank Hampton $179,000
First Federal Bank $70,000
Bank of Fayetteville $520,800
First Western Bank $210,900
First Bank Lonoke, $159,000
Integrity Bank Mountain Home $160,900
Simmons First National $85,000
First National Bank Russellville, $145,900
First National Bank Fort Smith, $393,380
Summit Bank, undisclosed amount
Legacy National Bank, undisclosed amount
Chambers Bank, undisclosed amount
First Security Bank, undisclosed amount.
Benefit Bank, undisclosed amount
Bank of the Ozarks, undisclosed amount
Bank of Oklahoma, undisclosed amount
Centennial Bank, undisclosed amount
Gary Head, President of Signature Bank, told The City Wire he was not approached for settlement by Arvest. Though Signature Bank was listed among those with claims to Smiley’s retirement account, Head said the bank did not file a claim with Benton County Court for payment.
“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.
First State Bank of DeQueen was the other institution not settling with Arvest. Bank officials reportedly said they too were not approached.
LIABILITY AGAINST FRAUD
Bank officers such as Smiley typically are required to carry professional liability coverage that protects them and their employer against financial loss.
Garland Binns, attorney with Dover Dixon & Horne in Little Rock, said banks typically have blanket liability coverage on their officers and employees in fiduciary positions. He said the policy can provide against financial loss in the case of fraud. It is not known if Arvest had blanket liability coverage on Smiley, or if the bank has filed any claims with liability carriers regarding the fraud alleged by Smiley.
Smiley allegedly signed other bank officer names on official Arvest documents that allowed him to borrow money from 20 banks using his bank retirement account as collateral. The retirement account had a value of roughly $500,000, but Smiley pledged that same collateral several times without the knowledge of Arvest or the lending banks.
Arvest told The City Wire that none of the officers whose names were signed in connection with pledging Smiley’s retirement account had knowledge of the loan and did not sign the papers.
“No other Arvest employees have been implicated in this matter,” said Jason Kincy, spokesman for Arvest Bank.
Smiley’s father, Henry Smiley Sr., also told the court that his signature was forged on loan documents to which he had no knowledge. Smiley Sr. claimed that he too, had been a victim of fraud in this matter.
The Federal Bureau of Investigation continues to probe the fraud allegations but no criminal charges have been filed. The statue of limitations on white collar fraud is seven years.
Tarvin said any criminal charges must come from the federal prosecuting attorney. He said the prosecution generally takes its time to fully investigate each case so that no stone is left unturned before a plea is entered.
Head said several years ago, he had a bank employee that committed a crime and it took three years before she had her day in federal court.