A Little Rock attorney advising the Arkansas Legislature's staff on how to respond to demands for records made by federal investigators also represents a top official in a company connected to an ongoing federal investigation into kickbacks received by at least one state lawmaker.
Kenneth Elser, acting U.S. attorney for the Western District of Arkansas, confirmed the ongoing investigation in a court hearing May 23. Less than a month later, the Arkansas Bureau of Legislative Research retained attorney Jane Duke and her firm of Mitchell, Williams, Selig, Gates and Woodyard to advise the bureau on complying with requests from federal investigators for legislative documents regarding matters that remain publicly veiled.
Duke, a former U.S. attorney for the Eastern District of Arkansas, said in February and confirmed this week that she also represents Tom Goss of Springfield, Mo., chief financial officer for Preferred Family Healthcare. Goss' wife, Bontiea, is the company's chief operating officer. The two were also founders of Alternative Opportunities Inc. in Arkansas, which Preferred Family took over in 2015.
Subsidiaries of Alternative Opportunities received more state General Improvement Fund grant money from Arkansas legislators since 2013 than any other entity in the state, according to research by the Arkansas Democrat-Gazette published in October. Two of those grants totaling $400,000 are the basis of the kickback scheme in which one former state lawmaker has pleaded guilty. A second former legislator, Jon Woods, goes on trial Monday on charges he also took kickbacks.
Duke said both of her clients are OK with the arrangement and that the two have no common dealings.
"There is no conflict of interest between our representation of Tom Goss and our representation of the Bureau of Legislative Research," Duke said in a statement Tuesday. "Neither had dealings with the other."
Duke said Tom Goss knows nothing about the kickbacks, which, according to court documents, were paid by the then-director of Alternative Opportunities in 2013.
Goss agreed to the law firm's representation of the bureau, and the bureau knew she represented Goss, Duke said. Neither the bureau nor federal investigators would comment on whether the investigation of Woods and the ongoing investigation at the Capitol are connected, or what legislative records investigators are seeking.
Invoices for services rendered by the Mitchell Williams firm to the state, obtained by the Democrat-Gazette, include charges for filing a motion to quash a subpoena from the FBI in its investigation for being overly broad. The firm has charged the state $59,301 since June 13, state records show.
The firm also helped the legislative staff in connection with the Woods trial, where four legislative staff members have been subpoenaed to testify, according to Marty Garrity, Bureau of Legislative Research director. Garrity confirmed Duke's account that the bureau was told about Goss.
The Legislative Council, a body of lawmakers that oversees government operations when the Legislature is out of session, approved hiring Duke's law firm. Sen. Bill Sample, R-Hot Springs and council chairman, said he spoke with Garrity on Tuesday and was satisfied with the representation Duke and her firm provided. He said he did not see a conflict of interest.
"As long as they're happy, I'm happy," he said of the bureau.
Under current Arkansas Supreme Court rules of professional conduct, Rule 1.7, even if there were competing interests between two clients with the same lawyer, there is no problem so long as each client gives "informed consent" of the situation and there is no direct conflict prohibited by law, such as when "representation of one client will be directly adverse to another."
Neither the Arkansas Bar Association nor the Arkansas Office of the Committee on Professional Conduct would comment on the particulars regarding the situation.
THE KICKBACK CASE
Charges against Woods, R-Springdale, include accepting a kickback in 2013 from a Bentonville nonprofit corporation named AmeriWorks in return for directing $275,000 in state General Improvement Fund grants to it. Former state Rep. Micah Neal, R-Springdale, pleaded guilty Jan. 4 to accepting a kickback after directing $125,000 in grant money to the company, which described itself as a jobs-training program.
Milton R. "Rusty" Cranford, who identified himself in grant records as statewide director of Alternative Opportunities Inc., signed the application. Alternative Opportunities Inc. was incorporated in Arkansas in March 2006, Arkansas secretary of state records show. Names registered under that nonprofit's umbrella group were Dayspring Behavioral Health Services, Decision Point, Health Resources, Health Resources of Arkansas and the Wilbur D. Mills Treatment Center.
The three principal incorporators were listed as Bontiea Goss, Tom Goss and Marilyn Nolan. The principal address was 1111 S. Glenstone, Springfield, Mo. That address is now an administrative office of Preferred Family, according to its website. Preferred Family and Alternative Opportunities merged in 2015 and became Preferred Family, the company said in a statement in February.
Cranford used the name and tax-exempt status of Decision Point Inc. to qualify for the AmeriWorks grant and used the Decision Point staff to prepare the grant application, according to court records. Decision Point provides counseling for substance abuse and other behavioral problems.
The business address used by AmeriWorks throughout the grant application process was the address of Decision Point's facility in Springdale, according to records from the Northwest Arkansas Economic Development District, which administered the grant program.
The grant checks were deposited in Decision Point's account, the indictment says. AmeriWorks was not formally incorporated until after the grant was approved, grant and secretary of state records show.
Preferred Family said there was never a formal connection between Decision Point and AmeriWorks. AmeriWorks was "a separate taxable nonprofit," spokesman Reginald McElhannon of Preferred Family said in a February statement. Any kickbacks took place before Preferred Family Healthcare became directly involved in Arkansas in 2015.
The amount of state money in programs such as Medicaid, far beyond the General Improvement Fund, that Alternative Opportunities and Preferred Family received in any given year is safely in the millions, said state Sen. Bryan King, R-Green Forest. King is a longtime critic of state Medicaid spending and what he describes as a lack of transparency in the business relationships between lawmakers and health care providers.
He is the sponsor of Senate Bill 175 of 2017, the latest in a number of such measures he proposed over the years to require reporting of business dealings between Medicaid providers, lawmakers and their spouses. The measure passed 23-6 in the Senate but died in the House State Agencies and Governmental Affairs Committee.
"Just what we know is enough where we should be concerned," King said. "I've had concerns for years about the influence of these providers."
King also said he would contact Duke personally to discuss her representation of Goss and the state.
COMPANIES CONNECTED
While Preferred Family did not operate in Arkansas until 2015, secretary of state records show the Gosses and Nolan were involved beginning in 2006 when they founded Alternative Opportunities.
Cranford was an employee of Dayspring when Alternative Opportunities formed. He "later provided executive leadership for our various Arkansas services," the February statement said. "Our organization also has contracted with Cranford Coalition for government relations services for many years." Preferred Family placed its contract with Cranford's lobbying firm on inactive status in January, McElhannon said.
Duke represented AmeriWorks briefly in July and August 2016, she said in a statement Tuesday, while it was being subpoenaed for records that were then under Tom Goss' control. Goss referred all questions to Duke when contacted earlier this year about the Woods case.
The $400,000 in grants to AmeriWorks in the Woods case was refunded after federal investigators interviewed Cranford about the grants, according to Woods' indictment. The Aug. 13, 2014, refund check bore Tom Goss' signature stamp, records show. A letter from Cranford on Alternative Opportunities stationery accompanied the check. The check was drawn from the account of Dayspring Behavioral Health.
The Woods case involves grants from the state General Improvement Fund, a portion of which was until recently controlled by legislators. The fund consists 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 state Supreme Court declared this method of distribution unconstitutional in a ruling Oct. 5.
From 2013 forward, Decision Point and other Goss-affiliated entities received $746,500 of General Improvement Fund grants on the approval of 15 state House and Senate members. The figure includes the $400,000 from Woods and Neal.
Cranford has not returned calls for comment left at his Little Rock office since Neal's guilty plea in January. A message left Tuesday was not returned. Nathan Garrett of Kansas City, Mo., is one of the attorneys representing Cranford, according to an office worker taking a request for comment at the law firm of Graves/Garrett LLC. Garrett did not return a message to him Tuesday.
MATTERS IN MISSOURI
Tom and Bontiea Goss and Nolan were recently placed on unpaid administrative leave, Preferred Family confirmed in a statement Monday. The company would not comment on the reason or the timing of the board's decision.
Nolan is a member of Preferred Family's senior management team, a spokesman for the company said. She was formerly the chief executive officer for Alternative Opportunities, according to news accounts.
A former member of Alternative Opportunities board of directors pleaded guilty June 12 to embezzling almost $2 million from the nonprofit company from his Missouri office, according to a statement from the U.S. attorney's office for the Western District of Missouri.
David Carl Hayes pleaded guilty to charges including theft from an organization receiving federal funds. Neither the U.S. attorney for the Western District of Arkansas the counterpart for the Western District of Missouri would comment on whether that case is linked to the investigation of either Woods or the one at the Capitol. Hayes was Alternative Opportunities' coordinator of merger and acquisition activity from 2006 to 2013, according to court documents.
"Doing business as Dayspring Behavioral Health Services, Alternative Opportunities operated dozens of clinics throughout the state of Arkansas. Hayes embezzled from Dayspring from Jan. 3, 2011 to March 31, 2014, by causing Dayspring to issue checks payable to himself or a person not identified in court documents, which Hayes deposited into his personal checking account," one such document says.
Preferred Family Healthcare notified Arkansas officials of the embezzlement, the guilty plea and the Gosses' administrative leave, said Amy Webb, spokesman for the Arkansas Department of Human Services.
"Under PFH's certification as a provider, they were obligated to alert the Division of Behavioral Health Services and they did so," Webb said in a statement. Also, it appears the money embezzled was taken from Hayes' employer and that no Arkansas state fund, such as Medicaid money, was involved, she said.
A Section on 11/30/2017