FORT SMITH -- A Sebastian County Circuit Court jury decided Tuesday that a sports complex project headed by former state Sen. Jake Files and Lee Webb will not have to repay Fort Smith nearly $27,000 in state General Improvement Fund money Files authorized for the project but used for his own purposes.
The jury of eight men and four women deliberated for about an hour before returning with a verdict against the city's accusations that the River Valley Sports Complex breached its contract with the city when it failed to build an eight-ball field complex on city property at Chaffee Crossing.
In addition to the General Improvement Fund grant money that totaled $26,945.91, the city wanted the River Valley Sports Complex to pay any expenses the city incurred as a result of the breach of contract, including any costs to the city if it decides to finish the complex, sell it or tear it down.
Files began serving an 18-month federal prison sentence Aug. 2 after pleading guilty to wire-fraud and money-laundering charges for taking the grant money for himself instead of using it to work on the sports complex project.
He resigned from his position in the state Senate days after his June 18 sentencing. At the time of his resignation, he was chairman of the Senate Revenue and Taxation Committee and a member of the Transportation, Technology and Legislative Affairs Committee; the Senate Efficiency Committee; the Arkansas Legislative Council; and the Joint Budget Committee.
The jury also ruled Tuesday that the city will have to pay more than $200,000 to four companies for work they performed on the complex but for which they were never paid.
The four companies -- B&A Electric Inc., Megehee Fencing Contracting LLC., Grimes Dozer Service Inc. and James Griffith -- sued the city for breach of contract, claiming that River Valley Sports Complex was an agent of the city and that the city was responsible for the debt.
The city argued the sports complex was not an agent of the city but was hired to build the complex. Files and Webb hired the four companies, the city argued, and Files and Webb should pay them.
"Unfortunately, Fort Smith has been a source of $200,000 to pay what in my opinion was the obligation of Jake and Lee," City Administrator Carl Geffken said after the decision Tuesday.
Webb, who testified Tuesday that it hurt him every day to see the four companies not paid for their work, declined to comment after the trial.
Derick Allison, who represented the four companies in the trial, argued to jurors that the sports complex developers had no money to pay contractors for the work they performed other than the $1.6 million city directors agreed to donate to the project. When Files and Webb were terminated from the project in early February 2017, the city had paid out $1.08 million.
Files and Webb had to provide the complex's bank statements to the city and city inspectors were at the site constantly overseeing the project's progress, which demonstrated that Files and Webb were under the city's thumb, Allison said.
The only benefit Files and Webb would receive from the project was that they would operate the complex for 10 years once it was completed, Allison said.
Attorney Joe Byars, representing Webb, said the city breached the contract with the two developers by not negotiating with Files and Webb before terminating the contract and not giving them a chance to cure the problems that led the city to pull the plug on the project.
The city's attorney, Michael Jones, argued negotiations were not possible because Files and Webb had withdrawn from the project, constituting a waiver of the city's requirement to notify Files and Webb of its intention to terminate the contract.
City directors had agreed in 2014 to a proposal by Files and Webb to build the tournament-quality complex that would draw in baseball and softball teams and provide an economic boost to the Fort Smith area.
The city agreed to pay in $1.6 million and Files and Webb would raise the rest of the estimated $4 million project cost through donations of money, materials and labor. Webb testified Tuesday that the sports complex received more than $1 million worth of dirt work from the Arkansas National Guard, donations of air conditioners for the two concession buildings, trusses and roofing material.
But Files and Webb missed five deadlines to complete the project, Jones said, and city directors began to lose faith in the men's ability to get the job done.
In December 2016, Files invited the city to apply for a General Improvement Fund grant he would authorize that would be administered through the Western Arkansas Planning and Development District. The grant would be for infrastructure work at the complex site.
When district officials told Files he needed to submit three bids for the job, he falsified the bids so that one of his employees, DiAnna Gonzales, would be the low bidder.
She was awarded the job, but Files instructed Gonzales to give the money to him. He used it to pay workers of his construction company, paid bonuses to Gonzales and put the rest in his personal bank account.
City officials ordered the return of the grant money after Files and Webb were terminated, but the city never received the money.
Geffken said Tuesday that requests for proposals have been sent out seeking anyone who would be able to finish the sports complex project or find some other use for the land. He said the city has received one proposal so far.
City directors eventually will decide what course to take with the project. If the city gives up on the sports complex project, Geffken said, the property could be returned to the Fort Chaffee Redevelopment Authority, which donated the land for the sports complex.
A Section on 09/12/2018
Print Headline: Sports complex let off hook on repaying city; state senator behind project convicted of fraud