Sen. Jake Files pleads guilty to wire fraud, money laundering, and bank fraud

by Roby Brock (roby@talkbusiness.net) 2,702 views 

State Sen. Jake Files, R-Fort Smith, pleaded guilty on Monday (Jan. 29) to one count of wire fraud, one count of money laundering, and one count of bank fraud. He said he plans to resign on Tuesday from his Senate seat.

The U.S. Western District Attorney’s office, under the direction of newly appointed Duane “Dak” Kees and Acting Assistant Attorney General John Cronan of the Justice Department’s Criminal Division announced the three charges in a press release.

Files, 45, entered the plea in U.S. District Judge P.K. Holmes, III court in Fort Smith.

“I will be submitting a letter of resignation tomorrow to remove any doubt,” Files said in a text message to Talk Business & Politics, indicating his intention to vacate his Senate seat.

According to court records, between August 2016 and December 2016, while serving in the Arkansas State Senate, Files used his State Senate office to obtain General Improvement Funds (GIF) “through fraudulent means and for personal gain,” according to the U.S. Attorney’s office.

The court filing says that Files authorized and directed the Western Arkansas Economic Development District, which was responsible for administrating the GIF in Files’s legislative district, to award a total of $46,500 in GIF money to the city of Fort Smith.

To secure the release of the GIF money, Files prepared and submitted three fraudulent bids to the Western Arkansas Economic Development District. He then instructed an unnamed associate to open a bank account under her name to conceal his role as the ultimately beneficiary of the GIF award.

When a first installment of approximately $26,900 was wire transferred from Fort Smith to the associate’s bank account, the associate withdrew approximately $11,900 of the funds in a cashier’s check made payable to FFH Construction, Files’s construction company, and the rest in cash. The associate then hand-delivered the check and the cash to Files who, in turn, deposited the check into his personal bank account.

Files also admitted to submitting a materially false loan application in November 2016 as part of a scheme to secure approximately $56,700 from First Western Bank.

General Improvement Funds have been at the root of another investigation involving former State Sen. Jon Woods, R-Springdale, and former Rep. Micah Neal, R-Springdale. Neal has confessed to a kickback scheme involving GIF money, while Woods is fighting the charges.

Files serves as the chairman of the Senate Revenue & Tax Committee. The fiscal legislative session is slated to begin on Feb. 12.

Gov. Asa Hutchinson issued a statement on the Files’ plea deal.

“I have spoken with Senator Files today, and he has indicated that he plans to submit his resignation to my office in the coming days,” he said. “After learning of his guilty plea to felony charges in federal court earlier Monday, I believe this is the appropriate decision. While I have known and respected the Files family for many years, it is essential that the voters are able to trust elected officials to have the public’s interest free from criminal conduct. Given today’s turn of events, it is clear Senator Files will not be able to fulfill his obligations to his constituents.”

The Democratic Party of Arkansas earlier had issued a statement from its chairman, Rep. Michael John Gray, D-Augusta, saying, “In pleading guilty, Sen. Files is admitting to the corruption that he and the Republican Party have denied for months. I call on Republican Party Chairman Doyle Webb and Governor Asa Hutchinson to demand his resignation immediately. If Governor Hutchinson doesn’t demand his resignation, he’ll be turning his back on corruption.”

Told of Files’ resignation, Gray said, “They’ve known about this, so they’ve kind of played Russian roulette with the timing on it. … We could have already had this settled, and we wouldn’t be worried about Arkansas Works.”

ARKANSAS WORKS VOTE
In the 2017 regular session, Files was one of 27 senators who voted for the appropriation for the Department of Human Services’ Division of Medical Services. The division administers Arkansas Works, the program created in 2013 that uses federal Medicaid dollars to purchase health insurance for lower income Arkansans. Opponents of the program have tried to block it by blocking funding for the division.

Twenty-seven votes is the minimum required for all appropriations. In the upcoming fiscal session, three senators who normally support Arkansas Works will not be in office, but the appropriation still requires 27 votes.

In addition to Files, Sen. Eddie Joe Williams, R-Cabot, who voted for the appropriation last year, resigned to work for the Trump administration. Sen. Greg Standridge, R-Russellville, who was ill and didn’t vote on the appropriation bill, died after the session. Special elections to replace them will not occur until after the session ends.

Senate Majority Leader Jim Hendren, R-Gravette, said, “Obviously it makes it more of a challenge … but I’ll also say we’ve had some great conversations in our caucus with DHS and with the governor’s staff in trying to find a way to get people who have opposed the appropriation in the past to support it, and I think we’ve made progress. So even being down three members, I still am optimistic that we can get to the 27 votes that are necessary.

“I think that particularly given the fact that we all had a chance to witness how little Americans think of dysfunctional government by watching what happened in D.C., I don’t think that there’s a big appetite for us to copy that down in Arkansas.”

Freelance reporter Steve Brawner contributed to this story.

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