The former director of a now-defunct youth services nonprofit that appears to be referenced in the federal bribery plea agreement of former Sen. Henry “Hank” Wilkins IV (D-Pine Bluff) denied any wrongdoing in a phone interview with the Arkansas Times on Tuesday.
Jerry Walsh, the longtime director of Magnolia-based South Arkansas Youth Services, matches the description of an individual referred to as “Person #3” in the Wilkins plea, which was announced Monday. (Here’s the Wilkins information filed by federal prosecutors.) SAYS itself matches the description of a nonprofit referred to as “Entity F,” which for many years contracted with the state Department of Human Services to serve delinquent and at-risk youth. In the plea agreement, Wilkins acknowledged receiving kickbacks from an unnamed lobbyist doing work on behalf of multiple unnamed nonprofits in exchange for Wilkins’ sponsorship of beneficial legislation. The lobbyist in the alleged scheme — called “Person #1” in the plea — fits the description of Rusty Cranford, a Little Rock lobbyist and health care executive who has been indicted in a separate federal case.
Walsh acknowledged that SAYS held a contract with Cranford Coalition, a firm operated by Rusty Cranford, but said he knew nothing about Cranford providing kickbacks to lawmakers for favorable treatment.
Walsh said he met Wilkins a handful of times at the state Capitol and found him to be “a very pleasant man” but that he never talked to Wilkins about sponsoring particular bills.
Asked whether he or SAYS ever had direct business dealings with other legislators besides Wilkins, Walsh said the nonprofit had hired two Republican senators, both attorneys, in recent years: Sen. Jeremy Hutchinson of Little Rock and former Senate President Pro Tem Michael Lamoureux of Russellville.
Sen. Hutchinson’s involvement
Sen. Hutchinson (who is Governor Hutchinson’s nephew) matches the description of an unnamed “Senator A” in the Wilkins plea agreement. “Senator A” is not accused of any crime in the Wilkins plea. However, the document indicates this lawmaker closely corresponded with Wilkins and a lobbyist (who appears to be Cranford) in 2013 about three bills that Wilkins sponsored. Prosecutors say two of those bills benefited SAYS.
Walsh said SAYS hired Hutchinson as an attorney about a year and a half ago to help the nonprofit appeal the loss of a contract awarded by DHS and appeal Medicaid reimbursement decisions. It’s been reported before that Hutchinson represented SAYS as an attorney in 2016, around the same time the youth services nonprofit was fighting a DHS decision to switch to a different provider to operate its residential facilities for delinquent youth (a decision that led to a political standoff and, ultimately, the state takeover of the facilities). Walsh said that when SAYS retained Sen. Hutchinson as an attorney, the senator made it clear he could not perform official government acts to benefit his clients.
“We had that meeting with him where he said what he could and couldn’t do,” Walsh said. “He could do legal work, but couldn’t do bills on our behalf.”
Asked whether SAYS retained Hutchinson as an attorney as far back as 2013 — during the time period covered by the Wilkins plea — Walsh said the agency “could have, but I never had any conversation with him about any legislation.” Walsh said Sen. Hutchinson supported a major piece of juvenile justice reform legislation he opposed in 2013, the Close to Home Act.
“Hutchinson was chair of [the] Judiciary [committee] … and he voted it out of committee,” Walsh said. Committee votes are not available on the Arkansas legislature’s website, but the record shows Hutchinson did not vote for the Close to Home Act when it came up in the Senate, along with most of his colleagues (including all of the chamber’s Democrats and a number of Republicans).
The Close to Home Act would have potentially reconfigured the state’s funding for youth services, and the state’s politically influential youth service providers saw it as a threat, according to a 2016 article by writer Dick Mendel for the Juvenile Justice Information Exchange. Soon after the bill’s failure, the head of the Youth Services Division at DHS, Ron Angel, resigned; Angel had been a driver of juvenile justice reform efforts in Arkansas. The federal information in the Wilkins plea agreement notes that the Arkansas Youth Services Providers Association was also among the clients of “Person #1” (again, likely Rusty Cranford).
Walsh said he didn’t care for the Close to Home Act but didn’t lobby against it. “I didn’t think it was a good bill … [but] I didn’t talk to any legislators about it. I know the Youth Providers Association was against it. I know a number of [juvenile] judges were for it and others were against it,” he said. “I just didn’t, you know, get the dog off the porch and get in that hunt. … I didn’t get involved.”
Lamoureux’s name also surfaced recently in testimony given in the corruption trial of former state Sen. Jon Woods. The director of a nonprofit planning and development district in Hot Springs said he’d been pressured by Lamoureux to direct grants to a private college in Springdale. That college, Ecclesia, is at the center of an alleged bribery scheme involving Woods; Rusty Cranford is also implicated in a separate alleged kickback scheme involving Woods and a different nonprofit.
Walsh said SAYS retained Lamoureux’s legal services when he was still in the Senate — that is, before 2015. Walsh said he was concerned the state was treating his nonprofit unfairly and failing to follow its own procurement process.
“We knew they were going to take away our contract … and they were not following the procedures to do that and [we] felt we needed some help, and I hired Mr. Lamoureux,” he said. Walsh said he felt Lamoureux would be qualified to help SAYS because he had a background as a public defender and understood the topic of juvenile justice.
Walsh said Lamoureux, like Sen. Hutchinson, also made it clear his role as a legislator could not intersect with his simultaneous work for SAYS.
“Now, he didn’t do any bills or anything like that,” Walsh said. “I had the same kind of meeting with him as with Hutchinson. He said what he would do, what he wouldn’t do.” Walsh also said that after Lamoureux resigned to become chief of staff for Governor Hutchinson, he never asked Lamoureux for favors.
Lamoureux was among the minority of legislators who did vote for the Close to Home Act, the reform legislation that the youth service providers opposed.
The Wilkins legislation and GIF grant
The Hank Wilkins plea agreement names three specific pieces of legislation in 2013 that federal prosecutors say the former Pine Bluff legislator sponsored in exchange for payments from Person #1 (again, who is likely Cranford). Walsh said he only recalled one of those bills: House Bill 1328, entitled “an act to require DYS to appear before the legislature for any changes to Youth Provider contracts.” It passed both chambers with near-unanimous support to become Act 321 of 2013.
“Yeah, I remember that. I never lobbied for that, but it was, in my opinion, a good check and balance — that they couldn’t unilaterally change contracts,” Walsh said.
Prosecutors say Act 321 benefited “Entity F,” which is likely SAYS. They also say the passage of HB 2227, which concerned early intervention day treatment for children, benefited Entity F. Walsh said he didn’t know anything about HB 2227 when a reporter read the bill title aloud, nor about HB 2209. Prosecutors say HB 2209 was favorable to the business of a different entity, not Entity F.
The Wilkins plea also names an appropriation bill sponsored by another senator, referred to as “Senator B,” who has been identified as Sen. Eddie Cheatham (D-Crossett). That appropriation sent “up to $1 million” of General Improvement Fund money to the Division of Behavioral Health at DHS, which then made grants to nonprofits with the funds. After the appropriation passed, Wilkins sent letters recommending three entities receive grants, one of which was Entity F. (The other two entities match the descriptions of Preferred Family Healthcare, which employed Cranford as an executive, and a Pine Bluff youth services provider called United Family Services.) In December 2013, DHS disbursed grants to the three entities totaling about $245,000. Entity F’s share was $61,282.
Cheatham told the Arkansas Times by phone on Tuesday that he recalls the GIF appropriation but didn’t know about Wilkins recommending those specific grants to DHS. “None of those are active entities in my Senate district,” he said.
“As I recall, I did place some money in this legislation, $10,000,” he added later in a text message. “Had no idea the other came from Wilkins and Senator A.” The Wilkins plea agreement does not accuse “Senator B” of any wrongdoing.
Walsh said he remembers the GIF-funded grant in 2013. “Mr. Wilkins did sign on for a GIF with us,” he said, but added, “we never talked to him about that … not about a GIF and not about any bills.”
Walsh said SAYS has now turned over records of its General Improvement Fund grants to investigators. “We spent every penny on what we were supposed to spend it on, which was infrastructure and buildings,” Walsh said. (As the operator of several residential facilities for delinquent youth, SAYS had significant capital overhead.)
“We gave that to the feds. The federal people. … And they got our audit. We can show where every penny went,” he said. Walsh said SAYS requested a GIF grant every year, and the one in 2013 was only the second it received after two decades of operations. “We’d asked every year for 20 years. Out of 20 years, we got two. Spent them the same way, on infrastructure.”
Walsh said it was “unfortunate” that the GIF grants have now come to an end. “A lot of good was done with it. … Corrupt influence kills it for everybody,” he said.
Walsh resigned from SAYS in April 2017. He said he was “forced out … because of all this stuff,” meaning the federal investigation. At that point, the nonprofit was struggling, having just lost its state contract to run the residential facilities.
“But when I left, we were meeting payroll. We were paying bills. The board president took over, and four or five months later [SAYS] filed bankruptcy,” he noted.
Walsh said he believes SAYS and other clients of Cranford “were used” and predicted more legislators would be implicated in the widening federal probe.
“There’s going to be a lot of people making statements.