Arkansas college’s finances evidence at kickback trial

FAYETTEVILLE — Ecclesia College received a $50,000 state grant before it even applied for the money and another $50,000 grant after the deadline for accepting applications had passed, according to federal court testimony Wednesday.

The state General Improvement Fund grants came from an economic development district based in Hot Springs, 198 miles by road from the private, Christian college in Springdale.

Dwayne Pratt was the government’s first witness Wednesday in the public-corruption trial of former state Sen. Jon Woods. Pratt is director of the West Central Arkansas Planning and Development District in Hot Springs. He took the grant requests to the board despite the deadline issues at the insistence of then-state Sen. Michael Lamoureux, R-Russellville, who was president pro tempore of the Senate at the time, Pratt testified.

Most of Wednesday’s testimony concerned the college’s private fundraising, with clashing views of the success and timeline of those efforts. Questioning and cross-examination of Ecclesia’s information-technology director, Mike Novak of Springdale, kept him on the stand most of the day.

The government contends a contract with an outside consultant to raise funds was a sham used to pass along kickbacks. The defense contends the contract was a long-term project derailed in 2014 by the federal investigation.

“Would it be fair to say that once this investigation started funds began to dry up?” asked Patrick Benca, Woods’ defense attorney. Novak replied “Yes.”

Woods was indicted in March 2017, accused of a kickback scheme involving such grants issued in 2013 and 2014. Two alleged co-conspirators –Randell Shelton, formerly of Alma, and Oren Paris III, former president of Ecclesia — were indicted with Woods.

Paris pleaded guilty April 4 to one count of conspiracy and will testify for the government. He resigned as Ecclesia’s president and from the college’s board the previous day. His sentence is pending. Paris disguised the kickbacks as consulting fees paid to Shelton’s company, Paradigm Strategic Consulting, according to the indictment. Shelton then passed the money along, the government contends.

The kickback allegations involve $550,000 of the more than $717,500 in state General Improvement Fund grants Ecclesia received from 2013 through 2014, the U.S. Department of Justice contends.

Woods directed the most grant money Ecclesia received, at more than $350,000, court records show.

The grant application from Ecclesia to the West Central district for the first $50,000 was received by the district on Dec. 12, 2013, although a letter informing the college it had received the grant is dated Nov. 25, 2013, according to documents provided the Northwest Arkansas Democrat-Gazette last year under a Freedom of Information Act request. Ecclesia signed the grant agreement Dec. 17.

The only document from legislators provided by that district in support of the December grant is a letter dated Dec. 18, 2013, with Woods’ signature and on his Senate stationery, according to the district records.

The first Pratt heard of the grant request was when Woods called him and informed him Lamoureux supported the proposal, Pratt testified. Pratt called Lamoureux to confirm and, when he told the Russellville senator the deadline had passed, “he didn’t seem too pleased,” Pratt testified. The grant proposal was put on the district board’s agenda at Lamoureux’s insistence, Pratt testified. After the grant was issued, Wood’s picked up the check for Ecclesia at the district’s Hot Springs office.

“It is the only time a lawmaker ever pick up a check at the office,” Pratt testified.

The signed agreement for the second $50,000 grant was received March 24, 2014. That grant’s file also contained a letter from Woods, dated March 12 of the same year, in support of Ecclesia’s application, according to district documents. The application for that grant bears a Feb. 28 time stamp but that is false, Pratt testified, saying he did not know who stamped the application on the last day of that quarter’s deadline.

A copy of the March 14, 2014, letter notifying Paris his grant was approved was sent to Lamoureux. Lamoureux declined comment last year when contacted by the Northwest Arkansas Democrat-Gazette.

Senate records provided by Lamoureux show no grants to Ecclesia College. As Senate president, Lamoureux’s name was attached to any improvement fund money left over after each senator received a share. Any grants coming out of that remainder would have been attributed to Lamoureux, even if another senator made the request, former state senators confirmed.

Ecclesia reported it used the grants to help buy two proprieties of almost 50 acres in 2013.

The indictment doesn’t mention the $100,000 grant to Ecclesia through the West Central district nor are any other lawmakers mentioned besides Woods and former state Rep. Micah Neal, who also directed grants to the college in 2013 and 2014. Woods and Paris worked together to persuade other lawmakers to provide grants, according to the indictment.

Neal pleaded guilty Jan. 4, 2017, for his role in the scheme and was the government’s first witness in the case. His sentence is also pending.

The trial of Woods and Shelton began April 9 in federal court in Fayetteville and is expected to last about three more weeks.

Novak, who is Paris’ brother-in-law, is the keeper of the college’s electronic records as information-technology director and also was assigned fundraising duties for Ecclesia, he said.

The government did not request a copy of the college’s long-range strategic plan to put into evidence, both Benca and defense attorney Shelly Koehler of Fayetteville brought out in cross-examination of Novak. Koehler is an attorney for Shelton. Yet the long-term plan is what the college was fundraising for, Novak testified under Benca and Koehler’s cross-examination.

Ecclesia executives, including him, expected Shelton’s efforts to take at least two years to begin to bear fruit, Novak testified. Little over a year passed between Shelton’s first contract and the appearance of federal investigators at Paris’ office, case records show.

News of the investigation, with federal agents first interviewing Paris in late 2014, also cut off enrollment growth, Novak testified. The college had as many as 130 students on campus before the investigation and has about 100 now, he said. Properties bought by the improvement fund grants were for additional student housing, but the need eased because enrollment went down, he said.

Woods directed a $200,000 grant to Ecclesia in September 2013, grant records show. Neal, of Springdale, supported a $50,000 grant to the college and Woods another $150,000 in December 2014, also according to grant records. The amount of money Woods is accused of receiving as a kickback isn’t specified in the indictment. It claims much of that money was paid in cash, except for one transaction made to Woods by wire transfer for $40,000.

In one transaction, Paris authorized $50,000 to Shelton’s firm on Sept. 27, 2013 — the same day Paris signed an agreement for the college to accept a $200,000 state General Improvement Fund grant, the indictment says. Shelton used the $50,000 that day to open an account for his business, which had been incorporated the day before, the document reads.

Less than a week later, on or about Oct. 1, 2013, Shelton transferred $40,000 by wire from that business account into the personal bank account of Woods, according to prosecutors. Defense attorneys have said the money transfers to and from Woods were loans and money to pay back loans.

Woods faces 15 counts of fraud, all relating to either wire or mail transfers of money. Paris and Shelton were named in 14 of the fraud charges. All three were charged with one count of conspiracy to commit fraud. Woods is also charged with one count of money laundering in connection with the purchase of a cashier’s check.

Woods and Neal also directed $400,000 in grant money to AmeriWorks, court and state records show. Neal said he received $20,000 delivered by Woods for steering $125,000 to AmeriWorks. Grant records show Woods directed $275,000 to the company.

AmeriWorks was incorporated by lobbyist Russell “Rusty” Cranford and described in a grant application as a work-training program. Cranford, 56, is set for trial June 11 in federal court in Springfield, Mo., on one count of conspiracy and eight counts of accepting bribes in an unrelated indictment.

Metro on 04/19/2018

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