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story.lead_photo.caption Former state Sen. Jon Woods walks alongside his attorneys outside the John Paul Hammerschmidt Federal Building in Fayetteville on Wednesday, April 4, 2018. - Photo by Andy Shupe

FAYETTEVILLE — The agency responsible for administering General Improvement Fund grants in Northwest Arkansas did a lousy job of tracking the money, its deputy director testified today.

Jeremy Ragland of Harrison, deputy director of the Northwest Arkansas Economic Development District, testified this morning in the federal case against former state Sen. Jon Woods. Woods was indicted in March 2017 a kickback scheme involving such grants issued in 2013 and 2014 with two alleged co-conspirators — Randell Shelton, formerly of Alma, and Oren Paris III, former president of Ecclesia College in Springdale.

Ragland testified he arrived in the district and took over its improvement grant program in November 2014 and said the district never investigated to verify the grants were spent as intended.

“Poor would be a good description” of the state of grant records when he arrived, he testified.

“Every grant should have a file. Each file should have a grant application, a grant agreement, closing forms and supporting documents. There were grant agreements missing, and close-out forms,” Ragland said. Record keeping was so bad, for example, that Woods and then-state Rep. Micah Neal were not aware one $400,000 grant that was part of another alleged kickback scheme had been returned four months later.

The General Improvement Fund consisted of state tax money left unallocated at the end of each fiscal year and interest earned on state deposits. Each legislator was given a share of the fund to be directed to a nonprofit group or government entity. The replacement for this unconstitutional system hasn’t yet been devised. Gov. Asa Hutchinson put no general improvement money in the budget in the last legislative session, which took place after Neal pleaded guilty.

Eight improvement districts cover the state. Their boards approved improvement grants, but in practice the Northwest Arkansas board followed the recommendations of legislators whose appropriation bills provided the grant money, Ragland testified.

Ragland never submitted a grant application to the board without the legislator who provided the money having the opportunity to approve or reject it, Ragland testified.

“How often did a legislator say, ‘Whatever the board wants’?” questioned assistant U.S. Attorney Kenneth Elser.

Ragland replied, “Very rarely.”

Former state Rep. Karen Hopper, R-Mountain Home, requested a state audit of the Northwest Arkansas Economic Development District in 2015 that showed the district manged money “as a single entity, without regard to legal or contractual restrictions,” according to the audit report.

The kickback allegations involve $550,000 of the more than $717,500 in state General Improvement Fund grants the private christian college received from 2013 through 2014, the U.S. Department of Justice argues.

The trial of Woods and Shelton began April 9 in federal court in Fayetteville.

Paris pleaded guilty April 4 to one count of conspiracy and will testify for the government. He resigned as Ecclesia’s president and from the college’s board the previous day. Former state Rep. Micah Neal pleaded guilty Jan. 4, 2017, for his role in the scheme and was the government’s first witness in the case.

Sentences for Neal and Paris are pending.

Paris disguised the kickbacks as consulting fees paid to Shelton’s company, Paradigm Strategic Consulting, according to the indictment. Shelton then passed money along, the government contends. The grants involved came from the state’s General Improvement Fund.

Defense attorneys have said the money transfers to and from Woods were loans and money to pay back loans.

Woods directed a $200,000 grant to Ecclesia in September 2013, grant records show. Neal supported a $50,000 grant to the college and Woods another $150,000 in December 2014, also according to grant records. The amount of money Woods is accused of receiving as a kickback isn’t specified in the indictment. It claims much of that money was paid in cash, except for one transaction made to Woods by wire transfer for $40,000.

In one transaction, Paris authorized $50,000 to Shelton’s firm Sept. 27, 2013 — the same day Paris signed an agreement for the college to accept a $200,000 state General Improvement Fund grant, the indictment says. Shelton used the $50,000 that day to open an account for his business, which had been incorporated the day before, the document reads.

Less than a week later, on or about Oct. 1, 2013, Shelton transferred $40,000 by wire from that business account into the personal bank account of Woods, according to prosecutors.

The trial is expected to take at least three weeks.

Neal’s guilty plea included his taking kickbacks along with Woods for $400,000 in state grants to AmeriWorks. Neal said he received $20,000 delivered by Woods for steering $125,000 to AmeriWorks. Grant records show Woods directed $275,000 to the company.

AmeriWorks was incorporated by lobbyist Russell “Rusty” Cranford a day before it received the grants. The $400,000 from the 2013 grant was returned Aug. 14, 2014, after federal investigators questioned the company’s founder about the grants, according to Woods’ indictment.

Woods and Neal, both Republicans, then cooperated to use part of the refunded $400,000 to steer another $200,000 to Ecclesia in return for another kickback, the indictment says.

Cranford, 56, is set for trial June 11 in federal court in Springfield, Mo., on one count of conspiracy and eight counts of accepting bribes in an unrelated indictment.

Woods faces 15 counts of fraud, all relating to either wire or mail transfers of money. Paris and Shelton were named in 14 of the fraud charges. All three were charged with one count of conspiracy to commit fraud. Woods is also charged with one count of money laundering in connection with the purchase of a cashier’s check.

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