When two men who operated a North Little Rock construction company go on trial today before a federal jury, spectators may wonder if prosecutors and defense attorneys are talking about the same people.
After about three weeks of testimony, jurors will have to sort out whether the Little Rock men are conniving criminals hell-bent on defrauding the federal government out of millions of dollars' worth of contracts they knew they weren't qualified to receive, or smart businessmen who took advantage of an opportunity that government officials led them to believe was perfectly legitimate.
Ross Alan Hope and Mikel Kullander, both 56, each face three counts of major fraud, 24 counts of wire fraud and one count of wire-fraud conspiracy.
Each man initially faced two additional counts of major fraud that U.S. District Judge Leon Holmes dismissed in March after finding that the statute of limitations for prosecuting them had expired.
Then on Friday, Holmes dropped an additional charge against Kullander of making a false statement to a federal agent, saying the charge included too many separate statements, making it unclear which statement or statements constituted the purported violation.
Hope and Kullander operated DAV Construction in North Little Rock and were indicted in December on accusations that for about eight years, they had falsely claimed their company was owned by a service-disabled veteran so they could collect more than $15.5 million in federal contracts. The two charges dismissed in March focused on more than $8 million of that total.
Neither Hope nor Kullander are veterans, let alone service-disabled. But between 2007 and Aug. 19, 2015, the day the business was raided by federal agents, they maintained on official documents that the business was headed by a man named "J.W.," who is a 100 percent service-disabled veteran.
Under the Veterans Benefits, Health Care and Information Technology Act of 2006, veterans with service-related disabilities can be part of a government contracting network as long as the veteran owns at least 51 percent of the business, receives at least 51 percent of the profits and controls the company's day-to-day management, operations and long-term decision making.
The indictment lists a Sept. 5, 2007, email from Hope to an unnamed recipient saying, "Mikel Kullander and I 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 goes on to say that J.W., "who currently works for me, said he will join us as the service-disabled veteran," and that J.W. "would have to be the 51 percent owner with Mikel and I splitting the remaining 24.5 each."
Records from the Arkansas secretary of state's office indicated that DAV was incorporated on Sept. 19, 2007, with James Wells listed as president, Hope listed as secretary and treasurer, and Kullander listed as vice president. The indictment said a pre-incorporation agreement showed that shares of the company were divided accordingly.
Hope was president of Powers of Arkansas, which he has said subcontracted and shared office space with DAV. Hope's attorney, Tim Dudley, said in December that Hope worked for DAV in the 1980s as a mechanical engineer and returned to it years later, then bought it in 2002. Dudley said DAV focused on heating and air work for which the government required the use of a particular kind of thermostat that Powers of Arkansas was one of few businesses qualified to work on, which resulted in DAV getting a large share of government contracts.
Less than a year after DAV was incorporated, the company's board of directors issued a memo replacing J.W. with Kullander as president and making J.W. vice president, according to the indictment. It says that at the same time, the board removed J.W.'s authority to sign checks and enter contracts on behalf of the company.
A month later, on July 30, 2008, a $1.57 million contract was awarded to the company based on its status as a service-disabled-veteran run business, the indictment says. It goes on to list other contracts of more than $1 million apiece that DAV was awarded in 2009 and 2010.
But in July 2011, the U.S. Department of Veterans Affairs' Center for Verification and Evaluation informed Kullander that the company's service-disabled veteran status had been denied because "J.W." no longer held the highest position at DAV, and "did not work full time or show sustained and significant time invested" in the company, according to the indictment.
The verification center, which was responsible for protecting the government program from fraud, reported that J.W. had acknowledged working for 20 years for Powers of Arkansas, but said he had quit because of his disability, the indictment said.
Less than a month after Kullander received that notification, Hope "caused" a letter signed by J.W. to be sent to the center requesting reconsideration, according to the indictment. The letter said J.W. was taking back the title of president and reassigning Kullander as vice president, according to the indictment.
In 2012, Hope managed to get the company relisted in the database of companies run by service-disabled veterans, the indictment states. It alleges that Hope later submitted documents saying the DAV office was moving to Sherwood, attaching a lease agreement for a new office space, as well as payroll ledgers indicating that J.W. made the highest salary.
But the address given for the office turned out to be J.W.'s home address in Sherwood, the indictment says.
The indictment goes on to list another contract of over $1 million that DAV was awarded based on its status as a business run by a service-disabled veteran, followed by the verification center's second refusal to keep DAV on the contracting list. That was followed by Hope again requesting reconsideration, this time saying that J.W. was now the majority shareholder and the company's sole board member.
In turn, more government contracts were awarded to the business, according to the indictment.
The bulk of the money paid through the contracts came from the Department of Veterans Affairs, while some of it came from the U.S. Food and Drug Administration, according to the indictment.
The indictment alleges that at least $1.25 million of fraudulent proceeds passed through the construction company to Hope and at least $268,695 went to Kullander, while J.W. received less than $100,000.
Federal prosecutors have told the judge that they have more than 450 possible exhibits lined up, and expect to call 30 to 40 witnesses. They have estimated that their presentation will take up to two weeks.
Defense attorneys -- Dudley for Hope and Jane Duke for Kullander -- have said their cases together may last a week.
The defense attorneys have indicated they want to show evidence of the government's "tacit approval" of the arrangement as a defense.
Holmes said in a pretrial hearing Thursday that a government expert can be cross-examined about "what he knows" about certain contracts, but the government doesn't have to turn over contracts that the expert isn't familiar with, which the defense thinks demonstrate the "tacit approval."
Holmes said he would permit only limited evidence from the defense about civil or administrative measures the government could have taken against the men instead of pursuing a criminal indictment.
Dudley has said the government suffered no financial loss as a result of the contract going to DAV, but Holmes said he won't require federal prosecutors to show that the government suffered a financial loss to prove its case.
The judge told prosecutors that because of the complexity of the case, he wants them to prepare a chart to which jurors can refer throughout the trial to help them keep track of what each count in the indictment pertains to.
"I am concerned about the complexity and the length of the indictment, and how that gets presented to the jury," Holmes said.
Metro on 09/05/2017