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Arkansas State Senator Pleads Guilty to Fraud and Money Laundering
Arkansas State Senator Jake C. Files pleaded guilty to wire fraud, bank fraud, and money laundering in front of Chief U.S. District Judge P. K. Holmes III of the Western District of Arkansas on Jan. 29, 2018. Files, 45, who represented Arkansas State Legislature District No. 8 and served as chairman of the Senate Revenue and Tax Committee, admitted to orchestrating a scheme to pilfer $46,500 from the state treasury. He also admitted to submitting a false loan application in order to secure an almost $57,000 bank loan.
Files' embezzlement scheme centered around the Arkansas General Improvement Fund, which provides money to counties and municipalities for various economic development projects. Between August and December 2016, Files used his position as a state Senator to direct the Western Arkansas Economic Development District, which was in charge of General Improvement Fund money for Files' district, to provide $46,500 to the City of Fort Smith for a water line project related to the construction of the River Valley Sports Complex, which has been plagued by constructing lags and corruption accusations since its 2012 inception. Files also submitted three false bids to the Western Arkansas Economic District in order to ensure that the cash would be released to him.
Files then directed an unnamed associate to open a bank account in the associate's name. When the City of Fort Smith paid out $25,900 to the unnamed associate's bank account, Files directed the associate to withdraw $11,900 of the funds in the form of a cashier's check made payable to FFH Construction, Files' construction company. The remaining $14,000 was withdrawn in cash and given directly to Files. Files allegedly used the cash to prop up his construction company and to give bonuses to his employees. It is not clear how much of the cash Files pocketed himself.
Files faces maximum penalties of 10, 20 and 30 years for the money laundering, wire fraud, and bank fraud pleas, respectively. He also faces fines of up to $1.5 million.
Separately, Files admitted to fraudulently obtaining $57,000 from First Western Bank by submitting a false loan application in November 2016. Files lied about his ownership of a forklift machine, which he claimed as collateral. The day after entering his guilty plea, Files announced his intent to resign his senate seat.
Files also faces civil suits related to alleged deceptive construction practices. In one of the suits, the City of Fort Smith alleges that it contracted with Files to perform roofing he has yet to perform despite accepting payment for it.
Files is the latest in a recent string of Arkansas politicians accused of corruption and the second lawmaker in the past year to plead guilty to federal charges of mishandling General Improvement Funds. Former State Senator Jon Woods pleaded not guilty to accusations that he directed state money to Ecclesia College in return for kickbacks. Former State Representative Micah Neal pleaded guilty last year to one count of fraud related to that case.
— Dennis Mahoney, Mayer Brown
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