State reviews grant to sister of ex-legislator

Hutchinson: ‘Premature’ to say if Walker broke law

Gov. Asa Hutchinson said Thursday that it is too early to tell if the former head of a state agency broke any laws in helping a family member get government funding to opt into the same multilevel marketing company in which the former official is a senior vice president.

A state audit says that while serving as director of the Arkansas Career Education Department, former Democratic legislator Bill Walker encouraged his older sister and three cousins to request federal grant money totaling $18,324 through his department's self-employment and small-business program.

Walker said only one relative, his sister, received assistance totaling $6,056 and that she qualified under the program's rules.

The money was to be paid to 5linx Enterprises Inc., where Walker has been working since 2013, according to an internal state audit. 5linx offers a range of items, including health insurance, phone service and nutritional supplements.

During a news conference Thursday, Hutchinson said the audit's findings -- which show that a step in the grant process for Walker's relatives was not followed -- demonstrate a need for his office to set "the tone" for state agencies and that "small things matter and that these add up."

"I think it is premature to know exactly where the review and the facts might lead," Hutchinson said in a question about Walker's actions.

The review Hutchinson referenced is part of a departmentwide review being spearheaded by the new director, Charisse Childers, one aimed at evaluating salaries, contracts and agency procedures, as well as eliminating inefficiencies, an official with the department said.

The audit, whose findings were sent March 9 to Hutchinson's office and the head of the Arkansas State Police, was prompted by an anonymous tip that Walker not only referred family members into his own state-run grant program but ordered staff to approve their eligibility as well as expedite their applications.

The grant program is aimed at providing money to "persons with physical or mental impairments" to help them find work or start a business.

Candidates have to be vetted by a counselor, doctor and psychological examiner, and their proposals are reviewed by a business analyst before grants are awarded.

According to the audit, the grant program requires clients to front 10 percent of the startup "capitalization."

The auditors found that one of Walker's three cousins did not qualify for the grants, and though the two unnamed cousins and Walker's sister qualified, the small-business consultant waived the 10 percent startup fee.

"It is our opinion that Program guidelines were not followed since the [consultant] made the sole decision to waive client participation requirements," the audit states. "Because proper approval to waive client participation requirements was not obtained, it is our opinion that none of these clients should have been approved for the program grant."

The audit says that the grant applications were not expedited nor were other steps "skipped or altered."

The report notes Walker has a business interest in 5linx and that he "has promoted the business to other employees."

When auditors reached out to 5linx for company records, they were denied and were told the company would only release financial information involving Walker or others under a subpoena.

Walker said he has recruited about half a dozen "representatives" to join the company, who have in turn, recruited their own members, creating a network that operates in about 16 states. Walker said he did not recruit his sister.

"She didn't sign up under me. Whether she signed up under somebody who was signed up under somebody who was signed up under somebody under me ... it's undetermined."

In his 2015 statement of financial interest, a required reporting document from lawmakers and government officials, Walker disclosed more than $12,500 in income from 2014 for his work with 5linx.

But his 2014 report -- which covers 2013, the year he started selling products and services for 5linx -- Walker made no mention of that new source of income.

Walker said he's not sure why it wasn't mentioned but that he may not have made enough money that year to trigger mandatory reporting requirements.

"I always err on the side of over-reporting," Walker said.

Childers has said she followed recommendations from the auditors to suspend the grant payments that were scrutinized in the audit and also agreed that her group will bar any grant money from going to similar "multilevel marketing ventures."

In a letter to the auditors, Childers said her office would cooperate with any "investigation that may transpire."

Childers was not available for comment Thursday.

In an interview, Walker said he objects to his business being labeled a "pyramid scheme" and thinks it's wrong for the state to make 5linx ineligible for the program.

"We're talking about a legal entity, a legal business and a legal opportunity that in America is a $200 billion industry," Walker said. "To say to some folks that you simply can't do that, I think that's a big huge mistake."

Information for this article was contributed by Michael R. Wickline of the Arkansas Democrat-Gazette.

Metro on 05/22/2015

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