Bentonville lobbyist tied to kickback scheme arrested

Employed ex-lawmaker who pleaded guilty

Milton Russell “Rusty” Cranford, 56, of Bentonville
Milton Russell “Rusty” Cranford, 56, of Bentonville

SPRINGDALE -- The former top Arkansas executive for a nonprofit organization receiving millions each year in Medicaid reimbursements is set to appear in federal court in Fayetteville today on a nine-count indictment involving kickbacks and illegal lobbying.

Milton Russell "Rusty" Cranford, 56, of Bentonville was indicted by a Springfield, Mo., federal grand jury Tuesday and arrested Wednesday, according to a statement from Timothy A. Garrison, U.S. Attorney for the Western District of Missouri. Cranford was both the chief executive officer and lobbyist for the Arkansas operations of Preferred Family Healthcare of Springfield, Mo.

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Preferred Family received almost $93 million in Medicaid payments from four states in 2016, according to federal court records. That figure includes $33.4 million in Arkansas.

"The indictment alleges that Cranford and co-conspirator Eddie Wayne Cooper, 51, of Melbourne, Arkansas, received $264,000 in secret kickback payments from co-conspirator Donald Andrew Jones," the statement says.

Cranford also played a role in the kickback case of former state Sen. Jon Woods and state Rep. Micah Neal, both of Springdale. Neal pleaded guilty to one count of conspiracy on Jan. 4, 2017. Woods faces trial April 9 for taking a kickback in exchange for his and Neal's support in getting a $400,000 state grant to a company incorporated by Cranford.

Cooper is a former state representative who pleaded guilty in Missouri last week on one count of conspiracy. Jones, also known as D.A. Jones, of Willingboro, N.J., is a lobbyist and political consultant who was hired by Preferred Family.

Jones pleaded guilty in federal court in Springfield on Dec. 18 to a charge of being paid for illegal lobbying services. Under federal law, nonprofit organizations receiving federal money such as Medicaid are barred from direct lobbying efforts. Money paid to Jones was hidden in Preferred Family's records as training and consulting costs, according to the indictment.

Cranford convinced three executives of Preferred Family to agree to a contract with Jones in 2011. Jones received $973,807 in payments from February 2011 until January 2017. Cranford "demanded payments to himself and Cooper of a portion of the funds Jones obtained from the charity in exchange for Cranford's influence on Jones's behalf," Garrison's statement said.

Cranford was both the employer and business partner of Cooper. Cranford employed Cooper at the Cranford Coalition lobbying firm in Little Rock from 2011 to 2015, and they co-founded a lobbying firm in Missouri together in 2013, records in each state show.

Cooper pleaded guilty in federal court in Springfield to conspiring with the same three Preferred Family executives to embezzle $3 million of the company's money for political contributions, lobbying and kickbacks, according to his guilty plea last week. This was in addition to the money paid to Jones.

Cranford is charged with one count of conspiracy and eight counts of receiving a bribe by an agent of an organization receiving federal money. The indictment also contains a forfeiture provision, which would require Cranford to forfeit to the government all property derived from the proceeds of the alleged offenses, if convicted.

Cranford, formerly of Rogers, was booked into the Washington County Detention Center at 10:49 a.m. Wednesday pending his appearance in federal court. The arresting agency was listed as the Internal Revenue Service on Washington County records.

Cranford's attorney, Nathan Garrett of Kansas City, Mo., didn't return calls to his firm.

Cranford has registered as a lobbyist since at least 2005 in Arkansas, as an individual and under the corporation names Cranford & Associates, the Cranford Coalition, Outcomes of Arkansas and Progressive Politics. His clients included Alternative Opportunities, Preferred Family's predecessor organization, and several of its subsidiaries in Arkansas. His lobbying on their behalf continued under Preferred Family.

Cranford's lobbying firms employed several former lawmakers over the years besides Cooper, including former state Sen. Gene Jeffress, D-Louan. Arkansas Legislative Audit released a report in September noting continuing education fees paid by bail bondsmen in Arkansas went to an industry association using much of the money to pay for a lobbyist.

That lobbyist was Cranford, said Jon Moore, deputy legislative auditor. Payment of those fees was required by Act 36 of 2011 by Jeffress. Cranford was a registered lobbyist for the Arkansas Professional Bail Bonds Association from 2008 to 2016, records from the Arkansas Secretary of State's office show.

Two other former lawmakers who lobbied for Cranford were Rep. Curran Everett, D-Salem, and Rep. Tim Summers, R-Bentonville. Summers works for a subsidiary of Preferred Family called Decision Point, although his employment there began before Preferred Family acquired the company. Everett now manages Health Resources of Arkansas, which is owned by Preferred Family.

From 2010-17, an Arkansas lobbying firm received the $3 million from Preferred Family with Cooper's cooperation, according to his plea documents. The nonprofit group's financial records show its payments were for "consulting services," training and other expenses allowed by federal law when the real purpose of the payments was for lobbying and political campaign contributions, the documents say.

The lobbying efforts were to get grants and other money, including money from Arkansas' General Improvement Fund, according to a statement from the U.S. attorney for the western district of Missouri about Cooper's guilty plea.

Cooper was an executive in Preferred Family Healthcare's operations in Arkansas from April 20, 2009, until April 26, 2017, in addition to being a lobbyist, according to court records. He was also a member of the Missouri nonprofit group's board where he voted against an independent audit requested by at least one other board member as early as 2013, according to court records.

Three unnamed executives of Preferred Family and its Arkansas lobbyist conspired with Cooper to pay the lobbyist's firm $3 million, the plea documents say.

The Preferred Family executives in Cooper's plea are identified only as the chief financial officer, the chief operating officer and the chief executive officer. The chief financial officer and chief operating officer, along with another member of the executive team, were placed on indefinite leave in November by Preferred Family's board. The company spokesman wouldn't comment on why. All three were terminated in January, Reginald McElhanon, the company's spokesman, confirmed Wednesday.

The chief financial officer placed on leave and then terminated was Tom Goss of Springfield. His wife, Bontiea, was chief operating officer. Also placed on leave before termination was Marilyn Nolan of Springfield, described by the nonprofit group as a member of the senior management team. Nolan, however, doesn't fit the description of the third executive involved in the scheme, who is identified in court documents as someone who left the company prior to Cooper's plea.

Cooper's plea documents say one of the Preferred Family executives involved in the scheme is the same one who signed the group's IRS Form 990, the tax return for nonprofit corporations, for 2015. An online check of Preferred Family's 2015 return showed it was signed by Tom Goss.

Cranford was mentioned by name in a pretrial hearing in the corruption case of Woods. Cranford was chief executive of AmeriWorks, a Bentonville-based nonprofit accused of paying kickbacks to Woods and Neal in return for their support in securing a $400,000 state grant.

The Springdale office of Decision Point, a behavioral health provider run by Preferred Family, processed the AmeriWorks grant and received the $400,000 on AmeriWorks' behalf. The grant was returned after federal investigators began questioning it, according to court documents in Wood's case. Tom Goss' signature stamp was on the check that refunded the money, grant records show.

Woods' trial will include charges from a similar case in which he is accused of receiving kickbacks in return for grants from Ecclesia College in Springdale. Two of his alleged co-conspirators also go to trial on the Ecclesia-related charges: Oren Paris III, president of Ecclesia College, and consultant Randell G. Shelton Jr., formerly of Alma. Neal's guilty plea included his participation in those kickbacks also.

The Missouri U.S. attorney's statement says the investigation is continuing with at least seven federal agencies involved. The combined investigation is overseen by U.S. attorneys in both the western and eastern districts of Arkansas, the western district of Missouri and the eastern district of Pennsylvania, which indicted Jones on a related charge. So far, the eastern district of Arkansas is the only one that hasn't issued any indictments related to Preferred Family, Cranford, or former members of the state Legislature.

In a related matter, accountant David Carl Hayes pleaded guilty in Missouri in June to charges including theft from Alternative Opportunities. Hayes was Alternative Opportunities coordinator of merger and acquisition activity from 2006-13, according to court documents. He embezzled almost $2 million from Jan. 3, 2011 to March 31, 2014. Hayes pleaded guilty June 12 and was found dead at his Missouri farm in November in what authorities described as a suicide.

NW News on 02/22/2018

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