Barber accomplice found guilty on eight charges (Updated)

by The City Wire staff ([email protected]) 213 views 

K. Vaughn Knight, a Northwest Arkansas attorney and one-time associate with Brandon Barber, was found guilty on eight charges related to money laundering and fraud related to Barber’s messy bankruptcy.

Barber, once a high-profile developer during the heady days of seemingly non-stop Northwest Arkansas commercial development, was arrested March 20 on several federal charges related to fraud and his bankruptcy filing.

At the time, Conner Eldridge, the United States Attorney for the Western District of Arkansas, and Christopher Henry, IRS-Criminal Investigation Special Agent in Charge for the Nashville Field Office, and Randall Coleman, FBI Special Agent in Charge, said Barber and four other men were charged with federal crimes stemming from schemes to defraud involving several Northwest Arkansas real estate transactions and Barber’s bankruptcy case.

The other individuals charged following Barber's arrest were Knight, 46; New York attorney James Van Doren, 37; Jeff Whorton, 45, of Johnson, Ark.; and Brandon Rains, 31, from Springdale.

On Monday the jury handed down a guilty verdict on the conspiracy to commit bankruptcy fraud, bankruptcy fraud-concealment of assets, false statements, and five counts of money laundering. The case was heard in the federal courthouse in Fort Smith of U.S. District Court Judge P.K. Holmes.

It didn’t take the jury long to decide on the guilty verdicts against Knight. Closing arguments were heard Friday (Nov. 15), with jury deliberation beginning at 2:56 p.m. on Friday – the ninth day of the trial – and concluding just before 5 p.m. the same day. The jury convened 8:30 a.m. on Monday (Nov. 18), with the verdicts handed down shortly after the noon hour.

No sentencing date has yet been set for Knight.

Penalties for the charges include 10 years in prison and $250,000 fine for money laundering, five years in prison and a $250,000 fine for the conspiracy to commit bankruptcy fraud, and five years in prison and a $250,000 fine for bankruptcy fraud by concealment of assets or false statements.

Barber has previously plead guilty to the following activities:
• Conspiracy to Commit Bankruptcy Fraud: Beginning in April 2008 and continuing through Nov. 9, 2010, Barber reached an agreement with K. Vaughn Knight and James Van Doren to conceal and disguise income and funds belonging to Barber in order to hide those funds from creditors;

• Conspiracy to Commit Bank Fraud: From around Aug. 2008 to around Dec. 2008, barber conspired with Jeff Whorton, Brandon Rains, David Fisher and others to defraud First Federal Bank. The parties falsely and fraudulently represented the purchase prices of certain lots known as "Executive Plaza" to be higher than the actual sales prices in order to obtain higher loans from First Federal Bank; and

• Money Laundering: Barber engaged in money laundering when he conducted monetary transaction of criminally derived property through a financial institution. …Barber had agreed with Van Doren and Knight to conceal certain income and transactions from the bankruptcy court.

Barber faces up to 45 years in prison with fines possibly maxing out at $1.5 million.

UPDATED INFO: In an Monday afternoon interview with The City Wire, Eldridge said he was pleased with the verdict from a jury who sat through a two-week trial and reviewed more than 400 exhibits.

“This case is about fraud, and you know, this jury verdict recognized that there was significant fraud that occurred here,” Eldridge said, adding that “there was clearly a conspiracy between the two of them (Barber and Knight).”

Of the six indicted so far in the Barber case, four have plead guilty, Knight was found guilty and David Fisher was found not guilty in an alleged role to inflate real estate sales prices. In addition to Barber, the other conspirators to plead guilty were New York attorney James Van Doren, 37; Jeff Whorton, 45, of Johnson, Ark.; and Brandon Rains, 31, from Springdale.

Eldridge would not speculate as to if others will be charged in the transactions related to the Barber bankruptcy.

He did say the sentences could be handed down in the first quarter of 2014.

Eldridge’s office issued this statement late Monday: Conner Eldridge, United States Attorney for the Western District of Arkansas, announced that K. Vaughn Knight, age 46 of Fayetteville, was found guilty today by a jury on all 8 counts charged. Knight was found guilty on one count of conspiracy to commit bankruptcy fraud, two counts of bankruptcy fraud, and five counts of money laundering. The Honorable P. K. Holmes presided over the two-week trial that featured over 300 exhibits and twenty-five witnesses in the United States District Court in Fort Smith.

U.S. Attorney Eldridge commented, “This case has always been about fraud.  The evidence showed that Vaughn Knight agreed with Brandon Barber to conceal a large sum of money by using his lawyer’s trust account and then did not tell the Bankruptcy Court about those funds.  This conduct prevented honest, hard-working subcontractors and other creditors from having a chance to recover at least some of the money they were owed.  His actions were also not only for afield from an attorney’s professional obligations – they were fraudulent and criminal.  We thank the jury for their service.  We will remain dedicated to prosecuting fraud – whenever the facts and law leads us.”

“IRS-Criminal Investigation is committed to unraveling complex financial transactions and money laundering schemes where individuals attempt to conceal the true source of their money, and we are proud to work with our law enforcement partners by lending our expertise in these complex financial investigations," stated Christopher A. Henry, Special Agent in Charge. “Today’s verdict sends a clear message to those who would consider conducting or participating in these types of fraudulent financial transactions.”

"The jury's verdict in this case sends a strong message to those who would engage in a scheme to help others hide assets from bankruptcy court; it is simply not worth it," stated Acting FBI Special in Charge Howard S. Marshall. "I commend the perseverance of those who worked on this three-year investigation, including the United States Attorney's Office, Internal Revenue Service, and the FBI's New York Headquarters, and Fayetteville and Fort Smith offices."

According to the evidence presented at trial, beginning in January 2008 and continuing through November 9, 2010, Brandon Barber reached an agreement with his attorney K. Vaughn Knight and James Van Doren to conceal and disguise income and funds belonging to Barber in order to hide those funds from creditors and the bankruptcy court.

From April 1, 2008 to July 31, 2009, Knight received over $1.3 million in funds into his Interest on Lawyer’s Trust Account (“IOLTA” account) to be held for the benefit of Brandon Barber. At Barber’s direction, Knight transferred the funds in the IOLTA account to various persons or entities on Barber’s behalf, including paying personal expenses. In order to execute and conceal the scheme to defraud creditors, Knight filed a petition for Chapter 7 bankruptcy on behalf of Barber. None of the funds in Knight’s IOLTA account were disclosed to the bankruptcy court as income, and Knight reported that Barber’s income was only $3,426.95 in 2008. Knight also served as Barber’s attorney of record for an adversarial proceeding and in doing so, made false and fraudulent representations in relation to his bankruptcy petition. Knight failed to disclose Barber’s only profitable entity during this time period. That entity, EIA International LLC, was solely owned by Barber and earned over 2.5 million dollars in gross income in 2008. Knight knew of Barber’s income because the majority of that income was deposited directly into Knight’s IOLTA account.

Barber, Knight, and three other defendants were originally indicted earlier this year. On March 6, 2013, Barber, Knight, and Van Doren were charged in a 27-count indictment.  On January 16, 2013, Barber, Brandon Rains, and Jeff Whorton were charged in a three-count indictment. On October 20, 2013, Vaughn Knight was charged in an 8-count superseding indictment. Brandon Barber pleaded guilty to one count of conspiracy to commit bankruptcy fraud, one count of conspiracy to commit bank fraud, and one count of money laundering on July 31, 2013.  Rains, Van Doren, and Whorton previously pleaded guilty to various charges.

The defendant’s sentence will be determined by the court after a review of factors unique to this case, including role in the offense, other relevant conduct, and the characteristics of the offense. The sentence will not exceed the statutory maximum and in most cases it will be less than the maximum. In this case, Knight faces the following maximum penalties for each count: conspiracy to commit bankruptcy fraud—five years in prison and a $250,000 fine; bankruptcy fraud—five years in prison and a $250,000 fine; money laundering—ten years in prison and a $250,000 fine.

This case was investigated by the Internal Revenue Service Criminal Investigation Division and the Federal Bureau of Investigation. United States Attorney Conner Eldridge, First Assistant United States Attorney Wendy Johnson, and Assistant United States Attorneys Glen Hines and Benjamin Wulff are prosecuting the case for the United States.