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Matt Cone admits to defrauding Allegiance Bank via unauthorized equipment sales in 2021 agreement

Save SBISD has just completed its first review of a lawsuit on this list of civil actions taken against Matthew Cone. The first case we examined was Allegiance Bank v. MCSC Holdings, LLC, Matthew T. Cone, et. al. This is the first of two updates we will be posting on this particular legal action; there is too much to cover in one post.

In 2019, Mr. Cone and his affiliated entities sold 5 pieces of heavy equipment, which Mr. Cone had pledged to Allegiance Bank as collateral, to a third party. This is a complicated story, but we will do our best to summarize.

Starting in 2017, Mr. Cone and his affiliated entities entered into a series of promissory notes with Allegiance Bank. These loans started off as revolving lines of credit against Mr. Cone's Accounts Recievable, but as the loans were maxed out, Mr. Cone wanted more access to cash.

Allegiance Bank obliged, and throughout 2018 and 2019 the bank lent Mr. Cone and his entities more money. The bank also added more and more teeth to each successive note, requiring more collateral, higher interest rates, and more personal guarantees and corporate guarantees for each incremental dollar. But the returns on investment simply weren't there for Mr. Cone.

Financial trouble started for Matthew Cone back in the white-hot economy of 2019. Mr. Cone and. his entities somehow found themselves on the verge of default in January 2019, two years after entering into his agreements with Allegiance Bank.

Hoping to avoid forbearance, Mr. Cone and the lender agreed to one last change of terms, to give Mr. Cone more breathing room:

Unfortunately for the parties, those revised terms did not work out for Mr. Cone.  The lenders took the next undesirable step and demanded payment and the surrender of collateral on November 20, 2019.

From the same document, a Notice of Default:

,,,a Notice of Acceleration:

...a Demand for Payment of $657,005:

And, most importantly, a Demand for Surrender of Collateral:

No bank ever wants to seize collateral. Ever. Banks don’t like physical things. They have to touch them, move them, store them, then sell them. That is not what banks do. Banks only deal in money, not dirty equipment in the real world.

Yet, Allegiance Bank was convinced that the only way they could get paid back was by getting their hands dirty.

Mr. Cone did not bother to collect this notice sent to his addresses of record:

It seems Mr. Cone was uninterested or unable to satisfy the cash demands in this letter. So the bank had to send someone out to the field to seize and collect the collateral.

What exactly was the physical collateral? A bunch of dirty bulldozers, heavy equipment, trucks and trailers, each of them with a VIN or serial number so we know they existed:

And we know that Allegiance Bank was in physical possession of the Titles to those pieces of dirty equipment, so there’s no way they could have been legally sold without Allegiance Bank's involvement:

So what happened when the bank showed up to collect the bulldozers?

Well, they weren't there.

Matthew T. Cone, Candidate for SBISD Board of Trustees, had sold the collateral without the bank's knowledge prior to the bank's arrival in the field. Mr. Cone did this notwithstanding the fact that the bank was in physical possession of the Title Certificates for these pieces of equipment!

You read that right. Matt Cone knowingly and deliberately sold pledged collateral to a third party, without conveyance of title to that buyer, and without the permission of the titleholder, Allegiance Bank. Furthermore, Mr. Cone did NOT remit the proceeds from this unscrupulous sale to the lienholder, Allegiance Bank.

Once again, Mr. Cone did not remit the proceeds from these sales to the Lender, instead he reserved those monies for his own use!

That is not speculation, conjecture, or hearsay. That is not what a jury or a judge concluded on a preponderance of the evidence standard. Nor is it based on what a jury concluded beyond any reasonable doubt. It’s even more bulletproof than that.

Matt Cone confessed to it, in writing, and affixed his signature to that confession in 2021, initially admitting that “events of default have occurred” and his indebtedness had “not been paid as agreed”.

Mr. Cone went on to confess that the following items “were sold to third parties by Borrower, without Lender’s prior consent or approval and the proceeds from such sales were not paid over to Lender nor applied to the unpaid balances of the Loans”:

Signed, Matthew T. Cone.

Four (4) times:

And notarized, for good measure:

Case closed.

So with Mr. Cone now having admitted he did sell this collateral in an end-run around his lender's security protections, how large was the scale of Mr. Cone's deception?

Huge. Financially and physically huge.

Items A, B, and C, which Matt Cone confessed to selling without consent or proper title, were:

  • a Caterpillar D6T XL Bulldozer

  • a Caterpillar 140M Series II Grader

  • a Caterpillar 615C Series II Water Wagon

This is a CAT D6T XL Bulldozer. It has a gross dry weight of over 22,000 lbs. It has a used market value of ~$225,000:

This is a CAT 140 M Series II Grader. It is 33 feet long. In has a gross dry weight of over 30,000 lbs. It has a used market value of at least $100,000:

This is a CAT 615C II. It is thirty-eight (38) feet long, and weighs up do 50,000 lbs. It has a used market value of ~$350,000:

How do you even get started selling nearly 50 tons of heavy equipment, with a combined value of around a half a million dollars, when you don't even have the titles to these assets? How? and to whom?

We at Save SBISD have speculated and reached our own conclusion. We suspect many of our readers will arrive in the same conclusion we have.

We felt this information was worth of its own update, but remember, this is just the preamble to the actual causes of action in Allegiance Bank v. MCSC Holdings, LLC, Matthew T. Cone, et. al. Save SBISD will update you on the remainder of the case shortly. Then we will move onto the next one, and so on.

So, if you want to remain informed, subscribe and follow us on Twitter if you haven't already.

The complete source documents are below. Most (but not all) of the snippets in this update came from Plaintiff's Exhibits A-15 and A-14.

Plaintiffs Petition
Download PDF • 536KB

Plaintiffs Exhibits
Download PDF • 19.19MB


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