Former Arkansas senator charged again in federal corruption probe

Former state Sen. Jeremy Hutchinson, R-Little Rock, and a husband-and-wife executive team for one of the nation’s largest healthcare nonprofits were charged with 32 new counts in a public corruption scheme that involved embezzlement, bribes and illegal campaign contributions to elected officials in Arkansas and Missouri.

The new allegations were contained in an unsealed 85-page federal grand jury indictment released Thursday (April 11). The federal charges in the U.S. District Court for the Western District of Missouri are in addition to a  similar indictment filed against Hutchinson in the Eastern District of Arkansas last summer. Federal court filings show charges against Hutchinson were first issued by U.S. District Judge Douglas Harpool on March 29, but were only revealed on the day after the 92nd General Assembly adjourned on Wednesday.

In the earlier federal case in Little Rock in August 2018, Hutchinson was indicted on 12 counts of allegedly devising a scheme to steal thousands of dollars in campaign contributions and then falsifying state campaign finance reports and tax filings as part of the scheme.

Hutchinson, 45, is the son of former U.S. Sen. Tim Hutchinson, R-Ark., and the nephew of Gov. Asa Hutchinson. He had been a state senator since 2011 and first came to the State Capitol as a state representative in 2000. The former senator and Little Rock attorney resigned from the Arkansas General Assembly last summer, but his attorney Marc Mukasey issued a statement saying his client was innocent.

“Jeremy Hutchinson pled not guilty to today’s charges and he will be exonerated after trial. Today’s indictment is a reminder that the government’s power to violate the Fifth and Sixth Amendments by forcing the same person to defend himself on multiple charges in multiple places, all at the same time, must be checked,” Mukasey noted in a statement to Talk Business & Politics.

Mukasey is former federal judge who served as the 81st U.S. Attorney General following the resignation of Alberto Gonzales in 2007.

“We will fight the government no matter how many times, or in how many places, they bring their trumped-up charges,” he said.

Gov. Hutchinson, who appeared at a signing ceremony at the State Capitol, called the new indictments against his nephew “another sad day in Arkansas.”

“ The allegations are very serious. As a public official, I am concerned with any allegations of wrongdoing by elected officials,” said Hutchinson. “As an Uncle, I continue to pray for Jeremy and know that he seeks his day in court. I am hopeful that everyone will let the criminal justice system work and wait to draw conclusions until such time as all the facts are known.”

Tim Hutchinson also issued a statement expressing support for his son.

“This case should never go to a jury but I am confident that when a jury hears the facts Jeremy will be exonerated. The government’s motivation and good faith are called into question where they employ the tactic of charging Jeremy in a separate jurisdiction once their first case appears to be in jeopardy,” said the former U.S. senator. “This recent ploy undeniably increases the pressure on Jeremy, who now faces a costly two front defense against the government’s unlimited resources.”

Hutchinson added: “But I respect and support Jeremy in his decision to not plead guilty to any accusation of which he is innocent. Put simply, in regard to the new charges, either the government’s theories are absurd, or we should all reconsider the extensive 183-year history of practicing attorneys simultaneously serving part time in the Arkansas General Assembly.”

GIF SCHEME BEGAN IN 2015
In the unsealed grand jury filing, Assistant Attorney General Brian Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Tim Garrison of the Western District of Missouri said Hutchinson “knowingly and unlawfully conspired, confederated, and agreed together” with Bontiea and Tommy Ray Goss to devise a scheme that began in 2015 to defraud Preferred Family Healthcare (PFH). That same Springfield, Mo.-based nonprofit is at the center of the wide-ranging federal corruption probe in several jurisdictions that has already entrapped several former Arkansas lawmakers and PFH executives.

According to the now unsealed grand jury filing, Hutchinson and the Gosses, the husband and wife who served respectively as PFH’s former chief operations and chief financial officers, knowingly conspired with several former state lawmakers and persons “known and unknown” to fraudulently embezzle and steal more than $8.5 million.

The indictment further alleges that the Gosses, along with former Arkansas lobbyist Milton “Rusty“ Cranford and other PFH executives, participated in a conspiracy from 20o5 to November 2017 to embezzle and misapply millions of dollars in federal funds received by PFH to pay bribes and kickbacks to elected officials, including Hutchinson.

The former PFH executives also sought to deprive the “the citizens of Arkansas of their right to the honest services of those elected officials,” states the federal filing brought by federal attorneys. In exchange for the bribes and kickbacks offered by the Gosses and other co-conspirators, Hutchinson and other elected officials allegedly provided favorable legislative and official action for the charity, including directing monies from the state’s GIF funds.

The indictment also alleges the Gosses and others defrauded the charity, and the governmental entities that funded the charity, by embezzling and misapplying charity funds for their personal benefit, including, but not limited to:
• causing the charity to pay for chartered air flights for the Gosses to commute between their home in Colorado and their work at the charity’s office in Springfield;
• providing millions of dollars in interest-free loans to their for-profit companies;
• charging the charity inflated prices to lease vehicles from their for-profit companies;
• renting charity-owned commercial real estate to one of their for-profit companies at below-market rates or, in some instances, for free; and
• using charity funds to pay for personal services for themselves, including child and pet care, housekeeping and cleaning their personal residences, picking up and delivering groceries, and shoveling snow, among other personal services paid for by the charity.

BACKGROUND
The new federal charges in Missouri closely mirror other indictments and guilty pleas in the federal government’s ongoing probe against several former Arkansas legislators, PFH executives and other public officials involving the GIF disbursements. In October 2017, the Arkansas Supreme Court ruled that leftover GIF dollars meted out to statewide planning and development districts by the Arkansas Legislature was “unconstitutional.”

Last June, Cranford pleaded guilty in the Missouri federal court to bribing Arkansas elected officials in the same multi-million-dollar scheme, and then along with other PFH executives, embezzled millions of dollars from the Missouri charity. By pleading guilty, the former Rogers lobbyist admitted that he and other PFH executives paid bribes to Arkansas Sen. Jonathan Woods, R-Springdale, Arkansas State Rep. Henry Wilkins IV, D-Pine Bluff, and a person named in court documents as “Arkansas Senator A,” which was first identified by Talk Business & Politics as Sen. Hutchinson.

A year earlier, the first shoe to drop in the byzantine federal investigation occurred when the same federal prosecutors in Missouri announced that PFH accountant David Carl Hayes had pleaded guilty to two embezzlement schemes totaling more than $3 million. Under Hayes’ guilty plea, he admitted to embezzling nearly $2 million from Springfield, Mo.-based Alternative Opportunities (AO), which merged with PFH in 2015 to create one of the largest behavioral health organizations in the U.S.

Doing business as Dayspring Behavioral Health Services and other nondescript LLCs in Arkansas, AO operated dozens of health care clinics in mostly rural areas and key urban markets. Federal prosecutors said Hayes embezzled from Dayspring from early 2011 to April 2014 by causing Dayspring to issue checks payable to himself and an unknown person not identified in court documents. Hayes, a former AO board member and the nonprofit’s internal auditor and bookkeeper, then deposited the funds into his personal checking account.

In early 2018, PFH’s board placed former AO Chief Executive Marilyn Nolan and the Gosses on unpaid administrative leave. Those executives, who are no longer with the nonprofit, were paid more than $490,000 in annual compensation in fiscal 2016, according to PFH’s most recent 990 tax filings and financial statements with the IRS.

In Arkansas, former state Rep. Eddie Cooper, D-Melbourne, pleaded guilty in February 2018 for his role in a conspiracy to embezzle more than $4 million from the Missouri charity. Wilkins pleaded guilty last summer to accepting more than $80,000 in bribes in exchange for influencing state legislation and transactions, including steering approximately $245,000 in GIF funds to his co-conspirators.

GIF spending was also at the root of the federal probe in Fayetteville involving former Woods and former Rep. Micah Neal, R-Springdale. In September, Neal was sentenced to three years of probation for his role in a kickback scheme concocted by Woods and other unknown persons to steal GIF dollars. He was ordered by a federal judge to pay $200,000 in restitution.

Woods, however, was sentenced to 18 years and four months in federal prison for his involvement in a widespread kickback and bribery scheme with Ecclesia College in Springdale at the center. He was ordered to prison in late September.

PFH’s operations in Arkansas included more than 50 clinics that provide an array of difficult-to-get healthcare services in key rural and urban markets across the state. The nonprofit has nearly 4,000 employees at its other operations in Missouri, Oklahoma, Kansas and Illinois.

In fiscal 2016, PFH reported program service revenue of $181.2 million, up 172% from $66.6 million in the prior year. Companywide, more than $127 million of the nonprofit’s $170 million in expenses was used to pay salaries of 4,927 employees on the nonprofit’s payroll, federal tax filings show.

In July, the state Department of Human Services suspended PFH from the state’s Medicaid program after former company executive Robin Raveendran, 62, of Little Rock, was arrested on two counts of Medicaid fraud, one Class A felony and one Class B felony. He was accused of coordinating an effort which reimbursed his company for 20,109 illegally billed mental health services for nearly $2.3 billion from Jan. 1, 2015 to Oct. 19, 2017.

That same month, PFH also settled a lawsuit alleging that it was fleecing hundreds of lowly paid hourly workers out of overtime pay at the same time it was doling out millions of dollars in bribes and kickbacks to Arkansas lawmakers, public officials and its own well-paid executive team.