A federal trial for two Little Rock businessmen accused of tricking the government into awarding them construction contracts worth millions of dollars got off to a slow start Wednesday with testimony focused on the minutiae in the contracts and the way the men divvied up company duties.
Federal prosecutors say Ross Alan Hope and Mikel Kullander, both 56, intended to commit fraud when they formed a construction company called DAV in 2007 for the sole purpose of obtaining government funds that were set aside for small businesses run by service-disabled veterans.
Neither man is a veteran, and didn't claim to be, but they set up the company naming James Wells, a service-disabled veteran and an employee of Hope's, as the president and 51 percent owner. Based on those assertions, DAV received more than $15 million worth of the set-aside contracts between 2007 and 2015, primarily for work done for the U.S. Food and Drug Administration and the Department of Veterans Affairs.
At the time they formed DAV, Hope already owned and was the chief executive officer of Powers of Arkansas, a heating and air business, and Kullander was vice president of Kullander Construction.
A December indictment accuses Hope and Kullander of conspiring to commit wire fraud, and committing major fraud, by falsely representing that Wells owned the majority of the new company and set its priorities, when in fact he had little to do with the business.
Little Rock attorney Tim Dudley, who represents Hope, told jurors Tuesday that Hope and Kullander weren't trying to deceive anyone in situating Wells as DAV's president. He said they were open about their intentions to try to legitimately take advantage of the new program after Hope learned through the construction grapevine that government agencies "weren't happy with the service-disabled companies they had."
"He saw an opportunity to fill that void," Dudley said. He said Hope approached Wells about whether he would be willing to own the majority of the company, and Wells agreed, but only after ensuring that he qualified.
The indictment quotes a 2007 email from Hope to an unnamed recipient noting that he and Kullander "would like to start a new company for the purpose of obtaining service-disabled veteran contracts, mostly construction and controls related, from the federal government."
The email notes that "J.W.," then an employee of Hope's, "said he will join us as the service-disabled veteran" and "would have to be the 51 percent owner."
In incorporation papers at the Arkansas secretary of state's office office, the men listed Wells as president, Hope as secretary and treasurer, and Kullander as vice president.
Dudley noted that the paperwork wasn't hidden and wasn't meant to be deceptive. But when DAV began receiving large government contracts in 2008, he said, Wells worried that he would make too much money to legally continue receiving his disability payments, and Hope and Kullander responded by at first reducing Wells' salary, and later, at Wells' request, making Kullander president instead.
The indictment alleges that the changes were made only after the men thought their classification as a service-disabled, veteran-run business was secure and the government was no longer paying attention. But Dudley said it was the men's openness with a government representative who interviewed them in 2011 that led the government to refuse to recertify the company.
In response, Dudley said, the men "started trying to fix the problem," taking actions that included reinstalling Wells as president, until they became recertified.
While prosecutors say the reshuffling was a sign of deception, designed to make it falsely appear that Wells was actively involved in the business when he wasn't, Dudley contends the men didn't hide their actions from government officials.
In addition, Dudley said, all the work DAV did on the government contracts was "performed in a timely manner," and the government "didn't lose a dime."
Attorney Jane Duke of Little Rock, who represents Kullander, opted to reserve her opening statement until later in the trial. It is underway in the Little Rock courtroom of U.S. District Judge Leon Holmes and is expected to last two or three weeks.
Metro on 09/07/2017