FAYETTEVILLE — The corruption probe leading to five convictions of Arkansas lawmakers flared again last week with the indictment of the chairman of the state Senate Judiciary Committee.
Related investigations by the U.S. Department of Justice and the Arkansas attorney general’s office span at least three states.
Fallout from the investigations cost one of the largest behavioral health service providers in Arkansas all of its state business. All but four of the 14 people charged so far as a result of the investigations have direct connections to that provider, Preferred Family Healthcare of Springfield, Mo. Seven were either employees, attorneys, lobbyists or board members of Preferred Family or an affiliate.
This week and next, former state lawmaker Jon Woods and consultant Randell Shelton Jr., both convicted in a kick back scandal involving state grants, are to be sentenced in U.S. District Court in Fayetteville.
The kick-backs involved Woods and former state lawmaker Micah Neal, both Republicans from Springdale. Woods faces sentencing Wednesday on 15 corruption counts.
The cost to taxpayers of the corruption and its investigations hasn’t been tallied, but more than $2 million in Medicaid fraud is alleged in the charges against one defendant alone. An indicator of the investigation’s scale is the $100,594 spent so far by the Arkansas Bureau of Legislative Research on legal fees to comply with requests for documents.
There are other resulting consequences. In the wake of the scandal, the state Senate changed its rules and set up a Select Committee on Senate Ethics to recommend changes. And there’s the issue of public trust in the Legislature, House Speaker Matthew Shepherd, R-El Dorado, said Thursday.
“What they did was wrong and has obviously caused a serious erosion of public trust from the misdeeds of a few,” Shepherd said. “It has tarnished the reputation of the Legislature,” he said. “There have been informal discussions of changes in the law that might be appropriate” going forward, he said.
In the Senate, the new Ethics Committee is working on changes to clarify what’s expected of lawmakers, what constitutes a breach and what the consequences will be, said Sen. Missy Irvin, R-Mountain View, chairman of the committee.
“We all made the assumption that everyone knew the rules and that they were abiding by them,” she said.
Every senator received the benefit of that assumption until there was cause to believe otherwise, she said. That will change, she said. The Senate will make sure incoming members are well-versed in expected standards of conduct.
Also, the new Ethics Committee is authorized to hear ethics complaints against members and make recommendations to the full body based on what its investigation finds, she said.
One committee recommendation will be that lawmakers disclose any direct or close financial interests they have in a bill they sponsor, Irvin said.
“If a lawmaker introduces a bill that benefits a certain type of business and his brother is in that business, the lawmaker will have to disclose that,” she said.
CHAIN OF EVENTS
Since Neal pleaded guilty to a kickback-related conspiracy charge on Jan. 4, 2017, four former state lawmakers and one who was still in office were convicted in the investigation.
And, Sen. Jeremy Hutchinson of Little Rock, retained by Preferred Family as an attorney in Arkansas, was indicted late last week. At least one more Arkansas lawmaker, referred to as “Senator C” in a guilty plea, is implicated as taking bribes in the case.
Shelton was a consultant convicted of passing kickbacks from Oren Paris III, then president of Ecclesia College in Springdale, to Woods and Neal. Woods is to go before U.S. District Judge Timothy Brooks at 9 a.m. Wednesday. Shelton is to appear before Brooks on Thursday, Paris on Sept. 12 and Neal on Sept. 13.
State grants to Ecclesia College are one aspect of the case that appears to be wrapped up, although federal investigators won’t confirm that. No other lawmaker who made General Improvement Fund grants to Ecclesia has faced charges.
The bribery and Medicaid fraud investigation into executives of Preferred Family Healthcare, however, resulted in new charges as recently as Aug. 20. Lloyd Warford, deputy to state Attorney General Leslie Rutledge, confirmed Aug. 22 that more lawmakers are under investigation by the state in cooperation with the federal investigation.
ThelinkbetweentheWoods’ investigation and the Medicaid corruption is lobbyist Milton R. “Rusty” Cranford, who also worked as an executive for Preferred Family Healthcare. Subsequent charges against Cranford and others revealed an embezzlement and bribery plot that extends from the state Capitol to Springfield, Mo., and from there to Philadelphia to Washington.
A business started by Cranford also received state grants from Woods and Neal in which the pair also received kickbacks.
AT THE BEGINNING
Brooks released 532 pages of previously sealed documents in Woods’ case Friday, revealing for the first time when the investigation of Woods began: July 24, 2014. By then, the first signs of serious concern related to improper use of state General Improvement Fund grants had cropped up in Harrison.
By the end of the year, then-state Rep. Karen Hopper, R-Mountain Home, asked the state Bureau of Legislative Audit to look into the finances of the Northwest Arkansas Economic Development District, which administered the grant money in the region.
The July 15, 2015, audit found that Ecclesia College received $592,500 in General Improvement Fund money from the district between 2005 and 2014. Woods and Neal were responsible for $550,000 of it. Later, grants f r o m o t h e r districts were s h o w n t o raise that total to $715,500. Cranford’s company, AmeriWorks, received $400,000 from the Northwest District in 2013.
Ecclesia and AmeriWorks each received more from the Harrison-based district than any other public entity or nonprofit group, except for a districtwide program to insulate the homes of impoverished Arkansans.
Federal investigators haven’t said when and where their inquiry began, but court documents show that the Improvement Fund grant to AmeriWorks attracted their attention.
Court documents in the Woods case revealed that investigators questioned Cranford directly in 2014 about the grant. Cranford returned the $400,000 to the district shortly afterward. The return check from the account of a Preferred Family affiliate is dated Aug. 13, 2014, and bears the signature stamp of Preferred Family’s chief financial officer at the time, Tom Goss, grant records show.
One of the lobbyists for Preferred Family was a political consultant who had long been under investigation in Pennsylvania, according to the U.S. attorney’s office. The lobbyist said in his plea that a scheme to commit Medicaid fraud originated in Preferred Family’s headquarters in Missouri.
Woods and Neal began cooperating with federal investigators in late 2015, court records show. Neal continued his cooperation and testified against Woods and Shelton at their trial. Woods met with investigators and gave information at least twice in 2015, once in November and once in December. Woods changed attorneys and stopped cooperating in March 2016, court records show.
WIDENING INVESTIGATION
Rumors of pending indictments swept the Capitol for a year before Woods, Paris and Shelton were indicted in March 2017. By June of that year, the legislative staff at the Capitol persuaded lawmakers to hire outside legal counsel to help comply with all of the document requests and subpoenas by federal investigators.
As of Wednesday, that legal assistance has cost the Bureau of Legislative Research $100,594 and an uncounted number of work hours. Legislative records are exempt from public disclosure, so what investigators obtained and which lawmakers’ records they demanded are undisclosed.
The indictments in the Woods kickback case implicated Cranford, but didn’t name him. He wasn’t indicted until Feb. 20 of this year. By then, three of Cranford’s business associates had pleaded guilty to federal charges. At least two further implicated Cranford, court records show. All three of those pleas were to federal authorities in Missouri because they involved Preferred Family.
One was Donald Andrew “D.A.” Jones, a Philadelphia-based lobbyist. Executives at Preferred Family hired Jones in 2011 as their lobbyist in Congress even though nonprofit groups receiving federal taxpayer money in programs such as Medicaid are prohibited from lobbying for more. Jones pleaded guilty on a conspiracy charge in December. He confessed to giving several members of Congress illegal campaign donations. Those congressmen, unnamed in Jones’ guilty plea, haven’t been charged to date.
Jones became the subject of an FBI investigation after the 2012 Democratic primary in Pennsylvania. He pleaded guilty in 2017 to helping pay a bribe to the Democratic opponent of a client of Jones’ lobbying firm to drop out of the race.
The next Cranford associates to plead guilty in Missouri was Eddie Wayne Cooper, a former Arkansas state House member from Melbourne. Cooper went to work for Cranford’s lobbying firm after leaving the Legislature in 2011 and was involved in the hiring of Jones, according to court records. Cooper’s Feb. 12, 2018, guilty plea revealed that he and the lobbying firm he worked for — Cranford’s — spent millions on illegal lobbying of Arkansas legislators on behalf of Preferred Family.
Cranford accepted a plea agreement with federal authorities June 7. His confession laid out a $3.5 million bribery and embezzlement racket in Arkansas from 2010-17. He implicated unnamed Preferred Family executive s and Jeremy Hutchinson. On Friday, Hutchinson declared his innocence. He also announced plans to resign from the state Senate.
The exact size and scope of the investigation — and how many U.S. attorneys and federal agencies are involved — remain unknown. But court records show that investigating agencies include the FBI, the Internal Revenue Service, and offices of Inspector General from the federal departments of Labor, of Health and Human Services, of Housing and Urban Development, of the FDIC and of Veterans Affairs.
The records also show that Sean Mulryne, an attorney for the Department of Justice Public Integrity Section in the U.S. Department of Justice, was active in Jones’ prosecution and was an attorney in the trial of Woods and Shelton.
“We all made the assumption that everyone knew the rules and that they were abiding by them.”
— Sen. Missy Irvin, chairman of the new Senate Ethics Committee