Inquiry into grant program crosses state

Federal agents subpoenaed state General Improvement Fund records from at least three of the eight economic development districts distributing those grants, records show.

All eight districts responded to state Freedom of Information Act requests from the Northwest Arkansas Democrat-Gazette. The requests came after then-state Rep. Micah Neal, R-Springdale, pleaded guilty Jan. 4 to accepting kickbacks. The money was paid in return for his help in obtaining improvement fund grants from one of those districts, according to the plea agreement. Neal's term in the House ended earlier this month.

The FOI responses included subpoenas to three of the districts. Two of the subpoenaed districts were ordered to turn over records specific to grants to Ecclesia College in Springdale, records show. The college has denied any wrongdoing involving the grant program.

Rodney Larsen, director of the Central Arkansas Planning and Development District, based in Lonoke, would neither confirm nor deny if the district also received a subpoena. However, its response to the FOI request gave a computer link to a web page bearing electronic files. The heading of the page opened by the link was: "FBI Subpoena 7.5.16 BATES". The district also provided a grant to Ecclesia, records show.

Northwest District

The Northwest Arkansas Economic Development District, based in Harrison, received two subpoenas from the office of the U.S Attorney for the Western District of Arkansas.

One dated Oct. 23, 2015, asked for records related to Ecclesia. The private, nonprofit Christian college received $592,500 in improvement fund grants from the district in 2013 through 2014, district records show.

The subpoena also requested any records of improvement fund disbursements involving Owen Paris III, Sen. Jon Woods, R-Springdale, and Randell Shelton.

An unrelated Benton County Circuit Court lawsuit lists a 8532 Carrie Smith Road address as Shelton's residence. The lawsuit was filed Oct. 31, and also lists the Carrie Smith address as the place of business for Shelton's Shingle Resource Recycling.

Ecclesia bought the house at 8532 Carrie Smith Road in 2013, according to Benton County records. The Secretary of State's office lists Oren Paris III, president of Ecclesia College, as a manager for Shingle Resource.

The district's other subpoena was dated May 10. That subpoena demanded records on grants to AmeriWorks, a nonprofit workforce training entity. The $400,000 grant intended for AmeriWorks was returned by its would-be partner in the enterprise, Decision Point, after the project fell through.

The subpoena also asked for records of grants involving Milton R. "Rusty" Cranford, a health care executive, lobbyist and a founder of AmeriWorks.

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Neal pleaded guilty to two instances of accepting kickback totaling $38,000. The grants involved all came through the Northwest District, according to court documents from his guilty plea.

One grant totaled $200,000 to "a nonprofit corporation operating a college located in Springdale, Arkansas," according to court documents. The other was for $400,000 to a nonprofit workforce training program. Ecclesia was the only private college in Springdale to receive grants directed by Neal, Northwest district records show. The only workforce training program to receive a grant that large was AmeriWorks, according to both district records and a 2015 state audit.

Neal agreed to request a $50,000 grant be given to a private college in Springdale and a senator unnamed in the court document would request the remaining $150,000, according to the plea. Development district records show the only grant Neal requested for $50,000 that went to a private college was for Ecclesia, awarded Dec. 18, 2014. This was the day after Woods' $150,000 grant to Ecclesia was issued, according to the district records. This was in addition to a $200,000 grant issued at Woods' request to Ecclesia on Sept. 18, 2013, records show.

Woods declined to comment, and Neal's attorney also declined comment. No one answered the door at the Carrie Smith address on Jan. 17 to verify who lived at the house. Cranford hasn't returned messages seeking comment.

Ecclesia officials declined to release documents related to its receipt and expenditure of more than $700,000 in improvement fund money, claiming the school is a private entity and not required to release the documents.

West Central District

The West Central Arkansas Planning and Development District, based in Hot Springs, also provided $100,000 to the college during that same time period through two grants of $50,000 each. The grant agreement for the first $50,000 was received by the district on Dec. 17, 2013. A letter of support for the grant was dated Dec. 18, 2013 with Woods' signature and on his Senate stationary.

The signed agreement for the second $50,000 grant was received March 24, 2014. That grant's file also contained a letter from Woods, dated March 12 of the same year, in support of Ecclesia's application. No other letters from a state lawmaker were included in the files provided by the district.

The West Central district's records were also subpoenaed by the Western District's U.S. attorney. That subpoena includes a specific demand for records for grants to Ecclesia. The subpoena requested records for all improvement fund grants issued by the district in 2013, 2014 and 2015. Ecclesia was the only entity the subpoena mentioned by name.

A copy of the March 14, 2014, letter notifying Paris his grant was approved was sent to then-state Sen. Michael Lamoureux, R-Russellville. Lamoureux declined comment for this report, but forwarded a copy of the Senate "working papers" detailing improvement fund requests he made in 2013 and 2014. Those records are exempt from disclosure under the state Freedom of Information Act.

The Senate records from Lamoureux show no grants to Ecclesia College. Lamoureux was Senate president at the time the $50,000 grants to Ecclesia were awarded. As Senate president, his name was attached to any improvement fund money left over after each senator received a share. Any grants coming out of that remainder would have been attributed to Lamoureux, even if another senator made the request, former state Senate senators confirmed.

West And Central Districts

The West Arkansas Planning and Development District, based in Fort Smith, also had improvement fund records subpoenaed on June 7, 2016, but Ecclesia grants weren't specified. The district gave no grants to the college nor to the AmeriWorks project, according to its FOI response.

That subpoena came from the U.S. Attorney's office in the Eastern District of Arkansas, based in Little Rock, although Fort Smith is in the western district.

The Central Arkansas Planning and Development District, based in Lonoke, also provided a $25,000 grant to Ecclesia during the same time period. The March 27 grant was requested by Rep. Stephen Meeks, R-Greenbrier, to provide matching money for Ecclesia for federal student aid grants.

"It's not unusual to get requests for General Improvement Funds from outside your district," Meeks said Wednesday.

The improvement fund comes from unspent budget balances at the end of each state fiscal year and from interest earned on state deposits. The fund has been a subject of controversy since 1997, when the Legislature took control of half from the governor's office and began using its share largely for local projects.

Rather than given directly to nonprofit groups and government entities, the money is passed to the economic development districts. Groups wanting a share submit an application, but the money is essentially controlled by the lawmakers who direct the development districts where to send it, according to district directors and lawmakers.

The result of giving districts the money was a near-complete loss of oversight of spending, former state Rep. Karen Hopper, R-Mountain Home, said Tuesday. Hopper requested the state audit that found the Northwest Arkansas Economic Development District manged money "as a single entity, without regard to legal or contractual restrictions," according to the audit report.

After the 2015 report, the district changed directors and revamped its board. The grants detailed in Neal's guilty plea took place before the reorganization and are from the same district covered by the audit.

"I knew it was bad, but I never knew it was this bad," Hopper said of Neal's guilty plea.

"I kept asking so many questions about the GIF and getting a different answer for the same thing on different days, I started going to the board meetings," Hopper said. "I found out that nobody was watching. No newspaper ever came to those meetings. There were two county judges on the board who really tried to get something done about the situation. They asked me to do something about it, so I requested the audit."

The state Department of Finance and Administration confirmed it receives no final report of how the fund money is spent after it is distributed to the districts. Any records kept by the legislative staff on what grants are approved by each lawmaker aren't public. Each development district keeps its own records.

NW News on 01/29/2017