Jerry Walsh, former director of South Arkansas Youth Services, was sentenced today in federal court in El Dorado to 30 months in prison for conspiring to divert public money his agency received to an unnamed Arkansas state senator and the lobbying firm of convicted felon Rusty Cranford.

The unanswered question is whether further action can be expected against the former senator. Information in the charge against Walsh — that he paid money in the form of legal fees to a lawyer-senator in return for the senator’s influence in protecting state contracts — matches the profile of two former senators — Jeremy Hutchinson and Michael Lamoureux, former Senate leader and former chief of staff to Gov. Asa Hutchinson. Lamoureux, now a lobbyist, has acknowledged doing legal work for Walsh’s agency but said it was legitimate legal work.  Jeremy Hutchinson, awaiting sentencing for taking bribes in the form of bogus legal fees from another nonprofit, has said through his attorney that he wasn’t involved in this particular investigation.

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Hutchinson is expected to provide testimony in a pending case against former top executives of Prefered Family Healthcare, the recipient of millions of Medicaid dollars in a public corruption investigation that has netted several other former legislative and nonprofit employees. He’s also apparently cooperating in a case against a dentist who paid Hutchinson to influence legislation and perhaps in at least one other investigation of money paid to legislators for influence.

The Justice Department news release:

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A former executive director of South Arkansas Youth Services (SAYS), an Arkansas-based nonprofit, was sentenced today to 30 months in prison followed by three years of supervised release for conspiring to unlawfully divert over $380,000 from the charity to an Arkansas state senator and the lobbying firm of a convicted lobbyist.

Acting U.S. Attorney David Clay Fowlkes for the Western District of Arkansas and Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division made the announcement.

Chief U.S. District Judge Susan O. Hickey sentenced Jerry Walsh, 72, of Magnolia, Arkansas, who previously pleaded guilty to one count of conspiracy to misapply the nonprofit’s funds without authority from the board of directors.  Judge Hickey also ordered Walsh to pay $515,631.56 in restitution.

As part of his plea, Walsh admitted that beginning in 2013, while serving as executive director for SAYS, he agreed to divert SAYS funds to convicted lobbyist Milton “Rusty” Cranford and an unnamed Arkansas state senator in exchange for the state senator’s influence in protecting the non-profit’s state contracts with the Arkansas Department Health Services (DHS) and DHS’ Division of Youth Services (DYS).  As part of that agreement, Walsh was to provide a monthly “legal retainer” to the Arkansas state senator without the expectation that the senator ever provide any legal work.  Instead, the purpose of the payments was to obtain the senator’s assistance in preserving the contracts by influencing DHS and DYS officials.  According to the plea, Cranford negotiated the amount paid to the senator, which amounted to over $120,000.

Additionally, as part of the conspiracy, Walsh admitted to paying Cranford’s lobbying firms above-market prices and employed a relative of Cranford who had a “no-show” job with SAYS.  In total, Walsh illegally diverted approximately $262,000 in charity funds to Cranford’s lobbying firm and relative.

            The FBI investigated this case along with the assistance of the Magnolia Police Department and the 13th Judicial District of Arkansas Prosecuting Attorney’s Office.  Assistant U.S. Attorney Ben Wulff of the Western District of Arkansas and Senior Litigation Counsel Marco A. Palmieri of the Criminal Division’s Public Integrity Section are prosecuting the case with the assistance of Deputy Prosecutor Ryan Phillips with the 13th Judicial District Prosecuting Attorney’s Office.  This is a combined investigation with the Public Integrity Section the Eastern District of Arkansas, Western District of Arkansas, and the Western District of Missouri.

Walsh’s attorney had argued last year for leniency in sentencing on account of mental and physical problems, his lack of criminal history, his military service and his substantial cooperation with prosecutors. The government responded that an enhancement of sentence was in order because of the public nature of the offense and the complex scheme that was necessary to carry it out. The scheme went farther than Walsh’s agency. Said the government:

For the payments to Arkansas Senator C, a mock contract for legal services was created as Arkansas Senator C was an attorney and he began receiving regular payments that later totaled over $120,000. These payments, which were in fact payments to Arkansas Senator C for agreement to provide legislative acts, were never disclosed to the [SAYS] Board despite the amount paid to Arkansas Senator C for no actual legal work. Moreover, as detailed in the pre-sentence report, according to the information in this investigation, the payments the defendant funneled from SAYS further played a role in a related scheme Arkansas Senator C and Cranford arranged to facilitate the release of GIF funds; $2,000,000 from Act 791 obtained by Senators Woods, and over $300,000 from Act 818 by Representative Wilkins.

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