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Prosecutor, FBI agent ordered to deliver files in public-corruption case involving former Arkansas senator

by Doug Thompson | January 10, 2018 at 4:30 a.m.
Former state Sen. Jon Woods (right), surrounded by members of his legal team, walks Nov. 30 into the John Paul Hammerschmidt Federal Building in Fayetteville.

FAYETTEVILLE -- The U.S. attorney and a federal investigator in the public-corruption case against former state Sen. Jon Woods must take records of any communications between themselves and Woods' former attorney to a hearing today, U.S. District Judge Timothy Brooks ordered Tuesday.

The issue is whether some statements by Woods that were made available to the government should be protected by attorney-client privilege, according to court documents.

The defense contends in motions before the court that Woods' former attorney, W.H. Taylor of Fayetteville, had a conflict of interest because he simultaneously represented FBI investigator Robert Cessario in a civil matter. Cessario was likely present during an interview of Woods, the defense argues.

Today's hearing will be closed to the public, according to a footnote in Tuesday's court order. It also will take up several requests by Woods' attorneys that were made under seal and not disclosed publicly.

Other matters, such as a motion to dismiss based on the alleged government failure to disclose relevant audio recordings, are expected to be taken up in a hearing Jan. 25.

The laptop computer used in the investigation of a kickback case involving state lawmakers was missing 79 covertly recorded audio files because Cessario took it home for unauthorized personal use and then wiped the machine's memory before returning it, according to a letter from government attorneys filed last month. Woods' case was originally scheduled for trial Dec. 14 but was delayed after this incident came to light.

That letter was under seal by court order, Brooks ruled in December. Therefore, his court also will hold a hearing Jan. 25 to determine if the attorney who attached the government's letter to a motion posted on the court's website should be subject to disciplinary action.

The order regarding today's hearing requires the U.S. attorney's office to give Woods' current lawyers copies of documents of any communication between Taylor and either interim U.S. Attorney Kenneth Elser or Cessario after March 25, the day Taylor ceased to be Woods' attorney.

Patrick Benca of Little Rock now represents Woods.

Neither government spokesmen, defense attorneys nor Taylor commented Tuesday on the court order. Taylor has said previously that it would be inappropriate for him to comment on the allegation of a conflict of interest.

Woods; Oren Paris III, president of Ecclesia College in Springdale; and consultant Randell Shelton Jr. are accused in a federal indictment of participating in a kickback scheme. Trial is set for April 9. Pretrial hearings are scheduled for today, Jan. 25 and April 4.

Woods is accused of accepting kickbacks in return for directing state General Improvement Fund grants to the college. The grants were approved by Woods with kickbacks passed through Shelton's consulting firm, according to the indictment.

Woods faces 15 counts of fraud, all relating to either wire or mail transfers of money. Paris and Shelton are named in 14 of the fraud charges. All three are charged with one count of conspiracy to commit fraud. Woods also is charged with one count of money laundering in connection with the purchase of a cashier's check.

The indictment says Paris paid Woods and former state Rep. Micah Neal of Springdale kickbacks in return for $550,000 in grants to his college from 2013 through 2014.

Neal pleaded guilty Jan. 4, 2017, to one count of conspiracy to commit fraud. The two also received kickbacks from a Bentonville company called AmeriWorks, the indictment says.

The indictment does not give a total figure of what Woods, a Springdale Republican, is accused of receiving in kickbacks because it says portions reportedly were paid in cash.

Woods, Shelton and Paris face up to 20 years in prison on the fraud and conspiracy charges, if convicted. Woods faces an additional 10 years on the money-laundering charge, if convicted. All three also may be ordered to forfeit any money or property obtained through their actions, if found guilty.

The case involves grants from the state General Improvement Fund, which was controlled by legislators. The fund consisted of state tax money left unallocated at the end of each fiscal year and interest earned on state deposits. Each legislator was given a share of the fund to be directed to a nonprofit group or government entity. The state Supreme Court declared this method of distributing general improvement funds unconstitutional in a ruling Oct. 5.

Woods also is accused of using his office to pass legislation in 2015 that would have created a special General Improvement Fund account in the state Department of Higher Education of up to $2.5 million. The fund would benefit only work-learning colleges that are "part of the Works College Consortium." The only college in Arkansas that is a member of that consortium is Ecclesia, according to the consortium's website. The law is still on the books but no money was ever appropriated to the account, according to the state Department of Finance and Administration.

Shelton is accused of using a consulting firm he owned as a way to pass along the kickbacks to Neal and Woods through consulting fees approved by Paris.

Ecclesia, a private, Christian college, also received improvement-fund grants from other lawmakers who are not implicated in the indictments, grant records show. In all, the college received $717,500 in improvement-fund grants from 2013 through 2014.

Neal, a Republican, pleaded guilty last January to one count of conspiracy to commit fraud, admitting that he took two kickbacks totaling $38,000 in exchange for directing improvement-fund grants to two nonprofits. He has not been sentenced.

All three defendants have entered innocent pleas. They were first indicted March 3 with a superseding indictment filed April 18 and a second superseding indictment filed Sept. 13.

AmeriWorks, a workforce training program, returned $400,000 in grants after federal investigators spoke with company officials, according to the indictment. Both the indictment and Neal's guilty plea say the two lawmakers cooperated in the workforce grants in return for kickbacks.

AmeriWorks was incorporated by Milton "Rusty" Cranford of Rogers, a lobbyist who represented and held an executive position with Alternative Opportunities, a defunct nonprofit corporation that provides behavioral and substance abuse treatment that merged with Preferred Family Health of Springfield, Mo., in 2015. Staff members at Decision Point, a subsidiary of Alternative Opportunities and now of Preferred Family Health, helped file the grant and the organization received the grants on AmeriWorks' behalf, with Cranford signing the application for the grants in question, according to state records and court documents.

State legislative employees have hired outside legal counsel to help them comply with federal investigators' requests for records, but the nature of those requests and whether they are related to the Woods' case remain under seal. Court records in the Woods case were sealed because of ongoing investigations, according to government and defense attorneys' statements in previous hearings.

A Section on 01/10/2018

Print Headline: Prosecutor, FBI agent ordered to deliver files in kickbacks case

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