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story.lead_photo.caption Former Rep. Micah Neal, R-Springdale, is shown in this file photo. - Photo by Jason Ivester

FAYETTEVILLE -- Former state Rep. Micah Neal secretly recorded anyone he felt federal investigators might be interested in for most of 2016, he testified Friday in a hearing in the corruption trial of former state Sen. Jon Woods.

Getting those recordings into evidence, however, has turned into a legal morass.

Two days of pre-trial hearings laid out in detail the circumstances under which the FBI computer used to collect copies of those audio files was improperly wiped Dec. 4 and then wiped again Dec. 7. The erasing of the files cast doubt on whether a true copy of all the files was ever provided to the defense.

U.S. District Judge Timothy Brooks wondered aloud from the bench Friday why attorneys in the case did not get pristine copies from the law office of Neal's attorney, Shane Wilkerson of Bentonville.

Assistant U.S. Attorney Kenneth Elser told Brooks late Friday that the FBI had sent a computer expert to Wilkinson's office on Thursday to make such copies and submitted a flash drive with those copies as evidence. Cross-examination of the expert who collected the copies, however, revealed the files were not taken from the law firm's original hard drive that stored the audio from Neal. That hard drive crashed on Dec. 27, and the whole computer had been replaced.

The events cast doubt on whether the copies obtained Thursday are complete and uncorrupted.

"Our pristine copy just went up in smoke," said defense attorney Shelly Koehler of Fayetteville.

Chad Atwell of Fayetteville conducted the cross-examination of computer expert Rebecca Passmore that revealed the Dec. 27 crash.

"I am at a loss for words," Atwell said when asked for comment after the hearing.

The U.S. Department of Justice alleges Neal and Woods, both of Springdale, took kickbacks in return for steering a total of $550,000 in state General Improvement Fund grants to Ecclesia College in Springdale. Neal pleaded guilty last January to one count of conspiracy to commit fraud. The kickbacks, according to the government's indictment, were passed through a consulting firm owned by Randell G. Shelton Jr., a mutual friend of Woods and Ecclesia President Oren Paris III. Woods, Shelton and Paris face trial April 9.

Brooks told attorneys for the defense and for the government to work together and verify the accuracy of the surviving copy of the files if at all possible and report to the court by Friday.

Brooks was supposed to hold an additional hearing Friday on Gregory F. Payne, another defense attorney in this case, on whether he should be disciplined for releasing a copy of court documents detailing the wiping of the FBI computer that was supposed to be sealed.

"I don't have the energy," Brooks told Payne from the bench after Friday's hearing lasted 11 hours. That hearing will come later, Brooks said.

Neal said he recorded conversations in Northwest Arkansas and Little Rock from March through October of 2016 to give federal investigators.

But investigators weren't interested, he said.

Neal, testifying in U.S. District Court in Fayetteville, insisted he recorded conversations on his own initiative using a recorder disguised as a pen.

Defense attorneys challenge whether Neal acted on his own, pointing to a March 30, 2016, text exchange between Neal's attorney and FBI investigator Robert Cessario. Cessario asks if "your guy" was willing to talk to a friend of Woods.

Wilkinson said in an interview after Neal's testimony the exchange was a discussion of whether Neal was willing to wear a FBI wire to record a conversation. The FBI decided against it, he said.

Neal also testified to a federal grand jury in Fort Smith in 2016 and met with federal investigators on at least six different occasions in their investigation, he said.

Some of Neal's recordings were given to defense attorneys, but the defense discovered gaps in the record provided. Further investigation found 79 more audio files in Wilkinson's possession on a computer at his Bentonville law firm. The defense did not learn of the 79 additional audio files until Nov. 15, 2017.

The hearing this week involves a motion by defense attorneys to dismiss the indictment against Woods, Paris and Shelton because the government failed to disclose the existence of the additional recordings.

Cessario was ordered to turn over a laptop on to which he had downloaded audio files to computer experts at the FBI's state headquarters in Little Rock after the discrepancy was brought to light at a Nov. 30, 2017, pre-trial hearing. Before turning in the laptop, Cessario had it professionally erased because it contained personal medical records, he testified Thursday. Then he erased the computer's hard drive again himself before turning it in.

All the audio files downloaded using the laptop were transferred to discs and provided to attorneys in the case, Cessario testified Thursday.

Cessario also told the court the government never intended to use Neal's audio because it was gathered without their supervision, without proper documentation, verification, context or notes.

The government also alleges Neal and Woods, both Republicans, also accepted kickbacks in return for directing $400,000 in grants to a Bentonville nonprofit organization called AmeriWorks. Neal admitted he took two kickbacks totaling $38,000 in exchange for directing the grants. He has not been sentenced.

Freedom of Information Act requests by the Northwest Arkansas Democrat-Gazette last year found at least three of the state's economic development districts, which distributed state General Improvement Fund grants, have been subpoenaed by federal investigators. Another will not confirm or deny whether it has.

Since that time, staff for the state Legislature have requested and obtained permission to hire outside legal counsel to represent it in dealing with federal investigators who have requested more records. Elser has confirmed the ongoing investigation in court proceedings.

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 is also charged with one count of money laundering in connection with the purchase of a cashier's check.

The case involves grants from the state General Improvement Fund, which was controlled by legislators at the time of the alleged kickbacks. The fund consists 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 distribution unconstitutional in a ruling Oct. 5.

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

Woods, Paris and Shelton have entered innocent pleas. They were first indicted on March 3 with a superseding indictment filed April 18 and a second superseding indictment filed Sept. 13.

The three defendants 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 may also be ordered to forfeit any money or property obtained through their actions, if found guilty.

NW News on 01/27/2018

Print Headline: Secret recordings included many officials, Neal testifies

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