Mayor Tim McKinney of Berryville dropped his objection to sending taxpayer money to a private Springdale college and his city received $61,000 in grants as a reward, he said Wednesday.
His actions in 2014 paved the way for Ecclesia College to receive $91,500 in grants in September of that year and an additional $200,000 approved before the year ended -- all from the state's General Improvement Fund, records show.
Arraignment
Arraignment for former state Sen. Jon Woods of Springdale; Oren Paris III, president of Ecclesia College; and Randell Shelton, an Alma businessman and the college’s consultant, is set for 1:30 p.m. March 28 in U.S. District Court in Fayetteville.
Source: Staff report
Former state Rep. Micah Neal, R-Springdale, pleaded guilty in U.S. District Court in January to taking a kickback in return for his role in getting one of those grants to the college.
Former state Sen. Jon Woods, R-Springdale, also is accused of taking kickbacks. He was indicted by a federal grand jury March 3 on 11 counts of wire fraud, one count of mail fraud and money laundering involving improvement fund grants to the college and another nonprofit. It was Woods who convinced McKinney to drop his objection, the mayor said and the indictment claims.
McKinney is a member of the board overseeing the Northwest Arkansas Economic Development District. The district is one of eight in Arkansas that distribute the grants. State lawmakers appropriate the grant money and recommend how the money should be spent, but the development board must approve the recommendations.
The General Improvement Fund consists of unspent money and interest income on state deposits left over at the end of each fiscal year. The fund is divided between the House, the Senate and the governor, with each member of each legislative chamber getting a share of his chamber's allocation.
"Economic development districts are the streetwalkers and legislators are the pimps," McKinney said in telephone interview. "When somebody calls a pimp, he sends a streetwalker."
McKinney balked at a proposed $28,500 grant for Ecclesia at the June 25, 2014, meeting of the development district board, district records show. The college had already received $301,000 in grants from the Northwest district over the preceding 12 months, records show. McKinney said he objected to a private college receiving so much state taxpayer money. The board agreed to postpone action on the grant after McKinney objected.
"The reason these organizations are tax-exempt is so they can go raise their own money without getting tax dollars," McKinney said. "If you want to support such an institution with tax dollars, then open up your wallet, give it the money and then write it off your taxes."
Defying state lawmakers has consequences for cities and mayors, he said.
"I was getting pressure and hints that it wouldn't be good for either Berryville or cities in general if I stood in a legislator's way on how he wanted to spend his General Improvement Fund money," McKinney said. McKinney declined to say who or how many people advised him to change his mind. He also said he had no knowledge at the time any kickbacks might be involved in the Ecclesia grants.
McKinney said the prospect of grant money for Berryville was not what changed his mind, but he wasn't going to turn the money down.
Both the director of the state's ethics commission and the director the state's largest lobby for cities agreed the mayor crossed no legal or ethical lines by accepting the grants.
"The laws we operate under at the Ethics Commission don't address the General Improvement Fund in any way, form or fashion," said Graham Sloan, director. "Google it, 'Arkansas Ethics Commission' and 'General Improvement Fund.' Nothing will come up."
McKinney is a longstanding, vocal critic of the way such grants are administered, said Don Zimmerman, director of the Arkansas Municipal League.
"He expressed his concerns many times in the past about how these grants were run," Zimmerman said. Also, the grants accepted by McKinney benefited his city -- not McKinney personally, he said.
The mayor said last month and again Wednesday he has met voluntarily with federal investigators about grants approved by the board.
Woods was contacted by telephone Friday, but gave no response for this story. Woods' attorney, Patrick Benca of Little Rock, released a statement March 3.
"I had faith that the investigating agencies would draw the correct conclusion that Senator Woods has committed no crime," the statement said. "Unfortunately, the indictment combines and selects unrelated events and conversations in an attempt to connect dots that are not linked and portrays standard grant request procedures, followed by all legislators, as somehow unique and illicit."
The allegation
Woods was indicted by a federal grand jury on 12 counts of fraud and one of money laundering. Ten of those fraud counts also name Oren Paris III of Springdale, president of Ecclesia College, and Randell Shelton of Alma, a consultant who is identified in the indictment as a friend of both Woods and Paris.
Woods and Neal were paid kickbacks for state grants they obtained for the college, according to the indictment. Paris would authorize the college to pay Shelton's company for consulting services, the indictment says. Shelton would then pass most of the money he received from Paris to Woods, the documents say. Neal was paid in cash, according to his plea Jan. 4 to public corruption charges.
Paris hired Shelton's consulting firm in 2013 without the knowledge of Ecclesia's board of governance, according to the indictment. On the day Paris was indicted, the board released a statement saying, in part, "While the allegations made against Oren are to be taken seriously, we are confident once all the facts and the truth are made known, all will come to understand as we on the Board of Governance believe, that Oren has acted at all times with absolute integrity and always in the best interest of Ecclesia College."
Both Neal's and Woods' cases involve steering grants to the college and another nonprofit entity, which is not named in the court documents, which was a job training enterprise. The grants were awarded in 2013 and 2014, after the allocation of state General Improvement Fund money in the regular legislative session of 2013.
Financial records from the Northwest Development District show AmeriWorks of Bentonville was the only nonprofit job training enterprise that received $400,000 in grant money and later returned it, as described in Woods' indictment and Neal's guilty plea.
Neither the indictment nor Neal's plea documents names the college involved in the kickbacks. But the indictment identifies Paris as the president of the college, says it's in Springdale and a nonprofit private institution and work study college. Those details match only Ecclesia. Development district records also show no other college received state grant money at Neal's and Woods' behest.
Gov. Asa Hutchinson included no General Improvement Fund portion for the Legislature in his proposed state budget for the next two fiscal years and called for an end of such appropriations after Neal's guilty plea.
Sen. Trent Garner, R-El Dorado, filed a bill on Feb. 9 to do away with the current system of awarding improvement money. Senate Bill 325 would put the money into an emergency fund requiring approval of three-quarters of the Legislature -- or of the Legislative Council if the request is made while the Legislature is not in session -- to authorize the governor to spend the money. The bill is pending before the Joint Budget Committee.
Objection dropped
Pressure on him to change his mind started soon after the June development district board meeting, McKinney said. Then Woods called and wanted to meet.
"I knew what he wanted," McKinney said.
He had decided to relent before he met with Woods, he said. McKinney has no record of when this meeting occurred, he said, but he and Woods shared lunch at the Ozark Cafe on the Berryville town square. By the mayor's account, Woods brought up the subject of more grants to Ecclesia.
McKinney told Woods it was his money to give and he would no longer stand in his way. The offer of grants to Berryville came at the end of their conversation when Woods asked if there were any projects for which the mayor would like to submit a grant application, according to McKinney.
The indictment says that sometime between June 25 and early September, Woods met with the board member who objected and secured that member's agreement not to oppose any future improvement fund grant applications by the college.
McKinney accepted the offer of support for grants for his city because local, public projects was the intended purpose of these grants, he said.
"They were legal, and they were what this money was intended for," he said of Woods' offer.
The mayor directed city staff to prepare grant applications for $36,000 to help complete a new building for the city's parks department, a project that cost about $250,000 total. The grant request went before the development district board that September.
Lawmakers used to allocate the General Improvement Fund directly. The state's development districts became the entities that distribute these grants after a 2006 state Supreme Court ruling. The court declared direct grants by the Legislature unconstitutional because they went to local projects. The constitution requires state money be spent for the overall benefit of the state, the court ruled.
The result of parceling out money among the eight districts was a near-total lack of accountability, according to critics of the system such as attorney and former lawmaker Mike Wilson of Jacksonville. Wilson filed both the 2005 lawsuit that stopped direct local appropriations and one against the current practice.
Lawmakers still direct the funds, he said, because development districts defer to them. Grants, in general, were not made without a lawmaker's approval, and each lawmaker had a share of General Improvement Fund money he was responsible for.
Lobbying for more
According to the indictment, Woods would receive kickbacks in return for General Improvement Fund money he obtained, whether the money came out of his share of the fund or not. The indictment also says Woods' use of general improvement money to clear obstacles to further grants to the college, such as the Berryville grants, was part of his plan.
"Woods also used and agreed to use his official authority as an Arkansas legislator to advise other Arkansas legislators, including Neal, to allocate additional GIF monies either directly to [the college] or to another applicant in an effort to secure more GIF money for [the college,]" the indictment says.
Woods lobbied other legislators between June and September of 2014 to support improvement fund grants to the college from their shares. By the time the Northwest development district board met on Sept. 17, 2014, a bundle of grants for Ecclesia totaling $91,500 was before the board for consideration.
Woods and Paris texted about grant commitments by other Arkansas legislators on or about Sept. 5, 2014, according to the indictment. In one of those text messages, Woods suggested Paris not mention the "hold up" on board approval in June unless asked about it by a legislator they were lobbying. If asked, Paris could tell the legislator the objecting board member "is now OK," the indictment says Woods texted.
Woods and Paris texted again about commitments by Arkansas legislators for general improvement grants to the college from about Sept. 8 to Sept. 12, 2014, the indictment says. Woods agreed to make more efforts to get legislators to approve grants for the college.
In one of those text messages regarding efforts to secure grants, Woods wrote, 'This is our last shot until next July. I had to give a lot to the [objecting board member] just to make this work. It's been a rough experience this go around. We need to make up for what it's taking to make this work."
Wood emailed the then-director of the Northwest development district on or about Sept. 10 in regard to the objecting board member's grant requests, according to the indictment. As quoted, the email said that Neal and another, unnamed legislator had agreed to endorse the objecting member's grant requests and "split both projects down the middle."
The $36,000 in September grant requests for Berryville were supported by two legislators: Neal and Rep. Bob Ballinger, R-Hindsville, grant records show. Each supported $18,000 of the grants. Another $25,000 grant to Berryville in December was supported solely by Woods, grant records show. Berryville is a Carroll County city of about 5,465 people is inside Ballinger's House district but outside the districts Neal and Woods represented.
Ballinger said Wednesday he was not told and did not know the grants and more money to Ecclesia were connected in any way.
"Jon contacted me and said the mayor was going to request this and that Micah would agree to support half of the request if I'd support the other half," Ballinger said, referring to Woods and Neal.
"I've never been a supporter of the General Improvement Fund and am not as anxious to hand my share out as other people," Ballinger said. He still had a balance of money to direct when Berryville's request came, he said.
"Jon was a friend. He asked me for a favor that helped one of my towns and brought money into my district," he said.
Ecclesia was never brought up by Woods nor Neal in talking about the Berryville grants, he said. Ballinger directed $8,500 in improvement funds grants to the college in the 2013-14 two-year state budget cycle and supports its conservative, Christian mission, he said.
NW News on 03/12/2017