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The government filed a motion Tuesday to drop its case against Fayetteville attorney K. Vaughn Knight instead of proceeding with a second trial on a charge related to Northwest Arkansas developer Brandon Barber's financial collapse.

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The motion for dismissal filed in U.S. District Court Western District of Arkansas said the government considered all of the previous rulings in the case, the likely testimony and other evidence that might be presented at a retrial and the interests of justice before deciding not to proceed.

David Matthews, Knight's attorney, said his client appreciates the thorough review and disposition of his case that U.S. District Judge P.K. Holmes III provided, which was upheld by the 8th U.S. Circuit of Appeals, as well as the government's decision not to proceed further.

"It has been a long road, and when I called my client he was very relieved," Matthews said. "He gets his life back, and that's a wonderful thing."

Matthews said Knight is a "fine, good man" who now gets to resume his career and family life without further worry.

The office of acting U.S. Attorney Kenneth Elser said he would not comment on the decision beyond what was written in the motion for dismissal. Meanwhile, the U.S. attorney's office also asked a federal judge to vacate the garnishment of Barber's life insurance policy after Barber offered the equal amount in lieu of the garnishment.

Last week, a federal judge scheduled Knight's second trial for Dec. 14. The new trial date came a month after the 8th U.S. Circuit of Appeals upheld a June 2014 ruling throwing out Knight's convictions and ordering the retrial.

Knight was originally convicted on all eight counts in the government's indictment by a jury that deliberated for six hours after hearing testimony and arguments from Nov. 4-15, 2013.

On a motion from Knight's attorney, Holmes threw out Knight's convictions for conspiracy to commit bankruptcy fraud, aiding and abetting bankruptcy fraud, and five counts of money laundering. Holmes also acquitted Knight of making false statements in relation to Barber's bankruptcy case.

The government appealed the judge's decision to the 8th Circuit.

The 8th Circuit affirmed Holmes' ruling in a Sept. 28 decision but reversed the judge's acquittal on the false statements charge, ordering that Knight be retried on that charge.

The government tried Knight on the five money laundering counts, accusing him of using his lawyer's trust account to help Barber hide $1.2 million from his creditors so Barber could use the money for his own purposes.

The government also accused Knight of misrepresenting Barber's financial condition to the U.S. bankruptcy court by omitting income from one or more business entities that Barber used for his own benefit.

In a majority opinion, the 8th Circuit agreed with Holmes that the government's evidence "largely invited only speculation and conjecture" with gaps that left in doubt the correctness of the jury's verdict.

The judges also agreed that because the jury deliberated for only six hours, it did not adequately weigh the "dense factual and legal issues in the case and instead convicted Knight because he was Barber's lawyer."

The 8th Circuit opinion described Barber as a successful Northwest Arkansas real estate developer whose practice crumbled when the real estate market weakened and he made some bad business decisions around 2007.

His plight became public when he defaulted on a $16.7 million loan to finance construction of the Legacy building in downtown Fayetteville. He ended up owing more than $30 million to various creditors.

Barber hired Knight in January 2008 to help him with his financial problems, according to the opinion.

Knight was the last of six defendants in two federal court cases brought in 2013 that involved Barber and his financial meltdown.

Barber pleaded guilty to money laundering and conspiracy to commit bankruptcy fraud in the case involving Knight and New York businessman James Van Doren.

Barber was sentenced Oct. 28, 2014, to 65 months in prison and ordered to pay $450,000 restitution.

In the second case, Barber pleaded guilty to bank fraud involving kickbacks in a bank loan scheme. His 65-month sentence runs concurrently with his bankruptcy fraud conviction.

Van Doren pleaded guilty in August 2013 to one count of money laundering and was sentenced to 15 months in prison.

Two defendants in the bank fraud case, Jeff Whorton of Springdale and Brandon Rains of Fayetteville, pleaded guilty in federal court.

Whorton pleaded guilty to money laundering and conspiracy to commit bank fraud, for which he was sentenced to 14 months of home detention, fined $10,000 and ordered to pay $100,000 in restitution. Rains pleaded guilty to lying to federal agents and was fined $5,000.

The fourth defendant in the bank fraud case, Rogers attorney David Fisher, had a federal court trial in October 2013 and was acquitted of conspiracy to commit bank fraud.

On the matter of garnishing Barber's life insurance policy, federal court records described a payment of $9,531.79 that would replace the cash surrender value from Barber's AXA Advisors LLC life insurance policy.

The government had petitioned the court to garnish the policy earlier this year to satisfy the $450,300in restitution Barber has been ordered to pay.

Barber's attorney for the garnishment, Joel Johnson of Fort Smith, filed a motion in July, explaining that AXA Advisors would cancel the insurance policy if the government attempted to collect the cash surrender value.

Johnson said in the motion that Barber needed the policy for his children's benefit. Barber proposed, instead, to borrow the amount equal to the cash surrender value and pay that to the government.

Two days later, Holmes ordered a stay of the garnishment until he ordered otherwise.

Johnson declined to comment Tuesday on where Barber came up with the money, saying the information was attorney-client privilege.

Elser would not comment on the source of the payment. However, in an email to the Arkansas Democrat-Gazette on Tuesday, Elser wrote that the government has collected $60,454 toward Barber's restitution.

In addition to the $9,531.79 Barber paid from the in-lieu-of insurance policy garnishment, according to the email, the government received $50,562.21 from a garnishment filed against the state auditor's Unclaimed Property Division for funds in the name of Barber Development, Inc.

Barber also paid $360 in three payments of $120 each through the Bureau of Prisons, the email said.

Metro on 11/04/2015

Print Headline: U.S. ends case against ex-Barber lawyer

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