Bank awarded $2.1 million in suit against Files

Senator, spouse in default on loans; two houses pledged

FORT SMITH — A circuit judge has filed a judgment against state Sen. Jake Files and his wife for more than $2.1 million for defaulting on loans for which they pledged their home, his business office and another house as collateral.

An attorney for First Western Bank of Booneville had filed suit against Jake and Michaela Files in June after they failed to make payments on the loans that were made to them in 2013 and 2014.

Sebastian County Circuit Judge Michael Fitzhugh filed the judgment against the Fileses in an order granting partial summary judgment to First Western Bank. The Fileses did not respond to the filing of the bank’s summary judgment motion, the judgment said.

Files did not respond to an email sent to him Tuesday

afternoon seeking comment on the ruling.

The ruling is the latest in a list of financial problems faced by the Fort Smith Republican who has served in the state Senate since 2011.

He is chairman of the Senate Revenue and Taxation Committee and serves on the Senate Transportation, Technology and Legislative Affairs Committee; Senate Efficiency Committee; the Arkansas Legislative Council; and the Joint Budget Committee.

Fitzhugh wrote in his Nov. 14 ruling that if the judgment was not paid within 10 days, the properties pledged in the four loans would be sold at the front door of the Sebastian County Courthouse in Fort Smith.

According to the summary judgment, the Fileses took out a mortgage on their home at 300 Free Ferry Landing to secure an $865,000 loan from the bank Aug. 22, 2013. The judgment said the Fileses defaulted on the loan Nov. 6, owing $844,158.96.

On Aug. 27, 2013, the couple took out a $350,000 loan from the bank and secured the loan with a mortgage on a house and property at 4105 Free Ferry Landing. As of Nov. 6, they owed $375,765.21

The Fileses took out a third loan July 29, 2014, for $30,125 and secured it with another mortgage on the property at 4105 Free Ferry Landing, the summary judgment said. It said the couple owed $31,769.57 as of Nov. 6.

The Fileses took out the loan from First Western Bank on Oct. 23, 2014, for $885,000 and secured the loan with another mortgage on their home and a separate mortgage on Jake Files’ business at 3203 Waco St. The property is the base of his construction business, FFH Construction LLC. The Fileses owed $878,224.38 on the loan as of Nov. 6.

Also named as defendants in the lawsuit First Western Bank brought against the Fileses were others to whom the Fileses were indebted, among them First National Bank of Fort Smith; Arvest Bank of Fort Smith; the Internal Revenue Service, which has a tax lien against the Fileses; Centennial Bank of Conway; and the Arkansas Development Finance Authority.

In issuing the summary judgment, Fitzhugh ruled that First Western Bank was first in line to collect its debt against the Fileses.

The FBI executed a search warrant against Files in August in relation to violation of federal wire fraud and money laundering laws, according to federal court documents. An affidavit for the warrant said Files put to his own uses more than $25,000 in state General Improvement Fund money he had obtained for the defunct River Valley Sports Complex project.

Files and Lee Webb were trying to develop a tournament-quality softball complex on 60 acres of city property at Chaffee Crossing when Fort Smith city directors in February terminated the city’s agreement with the two for lack of progress.

The city is suing the two men for breach of the agreement and want them to pay any expenses the city incurred because of the

breach. The city had paid out $1.08 million of the $1.6 million officials agreed to contribute to the project.

The Federal National Mortgage Association, also known as Fannie Mae, filed suit in March against FFH of Fort Smith LP, of which Files is a partner, seeking payment of more than $1.87 million on a loan it took out July 15, 2009.

A mortgage on the loan pledged collateral as Lot 1 of the Rock Creek Addition in Fort Smith, which is Rock Creek Apartments at 3020 N. 50th St.

Foreclosure judgments have been entered in at least two other lawsuits brought against Files, his company or him and his wife. Other companies have filed suit over nonpayment for building materials and equipment.

Files