FORT SMITH -- State Sen. Jake Files, R-Fort Smith, put to his own uses more than $25,000 in state General Improvement Fund money he had obtained for a softball sports complex he was involved in developing, according to an affidavit filed Monday in U.S. District Court regarding a federal search warrant.
The application for the search warrant, dated Aug. 10, said the warrant was sought in relation to violation of federal wire-fraud and money-laundering laws. Files had not been charged with any crimes as of Monday, a spokesman with the U.S. attorney's office said.
"This is the same story, different day that has been reported on before," Files said in an emailed response to a request seeking comment. "I was contacted by law enforcement, who are investigating this GIF grant (and from what I understand others across the state that have nothing to do with me). They asked me related questions about the grant. They asked me about the bids, which I have discussed multiple times. I was fully cooperative, and I will continue to be, and that was the end of it."
The search warrant affidavit, signed by FBI Special Agent Timmy Akins, said Files submitted three fictitious bids so the city of Fort Smith could receive $46,500 in General Improvement Fund money for utility work at the city-owned River Valley Sports Complex at Chaffee Crossing.
Three bids were required before the Western Arkansas Planning and Development District would release the grant money to the city, which in turn, gave the money to the low bidder for the project, Dianna Gonzalez, an employee of Files' FFH Construction LLC., the affidavit said.
In a July 27 interview with the FBI, Fort Smith City Administrator Carl Geffken said that at the time the bids were submitted, he didn't know Gonzalez worked for Files.
The FBI interviewed Gonzalez last month, according to the affidavit. Gonzalez said Files told her on Dec. 29 to open a bank account so the city could send the General Improvement Fund money to her account. Files had explained to her that all of his bank accounts were overdrawn, the affidavit said.
Gonzalez opened the account at Armstrong Bank on Dec. 30, according to the affidavit, and the city transferred $26,945.91 into the account that day.
The affidavit said Gonzalez told the FBI that Files instructed her to get a cashier's check for $11,931.91 and $14,000 cash, for a total of $25,931.91, and deliver both to Files. The cashier's check was made payable to FFH Construction.
Gonzalez "stated she watched as Files counted the cash out for payment to employees, which amounted to approximately $4,805," the affidavit said. "Gonzalez stated Files gave her $1,978.42 'in reimbursement' and a $1,500 'Christmas bonus.' Gonzalez said she saw Files place the remainder of cash and the cashier's check in his pocket."
The affidavit said records from FFH Construction's bank account at First National Bank of Fort Smith showed that the cashier's check for $11,931.91 was deposited into the account on Dec. 30.
Akins said in the affidavit the deposit of the check constituted wire fraud.
Fort Smith city directors on Feb. 7 terminated the agreement it had with Files and Lee Webb to develop the sports complex. Along with the termination, the directors required the return of the $26,945.91 in grant money.
Gonzalez told the FBI she believed that Files would have created the fictitious bids on his desktop or laptop computer. The search warrant sought to seize that gear and other electronic equipment from the FFH Construction office at 3203 Waco St. or from Files' 2016 Yukon XL.
FBI records in the file showed that agents seized from the Waco Street office computers, computer thumb drives, an external hard drive, an iPhone, River Valley Sports Complex documents and boxes of accounts payable documents, among other things.
Files and Webb, a Sebastian County Election Commission member, proposed in 2014 to build an eight-field baseball/softball complex to draw tournaments to the area. City officials agreed to allocate up to $1.6 million after Files and Webb promised to meet the remaining project cost with donated money, material and labor.
By the time the city directors terminated the contract with Files and Webb, the city had spent more than $1 million on the complex project.
Files and Webb had promised to finish the fields in 2015, but by late 2016 the project had stalled. Geffken, the city administrator, told Files that he and Webb were to be called before the city directors to explain the lack of progress, according to the affidavit.
Around that time, Files asked Geffken if the city would be interested in applying for General Improvement Fund money according to the affidavit. Geffken replied he was "receptive to the idea," the affidavit said.
Files filled out the General Improvement Fund application for $46,500 and sent it to the city, the affidavit said. Deputy City Administrator Jeff Dingman signed it and forwarded it to the Western Arkansas Planning and Development District, which was responsible for disbursing the General Improvement Fund money to the city.
Ashley Garris, project manager at the development district office, notified the city that three written quotes for the project were required before the money could be released, the affidavit said.
"On December 29, 2016, Files emailed three materially false and fraudulent bids to Western Arkansas Planning and Development District that represented bids from LEGO Construction, Williams Power and Light, and Dianna Gonzalez to lay water, sewer and electrical lines at the River Valley Sports Complex. The lowest of the three bids was the one ostensibly from Gonzalez," the affidavit said.
The FBI sought out the owners of LEGO and Williams Power and Light, who said they did not submit bids for the project and didn't know anything about it, the affidavit said.
Files has suffered financial trouble over the past few years. In June, a Booneville bank filed a foreclosure complaint against him and his wife, Michaela, after defaulting on multiple mortgages totaling more than $2 million, for which they had pledged their Fort Smith home and Files' business as security.
The Federal National Mortgage Association filed suit in March against Fort Smith LP, of which Files is a partner, seeking repayment of more than $1.87 million on a 2009 loan.
Files and others were ordered to pay $467,000 in May on a defaulted loan from the Richard B. Griffin Family Trust Dated Aug. 30, 1991.
American Builders and Contractors Supply Co. of Fort Smith won a $69,903 judgment against Files and FFH Construction in January for failure to pay for construction materials.
Files, who has served as chairman of the Senate Revenue and Taxation Committee, said in May that he would not seek re-election to the state Senate in 2018. Files said he would be spending more time with Texas-based EnviroSolar as a solar consultant.
A Section on 08/22/2017
Print Headline: State's $25,931 went to senator, affidavit says