A $1 million state grant went to lobbyist Milton "Rusty" Cranford's biggest client in 2013. The same year the legislator behind the grant, then-state Sen. Jon Woods, got to watch the St. Louis Cardinals play in the World Series compliments of that client.
The client, Preferred Family Healthcare, also hired Woods' fiancee for a $70,000-a-year job two months after receiving the grant, according to Cranford's guilty plea Thursday. Woods was convicted of 15 counts of public corruption May 3. Cranford pleaded guilty Thursday to one federal charge of bribery, involving Arkansas lawmakers between 2010-17.
Cranford and Preferred Family executives spread around World Series tickets, jobs for a spouse and for legislators, campaign fundraising expenses of up to $7,000 a week and at least $148,000 in cash, according to court papers.
In return, the company's income from Medicaid and other state-administered health care programs almost doubled in five years to $43 million in 2018, prosecutors say.
The executives spent at least $3.5 million with Cranford's lobbying firms from 2010-17 as part of the bribery and embezzlement scheme, according to federal prosecutors.
"Awesome on the mil," the then-chief financial officer of Preferred Family Healthcare of Springfield, Mo., emailed Cranford on Dec. 2, 2013. This was after the $1 million grant from the state's Drug Abuse Prevention and Treatment Fund to the nonprofit company had been approved, according to Cranford's plea documents. The executive was not named in the plea.
"Santa is coming," the executive said in that email exchange, which was 10 days before the state's $1 million check was deposited, according to the plea.
"I need Santa," Cranford replied.
'YEAR OF THE GREED'
By Jan. 13, 2012, Cranford was complaining, in an email contained in plea documents, about the expense of fundraisers conducted for Arkansas elected officials.
"Welcome to campaign season and 2012. 'The YEAR of The Greed' is what it is called!" Cranford said in an email to the same executive as the "Santa" exchange. "We documented the big big checks so you would know who these people are, it came to $7,000" for one week in state elected officials' campaign-related contributions.
The records also show Cranford and Eddie Cooper of Melbourne, a former state House member working at the Cranford Coalition lobbying firm, split the $5,000 expense for one fundraiser for a prospective governor's candidate on May 30, 2012, at the Capital Hotel in Little Rock. The two divided the expense evenly -- using their corporate credit cards from Preferred Family.
"Mr. Cranford's guilty plea contains admissions and allegations which demonstrate clearly the extent to which Preferred Family Healthcare was victimized by the actions of former employees and representatives of PFH," company spokesman Reginald McElhannon said Thursday.
"Preferred Family Healthcare will continue its cooperation and assistance with investigative agencies and hopes to recover any misappropriated funds so those funds can be used for the benefit of our communities and beneficiaries," McElhannon said.
Preferred Family provides behavioral health services and substance abuse counseling in five states, including 47 locations in Arkansas.
Cranford's plea agreement acknowledged that he was legally liable to forfeit $3.7 million. Cranford pleaded guilty to the bribery count in federal court in the Western District of Missouri, where Preferred Family is headquartered. The plea agreement drops all other charges. He was never charged in the federal investigation in Arkansas in which Woods was convicted. Cranford faces up to 10 years in prison and another three years of supervised release.
He pleaded guilty to paying off Arkansas lawmakers from 2010-17. Cranford served as both a lobbyist and director of Preferred Family's operations in Arkansas until early 2017. The chief financial officer of Preferred Family during that time was founder Tom Goss of Springfield, Mo., Preferred Family has confirmed and company records show.
Goss and two other executives, including his wife, Bontiea, and Chief Executive Officer Marilyn Nolan, were placed on leave Nov. 9 and were later dismissed by Preferred Family's board after the company's attorneys met with federal investigators in October. Bontiea Goss was the company's chief operating officer.
"Mr. Goss denies any suggestion or inference that he has engaged in any improper or illegal conduct as it relates to this matter," said his attorney, Chris Plumlee of Rogers. "It is his belief that he acted appropriately and lawfully in his duties at Preferred Family Healthcare."
The federal corruption probe so far has led to convictions of five former Arkansas lawmakers: Woods, Cooper, former state Rep. Micah Neal, former state Rep. Henry "Hank" Wilkins IV, and former state Sen. Jake Files.
Files is the only one of those former lawmakers who was not charged with at least one count in the bribery scheme involving Cranford and Preferred Family, court records show.
Neal pleaded guilty Jan. 4, 2017, to one count of conspiracy for accepting kickbacks along with Woods in return for steering state general improvement grants. One of those grants was in 2013 for $400,000 to a corporation created by Cranford. Neal received $20,000, he admitted in his plea. The amount Woods was paid on that same transaction never came out during the trial.
Cooper pleaded guilty to one count of conspiracy in Missouri for acts after he left office and joined Cranford's lobbying firm and Preferred Family as a manager. The other former lawmakers charged so far have been charged in Arkansas for acts committed while in office.
State Sen. Jeremy Hutchinson of Little Rock has not been charged with any wrongdoing, but was accused of taking bribes in Cranford's plea. Hutchinson, through his attorney, denies wrongdoing. Hutchinson was retained as an attorney by Preferred Family from April of 2012 to January of 2017 and performed the work for which he was paid, his attorney said.
Woods was the sole sponsor of Act 791 of 2013, which put $2 million from the state General Improvement Fund into the state's Drug Abuse Prevention and Treatment Fund for grants to private providers. The improvement fund consists mainly of unspent taxpayer money at the end of the state's two-year budget cycle. General improvement money also includes interest earned on state accounts.
The drug fund, administered through the Division of Behavioral Health Services of the state Department of Human Services, provides grants to curb drug abuse. Sources for the drug fund include general revenue, federal block grants and money from charitable organizations, in addition to General Improvement Fund money awarded by the state Legislature, state records show.
Act 791 provided $2 million of the $2.95 million in legislative improvement fund money put into the drug fund that year -- the largest single-year commitment of improvement money into the drug fund, state finance records show.
Woods sent a letter of support to the behavioral health division asking it to approve a $1 million grant to Decision Point, an alcohol and substance abuse treatment program based in Bentonville and operated by Preferred Family, Cranford's plea says and state records show.
Lawmakers' letters of support for drug fund grants were obtained by the Northwest Arkansas Democrat-Gazette under the state's Freedom of Information Act. The documents include an Oct. 25, 2013, letter from Woods.
The letter says, in part: "Please accept this letter in support of Alternative Opportunities/Decision Point as it applies for a GIF-funded Drug Abuse Prevention and Treatment grant." Alternative Opportunities was Preferred Family's company name before a May 2015 merger.
"AO/Decision Point is a well-respected social services provider for these populations across the state, and I fully support its mission," the letter says.
On Oct. 15, 2013, Preferred Family's chief financial officer sent an email to Cranford saying he and another of the executives cited as a conspirator wanted to hire Woods' fiancee for $90,000 a year, Cranford's plea says. A salary that large would bump up against the pay of top executives at the company, so a position paying $70,000 at Decision Point was created, the plea says.
"Senator is taken care of. He is new bubba for our team," the email in Cranford's plea says. The same email appeared in evidence in Woods' trial, only with Goss' name still on it.
Woods' fiancee was hired in February of 2014, according to evidence presented at Woods' trial. When Woods married later in 2014, his wife left the position, according to trial evidence. Her replacement received a $35,000 yearly salary, according to Preferred Family finance records presented in Woods' trial.
Woods was not the only lawmaker to tap the drug fund on Preferred Family's behalf. Wilkins pleaded guilty to doing much the same in return for bribe payments disguised as donations to the church where he was pastor.
Wilkins persuaded other lawmakers to commit a total of $345,000 to the drug fund in 2012 and then steered $122,565 to Dayspring Behavorial Health Services, another Preferred Family subsidiary, according to legislative records and court documents. Wilkins wrote a letter of recommendation to the Behavioral Health Division in support of Dayspring. The letter was dated Oct. 31, 2013, a copy shows.
All but nine of the 24 letters of recommendation in 2013 were for facilities either managed by Cranford for Preferred Family or represented by Cranford as a lobbyist, state records show.
Wilkins also supported another 2013 grant to a Cranford lobbying client, the now-defunct South Arkansas Youth Services of Magnolia. That entity received a grant of $61,218 after Wilkins wrote a letter of support that was also dated Oct. 31, 2013. The group filed for bankruptcy in January, has ceased operations and is under FBI investigation, bankruptcy court filings show.
Of $2.95 million of improvement money put into the drug fund by lawmakers in 2013, at least $1.2 million of it went to clients of Cranford's, the guilty pleas say.
The biggest prize of all, though, according to federal guilty pleas, indictments and court records in all the related cases of Woods, Wilkins, Cooper and Cranford, was state and federal Medicaid money and other taxpayer funds.
Nonprofit companies that receive taxpayer money are not allowed by law to lobby for more, prosecutors have said. The bribery scheme put Preferred Family's status as a nonprofit organization at risk, the plea says.
Preferred Family's affiliates saw their receipts from Medicaid and other state-administered health care programs in Arkansas rise from about $24 million a year to about $43 million from 2013-18, state financial records show.
That figure includes expansions. For instance, Preferred Family acquired Batesville-based Health Resources of Arkansas in May of 2014, which also qualified for Medicaid spending.
Arkansas taxpayer money from programs besides Medicaid to the firm went up at an even faster rate, state finance records show.
Payments to Preferred Family from non-Medicaid state accounts were $469,024 in the fiscal year ending June 30, 2012, state Department of Finance and Administration records show. The payments grew to $9.66 million in fiscal 2017. That is an almost 2,000 percent increase in five years.
FLEXING LEGISLATIVE MUSCLE
As for specific pro-Cranford legislation, Wilkins' guilty plea of April 30 cites Act 1017 of 2013. Much of the act was taken almost verbatim from a email Cranford sent to legislative staff members March 7 of that year, according to plea documents. Wilkins sponsored the bill.
The 11-page act defines what kind of facility is required to provide "early intervention" treatment for children with developmental disabilities, the text of the act shows. The act was of great benefit to Preferred Family because the requirements favored its affiliates, the plea says.
Wilkins' and Cranford's pleas cite House Bill 2209 of 2013 by Wilkins, which set standards and conditions for rating behavioral health providers. That bill never became law, but passed in the House. Cranford, Wilkins and Hutchinson used the measure as negotiating leverage with regulators to get changes to a state rating system that Preferred Health wanted changed, the plea said.
Hutchinson was retained by Preferred Family as an attorney and disclosed that attorney-client relationship at the time in accordance with Senate rules, state records show.
Hutchinson's attorney, Tim Dudley of Little Rock, denies that Hutchinson's actions were the result of his hiring as stated in Cranford's plea. The plea "clearly mischaracterizes Mr. Hutchinson's work as a practicing attorney and part-time legislator," Dudley said in a statement.
Hutchinson was paid $9,000 a month for his legal work for Preferred Family, according to the plea. He also attended the World Series as Preferred Family's guest and received other gifts, the plea states. Hutchinson has not worked for Preferred Family since January of last year, the company said in a statement.
Cranford's plea mentions two acts that benefited Preferred Family and that Hutchinson was involved in. Those were the improvement fund bills for the drug fund backed by Woods and Wilkins. Both of those bills passed in the Senate without a dissenting vote.
The plea also notes a $3 million improvement fund appropriation to another Cranford client, Teach for America. Hutchinson sponsored the two bills in 2015 that appropriated the money. The appropriation went to the benefit of the Little Rock School District, much of which is in the Senate district Hutchinson represents.
Cranford's lobbying firm, The Cranford Coalition, received $76,000 from Teach for America, according to federal prosecutors.
How much Woods received in cash from Cranford is not estimated, but he accepted at least $5,000 in 2013, the plea says. Wilkins received at least $88,000 in checks and at least $20,000 in cash over the course of years, the plea says. Hutchinson received a total of $500,000 in attorney's fees and gifts, according to Cranford's plea.
Metro on 06/10/2018
Print Headline: Lobbyist plea deal describes give, take; One email says: ‘Santa is coming’