Verdict innocent on fraud charge

Hot Springs man acquitted in phone-program scheme

After three days of trial, a federal jury acquitted a Hot Springs man Friday of participating in a conspiracy to defraud a federal program designed to ensure affordable access to telephone services for low-income people.

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Johnny Edward Walker, who was represented by Little Rock attorney Jason Files and Hot Springs attorney T. Clay Janske, walked away from the federal courthouse after the lunchtime verdict a free man. The jury had deliberated for about an hour and a half on a single charge of conspiring to commit wire fraud.

Walker and Cody Joe Morris of Sherwood were jointly indicted Feb. 4, 2015. Morris pleaded guilty to the conspiracy charge March 14, 2016, and is awaiting sentencing May 3.

The men were accused of conspiring from about December 2012 through about April 2013 to defraud the Universal Service Fund, a federal program designed by the Federal Communications Commission to ensure reasonable and affordable access to telephone services nationwide. It is funded by fees from telecommunications providers who generally pass along the fees to consumers as a "universal service charge" or something similar on their bills.

The Universal Service Administrative Co., an independent nonprofit corporation appointed by the FCC to administer the fund, collects money from telecommunications providers and administers the Lifeline program, which is meant to help low-income people.

According to the indictment, eligible companies can receive reimbursement from the administrator for providing discounted cellphones and wireless services to qualifying customers. The eligible companies, like Walker's TDE Industries, are paid $9.25 a month for each qualifying customer who receives Lifeline services. If the customer lives on tribal land, the company receives an additional $25 a month, for a total of $34.25 per month per customer.

The indictment said Walker hired salesmen, including Morris, to serve as "field agents" to find potential customers.

Starting in December 2012, it said, Morris initiated his part of the scheme by driving to Roland, Okla., just over the border from Fort Smith. It said he worked out of a motel room and, using the website for eligible telecommunications carriers, enrolled 150-200 customers for Lifeline service, falsely claiming he contacted each one and that each was eligible for a free cellphone.

In reality, the indictment states, once the cellphones were activated, they were thrown away or given away.

The indictment also accused Morris of renting motel rooms in Pine Bluff in March 2013 where, reportedly at Walker's direction, he enrolled about 700 customers that he said lived in Oklahoma but whose names he actually found in a phone book.

On the witness stand Thursday, Walker testified that he had no idea Morris used a phone book to come up with names, but he knew something was wrong when he saw the number of phones activated at one time, because "you couldn't possibly have done that many" in a short period.

He repeatedly denied directing Morris or any other salesmen to falsify customers and accounts, though he acknowledged netting $79,000 from June 2012 through March 2013 through the program.

Walker told Acting U.S. Attorney Pat Harris on cross-examination that Morris and three other salesmen "did wrong," but that nobody in another group of salesmen he hired falsified any numbers.

"So you hired a bunch of crooks?" Harris asked.

"I hired a bunch of people who turned out to be whatever they turned out to be," Walker replied.

In Morris' plea agreement, he acknowledged being responsible for more than $150,000 worth of fraud. At sentencing before Chief U.S. District Judge Brian Miller, he faces up to 30 years in prison and a fine of up to $1 million.

Metro on 04/22/2017

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