Thursday, September 14, 2017
A federal jury spent all afternoon Wednesday deliberating the fate of two Little Rock businessmen accused of defrauding a government program that helps service-disabled veterans, only to be sent home for the evening after indicating that a verdict wasn't close by day's end.
The jury of mostly women heard evidence for five days, followed by closing arguments Wednesday morning, on 28 felony charges apiece against Ross Alan Hope, owner of a Little Rock-based heating and air company called Powers of Arkansas, and his best friend, Mikel Kullander, owner of Kullander Construction in Little Rock.
Each man is charged with mail-fraud conspiracy; three counts of major fraud, each involving more than $1 million; and 24 counts of mail fraud. They're accused of falsely claiming that a business they formed in 2007, DAV Construction, was owned and operated by a service-disabled veteran, so that it would qualify for million-dollar contracts set aside for veteran-owned businesses.
The men haven't disputed forming DAV Construction with a former employee of Hope's, Jim Wells, who is a service-disabled veteran, for the purpose of being able to bid on the government contracts. They said they tried to comply with federal regulations and believed they were in compliance when they formed the company. But about four years and several million-dollar contracts later, after a visit by a government verification expert, they were deemed unqualified under a newly established government verification program.
The men sought reconsideration and were eventually allowed to resume bidding on the set-aside contracts, but when the government shut them down again, the denial was accompanied by criminal charges.
Assistant U.S. Attorneys John Ray White and Stephanie Mazzanti have sought, over the past week and a half, to prove that the men had the intent to deceive the government from the time they formed DAV Construction. The prosecutors say the men knew from the beginning that Wells wasn't going to "control" the day-to-day activities of the company, as federal regulations required the veteran to do, and that they deliberately overstated Wells' involvement to gain access to the set-aside contracts.
Defense attorneys -- Tim Dudley and former U.S. Attorney Chuck Banks for Hope, and former U.S. Attorney Jane Duke for Kullander -- contend that the men never intended to commit a crime. The attorneys say the men were surprised to learn in 2011, four years after forming the company to take part in the new program, that their business wasn't considered a true service-disabled veteran-operated business.
As evidence of their intent to deceive, White reminded jurors in his closing arguments of testimony that they prepared ahead of time for the verification expert's visit because "they knew Mr. Wells didn't control it," and they wanted to "cut off" the expert's questions.
Companies applying for the set-aside contracts were required only to "self-certify" when the program began, but the government later set up the verification program to detect possible fraud.
White recalled testimony that in the databases through which Hope certified DAV Construction as a veteran-run business, definitions automatically popped up for terms that some people would find confusing while trying to understand federal regulations.
White also told jurors, "It's hard to reconcile Mr. Hope's testimony that he wasn't really familiar with the regulations," when he had years of experience as a successful businessman.
"Their paper and their practice were inconsistent," White said, citing testimony about the men back-dating checks and expense invoices after being questioned, to make it appear that Wells had always received the highest income of the three men, as the regulations required, and was involved enough in the business to have a separate office.
White said another red flag was that more than $1 million of the profits earned through the program were traced to Hope's personal accounts, and more than $300,000 was traced to Kullander.
The contracts, he said, "made a huge difference in the W-2's of Mr. Hope and Mr. Kullander, and that is evidence of intent."
The federal prosecutor said the men's misrepresentations about how much control Wells had over the business "thwarted Congress' intentions to give some assistance to veterans who were injured during their service." He also asserted that "they used Jim Wells, and caused legitimate service-disabled veteran-operated businesses to not be in a fair competition."
Wells, who was considered 100 percent disabled because of seizures related to his time in the military, was never charged with a crime, nor given any sort of immunity agreement for testifying. But White told jurors, "Whether or not Jim Wells was a conspirator doesn't keep them [Hope and Kullander] from having conspired together."
Dudley argued that the defendants were "dealing with a bureaucratic, regulatory nightmare" that they tried to comply with, only to have their interpretations of certain regulations later declared inaccurate and their hard-won reputations tarnished.
"As long as they believed they were complying with the regulations, they were acting in good faith and are required to be acquitted," Dudley told the jury. "There's no evidence they didn't honestly believe they were eligible when they represented that they were."
Besides, he said, "they didn't get something for nothing. ... They did every one of those jobs in a competent, professional manner, and they did them timely."
He also pointed out that "violating a regulation is not a crime," and that "it's OK to make money. It's even OK to make a lot of money. That's what businessmen do."
Duke agreed in her closing argument that "the government has absolutely failed [in demonstrating] the intent to defraud here."
"The layers of bureaucracy involved here -- if it wasn't so serious, it would be funny," she said.
Metro on 09/14/2017
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