State Rep. Micah Neal pleads guilty to taking kickbacks from government grants | Arkansas Blog

Wednesday, January 4, 2017

State Rep. Micah Neal pleads guilty to taking kickbacks from government grants

Posted By on Wed, Jan 4, 2017 at 12:38 PM

MICAH NEAL: Guilty to kickback charges.
  • MICAH NEAL: Guilty to kickback charges.
Micah Neal, a Republican state representative from Springdale who abruptly dropped out of a race for Washington County judge last summer for "family and business" reasons, pleaded guilty in federal court today to taking $38,000 kickbacks from $600,000 in state grants to two nonprofit entities in Northwest Arkansas.

Documents related to the case reference a senator, lobbyist, consultant and nonprofit leaders, among others, as having a part in the kickback scheme, but none is named nor charged. Presumably further activity is likely. I have a question in to U.S. Attorney Kenneth Elser in Fort Smith on that point.
UPDATE: His office said he'd have no comment beyond the press release.

Justice Department news release here.

As part of his guilty plea, Neal admitted that, between January 2013 and January 2015, while serving in the Arkansas House of Representatives, he conspired with an Arkansas state senator to use their official positions to appropriate government money known as General Improvement Funds (GIF) to a pair of non-profit entities in exchange for bribes. Specifically, Neal and the senator authorized and directed the Northwest Arkansas Economic Development District, which was responsible for disbursing the GIF, to award a total of $600,000 in GIF money to the two non-profit entities. Of the $600,000, Neal personally authorized and directed a total of $175,000 to the entities. In return for his official actions, Neal received approximately $38,000 in bribes from officials at those non-profit entities.

Sentencing will come later. The maximum penalty is 20 years in prison and a $250,000 fine, but a first offender wouldn't be likely to receive that and Neal, 42, will get consideration for entering a negotiated plea and waiver of indictment. He has agreed to make restitution and to cooperate with the government. The government agrees to seek no more than sentencing guidelines for a sentence and to take his cooperation in to account. Neal signed a $10,000 unsecured bond to insure future court appearances. Neal appeared before Judge Timothy Brooks.


Correction: I incorrectly referred in original post to Neal as a former legislator. Though he didn't seek re-election, he serves through Jan. 9.

Neal, whose family owns Neal's Cafe, had said he decided to leave the legislature to bring his state experience back to the county level. But then he quit the race for county judge after winning the Republican nomination, which set off a legal squabble over whether the Republicans could field another candidate to face Democrat Mark Kinion. The party prevailed and their chosen nominee, Joseph Wood, a top deputy to Republican Secretary of State Mark Martin, won the race over, among others, then-Sen. Jon Woods of Springdale. Woods was another Republican legislator who decided not to seek re-election in 2016, citing a desire to start a "new chapter in his life." Woods served three terms in the House. His Senate term ends next week. I've written and called him to ask whether he's the senator referenced here.

Legal action had been expected for some time related to a harsh audit of the Northwest Arkansas Economic Development District and how it spent money funneled to it by the legislature. The audit questioned many of the expenditures made by the agency, those expenditures typically done at the direction of area legislators. Particularly curious was more than $500,000 given to build a building at Ecclesia College, a tiny Bible college in Springdale. Some repayment to a Missouri wholesale grocer also drew the auditors' attention.

UPDATE: The criminal information in the case provides further details on the unnamed senator and where the money went:

Senator A has served as a Senator in the Arkansas Senate from 2013 to the present. Prior to his service in the Arkansas Senate, Senator A served as a Representative in the Arkansas House of Representatives from 2007 until 2012.

Entity A was a non-profit corporation, with an address in the Western District of Arkansas, Fayetteville Division, that purportedly sought to create manufacturing jobs in northwest Arkansas, specifically for a specialized workforce including disabled veterans, disadvantaged youth, and individuals recovering from substance abuse.

Entity B was a non-profit corporation operating a college located in Springdale, Arkansas, in the Western District of Arkansas.
...

At all times relevant to this Information, NEAL and Senator A, acting in their official capacity as members of the Arkansas General Assembly, directed, authorized, and approved the award of GIF grants by the NW AEDD to eligible organizations or entities.
Likewise, the NW AEDD awarded GIF grants from GIF money appropriated by NEAL and Senator A only at the direction of, and with the approval and authorization of, NEAL and Senator A. 
Neal's plea agreement gives more hints at an investigation that covers a lobbyist, a consultant and representatives of the nonprofits:

Entity A was a non-profit corporation, with an address in the Western District of Arkansas, Fayetteville Division, that purportedly sought to create manufacturing jobs in northwest Arkansas, specifically for a specialized workforce including disabled veterans, disadvantaged youth, and individuals recovering from substance abuse. Entity A was associated with "Entity A-1 ," which was a healthcare provider with facilities in the Western District of Arkansas and elsewhere.

Person A was the incorporator, registered agent, and a member of the board of directors for Entity A. Person A was also a high-ranking executive with Entity A-1.

Person A also worked as a licensed lobbyist in the State of Arkansas.

Entity B was a non-profit corporation operating a college located in Springdale, Arkansas, in the Western District of Arkansas.

Person B was the president of Entity B and a friend of Senator A.

Person C was the incorporator and sole member of a limited liability corporation incorporated in the State of Arkansas that purportedly provides consulting services.

Person C also was a friend of Senator A and Person B. 
The recitation of events in Neal's plea agreement details the sponsorship of GIF, or surplus spending, by Neal and the senator. It said money steered to the development district was spent as they directed. The plea agreement details a paper trail of messages from Neal and the senator directing how the money was to be allocated.  It said:

In 2013, Senator A advised NEAL that if NEAL, as an Arkansas Representative, authorized and directed GIF money to Entity A, then Person A would pay NEAL a portion of the money in exchange for NEAL's official action. 
Neal said, for example, that he received $20,000 in cash from the senator in return for joining in distribution of $400,000 to Entity A. A similar procedure was outlined for Entity B to receive $200,000. In that case, Entity B sent $65,000 to Person C's company. Person C paid Neal $18,000 in cash, his plea agreement says. The agreement continues:

The preceding summary is made for the purpose of providing the Court with a factual basis for NEAL' s guilty plea. The facts set forth in this summary are supported by witness statements, emails, bank records, and other documentary evidence. The preceding summary does not include all of the facts known to NEAL concerning criminal activity in which he or others engaged, nor does it contain all of the facts that the government could prove in a trial against NEAL. 

I'm seeking a comment from Neal, but have received no response. Tipped that Neal's plea was expected today, I checked Neal's Twitter account this moring. He's been posting message such as these the last few hours.

click to enlarge neal.jpg

Some irony in the  information revealed here. Former legislator Mike Wilson sued over what he saw as unconstitutional local legislation in passing out state surplus to local development districts to be spent at the direction of legislators. Judge Chris Piazza didn't think Wilson had proved his case in targeting only the Central Arkansas Planning and Development District. Looks like at least one legislator has fessed up now to the direct control Wilson alleged. But a constitutional amendment devised by Sen. Jon Woods was passed in November that legalizes giving tax money to private entities such as was done here. I don't think teh amendment legalized kickbacks, however.

Asked about the news at a session with reporters Wednesday afternoon, Gov. Asa Hutchinson called it "troubling." I'd noted previously that he has vowed to end the General Improvement Fund dispensation of surplus money for legislators to spend as they choose on local beneficiaries.

I should add that the Capitol corridors are buzzing with speculation that this investigation, in addition to holding likely implications for unnamed parties in the Neal plea agreement, could involve other legislators and lobbyists. Talk has grown in recent times of the rising number of legislators with consulting businesses and what exactly those consulting businesses entailed.

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