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story.lead_photo.caption Jake Files, a Republican state senator representing District 8, walks Monday into the Judge Isaac C. Parker Federal Building in Fort Smith, where he pleaded guilty to charges of wire fraud, bank fraud and money laundering. - Photo by David Gottschalk

FORT SMITH -- State Sen. Jake Files pleaded guilty Monday in federal court to felony charges of wire fraud, money laundering and bank fraud for pocketing state money he obtained for a Fort Smith softball complex project and for pledging a forklift he didn't own as collateral on a bank loan.

Western Arkansas Chief U.S. District Judge P.K. Holmes III told Files, R-Fort Smith, during the 30-minute plea hearing that, among other things, a felony conviction would bar him from holding public office. Files has served in the Arkansas Senate since 2011. Currently, he is chairman of the Senate Revenue and Taxation Committee.

"Yes, I will be submitting a letter of resignation tomorrow," Files, who had already announced he didn't plan to seek re-election, said in an email seeking comment Monday.

Gov. Asa Hutchinson said in a statement that he spoke with Files and that the senator indicated he would resign.

[DOCUMENT: Read complete plea agreement filed in case]

"After learning of his guilty plea to felony charges in federal court earlier Monday, I believe this is the appropriate decision," Hutchinson's statement said.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, and Senate Republican leader Jim Hendren of Sulphur Springs said they expected Files to resign before the start of the fiscal session Feb. 12, based on their conversations with him.

It is pretty clear that Files' Senate seat needs to be vacated under the Arkansas Constitution, Hendren said.

Under Article 5, Section 9, of the constitution, no one convicted of embezzlement of public money, bribery, forgery or other infamous crime is eligible to serve in the General Assembly. An infamous crime includes a felony offense, abuse of office, tampering or certain misdemeanor offenses.

[DOCUMENT: Read federal information detailing allegations against Sen. Jake Files]

Arkansas Senate Rule 24.11 states that if a senator under a felony criminal indictment in federal or state court is found guilty of the charges against him, the senator is immediately ineligible to retain his seat under Article 5, Section 9, of the constitution, and a vacancy shall be immediately declared by the Senate president pro tempore.

"I will be working with staff to make sure that is appropriately done," Dismang said of Files' resignation.

Dismang said he understood the severity of the charges against Files and that Files' plea agreement showed he was taking responsibility for his actions.

"That said, I consider Jake a friend and will be praying for him and his family," Dismang said.

Senate Democratic leader Keith Ingram of West Memphis said he has been in the construction business and seen some people in the business end up in "a spiral downward."

"I hate it for Jake and his family," he said. "But that doesn't excuse what he did. It's very sad."

Files, 45, sporting a black suit and a beard, was represented in court Monday by federal Public Defender James Pierce. During the hearing, Files waived indictment and agreed to plead guilty to the criminal complaint that charged him with the three felonies. No criminal case had been filed against Files in federal court until after his appearance in court Monday.

The wire fraud and money laundering charges concerned the softball project, called the River Valley Sports Complex, and the bank fraud charge concerned the bank loan.

Files was released after posting a $5,000 signature bond. Holmes said sentencing will follow the completion of a pre-sentence report by the court's probation office that can take weeks or months to complete. No sentencing date was set Monday.

Files and Lee Webb, a member of the Sebastian County Election Commission, were developing the eight-ballfield complex on 60 acres at Chaffee Crossing in Fort Smith.

The two men persuaded city directors in 2014 to allow them to develop the ballfields with a $1.6 million appropriation from the city and from donations of time and materials from other entities.

Fort Smith City Administrator Carl Geffken, who was not in that position when the project began, said Monday that he was glad to see justice done. Geffken said he had trusted Files, "a state senator who was very personable and gregarious," and that he would have been convinced if Files had gone to him and said he could build the fields for $1.6 million.

Mayor Sandy Sanders said Monday that he thought the River Valley Sports Complex was a good project with a disappointing outcome after relying on two men in whom city officials had confidence. City directors terminated the project in February.

He said he hoped the project could be revived but that it depended on the outcome of a lawsuit brought by companies hired by Files and Webb to work on the complex. Those companies seek payment for their work from the city.

In August 2016, according to the government's plea agreement with Files, Files asked then-acting Administrator Jeff Dingman if Fort Smith would be interested in securing a General Improvement Fund grant from the Western Arkansas Planning and Development District to pay for work on the complex. Files expressed his support to the planning and development district.

The plea agreement said Files made up three fictitious bids for contracts to do the work and submitted them to the planning and development district. The low bid was that of an employee of his company, FFH Construction LLC. She was awarded the contract.

Files sent the fictitious bids and other documents via email to the planning and development district in his effort to seek the General Improvement Fund money for the work contract. Sending the false information by email constituted wire fraud, according to the government.

On the money laundering count, once the employee, DiAnna Gonzalez, was awarded the work contract, Files instructed her to open a bank account at Armstrong Bank in Fort Smith and deposit the $26,945.91 grant into the account. He told Gonzalez to withdraw $14,000 cash and a cashier's check for $11,931.91 made payable to Files' FFH Construction LLC, according to the plea agreement.

Gonzalez delivered the cash and cashier's check to Files at the FFH Construction office in Fort Smith, according to the plea agreement. An FBI search warrant affidavit filed in August said Files doled out cash to pay company employees who, Gonzalez told the Arkansas Democrat-Gazette last month, were waiting in the FFH Construction parking lot. Gonzalez told the FBI in the affidavit that Files gave bonuses to her and put the rest of the cash in his pocket.

He deposited the cashier's check into a bank account in his name at First National Bank of Fort Smith, the plea agreement said.

The bank fraud charge grew out of a $56,746.55 loan Files received from First Western Bank in November 2016, for which he pledged a SkyTrak forklift as collateral.

The plea agreement said Files had sold the forklift in March 2016 to an owner of a masonry company to whom he owed $55,000. By pledging the forklift he didn't own, Files knowingly made a material, false and fraudulent representation to the bank to obtain the loan.

Files represents District 8, which includes part of Sebastian County.

His resignation would leave the Senate with 32 senators and three vacant positions for the fiscal session.

The Senate District 29 seat became vacant in November with the resignation of Sen. Eddie Joe Williams, R-Cabot, to be President Donald Trump's representative on the Southern States Energy Board.

The Senate District 16 seat became vacant in November with the death of Sen. Greg Standridge, R-Russellville, after a battle with cancer.

To fill the Senate District 16 and 29 seats, special primary elections will be held Feb. 13 and a special election will be May 22 -- the same day as the regular primary election.

The governor would be required under state law to call a special election to fill the remainder of Files' term, which was to end in January 2019.

The law requires the governor to notify the state committees of the respective political parties of the Senate vacancy. He will ask the committees to notify him within 10 days whether they wish to choose a nominee by holding a special primary election or a convention of delegates. The governor will then set a date.

The law requires a special election to be held as soon as possible after a vacancy occurs, and within 150 days after occurrence of the vacancy, unless the governor determines that won't work. In that case, the special election will be held as soon as practicable after the 150 days after the occurrence of the vacancy.

Since the losses of Standridge and Williams from the Senate in November, there has been uncertainty about whether supporters of the Arkansas' version of Medicaid expansion, called Arkansas Works under Hutchinson, will be able to obtain the required 27 votes to reauthorize the use of state and federal funding for the program in the fiscal year starting July 1.

Dismang said Monday afternoon that he isn't in a position to say what having 32 senators means for the Medicaid expansion in the fiscal session.

"I'm confident that we will be able to effectively do the work for the people of Arkansas," he said.

Ingram said Files' departure will make it tougher to reauthorize spending authority for Arkansas Works. Files supported the spending authority when the Legislature voted on it in 2017.

"It will add another obstacle to it," Ingram said.

A Section on 01/30/2018

Print Headline: Guilty in fraud case, resigning, Files says

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