A high-ranking Arkansas lawmaker disclosed Friday that he is working for nursing home magnate Michael Morton.
State Rep. Jeff Wardlaw, R-Hermitage, told the Arkansas Democrat-Gazette that he sold his one-third share of a "durable medical equipment" company he co-founded to Morton last month. Morton acquired 100 percent of the company, Mallard Medical Supply, and has retained Wardlaw as a managing employee, Wardlaw said.
"I didn't carry any cash home [from the sale]," Wardlaw said. "I got no cash out of it. I've got a job."
Wardlaw revealed the transaction in an interview as the newspaper was preparing an investigative article about his ties to one of Morton's business associates, David Norsworthy. Wardlaw and Norsworthy had been partners in the medical supply company, a fact previously unreported.
The deal with Morton and Wardlaw's co-ownership of Mallard Medical Supply are significant because the legislator has played a key role in overseeing laws and rules for the nursing home industry since 2017.
State ethics laws allow legislators to write, vote on and argue for bills that would help themselves or their associates. That the 5-year-old partnership between Wardlaw and Norsworthy was not publicly known underscores the limitations of existing disclosure laws.
Wardlaw's business relationship with Norsworthy, and now Morton, also raise conflict-of-interest questions at a time when legislative leaders have called for stricter ethics and disclosure rules. Federal investigations into corruption at the Capitol have resulted in the indictments or convictions of several former lawmakers since early 2017.
"I think this is what we would call 'the swamp,'" said Kathleen Clark, a law professor at Washington University in St. Louis who works in government ethics. "Not that it's illegal -- because the Legislature decides what is illegal, and they've allowed it."
Wardlaw from 2017-18 was chairman of the House Public Health, Welfare and Labor Committee, the first gatekeeper for laws and rules facing the nursing home industry, Medicaid, durable medical equipment and other health care matters.
He is now co-chairman of the powerful Arkansas Legislative Council, which has ultimate approval of state rules and contracts under lawmakers' review. He remains on the public health committee as a voting member.
"I plan on recusing on anything that looks like a conflict with any industry that ties to my business," Wardlaw said Friday. "I'm not going to get in the middle of something that can come back and bite me."
Morton spokesman Matt DeCample confirmed the acquisition of Mallard Medical Supply.
"[Wardlaw] still runs the company, essentially, but he has no ownership stake," DeCample said. "He didn't get an increase in salary or anything like that. He's still running the show. It's a good investment for Mr. Morton. It's a growing company in a part of the long-term care industry where you don't always see that."
Mallard Medical Supply is a Medicaid- and Medicare-enrolled provider of durable medical equipment, items such as wheelchairs, oxygen tanks and other prescribed supplies.
Both Morton and Norsworthy have been subjects of investigative scrutiny in recent years.
Campaign contributions that Morton made in 2013 formed the basis of former Circuit Judge Michael Maggio's guilty plea to a federal bribery charge. Morton, who has denied wrongdoing, has not been charged with a crime.
Separately, a special state prosecutor is investigating an $80,000 wire transfer that Norsworthy made in November 2014 to then-state Sen. Jake Files' construction company. Files, R-Fort Smith, pleaded guilty in January 2018 in an unrelated case to felony charges of wire fraud, money laundering and bank fraud. In June, he was sentenced to 18 months in federal prison.
Norsworthy, of the Northwest Arkansas town Gateway, is a key player in Arkansas' nursing home industry. He has served as president of the industry's statewide lobbying association board, and he is the officer for a campaign finance committee that directs industry contributions to select House members.
Norsworthy also holds stock in 15 nursing homes across the state as a minority partner to Morton, according to Medicare records. Morton is a majority owner in about 30 nursing homes, according to Medicare.
Wardlaw, 38, has extensive experience in selling durable medical equipment, and did even before taking office in 2010. He is a certified "assistive technology professional" -- meaning he can help determine what equipment an individual patient requires. He joined the industry upon graduating college, he said.
Before forming Mallard Medical Supply in 2013, Wardlaw worked as a contractor to a different durable medical equipment provider called Medical Necessities, he said.
Mallard Medical was Norsworthy's idea, according to Wardlaw and Norsworthy.
Norsworthy, in an emailed statement, said existing durable medical equipment suppliers at the time were failing to provide same-day delivery service to patients who were transitioning from nursing homes after receiving rehabilitative services.
"In business, sometimes when you can't find the service you need, you start one yourself," Norsworthy said. "As I began that process, Rep. Wardlaw's name came up repeatedly as a dependable provider in the delivery of medical equipment and that reputation has proven true time and again."
They had a third partner -- Richard "Rick" Williams, a Hot Springs property developer who at the time had business interests in home-health care providers. Williams' business attorney said Norsworthy introduced Williams to Wardlaw.
Mallard Medical is based in a small building in Warren, about 16 miles west of Monticello.
The office is open five days a week, according to a schedule posted on a front window. Inside the small wood-paneled storefront, a row of display wheelchairs, walkers and scooters extends from a medical bed. Stuffed ducks hang from the ceiling.
On one wall are smaller medical items such as compression stockings. On the opposite wall hang dozens of plaques, including some that mark Wardlaw's lawmaking achievements. The accolades surround a large poster showing who represented each of Arkansas' House districts in the 2013-14 General Assembly.
Wardlaw on Oct. 2, 2014, filed an application to enroll Mallard Medical in the state Medicaid program. He attributed the lapse in time from the firm's founding to the lengthy process of enrolling in Medicare, which is a prerequisite to participating in Medicaid.
At the time, he was equal partners with Norsworthy and Williams, according to the application he filed. Mallard Medical Supply was enrolled as a Medicaid provider on Oct. 10, 2014.
Medicaid paid the company more than $905,000 from fiscal years 2015-18, according to state figures. Medicaid is the federal- and state-funded health insurance program for children and low-income Arkansans.
The newspaper hasn't determined how much money the company drew from other sources, such as private insurance or Medicare, the federally funded insurance program for the elderly.
Wardlaw disclosed his holding in Mallard Medical Supply on routine "Statement of Financial Interest" filings with the secretary of state's office as required of lawmakers and special appointees to boards.
But the forms do not require filers to identify business partners.
Norsworthy omitted Mallard Medical Supply from the forms he was required to file as an appointee to the Health Services Permit Commission in 2015, 2016 and 2018, thus making it difficult for interested people to identify the pair's mutual financial interest.
Norsworthy's filings listed dozens of other nursing homes, holding companies and other businesses.
His emailed statement to the newspaper did not address a question asking why Mallard Medical was omitted and whether the disclosures should be amended.
State law also keeps secret the members of private companies, so a person cannot determine the actual -- or "beneficial" -- owners of any businesses unless those owners reveal that information elsewhere.
The Democrat-Gazette pieced together the Mallard Medical Supply ownership chain after uncovering other public records -- including a property deed, a mortgage filing, lien records and paperwork that Wardlaw filed to enroll as a Medicaid provider. Not all businesses leave such a paper trail.
"It sounds like the disclosure standard needs to be beefed up in Arkansas," said Clark, the law professor. "I think you've made a case for why constituents ought to have easy access to information about, not just the names of [lawmakers'] businesses and a general description, but business partners."
Herb Sanderson, state director of AARP Arkansas, said he was not aware of the Wardlaw-Norsworthy partnership. His organization often has business before the public health committee, with interests that don't always align with the nursing home industry.
"I think it raises an eyebrow," Sanderson said when told of the partnership. "I think what the Legislature, [what] both the House and the Senate have been trying to address in terms of ethics reform, is positive and that disclosure and openness is a good thing. ... I think sunshine is good."
House Speaker Matthew Shepherd, R-El Dorado, who decided committee assignments this month, represented Wardlaw in his 2017 divorce, court records show. Mallard Medical Supply was one of the assets addressed in the settlement agreement.
Shepherd was familiar with Wardlaw's holdings in Mallard Medical Supply, but did not know who his business partners were, he said. Within the past six months, Wardlaw told Shepherd that he used to be business partners with Norsworthy but no longer was, Shepherd said.
"I don't know that I had any reaction," he said. "This is a citizen Legislature, and members have business dealings and work for various entities and have different interests, personal and professional.
"I encourage my members to make sure they are handling everything appropriately, that they are making proper disclosures through [statements of financial interest], that they are doing everything to comply with the law."
Mallard Medical Supply bought the Warren office at 801 E. Church St. for $135,000 in November 2014, the deed shows.
It acquired the property from Joe Simpson, who owned Medical Necessities, a former Jonesboro-based durable medical equipment company where Wardlaw had worked.
On Oct. 12, 2016, Wardlaw and Norsworthy mortgaged the property at a value of $550,000 as collateral for a $1.8 million loan, real estate records show.
Norsworthy also pledged 66 percent interest in the company as collateral, and Wardlaw put up 33 percent, financing records show.
Wardlaw said the purpose of the loan was to pay off debt and buy out Williams' share. The loan has been repaid, Wardlaw said. Norsworthy's email to the newspaper did not address questions about the loan.
The lender, Heartland Bank of Little Rock, was acquired by Simmons Bank in 2017 when it was on the brink of insolvency. The Federal Reserve sanctioned Heartland Bank in 2016 in part because of a long-standing pattern of poor loan practices.
Citing the confidentiality of some business deals, Williams referred questions about Mallard Medical Supply to his Little Rock business attorney Dylan Potts. Potts, also citing confidentiality, answered some questions but declined to provide other details.
Williams' involvement in Mallard Medical Supply was through his company Summit Properties LLC. He transferred his interest to one of the partners in October 2016, Potts said.
"Summit has had no involvement with Mallard Medical since that time," the lawyer said, later noting that "Summit was not a party to [the loan], did not negotiate the loan and saw no loan documents."
Williams developed The Atrium at Serenity Pointe, an assisted living facility in Hot Springs. He sold The Atrium and nearby property in 2014 for nearly $15 million, according to property records. He owns the Malco Theater and has overseen the redevelopment of other downtown Hot Springs properties.
"[Williams] met Mr. Norsworthy when looking for a potential skilled nursing facility to be located next to The Atrium to develop a continuum of care for residents who may later need a different level of care," Potts said.
"He met Mr. Wardlaw through Mr. Norsworthy and was presented with an opportunity to become a part of a [durable medical equipment] company that could provide a higher level of quality equipment to his home health and hospice agencies."
In the past month, Wardlaw recused from discussing or voting on two issues. Both times, he cited his position with the Southeast Arkansas Area Agency on Aging as the potential conflict. Wardlaw sits on the agency's Home Health Board.
One of the matters he refrained from discussing was the Human Services Department's proposal to cut Medicaid rates to home-health providers. Critics said the change, which was approved, will ultimately drive more people into nursing homes.
His second recusal was on a state contract for transportation services with the agency on aging.
But Wardlaw, whose legislative profile page lists his occupation as "farmer," never filed a special disclosure to let the public know that he or his partner had a personal interest in some of the matters before the public health committee.
In 2017, for instance, Wardlaw voted in favor of legislation affecting durable medical equipment suppliers.
Act 372 allowed nurse practitioners to prescribe such supplies. Previously, a doctor's order was required for Medicaid reimbursement. The law, sponsored by Rep. Mary Bentley, R-Perryville, originated in the House's public health panel.
Bentley's first draft would have given advanced nurses authority to sign off on jury-duty excuses, end-of-life care plans and other matters. She later amended the bill to include durable medical equipment prescriptions.
Wardlaw said he did not notice the durable medical equipment portion of the bill until last year, when the Department of Human Services proposed revisions to the Medicaid providers manual in order to align with the law.
Whether Wardlaw should have disclosed the conflict before voting on Bentley's bill is a matter of interpretation.
State laws do not prohibit lawmakers from voting on or discussing matters that affect their personal interests, but they do call for special disclosure filings in some cases.
The disclosure rule applies only if a lawmaker is required to take an action that "may affect his or her financial interest" -- even then, a special disclosure is required only if the conflict is not "readily apparent" on a lawmaker's annual financial interest statement.
Wardlaw's financial interest statements disclose his holdings in Mallard Medical Supply, describing the business as "medical sales." He has never specified that it was a Medicaid-enrolled dealer of durable medical equipment.
Wardlaw said Friday that he plans to amend the forms to clearly identify the company as a "durable medical equipment" provider.
Sunday on 01/27/2019
Print Headline: State legislator reveals work ties to owner of nursing homes