What Is Going On At SMI?

The headline should perhaps read “What is going on at Sonic Financial?” From falsified SEC filings to executives lying about their credentials, the empire of O. Bruton Smith is on shaky ground.

Chalk it up to the recession or mismanagement, there is a lot of troubling things going on at the company. It seems every day there is a new story about their problems.

In mid-March Bloomberg reported Speedway Motorsports Inc.’s (which operates under the Sonic Financial umbrella) President and Chief Operating Officer Marcus Smith (son of company majority shareholder Bruton Smith) did not earn the degree he said he earned from the University of North Carolina.

Smith’s only response was that he was “checking with the University for clarification.” As T.C. said a couple of weeks ago, how do you not know if you graduated?

Then came the earnings report from Sonic Automotive (one of the largest auto dealers in the country), a sister company of SMI and also under the umbrella of Sonic Financial. In 2008 the company reported a loss of more than $685 million. Company officials were upbeat, but admitted bankruptcy is an option.

The problem with that for SMI is that some of Sonic’s $1.9 billion debt is backed by five million shares of SMI. According to the Charlotte Observer $1.5 billion of that debt is expected to mature this year and next with a payment of more than $105 million due in May. If that debt can’t be restructured the b-word is going to look more like a reality.

Now I’m not going to try to discuss the questionable connections of all of Smith’s companies, but lucky for you others have taken the time to do it. The Charlotte Business Journal did a big article about the precarious and incestuous relationships. Likewise, convicted white-collar felon Barry Minkow, founder of the Fraud Discovery Institute, has created a list of ten red flags for fraud at SMI. He has even started a website dedicated to the company called SpeedScamMotorsports.com.

While I personally have not done any reporting on the situation at SMI, what Minkow says makes a lot of sense. If you have ten minutes check out the YouTube video he has created. He does a very good job of explaining all of the issues within the company.

On top of all the questionable practices within Sonic Financial, SMI claimed in a Securities and Exchange Commission filing that they had made a request for a Sprint Cup Series date at Kentucky Speedway. NASCAR in turn said no such request had been made.

I don’t know about you, but if I were a shareholder of SMI I wouldn’t be too thrilled to learn the company is not being completely honest with me or the Feds in their filings. Makes you wonder what else is going on.

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8 Responses to “What Is Going On At SMI?”

  1. Rick says:

    Hard to imagine SMI going under, but what might be the possible outcomes:
    Lots of open race dates?
    How many tracks would ISC purchase?
    Are their other investors willing to invest into tracks during down economy?
    The Rock gets a race date?
    I noticed something at Atl this year – not nearly as many souvenir rigs or event spaces in use. Is this true for other tracks…anyone?

  2. Zieke says:

    You know it looks like ‘ol Bruton is getting caught with his pants down, which could get real ugly in the near future. I have known people who have been in futures and etc. for a long time, and they are very careful when entering in an investment of this kind because of the huge risks. In my opinion, these red flags are for real, because of the large number of them and the apparent nature of the accusations.

  3. ATS says:

    Just curious, but do you have a problem with SMI? I know your reporting the facts as well but it looks as if you go out of your way to bash the Smith’s.

    You know ISC isn’t perfect either but if either fail NASCAR would be in trouble and our jobs after that.

  4. Journo says:

    ATS – Actually I really like Bruton. I wrote a post several months ago in fact talking about how much I liked he and Humpy. That’s beside the point though.

    I don’t think neither T.C. nor I have taken unnecessary shots at any of the Smiths and I certainly don’t want to see SMI or Sonic Financial fail. But when you do stupid things like lie to the SEC, or lie about graduating from college (I don’t care if you went to college, but don’t lie about it), criticism is bound to head your way. Especially when all of those things come in such quick succession.

    We certainly are not alone either. Have you read the Charlotte Observer lately? There is a new story about the company just about everyday. Yesterday I read about the compensation of Bruton and Scott Smith. Certainly none of these things have been very flattering to the company.

    So to answer your question no I don’t have a problem with the Smiths or SMI.

  5. RW says:

    SMI corupt? Why doesn’t someone investigate Hendricks? Oh that’s right they did but it was swept under the table when he had his “illness”.

  6. Richard in N.C. says:

    Isn’t it curious that you see nothing about any of the possible SMI-Sonic financial difficulties in the mainstream sports media, except occasionally in the Charlotte Observer.

  7. stevec says:

    RW Rick has not lied to anyone I know of. Filing corporate paperwork with the SEC and lieing about it is usaully the begining of the end. Lieing about graduating from College is just plain childish. At 80 years old Bruton appears to have made some bad managment choices. When this happens the board of directors will do what ever is neccessary to generate cash flow, I would not be suprised to see the sale of Sonic Financials assits, most likely the dealerships will be the first to go. Then you should see major changes in management, in any areas of the corporation is looseing money. But with the Smiths holding nearly 70% of the company stock, you may just see the titanic all over again. Only time will tell. As I have always said, With every action there is a result and it seems that some of Brutons actions have had very poor results.

  8. Robyn says:

    @Rick – There are definitely less merchandise trailers at the track. MA cut back the amount of trailers they are sending to the track due to slow merchandise sales.

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