A fraudulent financing scheme initiated almost 10 years ago has resulted in primary perpetrator Brandon Barber being sentenced to five years and five months in prison. Based on possible reductions in the sentence and his time served, Barber’s sentence could fall to a little more than three years.
After time served in prison, he will face three years of supervised release during which he will not be able to assume any debt of any type – including loans from family or friends – without prior approval of the U.S. Probation Office. Also during the supervised release his financial activities must be disclosed to probation officers.
A ruling on restitution is set for Jan. 5.
Barber was sentenced following a Tuesday (Oct. 28) morning hearing in Fort Smith before U.S. District Judge (Western District of Arkansas) P.K. Holmes III. At least 45 people attended the hearing, not including attorneys for the government and Barber.
Holmes sentenced Barber to 190 months for three counts related to bank fraud, money laundering and bankruptcy fraud. However, the time is served concurrently which reduced the sentence to 65 months, or five years and five months. The prison term is below the 8-10 years sought by the office of U.S. Prosecuting Attorney Conner Eldridge (Western District of Arkansas), and just a few months more than the 60 months requested by Barber’s attorneys Asa Hutchinson III and Asa Hutchinson.
The elder Hutchinson is the GOP candidate in the race for Arkansas Governor. He also served between 1982 and 1985 in the post now held by Eldridge.
In comments before Judge Holmes issued the sentence, Barber said his “selfishness and pride” eventually hurt those he loved the most. With his voice breaking from emotion, he apologized directly to his parents “who taught me better.” He also offered an emotional apology to his ex wife, fiance, three children and to the “Northwest Arkansas community.”
“I assure you that I take full responsibility for my actions,” Barber said as he addressed Judge Holmes – an address that included a plea to be “reunited with my children as soon as possible.”
Barber, once a high-profile developer during the heady days of seemingly non-stop Northwest Arkansas commercial development, was arrested March 20, 2013, on several federal charges.
Barber in July 2013 admitted guilt in various schemes to prop up his Northwest Arkansas real estate and development company between 2005 and 2009. The charges Barber plead guilty to included conspiracy to commit bankruptcy fraud, conspiracy to commit bank fraud and money laundering. The maximum sentence for all charges is 45 years, with fines maxing out at $1.5 million.
Following were the specific charges to which Barber admitted guilt.
• 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 August 2008 to around December 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.
• 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.
SENTENCING GUIDELINES, REQUESTS
Through his attorneys, Barber requested leniency in the sentencing. A 50-page sentencing memo submitted to the court in early August by Hutchinson III, with Rogers-based The Asa Hutchinson Law Group, details why Barber’s sentence should be set at five years. Reasons for the “downward departures” from the sentencing range include:
• Barber’s guilty plea and subsequent cooperation with government officials;
• Lesser amount of financial damage than is being alleged by the prosecution;
• A “more complete perspective” of Barber’s downfall and his life prior to committing fraud;
• His charitable contributions prior to committing fraud; and
• Comparison of “national sentencing statistics” that apply to the Barber case history.
As to the financial damage, Barber’s attorneys argue that the damage is less than $20 million instead of the more than $32.343 million argued by the prosecution.
The memo from Hutchinson III also includes several pages describing more than 40 letters from people providing background as to Barber’s “contributions to the community, his love for family and his own character.” The letters are part of documents provided to the court by Barber’s attorneys.
“These are respected and accomplished leaders and citizens who do not excuse Brandon’s conduct but do offer unique and important perspectives to the Court,” Hutchinson III noted in the memo.
U.S. Attorney Eldridge initially rejected the leniency request and supported the U.S. Probation’s Office sentencing range request of 19.5 years to almost 24 and a half years in prison. The prison term is based on a fraud amount of more than $32.343 million, and because Barber was the “leader” of a conspiracy that involved others.
However, Eldridge asked for a “downward departure” in an Oct. 22 court filing that moved the possible prison term to between 8 years and 10 years. Eldridge noted several reasons for agreeing to a reduced sentence. Those included the “defendant’s assistance and information provided after his change of plea has proven to be truthful, complete and reliable,” and that his cooperation “put him at a greater risk than that normally associated with cooperation as the defendant’s testimony at trial made his cooperation a matter of public record.”
WITNESSES FOR BARBER
It was clear early in the hearing that Barber’s sentence would be greater than the 60 months requested by his attorneys. Judge Holmes interrupted Hutchinson III as the attorney mentioned their request for the 60 months.
“Which I won’t do, I’ll tell you that right now,” Holmes interjected.
Nevertheless, Hutchinson III called three witnesses to speak to Barber’s credibility and pattern of business conduct prior to being charged with fraud and money laundering.
Lee Scarlett, a Northwest Arkansas home builder and owner of Celtic Homes, first met Barber in 1999 when Barber was a loan officer. They would eventually work together in building seven homes, and “everything went fine” and he “never had a bad experience” with Barber, Scarlett said.
Karon Reese, a Realtor who now lives in New Orleans, opposed Barber’s planned “Divinity” project that would have built a 12-story hotel on Dickson Street. However, she testified that Barber was willing to compromise with the group opposed to the hotel and eventually agreed to reduce the structure to six stories. The hotel was never built.
Reese also said Barber “did great work” as a developer and always dealt “honestly” in her interactions with properties he owned. She said she would not have driven the 12 hours from New Orleans if not for the belief that Barber is still able to “make a huge contribution to society.”
Also called as a witness for Barber was Richard Hudson, the former top lobbyist for the University of Arkansas. As part of the leniency request from Barber’s attorneys, Hudson wrote a letter that included this note: “Had the national recession not occurred, I believe Brandon would today be a highly successful and well-respected business leader in Northwest Arkansas.”
Hudson, who said Tuesday he made 15-20 jail visits with Barber, continued the theme. He said the national real estate collapse “was one of those things we didn’t see coming. … Obviously, he mishandled a financial crisis when it developed.”
Eldridge followed the witnesses by saying the government does not dispute that Barber has positive attributes, but noted that his actions created “many, many residual victims,” and that ultimately Barber’s actions “reflect conduct and fraud that cuts to the heart of the local economy.” Eldridge said Barber’s story is not as simple as being a developer who suffered because of a decline in the real estate market.
“This case is and has always been about fraud,” Eldridge said, adding that the facts show an “intentional pattern” of deceit that hurt not only large banks but numerous small companies in the construction and real estate sectors.
Hutchinson III responded by saying that the “extraordinary circumstances” faced by a young Brandon Barber are relevant in sentencing considerations. He said Barber’s “motivation was not to line his pockets” but to keep his businesses going. He also said Barber’s drinking problem, a failing marriage and a child being diagnosed with a developmental disorder added to the stress of the time. Hutchinson III said in addressing Judge Holmes that the factors “are not a justification,” but should be considered.
Hutchinson III also said a long prison sentence for Barber will not deter others from committing similar white collar crimes, and would likely delay Barber’s ability to pay restitution.
Prior to sentencing, Judge Holmes said he is not sure the full $32.343 million is the result of fraud committed by Barber, noting that some of the losses were “the result of a collapsed real estate market.”
He also said Barber did not commit a “repetitive fraud,” with his criminal actions a single response within the failing real estate market. Judge Holmes added that Barber’s actions did harm “vulnerable victims” but also harmed “sophisticated victims” like financial institutions. Judge Holmes said the government's sentencing request was “somewhat high” considering that not all facts are known as to the financial amount of fraud, that Barber is a first-time offender, and the level of community support for Barber.
Judge Holmes did note that the sad reality of Barber being separated from his children will not alter his consideration. He noted that almost all cases involve children or elderly parents who may have no one else to take care of them.
“I can’t treat (Barber) any different than a drug dealer who also loves his children,” Judge Holmes explained.
Judge Holmes sentenced Barber to 60 months for bank fraud (Count 1), 65 months for bankruptcy fraud (Count 13) and 65 months for money laundering (Count 25). He also sentenced Barber to three years of supervised release for each count, with the three years also to run concurrently.
Barber faced up to $1.5 million in fines, but Judge Holmes rejected the government’s request for fines.
Judge Holmes did not release Barber, but instead returned him to the custody of the U.S. Marshals Service until his prison sentence begins. Barber’s attorneys requested his prison time be served at Federal Prison Camp in Lewisberg, Pa., which has a minimum security facility for male inmates. Inmates who have served time at the adjacent high-security facility at Lewisberg include Jimmy Hoffa, John Gotti, Henry Hill and Alger Hiss.
Judge Holmes said he did not have the authority to mandate where Barber would serve, but would include in the sentencing a recommendation for Lewisberg.
Barber’s family appeared pleased with the sentencing. Hutchinson III said he believed Judge Holmes “exercised his judgment appropriately.”
Barber’s sentencing Tuesday was the first in a round of related sentencing hearings set for next week.
James Van Doren pleaded guilty on Aug. 23, 2013 and is set to be sentenced on Nov. 3. Jeff Whorton pleaded guilty on Aug. 26, 2013 and is set to be sentenced on Nov. 5, 2013. Brandon Rains pleaded guilty on Oct. 17, 2013 and is set to be sentenced on Nov. 6, 2013.
Vaughn Knight was convicted of eight counts of bankruptcy fraud and money laundering on Nov. 18, 2013. The Court overturned the jury verdict and the case is on appeal.
The four men were accused of aiding Barber in his criminal actions.