Knew of scams, ex-exec of nonprofit says in plea; Arkansas paid provider millions

A former senior executive with a Missouri mental health services provider that Arkansas paid millions for Medicaid services pleaded guilty in federal court Tuesday to one count of concealing knowledge of a felony.

Keith Noble, who started as a psychologist in 1994, rose to chief clinical officer for Preferred Family Healthcare in Springfield, Mo., and joined the nonprofit's executive Resource Team, according to Noble's plea filed in U.S. District Court in western Missouri.

Noble was aware of multimillion-dollar schemes by other top executives to divert money from the charity's work to enrich themselves, his plea agreement says.

His 28-page plea admits that he knew between 2005 through June 2017 that the company's top three former executives and Arkansas lobbyist Rusty Cranford, "embezzled, stole, obtained by fraud" and misapplied and converted to their use money and property from the nonprofit.

He personally gained $4.3 million.

Federal prosecutors said they agree with Noble's request for a sentence of probation, but the plea orders him to pay $4.3 million in restitution.

The Missouri company, which operated until 2015 as Alternative Opportunities Inc., is at the center of a four-year-long federal investigation into political corruption in Arkansas, Missouri and surrounding states.

Noble's plea bargain names the three top former company executives only by number.

Their titles in court records and testimony in the federal trials of others have identified them as Tom Goss, Person #1 in the plea, the company's chief financial officer; his wife Bontiea Goss, Person #2, chief operating officer; and Marilyn Nolan, Person #3, chief executive officer.

They have not been charged in connection with the federal investigation.

Those three, Noble and others made up the Resource Team, which consisted of the company's top decision makers, his plea said.

Cranford pleaded guilty June 7 to one count of federal program bribery in connection with his work. He admitted paying tens of thousands of dollars in bribes to at least three Arkansas legislators: Rep. Hank Wilkins, D-Pine Bluff; Sen. Jon Woods, R-Springdale and "Senator A," who fits the description of Sen. Jeremy Hutchinson, R-Little Rock.

Wilkins pleaded guilty April 30. Woods was found guilty by a federal jury May 3.

Hutchinson was indicted Aug. 31 on 12 felony counts related to campaign finance reporting and false income tax returns, but not specifically in connection with Preferred Family. Hutchinson has said through his attorney that he will fight the charges.

Among the plots outlined in Noble's plea bargain to enrich Alternative Opportunities executives at the expense of the nonprofit company:

• Causing the nonprofit to pay unneeded, excessive management fees to another company the conspirators owned that generated more than $17.6 million in income for the Resource Team.

• Embezzling $566,250 from the company to pay David Hayes, the company's internal auditor, for illegal financial transactions. Hayes pleaded guilty to a $3 million fraud scheme in June 2017 and died of an apparent suicide in November.

• Paying excessive amounts for leased vehicles to a company owned by top Alternative Opportunities executives. The arrangement generated an overpayment to them of $18,700 per month.

• Causing the charity to lend money at zero interest to for-profit companies owned by the executives. That arrangement benefited Alternative Opportunities executives by about $4.75 million, Noble's plea agreement said.

• Making more than $1.5 million in rent payments from the mental health services provider on homes owned by a for-profit company in turn owned by the company's top executives. Some of those payments also went to Cranford.

The properties included a 3,196-square-foot home on six acres in Green Forest; a 590-acre property with a house and small cabin in Compton ; a luxury lakefront property in Eureka Springs that included a 5,292-square-foot house and a two-slip private boat dock situated on a limestone bluff; Cranford's 3-bedroom home with pool in North Port, Fla. and Cranford's childhood home in Douglassville, Texas.

• Causing the charity to misapply more than $4.5 million for substantial, undisclosed lobbying and political advocacy and to bribe public officials, the plea said.

The largest payments went to Cranford lobbying firms, $2.9 million. Others paid were an unnamed lobbying firm in Jefferson City, Mo.; Philadelphia lobbyist D.A. Jones, who has pleaded guilty in the scheme; and an unnamed lobbyist in Oklahoma.

"The conspirators stole, embezzled, and misapplied the charity's funds through a variety of other schemes and artifices," Noble's plea continued.

The inappropriate spending included "personal services, charter air flights for commuting, personal, family and pet travel; personal use of charity-provided vehicles; excessive charity payment" of travel expenses and personal expenses not reported as compensation and Alternative Opportunities-provided premium tickets to sporting events; theft and kickback arrangements.

Noble is the first member of the nonprofit's former executive team to be charged or convicted in the probe. Teresa Fiester , his attorney based in Springfield, Mo., did not immediately respond to an email seeking comment late Tuesday evening.

Noble received $4.3 million between 2005 and 2017 in proceeds through the embezzlement, theft and misapplication of the charity's money, according to the plea.

Most of that stemmed from the sale of an unnamed business entity controlled by Alternative Opportunities executives more than a decade ago.

Alternative Opportunities' executive team in June 2005 began talks with a publicly traded company -- identified only as "Company A" -- concerning the sale of the nonprofit's management company, a limited liability corporation based in Missouri, according to the plea agreement.

Court documents refer to the Missouri-based management company as "Entity A." Tom Goss, Bontiea Goss, Nolan and Noble were four of five people who held stakes in the management company -- the fifth owner was not named.

The next month, the executive team engaged Alternative Opportunities in a 10-year contract with Entity A requiring that the nonprofit pay fees of up to 15 percent of Alternative Opportunities' annual revenue.

In November, executives structured a five-month "consulting agreement" between the nonprofit and Company A. That agreement caused Alternative Opportunities to pay $1 million to the publicly traded corporation.

In April, after the five-month period was up, Company A purchased the nonprofit's management company for $1 million. Each of the five owners took $200,000 from the sale.

The transaction continued paying millions even after the initial sale due to two "earn-out payments," according to Noble's plea.

The earn-outs were annual bonuses based on the sold management company's net earnings. The first earn-out was paid 100 percent in currency, and the second was 75 percent currency and 25 percent in Company A stock.

In order to maximize Entity A's revenue, and their earn-out bonuses, Alternative Opportunities executives "artificially" inflated the so-called management fees Alternative Opportunities paid to Entity A, the plea says.

In total, the five people who held stakes in the Missouri-based management company collected $17.6 million through the sale in 2006 and 2007, according to the plea.

Noble's take amounted to $3.97 million, according to his plea. He later received $353,570 in checks from two other entities controlled by Alternative Opportunities executives, starting in 2012.

"Because [Tom Goss], [Bontiea Goss], and [Nolan] excluded the defendant from most decision-making regarding financial operations of the Charity, the defendant maintains -- and the Government agrees -- NOBLE did not know the details of the many embezzlement and misapplication of fund schemes ..." the plea says. "However, the defendant acknowledges he knew at the time that many of the schemes concocted by the conspirators ... were perpetrated for the primary purpose of enriching the Resource Team, including himself."

Information for this article was contributed by Doug Thompson of the Northwest Arkansas Democrat-Gazette.


https://www.arkansa…">Sale fails, Preferred Family to exit state

A Section on 09/12/2018