Ex-lawmaker says recordings were his idea, not FBI’s
Judge dismayed as to why pristine copies unavailable
FAYETTEVILLE — Former state Rep. Micah Neal secretly recorded anyone he felt federal investigators might be interested in for most of 2016, he testified Friday in a hearing in the corruption trial of former state Sen. Jon Woods.
Neal, who pleaded guilty last January to one count of conspiracy to commit fraud, said he recorded conversations in Northwest Arkansas and Little Rock from March through October of 2016.
But investigators weren’t interested, he said.
Neal, testifying in U.S. District Court in Fayetteville, insisted he recorded conversations on his own initiative using a recorder disguised as a pen.
Defense attorneys challenge his account, pointing to a March 30, 2016, text exchange between Neal’s attorney, Shane Wilkinson, and FBI investigator Robert Cessario. Cessario asks if “your guy” was willing to talk to a friend of Woods.
Wilkinson said in an interview after Neal’s testimony that the exchange was a discussion of whether Neal was willing to wear an FBI wire to record a conversation. The FBI decided against it, he said.
Neal also testified to a federal grand jury in Fort Smith in 2016 and met with federal investigators on at least six occasions in their investigation, he said. The
U.S. Department of Justice alleges Neal and Woods, both of Springdale, took kickbacks in return for steering $550,000 in state General Improvement Fund grants to Ecclesia College in Springdale.
The kickbacks, according to the government’s indictment, were passed through a consulting firm owned by Randell G. Shelton Jr., a mutual friend of Woods and Ecclesia President Oren Paris III. Woods, Shelton and Paris face trial April 9.
Neal secretly recorded about 140 hours of conversations with Woods. Those recordings were the focus of a hearing Thursday and Friday before U.S. District Judge Timothy Brooks.
Some of the recordings were given to defense attorneys, but the defense discovered gaps in the recordings provided. Further investigation found 79 more audio files in Wilkinson’s possession on a computer at his Bentonville law firm. The defense did not learn of the 79 additional audio files until Nov. 15, 2017.
The hearing this week involves a motion by defense attorneys to dismiss the indictment against Woods, Paris and Shelton because the government failed to disclose the existence of the additional recordings.
Karri Layton, a paralegal for the Wilkinson law firm, testified Thursday that the Wilkinson law firm had made the 79 files available to the government at a Dropbox file-sharing site a few days after it had transferred the bulk of the files on Nov. 2, 2016.
Cessario was ordered to turn over a laptop on to which he had downloaded audio files to computer experts at the FBI’s state headquarters in Little Rock after the discrepancy was brought to light at a Nov. 30, 2017, pretrial hearing. Before turning in the laptop, Cessario had it professionally erased because it contained personal medical records, he testified Thursday. Then he erased the computer’s hard drive again himself before turning it in.
Gregory Payne, an attorney for Paris, filed a letter describing those events on a public website in December. The letter was subject to a protective order from the court and should have been sealed, Brooks has ruled. The matter of the letter’s release is expected to be a subject at a later proceeding, according to court documents.
All the audio files downloaded using the laptop were transferred to discs and provided to attorneys in the case, Cessario testified Thursday.
An employee of Dropbox confirmed Friday that Cessario downloaded audio files only once and before the 79 additional files were placed in the file-sharing service. Justin Taleisnik, a law enforcement analyst with Dropbox, testified via a video link from California.
Cessario testified he downloaded the audio as soon as he was told they were available, on or about Nov. 3, 2016. He did not check the Dropbox file after that. He also said he used the laptop because filters on desktop computers at FBI offices bar the use of Dropbox. Cessario also told the court the government never intended to use Neal’s audio because it was gathered without the government’s supervision, without proper documentation, verification, context or notes.
The government alleges Neal and Woods, both Republicans, also accepted kickbacks in return for directing $400,000 in grants to a Bentonville nonprofit organization called AmeriWorks. Neal admitted he took two kickbacks totaling $38,000 in exchange for directing the grants. He has not been sentenced.
Freedom of Information Act requests by the Northwest Arkansas Democrat-Gazette last year found that at least three of the state’s economic development districts, which distributed state General Improvement Fund grants, have been subpoenaed by federal investigators. Another will not confirm or deny whether it has.
Since that time, staff members for the state Legislature have requested and obtained permission to hire outside legal counsel to represent them in dealing with federal investigators who have requested more records. Kenneth Elser, acting U.S. attorney for the Western District of Arkansas, confirmed the ongoing investigation in a court hearing May 23.
Woods faces 15 counts of fraud, all relating to either wire or mail transfers of money. Paris and Shelton are named in 14 of the fraud charges. All three are charged with one count of conspiracy to commit fraud. Woods also is charged with one count of money laundering in connection with the purchase of a cashier’s check.
The case involves grants from the state General Improvement Fund, which was controlled by legislators at the time of the alleged kickbacks. The fund consists of state tax money left unallocated at the end of each fiscal year and interest earned on state deposits. Each legislator was given a share of the fund to be directed to a nonprofit group or government entity. The state Supreme Court declared this method of distribution unconstitutional in a ruling Oct. 5.
The indictment does not give a total figure of what Woods is accused of receiving in kickbacks, because it says portions of it were paid in cash.
Woods, Paris and Shelton have entered innocent pleas. They were first indicted on March 3 with a superseding indictment filed April 18 and a second superseding indictment filed Sept. 13.
The three defendants face up to 20 years in prison on the fraud and conspiracy charges, if convicted. Woods faces an additional 10 years on the money laundering charge, if convicted.
All three may also be ordered to forfeit any money or property obtained through their actions, if found guilty.
AmeriWorks was incorporated by Milton “Rusty” Cranford of Rogers, a lobbyist. He also held an executive position with Alternative Opportunities, which provided behavioral and substance-abuse treatment. Staff members at Decision Point, a subsidiary of Alternative Opportunities, helped file the grant involved in the kickback allegation, according to state records and court documents.
An employee of Dropbox confirmed Friday that Cessario downloaded audio files only once and before the 79 additional files were placed in the filesharing service.