FORT SMITH - Fayetteville attorney K. Vaughn Knight was deeply involved in every aspect of the business of his client, former Northwest Arkansas developer Brandon Barber, Internal Revenue Service criminal investigator David Kimbrough said Friday.
Kimbrough’s testimony took up the most of the fifth day of Knight’s trial in federal court on charges of conspiracy to commit bankruptcy fraud, bankruptcy fraud, making false statements and five counts of money laundering.
Kimbrough, who wascalled as a witness for the government, said he was one of the many FBI and IRS agents who worked on the Barber investigation.
He said in talking to witnesses during the investigation, he learned that Knight was involved in all of Barber’s substantial real-estate transactions, represented him in all of his legal matters, knew all of Barber’s 26 business entities and knew all about his financial affairs.
Knight attorney David Matthews of Rogers criticized some of Kimbrough’s assertions, getting him to admit, for example, that Knight did not represent Barber inhis driving while intoxicated case or in Barber’s divorce from his wife, Keri.
Knight also did not prepare any contracts for the socalled Ball Park or Executive Plaza land transactions that Barber engineered in 2008, Kimbrough admitted.
And Matthews pointed to a November 2008 email between Barber and Knight in which Barber lied to Knight about a $314,000 check he got from Springdale developer Jeff Whorton from the Executive Plaza sale instead of the $394,000 Knight was expecting.
In the email, Barber told Knight $314,000 was the onlymoney Whorton had on hand the day Barber approached him for payment.
Actually, Whorton testified Thursday that he had negotiated down the amount of payment to Barber because of extra work done on Barber’s mansion, which he sold to Whorton as part of the Executive Plaza deal - and the amount of trouble Whorton took to wire the money to Knight’s lawyers trust account.
Trust accounts are used by lawyers to hold and safeguard clients’ money, but it’s alleged that Knight used the account to help Barber hide assetsfrom the bankruptcy court.
The Executive Park deal resulted in both men, along with developer Brandon Rains and Rogers attorney David Fisher, being indicted on federal bankfraud, money-laundering and other charges. Barber, Whorton and Rains have pleaded guilty to charges in the indictment, while Fisher was acquitted at trial last month.
In the pleas, the men admitted they misrepresented the value of land for which the bank loan was sought and paid kickbacks to participants in the deal.
Kimbrough testified that Barber and Knight began their relationship Jan. 11, 2008, when Knight emailed Barber to thank him for donating the Dallas Cowboy tickets that Knight and his wife bought in an auction. Knight also extended an offer to provide legal advice to Barber.
Kimbrough said Barber already was in financial troublewith creditors at the time of the email. Barber responded in an email to Knight’s offer of legal help, saying it was “an angel to me.”
First Assistant U.S. Attorney Wendy Johnson presented to the jury, through Kimbrough, a series of emails between Knight and Barber that showed the working relationship the two had.
Much of the evidence presented during the trial was in the form of emails between various people. Kimbrough said as many as 100,000 emails were taken from hard drives from the Barber Group office and were sifted by federal agents for evidence during the investigation. Copies of the emails also were turned over to Knight’s attorneys.
On Jan. 16, 2008, Knight told Barber in an email that he should have an account where creditors could not reach his money. Barber opened an account at Union Bank.
On Feb. 25, 2008, Knight said in an email that Barber needed to get his personal property appraised beforedeclaring bankruptcy, and he should make sure not to keep the appraisal a secret. Such a property appraisal would alert creditors of the possibility he could file for bankruptcy, which could give him leverage in negotiating his debt with creditors, Knight wrote.
Under cross examination, Kimbrough agreed with Matthews it was not illegal for a lawyer to tell a client to get a property appraisal and tell creditors that if they did not negotiate the client’s debt, he would go into bankruptcy.
Matthews also reiterated that Barber wanted and tried to avoid bankruptcy and only decided to file for bankruptcy the week before he filed the petition in federal bankruptcy court on July 31, 2009.
On March 5, 2008, Knight and Barber exchanged emails about hiring appraiser Charles Hudson to appraise the 28 acres involved in the Ball Park transaction. It was so named because the land sat next to the Arvest Ballpark in Springdale.
In the exchange of emails,Barber wanted Hudson to appraise the property at $3.5 million, but Knight responded that Hudson didn’t think he could appraise the property for that amount. A meeting was scheduled with Hudson to talk about it. Matthews suggested to Kimbrough that it would be good business to get an appraisal before deciding whether the deal was worth pursuing. And Hudson was an appraiser who was approved by First Federal Bank, which was the lender in the transaction, he said.
But Kimbrough said it was customary for the bank to hire the appraiser, rather than one of the parties of a transaction, to ensure an independent and objective appraisal.
The Ball Park transaction closed March 31, 2008, with John David Lindsey Development LLC selling the land to Barber’s EIA International LLC for $2 million. EIA immediately sold the land to Outfield Development LLC, owned by developer Bob Gaddy, for $3.2 million.
Testimony in the trial will resume at 8:30 a.m. Tuesday.
Northwest Arkansas, Pages 9 on 11/09/2013