Investigation shows Arkansas legislators directed state grant money to 2 organizations

Arkansas legislators directed more state grant money to a tiny Bible-based college in Springdale and to a Bentonville addiction treatment provider and its affiliates than almost any other nonprofit in the state, an Arkansas Democrat-Gazette investigation shows.

Ecclesia College, with about 150 students, collected $717,500 with the support of 11 lawmakers.

Decision Point Inc., which operates an 84-bed treatment center in Bentonville but has related facilities statewide, received $746,500 on the approval of 15 state House and Senate members.

The college, the treatment agency and a multimillion-dollar pool of grants controlled by individual legislators through planning districts are the focus of federal indictments.

Charged with fraud and accepting kickbacks are former state Sen. Jon Woods and former Rep. Micah Neal, both Springdale Republicans.

The newspaper's investigation found that in addition to Woods and Neal, 24 more Arkansas House and Senate members directed grant money since 2013 to Ecclesia and Decision Point.

The college and the treatment center and its related agencies each received more of that grant money, for example, than:

• All Arkansas homeless shelters for men, women and children combined ($660,731).

• All public libraries statewide ($525,883).

• All American Legion, ArVets and VFW groups combined ($307,683).

Among the few nonprofits that pocketed more than Ecclesia and Decision Point were all of the Boys and Girls Clubs statewide combined.

For its investigation, the Democrat-Gazette examined records of more than 4,200 General Improvement Fund (GIF) grants directed by individual lawmakers and administered in the past four years through eight regional Arkansas Planning and Development Districts.

Each legislator was credited with a set amount of grant money, records and interviews show. Each typically had to endorse recipients from his allotment.

Grants by individual legislators to nonprofits of all stripes since 2013 totaled more than $50 million, records show.

Critics describe state grants doled out by individual legislators as pork barrel, earmarks and a "money-laundering machine." They say some state House and Senate members funnel the money to pet projects and groups that might help re-elect them.

The Ecclesia College grants, in particular, bother some current and former state officials who say constitutional requirements for separation of church and state normally would bar Arkansas from giving state money to the private Christian school.

Supporters of the grants say the money has done much good in the hands of deserving local groups, from senior citizen centers to police and fire departments.

Woods and Neal, and two others face federal fraud charges in connection with their General Improvement Fund grants to Ecclesia College and Decision Point that totaled $800,000, according to records.

Neal has pleaded guilty. Woods, Ecclesia President Oren Paris III and consultant Randell Shelton have pleaded innocent and await a Dec. 4 trial.

The 24 other current and former Arkansas legislators' grants to the college and treatment center totaled more than $600,000, the newspaper's review found.

None of those 24 lawmakers have been charged with any crime. Their individual grants ranged from $1,000 to $100,000.

At least three acknowledge that they have been interviewed by federal authorities.

"I had heard a lot of people were being interviewed" before Neal and Woods were indicted in January, state Sen. Bart Hester said.

Records show Hester approved two grants totaling $60,000 to Ecclesia College in 2013 and 2014 from his General Improvement Fund grant allocation of $690,000.

Federal authorities contacted him soon after the indictments, Hester said.

The Cave Springs Republican remembers thinking: "'This can't be reality.' You start wondering if this is some kind of Netflix TV series."

State Rep. Stephen Meeks of Greenbrier and former Rep. Randy Alexander of Springdale, both Republicans, told the newspaper that they, too, have been interviewed by the FBI.

Meeks supported giving $25,000 from his individual grant allocation for Ecclesia in 2015, records show. Alexander approved $26,500 for the college a year earlier.

Two more legislators, former Sen. Michael Lamoureux, R-Russellville, and current Sen. Cecile Bledsoe, R-Rogers, declined to say whether federal agents interviewed them. Other current and former legislators said the FBI has not contacted them.

Among larger gifts from legislators to Ecclesia or to Decision Point and its related companies, according to regional planning district grant records were: Lamoureux, two grants totaling $100,000 to Ecclesia College; the late Sen. David Wyatt, D-Batesville, $100,000, Decision Point; Bledsoe, $60,000 for Ecclesia, $25,000 to Decision Point; Sen. Joyce Elliott of Little Rock and Rep. Eddie Armstrong of North Little Rock, both Democrats, combining for $57,500 to Dayspring Behavioral Health Services in Little Rock, a Decision Point sister company; and former Rep. Hank Wilkins IV, D-Pine Bluff, $50,000 to Dayspring's Monticello office.

The newspaper asked all legislators it interviewed if anyone offered kickbacks or favors in return for their grants. Lamoureux's response echoed everyone else's:

"I have never received anything in exchange for General Improvement Fund money," he said.

Several legislators and regional planning district officials talked about why the grants are good.

State lawmakers, they said, should be well-positioned to know which nonprofits in their districts deserve funding.

"The concept of taxpayer money flowing to the local needs of the community, conceptually I don't think that's a bad thing at all," said Rep. Charlie Collins, R-Fayetteville.

Collins authorized two grants totaling $14,000 for Ecclesia College and one for $7,500 to Decision Point, grant records show.

But like several other lawmakers, Collins said he's no longer in favor of individual legislators directing grants.

Scott Trotter, a Little Rock lawyer and public interest advocate, also is opposed. He said individual-legislator-controlled grants qualify as "the Arkansas version of 'earmarking,'" a practice of funding pet projects in Congress that came under criticism and was banned in 2011.

"Earmarking typically results in funding projects not based on merit or broad consensus of need, but rather on individual legislators directing funds to favored constituents," said Trotter, who is promoting a constitutional amendment to ban the practice.

Earmarking also infringes on the executive branch's authority to oversee spending, he said.

"In our state," Trotter added, "in addition to the typical flaws of earmarking, some of the funding has led to criminal charges."

KICKBACK ALLEGATIONS

How did private Ecclesia College and Decision Point Inc. persuade Arkansas legislators to hand them so much General Improvement Fund grant money?

A federal grand jury's 43-page indictment outlines how prosecutors say it worked for Woods and Neal.

The purpose was for the two lawmakers "to enrich themselves by soliciting and accepting bribes in exchange for using their official positions as Arkansas legislators to direct GIF monies" to "Entity A," "Entity C" and "Entity C-1," the indictment says.

The document names neither the college nor the drug treatment center or its affiliates. But it does cite General Improvement Fund grant documents, which the Democrat-Gazette obtained under the Arkansas Freedom of Information Act.

Those documents identify "Entity A" as Ecclesia College. "Entity C" is AmeriWorks Inc. a startup job-training program attempt by a Decision Point executive that failed. "Entity C-1" is Decision Point.

Between May and June 2013, Woods "discussed with Neal how a legislator could direct GIF monies in exchange for receiving a kickback payment," the indictment alleges.

Woods advised Neal that "Businessman A," would "pay Woods and Neal 20 percent of any GIF monies that they, as Arkansas legislators, would approve and direct," the March 1 indictment said.

The indictment alleges "Businessman A" received the grants and passed cash back to Woods and Neal.

Though the indictment doesn't identify the businessman by name, it refers to grant documents and a handwritten note signed by Woods and obtained by the newspaper that show "Businessman A" is a former Decision Point executive, Rusty Cranford. Cranford declined to be interviewed.

A longtime legislative lobbyist, Cranford hasn't been charged with any crime.

His signature and name appear on at least six legislator-controlled General Improvement Fund grants approved for Decision Point; Decision Point dba (doing business as) AmeriWorks; Dayspring Behavioral Health Care, a Decision Point sister company that provides mental health services; and other affiliated agencies.

The federal indictment also alleges that after federal law enforcement officials contacted and interviewed "Businessman A" in August 2014, he sent a letter and check returning Woods' and Neal's $400,000 in General Improvement Fund grant money to Decision Point dba as AmeriWorks.

After Woods and Neal learned in November that money was being returned, the indictment says, they agreed to direct $200,000 of it to Ecclesia.

"Woods previously had advised Neal that Woods had an arrangement with Paris whereby Paris would pay Woods a percentage of funds Woods obtained" for Ecclesia College, the indictment said.

Ecclesia President Paris accepted grant checks approved by Woods, Neal and a regional planning district's board on behalf of the college, then funneled a share back to the two lawmakers through consultant Shelton, the indictment said.

In his guilty plea, Neal admits accepting $38,000 in cash kickbacks in connection with his grants to the college and the treatment center, according to court records.

Attorneys for Woods, Neal, Paris and Shelton have not returned calls or have declined to be interviewed.

'NEED WAS THERE'

Bledsoe, like several legislators, said she supported grant money to Ecclesia College because she was impressed by its status as a "work college" -- institutions that employ many students in campus jobs to help reduce college debt.

As for Decision Point treatment center, Bledsoe said, she liked its efforts to curb drug and alcohol addiction and wanted to support adding a women's wing.

Bledsoe's grants to the two nonprofits totaled $85,000. Her allocation for General Improvement Fund grants from the Northwest Arkansas Economic Development District for that two-year period beginning in 2013 was $480,000, according to records.

Bledsoe stressed that legislators like herself should "not be painted with the same brush" as any who may have violated the law in connection with grants.

"It would be easy to blame those who did the right thing in trying to help people," she said.

Other current and former lawmakers told the Democrat-Gazette that they contributed to Ecclesia or Decision Point, at least in part, after Woods requested more grant money to help his causes.

Hester can't remember who asked him to endorse his first $30,000 grant to Ecclesia College to build a dormitory, he said. He met the president, Paris, and walked the campus, which offered little student housing.

"I thought it was a worthy cause to support," Hester said. "I saw the need that was there."

Woods' persuasion was key to Hester's second $30,000 grant, he said.

"Sen. Woods was a senior member of the Legislature who had helped me a lot," Hester said. "There was a lot of trust and a lot of appreciation for the time he spent."

Former Senate President Pro Tem Lamoureux said West Central Arkansas Planning and Development district records showing two $50,000 grants under his name for Ecclesia College were made at Woods' urging.

Lamoureux said he sent all his allocation of General Improvement Fund money, $1 million, directly to state agencies for his district.

Lamoureux recalls Woods' learning about the existence of unallocated General Improvement Fund money that went to the West Central district agency under the Senate president's name. Woods asked for part of it, Lamoureux said.

Lamoureux said he approved Woods getting "an additional $100,000 to allocate however he chose across those projects. He chose to allocate it to Ecclesia College."

West Central planning agency records show the two $50,000 Ecclesia grants under Lamoureux's name.

"It is fair to say I authorized the disbursement," Lamoureux wrote in emails. "I have never met nor spoken to anyone at Ecclesia. I agreed to give the money to Sen. Woods and let him decide where it went."

The Ecclesia grant records also include letters from Woods, saying he supported the grants. Woods could not be reached for comment.

Several lawmakers said Paris, the college president, and Tim Summers, a former legislator and current Decision Point employee, also sought grants from lawmakers.

Former Rep. Debra Hobbs, R-Rogers, said Summers asked for her support. The treatment center was "doing some remodeling. I knew the impact drugs and substance abuse have on families."

Summers declined to be interviewed.

Hobbs authorized a $10,000 grant for Decision Point in 2013 and $10,000 for Ecclesia College in 2014, records show.

Regarding Ecclesia, Hobbs said, "a lot of us visited the campus and were told students graduated with very little debt." Paris invited her to visit, she said.

Hobbs wasn't troubled about allocating state tax money to a religious school.

"Christians pay taxes, too," she said.

'A CIVIL CONSPIRACY'

On Thursday, former legislator and Jacksonville lawyer Mike Wilson will try to persuade the Arkansas Supreme Court to outlaw all individual-legislator-controlled grants like those that went to Ecclesia College, Decision Point and thousands of other nonprofits.

When he sued three of the state's top finance officials over the General Improvement Fund grants early last year, he wasn't aware of any fraud or kickbacks, Wilson said. He sued because he believes individual lawmakers approving grants for local projects is unconstitutional in Arkansas.

"You know that can happen," he said of fraud allegations. "But I was outraged at the general scheme of the whole grant process -- a civil conspiracy to violate the constitution."

Legislators' General Improvement Fund grants, Wilson said, violate the Arkansas Constitution's ban on "local acts" or local spending by legislators. The constitution also specifies "no money shall be drawn from the state treasury" except by a "specific appropriation made by law, the purpose of which shall be distinctly stated in the bill."

The Arkansas Supreme Court in 2006 and 2007 twice barred legislators from directly approving grants from the state's surplus General Improvement Fund to their local districts, unless the projects carried a statewide benefit. The rulings came in an earlier lawsuit by Wilson, who spent 12 terms as a Democrat in the state House.

After those high-court rulings, legislators started funneling tens of millions of dollars through the eight regional economic development districts statewide, records show.

Several legislators interviewed by the newspaper stressed that they don't give final approval to the regional agency-administered grants.

But a legislator's letter or phone call of support is virtually always required for a planning agency's board to formally vote yes, according to grant records and testimony in Wilson's appeal. The lawsuit is Mike Wilson v. Larry Walther CV-17-90.

In November, Pulaski County Circuit Judge Chris Piazza dismissed Wilson's suit, saying the regional planning districts' General Improvement Fund grants are legal.

Wilson, who contends that the system is a "money-laundering machine" for state lawmakers to fund pet projects, appealed.

Sometime after 10 a.m. Thursday at the state Justice Building in Little Rock, Wilson, the state attorney general's office and other lawyers will face off in oral arguments before Arkansas' highest court.

"The major part of my outrage and condemnation is that individual members of the Legislature pick and choose what is to be funded in their individual electoral districts, or not," he said. One public library or volunteer fire department gets money, another doesn't, he said.

The process "is not intended to be transparent or methodical or accounted for," he said. Too often the money goes to groups a legislator hopes will provide votes at re-election time, he said.

"And it's a lot of money," Wilson said of $50 million in individual legislator General Improvement Fund grants since 2013. "The state could have built some highways, paid for some buildings or financed some Medicaid for poor folks."

'REAL AND STRONG'

The same kind of grants Wilson is trying to stop came up in another court proceeding recently.

On Aug. 21, federal authorities filed an affidavit with a search warrant concerning a $46,500 General Improvement Fund grant OK'd by state Sen. Jake Files, R-Fort Smith. The money went to the city of Fort Smith to help construct a softball complex.

An affidavit in U.S. District Court in Fort Smith alleges that the city used part of the grant money to pay $26,945.91 to a contractor, Dianna Gonzalez.

Gonzalez, who had worked with Files, said the senator instructed her to take the funds, in cash and a check, to him, the affidavit says. Gonzalez said in the affidavit that Files paid about $8,300 of the cash to employees, including herself, and pocketed the rest.

A four-term legislator and chairman of the Senate Finance Committee, Files hasn't been charged with any crime and has denied wrongdoing. He isn't seeking re-election.

With so much law enforcement scrutiny, state House and Senate members and other political observers say they wouldn't be surprised to see more indictments.

"The rumors were real and strong," before the Woods and Neal charges, Hester said. "Now rumors are real and strong again."

Legislators and Gov. Asa Hutchinson decided this year to halt lawmaker-directed General Improvement Fund grants for now. Their decision came after the Woods and Neal indictments. Today, it's not difficult to find legislators who speak critically of that General Improvement Fund grant system.

The grants are "a terrible idea," said Rep. Jim Dotson, R-Bentonville. "It never should have been done that way to begin with. If we have surplus money, we either need to be setting things aside for rainy-day type issues" or cutting taxes, he said.

Dotson since 2013 authorized two grants totaling $13,000 for Decision Point and two grants totaling $13,500 for Ecclesia College, according to grant records.

Former Rep. Wilkins, now county judge for Jefferson County, in 2013 approved a $50,000 grant to Dayspring Behavioral Health's branch in Monticello. His General Improvement Fund allocation totaled $225,000.

Cranford's signature appears on that Dayspring grant application in December 2013, listing his title as "CEO."

Wilkins said he contributed because of the "extreme need in my area and some areas of the state" for mental health and addiction help.

When he heard about the indictments, "I was quite horrified," Wilkins said.

He was offered nothing in return for his grant, he said, and federal authorities haven't contacted him.

"I'm not going to blame everything on being a pastor 85 percent of my life," Wilkins added. "But someone would probably be less prone to approach me."

Information for this article was contributed by John Moritz of the Arkansas Democrat-Gazette.

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