Dr. Richard Roblee, a Fayetteville orthodontist, co-signed a $30,000 unsecured loan to state Rep. Jon Woods in March 2012. One year later, Woods introduced a bill resulting in a $900,000 state grant to a medical-records business whose board chairman was Roblee.
"We would have been much better off if we had never gotten that grant," Roblee said Thursday. The grant started a chain of events leading to the 20-year-old U.S. HealthRecord closing its operations in 2017, according to Roblee and business records.
The bill authorizing the grant became law in March 2013. Woods, who was a state senator by then, picked up the $900,000 grant check to Roblee's firm on Sept. 27, 2013. State grant records say he intended to hand-deliver the check. Six months later, the secretary-treasurer of Roblee's company co-signed the first of two more unsecured loans to Woods totaling another $50,150, according to court records.
A federal court jury convicted Woods on May 3 of 15 fraud-related counts involving kickbacks from state General Improvement Fund grants that Woods directed to two nonprofit companies, AmeriWorks of Bentonville and Ecclesia College of Springdale, from 2013-15. Woods is serving an 18-year, four-month prison sentence. The investigation is ongoing and has resulted in the convictions of four former state lawmakers and the indictment of a fifth, so far.
The "ongoing public corruption investigation has not developed sufficient evidence for the filing of criminal charges related to the GIF grant to U.S. HealthRecord," U.S. Attorney Duane "Dak" Kees said in a statement on Dec. 14.
Word of the FBI investigation into Woods and others, which began in July 2014, quickly spread through the state Capitol, Roblee said.
"Bluntly, it just closed the doors," Roblee said Thursday of the investigation's effect on his business's prospects. In all, HealthRecord investors, including himself, lost close to $2 million, Roblee said.
"If there's anything underhanded about this, I'm a pretty dumb crook," he said.
Patrick Benca of Little Rock, Woods' attorney, said Wednesday concerning all of the loans: "They were friends and he needed a co-signer on the loans as he had no credit history. Jon received the loans, and he paid back the loans with no assistance from his friends. There was never a quid pro quo from Jon to these guys regarding the grant. This allegation was vetted by the government, including interviews from them, and no charges were filed."
LOANS TO WOODS
Woods, R-Springdale, was first elected to the Legislature in 2006. He was assigned to the House Public Health, Welfare and Labor Committee. Woods took an interest in HealthRecord's system of sharing detailed medical records electronically, according to Roblee.
The goal of the company was to make sharing such records immediate and secure, ensuring patients privacy, Roblee said. One of the problems the company hoped to solve was the long delay in getting state approval for dental work under the state's Medicaid program, Roblee said.
Ray Scott, first director of the Office of Health Information Technology, confirmed that getting more of the state's dentists on an electronic system was a priority of the office at the time of the grant.
Electronic medical-record keeping received a major boost in the so-called federal stimulus package, formally known as the American Recovery and Reinvestment Act of 2009, according to Scott. The health information technology office was set up in 2011 with a $7.9 million federal grant from the act. The office was supposed to assist health care providers in adding their systems into the State Health Alliance for Records Exchange.
Integrating HealthRecord's system and State Health Alliance for Records Exchange was one of the aims of the grant, state records show.
Woods provided valuable assistance to HealthRecord long before the grant, Roblee said. It's much easier to get a meeting with state Department of Human Services officials when a state legislator asks for it, he said.
Woods successfully challenged Sen. Bill Pritchard, R-Elkins, for re-election in the Republican primary in 2012. Woods asked Roblee if there was anything he could do to help on the campaign, according to Roblee. He said he made a campaign contribution up to the legal limit and hosted a fundraiser for Woods. The individual limit on campaign contributions at the time was $2,000.
Woods then asked for a loan, Roblee said. He co-signed a $30,000 loan from Arvest Bank on March 22 on the condition that Woods would repay it.
"I started getting late notices from the bank almost immediately," Roblee said. "I called him up and told him he had to do something about it."
Roblee said the bank's calls stopped, and the loan was paid. He knew no other details, Roblee said.
Roblee said he didn't know about more loans to Woods co-signed by Jim Phillips until after the investigation began. Phillips is the owner of a liquor business in Springdale. He's also listed on grant records as the secretary-treasurer of HealthRecord at the time. Contacted for comment, Phillips said he hasn't been involved in HealthRecord for years and referred all questions to Roblee.
Phillips co-signed a $25,150 loan on June 11, 2014, and a $25,000 loan on July 21 of the same year. Each of those loans were from Arvest.
THE GRANT
The goal of the State Health Alliance for Records Exchange system, which still operates, is to improve the quality of care and reduce its cost, according to federal and state legislation creating the system.
The grant to HealthRecord was through the Health Information Technology office. Woods was the leading sponsor of the 2011 bill creating the office, which became Act 891 of 2011, legislative records show. The office was structured to sustain its operations through fees received from medical practices accessing the records exchange system, Scott said.
Woods also sponsored the bill authorizing putting General Improvement Fund money into the office's accounts for grants, Act 1235 of 2013. The technology office didn't request money for grants in 2013, then-director Scott said on Dec. 5.
Scott first learned of Woods' desire to make grant money available in late 2012 after Woods' election to the state Senate and before the legislative session began in January 2013. Woods contacted Scott and informed him that he would be seeking money for grants, according to Scott.
"I told him we didn't need money for grants," Scott said. "He said he had some constituents who needed it," Scott said. Woods was sole sponsor of Act 1235, legislative records show.
HealthRecord's grant was directly supervised by Scott, a veteran administrator who had previously served as director of the state's largest agency, the Department of Human Services, for seven years. Scott's office added conditions such as financial reporting not called for in the legislation creating the grants but which were within the office's authority to impose, Scott said.
HealthRecord applied for a state grant Aug. 26, 2013, records show. Roblee signed the application. Only one other applicant -- which received its requested $100,000 -- was an up-and-running electronic medical-records business, Scott said. Scott approved the HealthRecord grant Sept. 3 of the same year. The grant agreement stipulated that the company's software, TEAMLinks, would connect to and participate in the State Health Alliance for Records Exchange no later than Oct. 30, 2014.
"I had been a state employee at the governor-appointee level since 1973," Scott said. "I have never seen anything like it," he said of Woods picking up the $900,000 check so he could deliver it.
A record of Woods' request to hand-deliver the money exists because Scott required Woods to sign for the check and include his reason why. "I did it because my CFO [chief fiscal officer] was uncomfortable doing it this way," Scott said of Woods' wanting to pick up the check. "So we documented it to a T."
HealthRecord never completely worked out technical problems that would allow it to join the state system while also ensuring no unauthorized access to private medical records, according to Scott. The business also had difficulties persuading other clinics to adopt its system and buy the software, he said.
According to Roblee, the problem was that the system needed a major redesign that could have been paid for by private investors if the company had a formal contract with the state. The grant provided no guarantee to investors that the state would adopt the system even if the redesign was successful, he said.
The product worked, but up to that time it was the result of a series of improvements over the years, Roblee said. The various changes and adaptations needed an overhaul if the system was to expand further, he said. He hoped the $900,000 grant would be enough to pay for the redesign, but it wasn't, he said.
An Aug. 15, 2014, summary of use of the grant provided by HealthRecord to the state office showed that it spent all of the $900,000 and another $220,000 of investors' money trying to integrate the system with the State Health Alliance for Records Exchange and make the needed changes.
Expenses listed by the company included hiring two software developers "to assist with new version [of software] and SHARE integration" for $225,000. The company moved to a "new, private, secure cloud environment" with a vendor in Arkansas from one in Texas at a cost of $300,000, and developed an interface at a cost of another $100,000. Hiring two new support personnel cost another $90,000, the summary said. Licensing and legal fees cost another $20,000, according to the summary.
Arkansas taxpayers received no tangible benefit from the U.S. HealthRecord grant by the time he retired at the end of 2014, Scott said.
Scott's successor, Shirley Tyson, also has left the office. She no longer has the authority to speak on behalf of the agency, she said, and deferred comment to the state office.
Roblee did connect his own orthodontics practice to the State Health Alliance for Records Exchange through TEAMLinks but disconnected it in 2017, according to a statement from the office. Roblee said, by that time, the cost of maintaining the "cloud" of computer storage alone was costing $40,000 a month.
Scott confirmed that federal investigators questioned him for 2½ hours last year about the U.S. HealthRecord grant. Roblee also said the FBI questioned him and went through his finances and those of HealthRecord.
WOODS' FINANCES
Neither Roblee, Phillips nor anyone else's name appears as creditors or co-signers on either the 2012 or 2013 "Statement of Financial Interest" report filed by members of the Legislature. Woods was responsible for those reports. Neither Roblee nor Phillips was required to report loans to Woods. Section 7 of those forms specifically required lawmakers to "List each guarantor or co-maker who has guaranteed a debt of yours that is still outstanding."
Woods' bank records at his trial showed as many as 16 overdraft penalties a month in one of his bank accounts in 2013. He had at least four bank accounts in 2013 and 2014 but didn't keep a positive balance in any of them, according to his financial records.
Testimony by government witnesses at the trial showed that Woods consolidated his Arvest loans, a $52,000 balance on a car loan and other debts into a $165,000 loan from Signature Bank in June 2015.
The following November, Woods dropped his re-election bid for state Senate. He began cooperating with federal investigators that same month, court records now show, but he stopped cooperating in early 2016.
A Section on 12/23/2018