Sentencing to start in corruption cases

Woods’ set for this week, Neal’s next

FAYETTEVILLE — The corruption probe leading to five convictions of Arkansas lawmakers picked up steam again this week with the indictment of the chairman of the state Senate Judiciary Committee. And there appears to be no end in sight.

Related investigations by the U.S. Department of Justice and the Arkansas Attorney General’s Office span at least three states and into the halls of Congress.

Fallout from the investigations cost one of the largest behavioral health service providers in Arkansas all of its state business. All but four of the 14 people charged so far as a result of the investigations have a direct connection to that provider, Preferred Family Healthcare of Springfield, Mo. Seven were either an employee, an attorney, a lobbyist or a board member of Preferred Family or an affiliate.

The scene shifts this week and next to the U.S. District Courthouse in Fayetteville where two men convicted in a kickback scandal involving state grants will be sentenced.

The kickbacks involved former state lawmakers Jon Woods and Micah Neal, both of Springdale. Woods faces sentencing on 15 corruption counts Wednesday.

The cost to taxpayers of the corruption and its investigations hasn’t been tallied, but is certain to be in the millions. More than $2 million

in Medicaid fraud is alleged in the charges against one defendant alone. An indicator of the investigation’s scale is the $100,594 spent so far by the Arkansas Bureau of Legislative Research on legal fees to comply with requests for documents.

The state Senate changed its rules and set up a new Select Committee on Senate Ethics in the wake of the scandal to recommend reforms. The House will also have to deal with the damage done to public faith in the Legislature, House Speaker Matthew Shepherd of El Dorado said Thursday.

“What they did was wrong and has obviously caused a serious erosion of public trust from the misdeeds of a few,” Shepherd said. “It has tarnished the reputation of the Legislature,” he said. “There have been informal discussions of changes in the law that might be appropriate, but the lawmakers convicted so far have broken laws that are already in existence.”

Changes that would take effect before a law is broken might include measures for more transparency, although the House has taken large strides already in that regard, he said.

In the Senate, the new Ethics Committee is working on changes to clarify what the expectations are, what constitutes a breach and what the consequences would be, said Sen. Missy Irvin of Mountain View, chairwoman of the committee.

“We all made the assumption that everyone knew the rules and that they were abiding by them,” Irvin said.

Every senator received the benefit of that assumption until there was cause to believe otherwise, she said. That culture will change, she said. The Senate will make sure incoming members are well-versed in what the expected standards of conduct are. The new Ethics Committee is also authorized to hear ethics complaints against members, she said. It can then make recommendations to the full body based on what its investigation finds, she said. The Senate has the powers to remove members, if need be, under existing rules.

One rule the new committee will recommend is lawmakers disclose any direct or close financial interest they have in a bill they sponsor, Irvin said.

“If a lawmaker introduces a bill that benefits a certain type of business and his brother is in that business, the lawmaker

will have to disclose that,” she said.

THE TRAIN OF EVENTS

Since Neal pleaded guilty to a kickback-related conspiracy charge on Jan. 4, 2017, four former state lawmakers and one who was still in office were convicted in the investigation.

Sen. Jeremy Hutchinson of Little Rock, who Preferred Family retained as an attorney in Arkansas, was indicted Thursday. At least one more Arkansas lawmaker is implicated for taking bribes, the unnamed “Senator C” mentioned in a guilty plea in the case.

This week, the convicted receiving sentences are Woods and Randell Shelton Jr., a consultant convicted of passing kickbacks from then-President Oren Paris III of Ecclesia College in Springdale to Woods and Neal. Woods goes before U.S. District Judge Timothy Brooks at 9 a.m. Wednesday. Shelton goes before Brooks on Thursday, Paris on Sept. 12 and Neal on Sept. 13.

Most of those who pleaded guilty in the rest of the dragnet await sentencing as the probe goes on. Not even investigators emerged unscathed. One FBI agent in the case went under investigation for destroying evidence.

Grants to Ecclesia are one aspect of the case that appears wrapped up, although federal investigators won’t comment on an ongoing probe. No other lawmaker who made Improvement Fund grants to Ecclesia has faced charges.

The ongoing bribery and Medicaid fraud investigation into executives of Preferred Family Healthcare, however, resulted in new charges as recently as Aug. 20. Lloyd Warford, deputy to state attorney general Leslie Rutledge, confirmed Aug. 22 more lawmakers are under investigation by the state in cooperation with the federal investigation.

The link between the Woods’ investigation and the Medicaid corruption is lobbyist Milton R. “Rusty” Cranford, who also worked as an executive for Preferred Family. Subsequent charges against Cranford and others revealed an embezzlement and bribery plot that extends from the state Capitol to Springfield, Mo., and from there to Philadelphia to Washington.

A business started by Cranford also received state grants from Woods and Neal in which the pair also received kickbacks.

AT THE BEGINNING

Brooks released 532 pages of previously sealed documents in Woods’ case on Friday, revealing for the first time when the investigation of Woods began: July 24, 2014. By then, the first open signs of serious concern related to improper use of Improvement Fund grants had cropped up in Harrison. By the end of the year, then-state Rep. Karen Hopper of Mountain Home asked the Bureau of Legislative Audit to look into the finances of the Northwest Arkansas Economic Development District, which administered the grant money in the region.

The July 15, 2015, audit found Ecclesia College received $592,500 in General Improvement Fund money from the district between 2005 and 2014. Woods and Neal were responsible for $550,000 of it. Later, grants from other districts were shown to bring that total to $715,500. Cranford’s company, AmeriWorks, received $400,000 from the Northwest District in 2013.

Ecclesia and AmeriWorks each received more from the Harrison-based district than any other public entity or nonprofit group except for a district-wide program to insulate the homes of impoverished Arkansans.

Federal investigators haven’t said when and where their inquiry began, but court documents show the Improvement Fund grant to AmeriWorks attracted their attention. Court documents in the Woods case revealed investigators questioned Cranford directly in 2014 about the grant. Cranford returned the $400,000 to the district shortly afterward. The return check from the account of a Preferred Family affiliate is dated Aug. 13, 2014, and bears the signature stamp of Preferred Family’s chief financial officer at the time, Tom Goss, grant records show.

One of the lobbyists for Preferred Family was a political consultant who had long been under investigation in Pennsylvania, according to the U.S. attorney’s office. The lobbyist said in his plea a scheme to commit Medicaid fraud originated in Preferred Family’s headquarters in Missouri.

Both Woods and Neal began cooperating with federal investigators in late 2015, court records show. Neal continued his cooperation and testified against Woods and Shelton at their trial. Woods met with investigators and gave information at least twice, once each in the November and December of 2015. Woods changed attorneys and stopped cooperating in March 2016, court records show.

THE WIDENING INVESTIGATION

Rumors of pending indictments swept the Capitol for a year before Woods, Paris and Shelton were indicted in March 2017. By June of that year, legislative staff at the Capitol persuaded lawmakers to hire outside legal counsel to help them comply with all the document requests and subpoenas by federal investigators.

As of Wednesday, that legal assistance has cost the Bureau of Legislative Research $100,594 and an uncounted number of man-hours. Legislative records are exempt from public disclosure, so what investigators obtained and which lawmakers’ records they demanded remains undisclosed. The indictments in the Woods kickback case clearly implicated Cranford, but didn’t name him. He wasn’t indicted until Feb. 20 of this year. By that time, three of Cranford’s business associates had pleaded guilty to federal charges. At least two further implicated Cranford, court records show. All three of those pleas were to federal authorities in Missouri because they involved Preferred Family.

One was Donald Andrew “D.A.” Jones, a Philadelphia-based lobbyist. Executives at Preferred Family hired Jones in 2011 as their lobbyist in Congress even though nonprofit groups receiving federal taxpayer money in programs such as Medicaid are prohibited from lobbying for more. Jones pleaded guilty on a conspiracy charge in December. He confessed to giving several members of Congress illegal campaign donations. Those congressmen, unnamed in Jones’ guilty plea, haven’t been charged to date.

Jones became subject to an FBI investigation after the 2012 Democratic primary in Pennsylvania, pleading guilty in 2017 to helping pay a bribe to the Democratic opponent of a client of Jones’ lobbying firm to drop out of the race.

The next Cranford associates to plead guilty in Missouri was Eddie Wayne Cooper, a former Arkansas state House member from Melbourne. Cooper went to work for Cranford’s lobbying firm after leaving the Legislature in 2011 and was involved in the hiring of Jones, according to court records. Cooper’s Feb. 12, 2018, guilty plea revealed he and the lobbying firm he worked for — Cranford’s — spent millions on illegal lobbying of Arkansas legislators on behalf of Preferred Family.

Cranford accepted a plea agreement with federal authorities June 7. His confession laid out a $3.5 million bribery and embezzlement racket in Arkansas from 2010 to 2017. He implicated unnamed Preferred Family executives and directly implicated Hutchinson. Hutchinson on Friday announced plans to resign, but declared his innocence.

The size and scope of the investigation — and how many U.S. attorneys and federal agencies are involved — remains under wraps. This much is known from court records: Investigating agencies include the FBI, the IRS, and offices of Inspector General from the federal departments of Labor, of Health and Human Services, of Housing and Urban Development, of the FDIC and of Veterans Affairs. Sean Mulryne, an attorney for the Department of Justice Public Integrity Section in the U.S. Department of Justice, was active in the Jones prosecution and was a trail attorney in the trial of Woods and Shelton.