By Bill Lodge, Staff Writer of The Dallas Morning News, Published June 26, 1997
A Dallas jury Wednesday acquitted James Wadsworth “Jim” Smith II on all charges of conspiracy and wire fraud involving allegations that he had swindled $6 million from European investors in his factoring firm.
He immediately hugged his attorney, Assistant Federal Public Defender Clint Broden , then embraced his three children and other wet-eyed family members.
“Thank God for Clint Broden and the public defender’s staff,” Mr. Smith, 51, said as he left the courtroom of U.S. District Judge Sidney Fitzwater. “I owe those guys everything. ” “We’re disappointed,” Assistant U.S. Attorney Michael Uhl, the prosecutor, said after the verdict. “But we certainly respect the jury’s verdict. ” The acquittal occurred after two days of deliberations by a panel of nine men and three women. And it was accomplished despite testimony from Jim Smith’s younger brother, Hoke Smith.
Hoke Smith, who was not charged in the case, testified as a prosecution witness that he and Jim Smith conspired to entice foreign investments in Capitalcorp Financial Inc. by creating phony business records.
Those records were accounts receivable and purchase orders of Floral Foam Inc., Hoke Smith’s foam products manufacturer.
Jim Smith’s Capitalcorp provided Floral Foam with operating funds by buying its accounts receivable. Capitalcorp then charged Floral Foam interest on the outstanding balance and collected money from firms that bought products from Floral Foam.
As a factoring firm, Capitalcorp had similar relationships with several other companies in Texas and Arkansas, but Floral Foam was its largest customer.
Hoke Smith testified that he and his brother falsely inflated Floral Foam’s receivables and purchase orders to make the company appear more successful. And investors in Capitalcorp relied on Jim Smith’s word that Floral Foam’s accounts were valuable, both brothers testified.
But Jim Smith denied all of his brother’s allegations of criminal activity.
“I believed those receivables were good,” Jim Smith said.
Jim Smith testified that $750,000 in payments from Floral Foam to accounts controlled by him and his ex-wife in 1991 and 1992 were simply repayment of loans they had granted to his brother’s firm.
“I had nothing to do with it,” Jim Smith told jurors. “He [Hoke Smith] lied. ” Hoke Smith was not in the courtroom Wednesday and could not be reached for comment after the verdict.
“I trusted my brother explicitly,” Jim Smith testified earlier this week. “I thought he always told me the truth. I never really doubted him.
“The reality is that I was lied to,” Jim Smith said, referring to his brother. “I found that he had scammed me out of $150,000. ” Jim Smith added that his three children lost more than $270,000 in trust funds that were invested in Floral Foam.
“This family got left holding the bag,” Mr. Broden told jurors before they began their deliberations.
Both Floral Foam and Capitalcorp collapsed after Jim Smith was forced out of his factoring firm in late 1992.
But Capitalcorp continued to factor Floral Foam’s business in early 1993, Mr. Broden noted, adding his belief that Hoke Smith was responsible for the downfall of both firms.
“This is a man who let his own nieces and nephews put money in a company that he knew was failing,” Mr. Broden told the jury.
“Justice was done,” Mr. Broden said after the verdict. “I think they saw through Hoke Smith. “