Rent-free deal raised at kickback trial of former Arkansas legislator

FAYETTEVILLE — Randell Shelton Jr. lived rent-free in the basement apartment of a friend’s parents while his consulting business received $115,000 in payments from Ecclesia College, according to testimony Monday.

Shelton is on trial over accusations of passing along kickbacks from the college in return for $550,000 in state grants directed to Ecclesia by two legislators. Assistant U.S. Attorney Kenneth Elser described Shelton’s company, Paradigm Strategic Consulting, in opening statements April 10 as a “bogus” company created to pass along the kickbacks.

Shelton’s defense closed its case Monday. He didn’t take the stand in his defense. U.S. District Judge Timothy L. Brooks will read final instructions on the law as it applies to this case to the jury when court convenes at 8:30 a.m. today. After those instructions, attorneys for both sides will make closing statements before the jury begins its deliberations.

Shelton is on trial along with former state Sen. Jon Woods, R-Springdale. The two were indicted in March 2017, accused of a kickback scheme involving state General Improvement Fund grants issued in 2013 and 2014. An alleged co-conspirator, Oren Paris III, former president of Ecclesia College in Springdale, was indicted with Woods.

Paris pleaded guilty April 4 to one count of conspiracy. He resigned as Ecclesia’s president and from the private, Christian college’s board before his guilty plea. His sentence is pending.

Paris disguised the kickbacks as consulting fees paid to Paradigm Strategic Consulting, according to the indictment. Shelton then passed the money along to Woods and former state Rep. Micah Neal of Spring-dale, the government contends.

In Monday’s testimony, Dr. George Schroeder, a Little Rock ophthalmologist and co-owner of a weight loss clinic there, testified on Shelton’s behalf. He allowed Shelton to move into a basement apartment at his home near Bigelow in the late autumn of 2013, Schroeder said. Shelton is a friend of his son, Daniel, and needed a place to live, Schroeder testified. The doctor also employed Shelton to do marketing for the weight loss clinic, New Creations MedSpa.

Shelton’s consulting company received a $50,000 check from Ecclesia on Sept. 27, 2013, Assistant U.S. Attorney Aaron Jennen reminded the jury in cross-examination.

“Do you think someone who had just been paid $50,000 ought to be able to find a place to live?” Jennen asked Schroeder. Schroeder replied “Yes.” Jennen went on to show another $65,000 in checks issued to Paradigm from Ecclesia before Shelton moved out of the basement apartment in early June 2014.

But would showing checks a business received without showing expenses and other records give a clear picture of his income from either his ophthalmology clinic or the weight loss business, asked Shelton defense attorney Chad Atwell. No it would not, Schroeder replied.

His client’s defense is based on the contention the government’s investigation was inadequate, Atwell told the judge Friday during a conference away from the jury. That investigation did not, for instance, subpoena Shelton’s personal bank records, only those of his business.

Another defense witness was Shelton’s accountant, Alan Levi of Dallas. Levi testified the organization of Paradigm was simple, straightforward and clear. Shelton could have chosen other forms of organizing a corporation to make his business dealings harder to track if he wanted to, Levi said. All income from Ecclesia was reported for tax purposes, Levi testified.

Shelton’s defense called character witnesses Monday such as his pastor, Robert Parry, and a longtime friend and former business associate, David Glosup, both from his hometown community of Mabank, Texas. Each attested to Shelton’s honesty and business acumen.

The kickback allegations involve $550,000 of the more than $717,500 in Improvement Fund grants, the U.S. Department of Justice contends. Woods directed the most grant money Ecclesia received at more than $350,000, court records show.

Neal pleaded guilty Jan. 4, 2017, for his role in the scheme and was the government’s first witness in the case. His sentence is also pending.

The trial of Woods and Shelton began April 9 in federal court in Fayetteville and is expected to end this week.

Also on Monday, the government presented two rebuttal witnesses, Dan Fischer of Oklahoma and Jo Ann Wilks of Texas. Fischer is a pastor whom Paris called to ask if he knew of anyone who could assist the college, which was in financial difficulty. Fischer contacted Wilks of the Wilks Family Foundation on Paris’ behalf.

Wilks’ foundation donated $140,000 to Ecclesia in November 2017, shortly after a direct personal appeal from Paris by telephone. Wilks testified that Paris made the appeal directly, that Shelton and his company were not involved in arranging the donation. Shelton’s defense attorneys argued during trial that Shelton was paid to arrange donations such as these.

Shelly Koehler, another of Shelton’s attorneys, argued in a hearing before Wilks testified that it was Shelton’s task to identify likely prospects for Paris to call, not to make the appeal for donations himself. She argued Wilks and Fischer were not rebuttal witnesses, but witnesses the government should have offered during its case. Brooks overruled Koehler and allowed the testimony.

Wilks testified that Paris appealed for the donation because the school was having cash flow problems, “something about paperwork that had not been filled out.” Wilks declined to say after her testimony whether Paris told her that he had been indicted in March of 2017.

Koehler renewed Shelton’s motion that he should be granted a separate trial after testimony ended and after the jury was excused for the day. Brooks denied it. Attorneys for both Shelton and Woods asked for a directed verdict of acquittal because the government had failed to prove its case. Brooks denied their requests.

Closing statements will take hours, according to requests made Monday. The government asked for two hours for its closing arguments and another 30 minutes of rebuttal after the defense makes its statements. Attorneys for each defendant asked for an hour each. Brooks will notify the attorneys of his decision, he said at the end of the hearing.

Woods directed a $200,000 grant to Ecclesia in September 2013, grant records show. Neal supported a $50,000 grant to the college and Woods another $150,000 in December 2014, also according to grant records. The amount of money Woods is accused of receiving as a kickback isn’t specified in the indictment. It claims much of that money was paid in cash, except for the $40,000 wire transfer from Shelton.

That Oct. 1, 2013, wire transfer was a loan, Shelton’s defense contends.

Woods faces 15 counts of fraud, all relating to either wire or mail transfers of money. Paris and Shelton were named in 14 of the fraud charges. All three were charged with one count of conspiracy to commit fraud. Woods is also charged with one count of money laundering in connection with the purchase of a cashier’s check.

Woods and Shelton face up to 20 years in prison on the fraud and conspiracy charges, if convicted. Woods faces an additional 10 years on the money-laundering charge, if convicted.

Woods and Neal also directed $400,000 in grant money to AmeriWorks, court and state records show. Neal said he received $20,000 delivered by Woods for steering $125,000 to AmeriWorks. Grant records show Woods directed $275,000 to the company.

AmeriWorks was incorporated by lobbyist Russell “Rusty” Cranford and described in a grant application as a work-training program. Cranford, 56, is set for trial June 11 in federal court in Springfield, Mo., on one count of conspiracy and eight counts of accepting bribes in an unrelated indictment.