A state representative from Hot Springs was arrested Thursday on six felony counts of failing to pay state income taxes or file returns.
An Arkansas State Police affidavit said Rep. Michael "Mickey" Gates owes the state almost $260,000 in back taxes, penalties and interest.
Gates was booked into the Garland County jail at 9:41 a.m. and released a short time later on a $1,500 bond. The maximum penalty for a conviction of the Class D felony is six years in prison and a $10,000 fine.
"I will be pleading not guilty to the charges," Gates told The Sentinel-Record. "I have been dealing with the authorities in good faith. The filing of criminal charges came as a total surprise. I will not be making any further comment on advice of counsel."
[DOCUMENT: Read complete arrest affidavit]
Gates, a Republican, did not file an individual income tax return with the state from 2003-17, but because of the statute of limitations, the charges are limited to tax years 2012-17, according to a state police affidavit filed in Garland County Circuit Court. The state police said the agency was asked to investigate by Special Prosecuting Attorney Jack McQuary, who was selected by the Office of the Prosecutor Coordinator.
The affidavit, written by Arkansas State Police Special Agent Joe Pickett, states that the state Department of Finance and Administration notified Gates in October of 2011 that it was conducting an audit, and that investigation concluded in September of 2015. The agency could not produce any documents that showed Gates filed a tax return during that time, Pickett wrote.
In a June 15 interview with investigators, Gates reportedly told authorities that he thought he and the finance department had reached a $30,000 settlement for the period from 2003-07. He also told troopers that he had been paying the sum in $1,500-a-month installments.
He added that he did not file tax returns from 2007-15 because he thought the finance department was completing them on his behalf, the affidavit said.
Throughout the interview, Gates referred to his tax situation as an "albatross around my neck" and said he had done very little to remedy the situation other than keep his receipts, Pickett wrote. In a subsequent interview, Gates said he didn't "ever want to make it sound like it's not my fault," the affidavit notes.
Pickett wrote that Gates owes the state $259,841.95 in individual income tax, penalties and interest. Finance department spokesman Scott Hardin said state law prohibited the agency from commenting on the matter.
Gates said he owed the state $40,000 in taxes on the 2017 statement of financial interest he filed with the secretary of state's office.
Responding to the arrest, House Speaker Matthew Shepherd, R-El Dorado, suspended Gates from his committee assignments and responsibilities, which include chairing the Aging Subcommittee of the House Aging, Children and Youth, Legislative and Military Affairs Committee.
Gates also serves as vice chairman of the Joint Budget Committee's Personnel Subcommittee, and is a member of the Joint Budget Committee and the Joint Performance Review Committee. Gates' suspension from duties was made effective immediately.
He has been in the House since 2015. Gates is running for re-election to a third two-year term and faces a Democratic challenger in November.
Neither Shepherd nor Gov. Asa Hutchinson called upon Gates to resign right away.
"I have known Rep. Gates for many years, and I trust he will do the right thing to assure the public that his tax responsibilities are handled appropriately or step aside," Hutchinson said in a statement.
House Minority Leader Charles Blake, D-Little Rock, submitted a letter to Shepherd inquiring about the process for the House to consider the removal of a member, though Shepherd said he believed suspension was the limit of the action he could take at the time.
Meanwhile, other Democrats began calling for Gates to resign or to be defeated in November.
Gates' opponent in District 22, Kevin Rogers, issued a statement calling for leadership "that takes seriously Arkansans' tax dollars."
Rep. Michael John Gray of Augusta, the chairman of the state Democratic Party, called on Gates to step down.
"Yet again, we see how the continued corruption at our state Capitol is eroding the trust Arkansans have placed in their public servants," Gray said in a statement. "Representative Gates' inability and refusal to follow the law displays not only an abuse of power, but also a failure to the people of his district."
In 2015, the Arkansas Democrat-Gazette reported that Gates was among five lawmakers at that time to have state tax liens filed against them. A lien is a legal claim or hold on a piece of property as security for the payment of a debt. It has the same force as a judgment issued by the circuit court, where the liens are filed.
Gates told The Sentinel-Record in 2015 that he fell behind on his taxes after his pen and knife engraving company's annual revenue fell from $1.4 million to $400,000. He said former employees who stole computer files and used them to solicit business for a competitor led to the company's reduced circumstances.
Gates sued the former employees, along with the company's former distributor, in federal court, winning a $7,965 judgment against the distributor and a $36,105 judgment against all of the defendants in January 2014, according to court records. He said he spent $300,000 on attorneys and an expert witness.
Gates told The Sentinel-Record in 2016 that a lien filed in October of that year for $54,325 in unpaid 2007 income taxes was the result of faded receipts for business-related expenses that he deducted from his taxable income.
Gates is the second member of the 91st General Assembly, which convened in 2017, to be charged with a crime.
Sen. Jake Files, R-Fort Smith, resigned in January after pleading guilty to federal charges of wire fraud, money laundering and bank fraud. He was later sentenced to 18 months in prison.
Four other former lawmakers have been convicted in recent months as the result of ongoing federal corruption investigations.
Information for this article was contributed by The Associated Press.
A Section on 06/29/2018