Ecclesia FOIA, illegal exaction lawsuit survives motion to dismiss

FAYETTEVILLE -- A judge Tuesday refused to dismiss a Freedom of Information Act and illegal exaction lawsuit against Ecclesia College.

Washington County Circuit Judge John Threet also ruled during the hearing Tuesday two legislators won't have to give depositions in the case.

Threet said the point of Jim Parsons' lawsuit, which is approaching two years without resolution, is whether Ecclesia complied with the Freedom of Information Act by producing requested documents timely and whether fraud was committed by the private college in receiving and spending state economic development grant money.

Parsons' lawsuit asks Ecclesia be ordered to repay the state General Improvement Fund money it received from the Legislature through the Northwest Arkansas Economic Development District.

"We're arguing that Ecclesia got the money by fraud," said Matthew Bishop, an attorney for Parsons. "We have admitted fraud. People have gone to prison for it."

Bishop said Oren Paris III, former president of the religious school in Springdale, admitted fraud on the part of the college in federal court when he pleaded guilty to his role in a kickback scheme. Paris is serving a prison term.

Travis Story, an attorney for Ecclesia, argued the Legislature distributed the state money in what was believed at the time to be a constitutional manner. He also said the lawsuit doesn't allege any wrongdoing by a state actor, which he argued is required of an illegal exaction complaint.

"The issue here is the state got what it paid for," Story said. "It got the economic development."

Story argued the case should be dismissed because the college has made available all the documents Parsons requested, some of which were recently released from a federal court protection order.

Bishop countered, the point is Ecclesia didn't provide the requested documents in a timely manner, as required by law.

"You can't dismiss it because you comply two years later," Bishop said.

Parsons was seeking to take depositions from Rep. Jim Dotson, R-Bentonville, and Rep. Charlie Collins, R-Fayetteville, to explain why they directed state grant money to Ecclesia.

Jennifer Merritt, a deputy in the state Attorney General's office, sought to quash the subpoenas for Collins and Dotson, citing legislative privilege. Merritt argued Dotson and Collins weren't involved in the grants implicated in the kickback scheme and neither knew how Ecclesia spent the money it received.

Threet agreed, saying the lawsuit makes no claims of wrongdoing by either Collins or Dotson and all their actions in regard to spending the grant money were within their legitimate legislative duties.

Originally filed Feb. 9, 2017, Parsons' lawsuit contends private organizations receiving public money, engaging in activities of public interest, carrying on work intertwined with a government body or receiving grants to promote economic development are subject to the requirements of the state Freedom of Information law.

Parsons, who is a former Ecclesia board member, recently amended the lawsuit, asking the college be ordered to pay back all the grant money it received because the money wasn't used for the stated purpose. In all, Ecclesia received $717,500 in state grants from 2013 through early 2015, but no more than $550,000 of that was involved in any kickbacks, according to court records.

"The funds were not used for the acquisition of land for student housing, nor were they used to build student housing," according to the complaint. "Instead, the funds were used to pay kickbacks to legislators, to purchase tracts of land which the defendant promptly encumbered to acquire additional funds for the personal benefit of its officers, agents and employees."

Ecclesia spent $692,500 in state grants from 2013 through 2014 to buy land, according to the U.S. attorney's office for the Western District of Arkansas. The school either bought or paid off the loans on 48.5 acres from 2013 through 2014 with the taxpayer money. Its grant applications said the land was needed to accommodate the college's growth.

Five acres of Ecclesia's land bought with state grants have since been sold for more than twice as much per acre as the college paid, Benton County land records show. The 20.4 acres Ecclesia still owns of that tract include about 640 feet of frontage along Arkansas 112 that begins about six-tenths of a mile south of the ramp to the recently opened U.S. 412 Northern Bypass, connecting Arkansas 112 to Interstate 49.

The state Department of Finance and Administration has asked Attorney General Leslie Rutledge's office to sue the college to reclaim at least $600,000 of the grant money.

"It appears that a significant portion, if not all, of these funds were procured in coordination with criminal activity that has been and is being prosecuted by the United States attorney's office," Larry Walther, director of the state's Department of Finance and Administration, wrote to Deputy Attorney General Monty Baugh in a letter dated Sept. 7.

The Attorney General's office, representing Dotson and Collins, has contended Parsons has no standing to pursue repayment of General Improvement Fund money legislators gave Ecclesia because it has no relation to his Freedom of Information claims against college officials. The office further contends Ecclesia has spent the money and Paris has been ordered by a federal judge to repay $621,500.

Ecclesia's receipt of the money entered the spotlight when then-state Rep. Micah Neal of Springdale pleaded guilty in federal court Jan. 4, 2017, to a single conspiracy charge related to taking kickbacks in return for steering grant money to the college and another nonprofit organization. Neal was given probation and ordered to pay restitution.

Former state Sen. Jon Woods of Springdale, Paris and consultant Randell G. Shelton Jr. were accused in a federal indictment in 2017 of participating in the kickback scheme.

Woods and Shelton were convicted May 3. Paris pleaded guilty April 4 and resigned as college president. All have been sentenced and reported to federal prisons. All were ordered to pay restitution.

Woods and Neal not only steered $550,000 in grants to Ecclesia directly, but the two also encouraged other lawmakers to send General Improvement money to the school. Woods received a direct kickback for a $100,000 grant he helped obtain from another lawmaker, according to court documents.

The improvement fund contains mainly tax money left unspent at the end of the state's two-year budget cycle. The fund also includes interest earned on state accounts. After the state Supreme Court in 2006 declared the Legislature could not direct appropriations to local-level projects, lawmakers adopted the process of dispersing such funds through regional improvement districts.

On Oct. 5, 2017, the Supreme Court also declared the district distribution process unconstitutional.