Lobbyist got part of fees paid by bondsmen in Arkansas

Continuing education fees paid by bail bondsmen in Arkansas went to an industry association that used much of the money instead to pay for a lobbyist, according to Arkansas Legislative Audit.

Jon Moore, deputy legislative auditor, said most of the money marked for education ultimately went to Rusty Cranford of Rogers, who lobbied lawmakers on behalf of the Arkansas Professional Bail Association.

"I've never seen it before," Moore said in an interview. "Now, there's lots of other associations, but I've never seen it written into law where you had to make a payment into an association."

According to Arkansas Legislative Audit, the Professional Bail Bondsman Licensing Board, a state agency, required bondsmen to pay fees to the association.

The audit said: "The Board required licensees to pay fees to the Arkansas Professional Bail Association that may not be consistent with authority delegated under law by the Board to the Association. [Attorney General Opinion No.] 2015-028 concerning this authority says that the Association can only require fees to the extent that the proceeds are used for the sole purpose of education training for bail bondsmen. The Association used some of the proceeds for purposes other than education training for bail bondsmen."

The continuing education fees' flow to the industry association -- totaling $100 per year for each of the roughly 475 licensed bail bondsmen in Arkansas -- was laid out in Act 36 of 2011. The law was repealed this year.

Act 36 required the association to select education providers and set a schedule of fees that were subject to the approval of the state board. In addition to the $100 fee to the industry association, bail bondsmen paid additional fees to education providers.

During the legislative session earlier this year, lawmakers approved a law that reverted back to the previous system, putting the state board squarely in charge of education.

"The old [2011] law required the licensees to pay the Professional Bail Association, and then there was an [attorney general] opinion that said you could only do that to the extent that you were providing training to the bail bondsmen," Moore said. "When we looked at the financial records of the association, we saw that they were paying for lobbying, primarily, out of their monies that they received."

The Cranford Coalition Inc. has lobbied on behalf of the Arkansas Professional Bail Association since at least 2008, according to lobbyist registration reports. Neither Rusty Cranford nor his attorney returned a phone call seeking comment.

Auditors declined to share internal financial information received from the association, citing Arkansas Code Annotated 10-4-416, which states: "Records that are exempt from public disclosure in the hands of the entity's custodian remain exempt from public disclosure in the hands of the Legislative Auditor and Arkansas Legislative Audit."

However, because the Arkansas Professional Bail Association is a nonprofit, tax forms filed with the Internal Revenue Service are public records.

In 2015, the association collected $4,150 in membership dues and $47,488 in "program service revenue including government fees and contracts."

The association spent $32,000 on "political expenditures" in 2015, according to the tax form for that year. It spent $34,000 in 2014 and $36,350 in 2013, according to tax forms for those years.

Since Act 36 of 2011 by then-Sen. Gene Jeffress, D-Louann, became law, the industry association's assets have steadily increased from $552 in 2011 to $55,145 in 2016, according to GuideStar, a website that tracks nonprofit groups.

At least five lawsuits have been filed related to Act 36.

John Kiesling, who owns the Central Arkansas Bail Bonds School, has sued over the arrangement four times in Pulaski County Circuit Court. All of the suits were dismissed by the trial court, but the latest dismissal has been appealed to the Arkansas Supreme Court.

"The Legislature passed a law putting the Arkansas Professional Bail Association in as a gatekeeper over the education side, and when they did that the association forced every bail bondsman to pay $100 a year since 2011 so they could pay a lobbyist -- Rusty Cranford -- for his services to keep the industry going in the association's favor," Kiesling said in an interview.

"To me, it's an illegal exaction, because the bail bond board itself -- the executive director Larry Peters -- was enforcing it for the association to collect that money."

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In the latest suit, Kiesling argues that Act 36 is unconstitutional. He cites two passages in the Arkansas Constitution.

Article 5, Section 25, of the constitution states "no special law shall be enacted; nor shall the operation of any general law be suspended by the legislature for the benefit of any particular individual, corporation or association." Amendment 34 states "No person shall be denied employment ... because of refusal to join or affiliate with a labor union."

In 2011, North Little Rock attorney Lisa Douglas, who teaches continuing-education courses, filed a lawsuit challenging Act 36, saying that one private association, the older one, should not be "the gatekeeper" over who can provide education when instructors are already regulated by the state. Her lawsuit was dismissed.

Rep. Bob Ballinger, R-Hindsville, filed a bill that became Act 917 of 2017. It requires the state board to decide which entities can provide educational services and to set fees.

Peters, executive director of the Professional Bail Bondsman Licensing Board, said he felt that the audit finding was a moot point considering Ballinger's act. He said he fought against Act 36 of 2011.

"It took it totally away from the board, and we fought that tooth and nail," Peters said. "Well, as it turned out, it wasn't a good thing, and it's gone back to where the board is in charge of all of it."

Once Act 36 of 2011 passed, Peters said he had no choice but to follow the law. He said the law did not give the state board oversight authority over the industry association.

"Let's be clear on this. The board didn't touch that money," he said. "We didn't have a legal right to collect any money. We didn't have a legal right to appropriate any money."

Jeffress said in 2011 that he sponsored the bill because he has sponsored similar legislation in the past.

"We were approached by the association. ... I don't really know what their purpose was, but I surmise that they wanted to be in charge of their own training and raise money for their organization," he said at the time.

Reached Tuesday, he said he didn't remember much about the bill.

The Arkansas Professional Bail Association didn't respond to multiple requests for comment. John Muldoon, president of the Arkansas Professional Bail Association, also co-owns H&H Bail Bond Co. in Hot Springs.

The Legislative Joint Auditing Committee on State Agencies heard the audit Thursday and filed the report without taking further action.

In an unrelated matter, Rusty Cranford has been in the news as "Businessman A" in a federal indictment alleging kickbacks involving grants from the General Improvement Fund. Cranford, who has not been charged with any crime or named in indictments, incorporated a company called AmeriWorks, according to the secretary of state's office.

According to the indictment, two lawmakers took kickbacks from a workforce training program that returned $400,000 in grants after being questioned by federal investigators. Grant records and a state audit show that the only workforce training program to receive and then return $400,000 was a Bentonville company called AmeriWorks.

The federal investigation alleges that bribes were paid for grants to a private college. A former state senator, the college president and a consultant have been charged in the case. A state representative pleaded guilty to fraud in January.

Information for this article was contributed by Michael R. Wickline of the Arkansas Democrat-Gazette and Doug Thompson of the Northwest Arkansas Democrat-Gazette.

SundayMonday on 09/18/2017

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