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.