FAYETTEVILLE -- A federal judge refused Thursday to dismiss criminal charges against two men accused of scamming investors in a proposed wind farm project at Elm Springs.
Jody Douglas Davis and Phillip Vincent Ridings are charged with multiple counts of wire fraud, aiding and abetting wire fraud, money laundering and aiding and abetting money laundering.
Both men have entered not guilty pleas. They will be tried together, and the trial is set for Sept. 20 in Fayetteville.
Dragonfly Industries International of Frisco, Texas, purported to build a wind farm for electric power generation in Elm Springs.
Davis and Ridings of Dragonfly scammed six investors in Northwest Arkansas and southwest Missouri, according to an indictment. They are identified only by their initials. Investors lost amounts ranging from $13,000 to $300,000, the indictment claims.
Davis and Ridings intentionally misled investors in the wind farm project about the financial viability of the project and potential returns on investment, according to the indictment. Specifically, they told investors they developed cutting-edge wind turbine technology, a prototype was being developed companies were lining up to buy and a $10 million federal grant was imminent when none was true, the indictment says.
Davis and Ridings hid bank accounts from their accountants and used investor money transferred to those accounts to buy a luxury vehicle, pay fitness club fees, make a down payment on a home and a trip to Walt Disney World in Florida, according to the indictment.
U.S. District Judge Timothy L. Brooks issued an order Thursday addressing a stack of motions from Davis and Ridings.
Brooks found several motions to dismiss to be without merit, including an argument a jury trial would inevitably expose defendants and jurors to covid-19.
Brooks agreed with the government it can use at trial a plea agreement Ridings backed out of after signing. Brooks said the agreement, which lays out the basis for Ridings pleading guilty, must be redacted in such a way as to not identify Davis. Brooks rejected the government's first redaction attempt.
Brooks ruled the government can also use evidence related to an engineering firm, Belcan, that Ridings sought to suppress.
Ridings argued Belcan incorrectly concluded Dragonfly's wind turbine wouldn't work and, therefore, all evidence regarding Belcan's conclusions should be prohibited.
The government contends Belcan presented a report in September 2015 to Davis and Ridings their wind turbine wouldn't perform as expected, and Davis and Ridings continued to solicit investments.
Brooks denied a motion from Ridings to disallow a video of him talking with a government informant.
The judge rejected a motion from Davis to withhold evidence of an earlier conviction. Davis, chief executive officer for Dragonfly, pleaded guilty in 2009 to wire fraud and money laundering after embezzling about $785,000 in Oklahoma.
Dragonfly sought to rezone 312 acres in Elm Springs in late 2015.
Opponents of the wind farm collected petitions to force a special election March 1, 2016, to undo the October 2015 annexation of the wind farm site by the city. Voiding the annexation passed 483-273. Dragonfly announced it was dropping the project later the same week.
Rescinding the annexation placed the needed site approval into the purview of Washington County officials, who were skeptical of the project, according to news accounts at the time.
Dragonfly also drew the scrutiny of the Arkansas Securities Department. The department issued a cease-and-desist order against the company Aug. 11, 2016, which prohibited Dragonfly from efforts to sell unregistered securities to investors.
Cody Fell of Springdale, a contractor and principal in the firm, pleaded guilty to federal wire fraud and tax evasion charges in December 2018. Fell agreed to cooperate with the government and hasn't been sentenced.
Fraud committed using means of electronic communication, such as telephone or computer. The involvement of electronic communications adds to the severity or harshness of the penalty, so it’s greater than the penalty for fraud that’s otherwise identical except for the non-involvement of electronic communications.
Ron Wood can be reached by email at [email protected] or on Twitter @NWARDW.