Smith, also a former coach at Michigan State and Louisville, was hired in April to replace Bobby Petrino, who was fired after revelations that he had hired his mistress to a position in the football department and given her $20,000 in gifts. Smith was an Arkansas assistant for three seasons under Petrino before leaving in December to become the coach at his alma mater, Weber State.
Following Petrino's firing, Smith approached Arkansas athletic director Jeff Long about the job as was later signed to a 10-month, $850,000 contract. Long said Smith was up front about his financial problems during the hiring process, and he was comfortable the issues wouldn't affect Smith's ability to coach the Razorbacks.
"Certainly, initially, I had concerns, but as he explained the situation to me, it clearly became a bad investment," Long said. "There's a large differentiation for me between what we had just gone through and someone who had made a bad financial decision and put himself in a financial difficulty. But at the same there, there was nothing inappropriate other than he had engaged in a risky financial deal."
Smith said his land investments began through acquaintances while he was the coach at Louisville from 1998-2002, starting with one subdivision development and evolving from there.
As the real estate market began to slow several years ago, Smith said, he and his partners faced a difficult time maintaining their investments.
"It just got big," Smith said, who described his stake as being in the "multi-millions."
"It was a situation where we all made a little and said, 'Well, that's good. Let's see if we can make a little more,'" he said. "At that point, the bank was willing to give away money. We got in over our head with land, and then the bubble burst and all this land value dropped and we couldn't sustain it."
Smith wasn't sure exactly how much money he owed to creditors, including some of his former partners, but he has started preparing to declare bankruptcy now. He wasn't 100 percent certain he'll have to declare, but said "that's where I am proceeding to get my plate cleaned up."
One of Smith's former partners, John Mason, filed for bankruptcy in December in Kentucky, listing Smith as one of his creditors. Mason's attorney, Julie Ann O'Bryan, didn't immediately respond to e-mails sent by The Associated Press on Tuesday, but in his bankruptcy filing he listed liabilities totaling between $10 million and $50 million.
Mason's filing listed $250,000 in debt to one of Smith's investment limited liability corporations, while also listing an unknown amount of debt to Smith personally. The filing also listed numerous banks as creditors, with Fifth Third Bank in North Carolina listed as the largest. Barbara Grimsley, a spokeswoman for Fifth Third Bank, said Tuesday it was the bank's policy not to comment on customer accounts.
Smith is represented by attorney Jim Dowden in Little Rock and has representation in Kentucky.
"I think everybody got into this real estate deal, hoping to make a bunch of money," Dowden said. "Just like there are prominent families in northwest Arkansas that did, but unfortunately the recession hit and here we are."