A Former Executive Director of a non-profit pleaded guilty today to conspiring to unlawfully divert over $380,000 from South Arkansas Youth Services (SAYS), without the authority of the non-profit’s Board of Directors. According to plea documents, the scheme involved steering the non-profit’s funds to an Arkansas state senator and the lobbying firm of convicted lobbyist Milton “Rusty” Cranford, in exchange for the state senator agreeing to influence Arkansas officials regarding state contracts.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Duane (DAK) Kees for the Western District of Arkansas made the announcement.
Jerry Walsh, 72, of Magnolia, Arkansas, who served as the Executive Director of SAYS pleaded guilty before U.S. District Judge Susan O. Hickey to an information charging him with conspiracy to misapply the non-profit’s funds without authority from the Board of Directors.
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 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 payment was to obtain the senator’s assistance in preserving the contracts by influencing DHS and DYS officials. According to the plea, the amount paid to the senator was negotiated by convicted lobbyist Rusty Cranford and amounted to over $120,000.
Additionally, as part of the agreement, Walsh locked SAYS into a more expensive contract with Cranford’s lobbying firms and employed a relative of Cranford who would have a “no-show” job with SAYS. Between the new contract with the Cranford lobbying firm and the payment for the no-show job, the non-profit paid out an additional $262,000 in diverted funds. As part of his plea, Walsh admitted that these payments and those to the state senator were not authorized by the SAYS Board of Directors.
“Jerry Walsh diverted hundreds of thousands of dollars intended to help vulnerable children in southern Arkansas as a part of a corrupt scheme to influence the award of state contracts,” said Assistant Attorney General Benczkowski. “Walsh’s actions ultimately risked destroying the non-profit he helped lead and undermining the public’s confidence in its elected officials. The Criminal Division and our law enforcement partners are committed to protecting the integrity of charitable programs, rooting out corruption, and ensuring that individuals like Walsh are held accountable for their actions.”
“This plea exposes the depths to which ‘pay to play’ politics has corrupted a non-profit organization which was formed with the best of intentions, to help children,” said U.S. Attorney Kees. “Unfortunately, there are many victims in a scheme like this. The people of this state were deprived of the uncorrupted functioning of their government agencies, the non-profit was stripped of funds, and now that the non-profit has been shuttered, the community is deprived of a non-profit dedicated to providing services to their most vulnerable children, those who are incarcerated and in state custody. I look forward to a day when all politicians exercising influence do so based upon the best interests of the children in their communities and not on who is paying them for no-show jobs.”
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 Trial Attorney 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 of the Department of Justice, the Eastern District of Arkansas, Western District of Arkansas, and the Western District of Missouri.
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