U.S. fraud case ends in mistrial for two men

A mistrial was declared late Thursday afternoon in a major-fraud case against Little Rock businessmen Ross Alan Hope and Mikel Kullander, after a federal jury announced it was hopelessly deadlocked on the charges.

The jury had deliberated half a day Wednesday and all day Thursday. Its foreman told U.S. District Judge Leon Holmes about 2 p.m. Thursday that the panelists couldn’t agree on a unanimous verdict, and Holmes encouraged the group of 12 to return to the deliberations room and keep trying.

But three hours later, jurors announced that they still didn’t have a consensus and didn’t see the situation changing.

In keeping with the rules of federal court, the jury was prevented from telling Holmes which and how many charges they could and couldn’t agree on, and how many jurors favored conviction or acquittal.

Hope, the owner of a heating and air-conditioning business called Powers of Arkansas, and Kullander, the owner of Kullander Construction Co., faced 56 charges between them. Each man faced a single major-fraud conspiracy charge, three counts of major fraud and 24 individual mailfraud counts. Major fraud applies to transactions involving more than $1 million.

Holmes declared the mistrial at the end of the workday, and there was no immediate word from federal prosecutors on whether they expect to pursue the charges a second time, reformulate the case or drop it altogether.

The U.S. attorney’s office for the Eastern District of Arkansas is currently between leaders, as Chris Thyer, appointed by President Barack Obama, departed in March after seven years and President Trump’s replacement nominee, Cody Hiland of Conway, is still undergoing the confirmation process. The Senate Judiciary Committee voted Thursday to approve Hiland’s nomination, but it still must be approved by the full U.S. Senate.

The major- fraud case against Hope and Kullander, each 57, concerned their formation of a new company, DAV Construction, in 2007 with Jim Wells, a former employee of Hope’s who is a 100 percent service-disabled veteran.

Hope testified this week that the idea to form DAV came to him when Wells announced he had to quit his job as a computer-assisted design and drafting specialist after 19 years because the U.S. Department of Veterans Affairs had declared him 100 percent disabled, which prevented him from working. Wells suffered from seizures that stemmed from his military service years earlier.

Congress had enacted a law in 2006 called the Veterans Benefits, Health Care and Informational Technology Act, which mandated that government agencies seeking contractors for big jobs give first preference to businesses operated by service-disabled veterans.

Hope said he was aware of the government program, so he asked Wells if he was permitted to own a company, even if the Department of Veterans Affairs said he could no longer work. Hope testified that as a frequent subcontractor for federal agencies, he had regularly sat in on meetings and knew that some agencies weren’t pleased with the quality of the veteran-owned businesses they were required to hire as the main contractors for construction projects. Hope said he thought that forming a new business that might qualify for the set-aside contracts could be a solution for his business, his customers and Wells.

Hope said he was familiar with the business side of setting up a company, but asked Kullander, his best friend, to join him and Wells to supply the much-needed expertise of bidding on construction contracts.

Kullander didn’t testify, but his father, Karl Kullander, 82, testified that he formed the family construction business in 1978 after moving to Little Rock years earlier from Iowa with his wife, who was from Little Rock. The elder Kullander, who retired in 2012, called his son an “excellent” project manager and estimator who had a knack for supervising big jobs, saying it was only natural that Mikel Kullander eventually took over the business.

Hope, Kullander and Wells incorporated DAV in 2007, and months later started receiving federal contracts worth millions of dollars. But after several years, a new government office set up to verify that the veteran-owned businesses were in compliance with the law found that DAV was no longer qualified because Wells didn’t appear to still be in control of the business. The verification office noted, among other things, that Wells was no longer listed as president of the board and cited his admissions that he didn’t go to the office regularly.

After Hope and Kullander were indicted in December on fraud charges, defense attorneys complained that the charges should be dropped because the men had been following federal regulations as they understood them and their federal contacts had given “tacit approval” to the way they were doing business. The attorneys maintained that Hope and Kullander acted in “good faith” in complying with federal regulations.

At the time of the indictment, DAV had received $15.5 million in federal contracts through the service disabled veteran- operated business program.

In closing arguments Wednesday, Assistant U. S. Attorney John Ray White said that Hope’s and Kullander’s actions after initially being removed from the set-aside program — such as backdating documents — showed their intent to deceive the government. But defense attorneys Tim Dudley and Jane Duke argued that the men’s actions only showed their efforts to try to comply with the regulations on which they had been previously confused. The defense attorneys also complained that the regulations were subject to varying interpretations.