FAYETTEVILLE — Former state Rep. Micah Neal will spend the next year confined to his home, but avoided jail time for his role in the kickback case involving state grants.
Neal will be monitored electronically and can leave for work, medical reasons and religious services,U.S. District Judge Timothy L. Brooks ruled today. After the first year, Neal will serve two years of probation when he will log 300 hours of community service, the judge ruled.
He also ordered Neal to pay $200,000 in restitution.
“Your honor, I will spend the rest of my life trying to redeem myself,” Neal told the judge before his sentence was announced.
Brooks agreed this morning to a reduction based on Neal’s continuing cooperation with the government in its investigation of corruption in the state Legislature.
Brooks said he had never granted such a large sentencing reduction as the government asked for in Neal’s case, he told U.S. Attorney Duane “Dak” Kees. The decision stripped more than seven years off the maximum sentence Neal faced on his guilty plea to one count of conspiracy to commit fraud.
“I wish I could go into detail, but we want to send a message to others that if you do like Mr. Neal, come forward immediately and truthfully do what the the government asks — even if it hurts you economically — you will be rewarded for it,” Kees told Brooks.
Brooks said Neal’s actions throughout the case were the best argument for the sentence reduction.
“Mr. Neal’s cooperation in this case is not solely responsible by any means but is very largely responsible for many indictments and guilty pleas, not just in his co-defendants but in other cases,” he said.
The long-time Washington County Quorum Court member and heir to his family’s Neal’s Cafe pleaded guilty in January 2017 and agreed to testify against his co-conspirators. Sentencing was delayed as the cases of two of his accomplices went to a trial.
The jury in U.S. District Court in Fayetteville found those co-defendants, including former state Sen. Jon Woods, guilty on May 3. Woods last week received a sentence of 18 years, four months. A third co-defendant pleaded guilty before the trial began.
Neal received $38,000 in kickbacks in return for steering state General Improvement Fund grants to two entities, according to his guilty plea. He also testified he put in his personal account a $1,000 campaign donation for his 2012 state House race.
Five former state lawmakers have pleaded guilty to either misusing state grant funds, accepting bribes or both since Neal’s plea. Another was indicted for filing a false tax return and using campaign funds for personal use. Two lobbyists and three former executives of companies that received favorable state treatment in return for kickbacks, in addition to Neal’s co-defendants, have also entered guilty pleas.
Looking for cash
Neal was financially strapped in 2012 when he asked then-state Sen. Jon Woods, a friend and fellow Springdale delegation member, how he could make money, according to his court testimony against Woods in April.
Neal testified he drew more than $100,000 a year from his family’s restaurant and thousands more a month from legislative per diem, but still was struggling financially.
He and Woods launched a scheme with Oren Paris III, then-president of Ecclesia College, and businessman Randell Shelton Jr., a mutual friend of Paris and Woods.
Neal and Woods steered state grants to Paris’ small, private Christian school. Paris signed a contract with a company Shelton created, Paradigm Strategic Consulting. When Ecclesia received a state grant, the college would pay Paradigm fees. Most of those fees flowed to Woods and Neal through Shelton as kickbacks, according to federal prosecutors.
Woods and Neal also convinced other lawmakers who were not in on the plot to direct grants to Ecclesia. Each lawmaker received a share of Improvement Fund money that he could distribute to either government bodies or nonprofit groups.
In all, the college received $715,500 in Improvement Fund grants from 2013 through 2014. Of that, Woods and Neal were directly responsible for $550,000.
Woods and Neal also structured a separate deal with Milton R. “Rusty” Cranford, a lobbyist who was also an executive for Preferred Family Healthcare Inc. of Springfield, Mo. Cranford pleaded guilty to a conspiracy charge earlier this year in federal court in Missouri in an unrelated case. He remains in the Greene County, Mo. jail while awaiting sentencing.
In the deal struck with Neal and Woods, Cranford and David Carl Hayes of Springfield, Mo., incorporated a company called AmeriWorks in Bentonville in 2013. The company applied for and received $400,000 in Improvement Fund grants to train workers for a new industry that would move to Northwest Arkansas.
Cranford returned the AmeriWorks grant in September 2014, after federal investigators questioned him about it, according to court records. Neal and Woods, unaware of the investigation, redirected $200,000 of the returned money to Ecclesia and received kickbacks from it, according to court records.
Too much help
Neal’s cooperation with the investigation was more than the government asked. His secret recordings of conversations with others, including Woods, that he thought would help the government instead led to a legal tangle that largely makes up his accomplices’ case for an appeal on the grounds of government misconduct.
Neal offered to wear a wire. Investigators declined, according to Shane Wilkerson of Bentonville, Neal’s attorney. Neal then decided to secretly record conversations on his own that might be of interest to the government. His goal, Neal said in testimony on Jan. 26, was to lighten his sentence.
Neal used an audio recorder disguised as a writing pen to tape conversations from March to October of 2016. He said he recorded conversations in Northwest Arkansas and Little Rock to give to federal investigators. Woods told Neal the strategy for his defense in one of those recordings.
The government contends the recordings were made without its supervision nor approval. The defense disputed the claim, noting text messages from Wilkinson about the recordings to the lead investigator on the case, FBI special agent Robert Cessario.
Cessario copied the files. The copies Cessario made went to defense attorneys, who compared the files they had with the texts Wilkinson sent Cessario about them and noted some of the conversations Wilkinson texted about were missing.
Later investigation found Cessario had copied and provided only 39 of Neal’s 119 audio files.
Cessario was ordered last December in an email from Assistant U.S. Attorney Aaron Jennen to turn over the laptop. Instead, he had the hard drive professionally erased, then erased it again himself before turning it in, Cessario testified in a pretrial hearing Jan. 25.
Brooks barred the prosecution from calling Cessario as a witness at the trial and also barred the prosecution from using any of Neal’s recordings, but allowed the trial to proceed. Brooks declared Cessario’s actions “reprehensible,” in a March 2 court order, but ruled the government had made a good-faith effort to find all the recordings and provide them to the defense once the U.S. attorney’s office was made aware of the problem.
Neal’s history
Neal, a Republican, was a member of the Washington County Quorum Court before running for state representative in 2012. He didn’t seek re-election in 2016, but announced for Washington County judge. He dropped out of the race a few months before his guilty plea, citing family concerns.
Neal is the fourth generation working in his family’s restaurant, a longtime Springdale gathering place for politicians. He was working at the cafe and serving as a state representative in 2013 when he met with Cranford, Woods and Mike Norton, the then-director of the Northwest Arkansas Economic Development District, which administered the Improvement Fund grants.
Norton testified the meeting was to discuss how to award the grants to AmeriWorks since it didn’t have 501(c)3 tax status as a nonprofit when it applied. The group decided to use a Preferred Family Healthcare’s tax-exempt status, Norton said.
Neal also testified he later accepted a $18,000 kickback in two envelopes filled with $100 bills behind Neal’s Cafe.
He was the government’s first witness in Woods trial. He also testified to a federal grand jury in Fort Smith in 2016 and met with federal investigators on at least six different occasions in their investigation, Wilkinson said.