Political Corruption and a Chamber of Secrets
Mountain Home City Council has likely violated state law and left the door wide open for deep political corruption.
The Mountain Home City Council has likely violated Arkansas state law and the city’s own municipal code. At the July 6th meeting of the Mountain Home City Council, Dani Pugsley, President of the Mountain Home Chamber of Commerce, presented a proposal for a city and chamber partnership to focus on economic development. This was the public’s first opportunity to hear the proposal, and it was the first group presentation and hearing by the city council, yet they moved to approve the contract and it passed by a majority vote. It was revealed that individual city council members had been approached separately by chamber representatives the week before the council meeting to discuss the proposed contract and to provide a packet of information for their consideration.
The City of Mountain Home was unable to provide any copies of bids or quotes for economic development services in response to a citizen’s FOIA request. Arkansas Code A.C.A. § 14-176-105 states that economic development service contracts must follow applicable bidding, procurement, and professional services procedures in accordance with state law or local ordinance. The code also states it must be approved by the governing body in ordinance or resolution, which did not occur in this city council vote. A brief summary of this Arkansas code is available here. The Arkansas Department of Finance’s Office of Procurement Services also confirmed via phone that state law requires the solicitation of bids for economic development services totaling more than $20,000. The department emailed a link to the State of Arkansas Procurement Laws and Rules published on the AR DFA’s website.
The City of Mountain Home’s procurement procedures also require bidding of professional consulting services that exceed $20,000. In the City’s Municipal Code, posted on their website here, under Fiscal Affairs, it states in Section 3.04.02, “ Where the amount of expenditure for any purchase or contract exceeds the sum of Twenty Thousand Dollars ($20,000.00), the Mayor, or his duly authorized representative, shall invite competitive bids thereon by legal advertisement in any local newspaper. Bids received pursuant to said advertisement shall be opened and read on the date set for receiving said bids, in the presence of the Mayor, or his duly authorized representative. The contract shall be awarded to the lowest responsible bidder; provided, however, the Mayor, or his duly authorized representative, may reject any and all bids received. (Ord. No. 2009-4, Sec. 2.).”
It appears the City of Mountain Home may have violated the law by failing to engage in appropriate bidding for consulting services, and it is likely they are going to have to revisit this proposal.
The failure to properly bid out the consulting services is only one indication of deeper problems with this partnership and how it was approved. The public has also expressed concerns about the city’s communications regarding the published agenda and that the agenda item did not disclose that a financial contract of $40,000 was being discussed or that a decision would be made. The public is also concerned with the haste and lack of due diligence demonstrated by a majority of city council members.
The city council had some brief discussion about the partnership, during which several city council members expressed concern about the co-mingling of public funds with private funds and the tax implications to the city. They discussed the reporting structure of Chamber CEO Pugsley, who would co-report to multiple governing non-profit boards and to the City of Mountain Home. Some questioned the pay-to-play aspect of the chamber’s proposal which allows individuals to “buy” their seat and influence on the North Central Arkansas Chamber Foundation Board. One council member inquired about the status of the chamber’s volunteer base and committees to help meet its core mission and purpose, which revealed the chamber has failed to maintain and engage its volunteer committees.
Despite the questions and concerns posed by multiple council members, and without allowing the public appropriate opportunity to review and provide informed feedback on the proposal, a motion was made to approve the contract, and the measure was quickly passed by a majority vote, with council members Paige Evans and Susan Stockton voting against the partnership. Neither Mayor Adams, acting as the meeting chairman and parliamentarian, nor the city attorney, Roger Morgan, attempted to intervene when the council inappropriately moved to take official actions.
For transparency and due diligence, the city should ensure the public has timely and complete notice of all agenda items, any pending action items, and an appropriate amount of time to respond before the city acts on public matters.
There is also growing concern among citizens about elected officials serving on the boards of many private entities while simultaneously serving in their role as guardians of public trust and public interest. The city council members are elected and entrusted to be the gatekeepers of the public’s interest, not ambassadors for business interests. Elected officials’ service to the public may be compromised if they have conflicting interests and commitments.
A link to the video recording of the July 6th Mountain Home City Council meeting is available here.
THE POWER GRAB BY SPECIAL INTERESTS AND CORRUPTION OF PUBLIC OFFICIALS
There has been a recent movement across the state of Arkansas by local chambers of commerce seeking opportunities for partnerships that provide access to taxpayer money for funding of various private business enterprises. Several changes to the Arkansas Constitution, along with many legislative measures, have distorted the relationship between public government and private business and blurred the lines of what constitutes public interest. Private enterprise forces have applied consistent pressure on legislators and have invested significant money to market their business-centric initiatives to citizens who do not have the same resources to counter these special interest groups. They have shown no hesitation about using the power of government to get their hands deeper into citizens’ pockets.
There is no better illustration of this than the passage of Amendment 97 to the Arkansas Constitution. This amendment was approved by the General Assembly in April of 2015 as Ballot Issue #3 and presented to Arkansas voters during the 2016 general election. You can view Issue #3, on pages 13-18 in the 2016 voter guide, for details on this measure. Amendment 97 amended previous Arkansas Constitutional Amendments #62 and #82, and Article 12 of the state constitution.
Amendment 97 removed all limits on the amount of bonds the state could issue for economic development projects. Amendment 82 had set a cap of 5% of general revenues.
Amendment 97 removed the requirement that state bonds had to be issued publicly and cleared the way for private issuance of state bonds.
Amendment 97 amended Article 12 of the Arkansas Constitution. Prior to Amendment 97’s passage in 2016, it was ruled by Arkansas courts that payments to private entities violated Article 12 by providing taxpayer money to private corporations or associations. The passage of Amendment 97 legalized partnerships between local governments and private business or non-profit organizations for economic development.
Amendment 97 allowed local governments to issue bonds for “economic development.” Previously, this was limited to “industrial development” projects. Economic development is broader, less defined language that encapsulates more projects for public funding.
Amendment 97 allowed legislators to use other taxes (beyond special taxes) to pay off municipal and county bonds. Previously, Amendment 62 required city and county governments to pay off bonds with special taxes specifically approved by voters to pay toward the bond debt.
Amendment 97 allows excess revenue from city or county bonds issued for economic development to be moved to the general revenue fund of the governing body. Prior to Amendment 97, excess revenue from bonds was used for bond debt.
Amendment 97 allows cities, counties, and school districts to form compacts for economic development.
Amendment 97 defined economic development projects and economic development services.
Supporters of the Issue 3 proposal formed a Legislative Question Committee (LQC) to campaign, promote and advertise the issue to the public. The LQC’s filing is located on the Arkansas Ethics Commission under the name Jobs for Arkansas formerly Jobs for Arkansans. The LQC received more than $386,000 in donations, with the largest donations coming from the Arkansas Economic Development Foundation, Arkansas Chamber of Commerce, Northwest Arkansas Chamber of Commerce, Little Rock Chamber of Commerce, Murphy Oil, Arkansas Electric Cooperative, and by Stephens Investments Holdings LLC, the largest public and school bond broker and financial institution in the state of Arkansas.
The warnings issued to citizens and elected official by opponents of Issue 3 prior to the 2016 election ring true and should be heeded.
More information on Issue 3 is available here. Copies of all financial reports filed with the Arkansas Ethics Commission are available through a search on the Ethics Commission’s website here or by browsing the shared folder here.
Arkansas citizens were unable to organize and fund a counter-campaign committee, so Issue 3 came before the voters without organized opposition. The passage of Arkansas Amendment 97 demonstrates the power and influence of special interests with big money, and how they can exert state-wide control over our constitution, our freedom, our laws, and our tax dollars, which should be reserved for essential public services.
We don’t have to look very far to find an example of the criminal activities, including bribery, fraud, money laundering and kickbacks, tied to individuals who pushed through Amendment #97.
Former Arkansas Senator, Jon Woods, the sponsor of Issue 3, was subsequently convicted to 18 years in prison for political corruption, and mail and wire fraud. According to a news story on KARK,
“Jonathan Woods abused his position as an Arkansas State Senator and betrayed the public trust by taking bribes and kickbacks,” said Assistant Attorney General Benczkowski. “This conviction demonstrates the commitment of the Department of Justice and our federal partners to investigate and prosecute public officials who misuse their authority to benefit themselves at the expense of the citizens they pledged to serve.”
“Jonathan Woods violated the public’s trust and misused his authority for the purpose of lining his own pockets,” said Special Agent in Charge Diane Upchurch with the Little Rock FBI Field Office, “We are proud of the commitment of our partners at the United States Attorney’s Office of the Western Division, the IRS, and the Criminal Division’s Public Integrity Section.”
Between approximately 2013 and approximately 2015, Woods used his official position as a senator to appropriate and direct government money, known as General Improvement Funds (GIF), to two non-profit entities by, among other things, directly authorizing GIF disbursements and advising other Arkansas legislators – including former State Representative Micah Neal, 43, of Springdale, Arkansas – to contribute GIF to the non-profits.
Specifically, Woods and Neal authorized and directed the Northwest Arkansas Economic Development District, which was responsible for disbursing the GIF, to award a total of approximately $600,000 in GIF money to the two non-profit entities.
Woods used the Northwest Arkansas Economic Development District as a channel for illegal disbursement of taxpayer funds. This article can be view in its entirety here.
Prior to the exposure of his criminal activities, Woods had announced he would not run for re-election, because he wanted to spend more time with family and friends and had been talking with his family about leaving the Legislature. That news article is available here.
Other legislators who supported and voted for Issue #3 are also serving prison time for political corruption and crimes. Jake Files, the Senator from Fort Smith area, was convicted of bank and wire fraud, and money laundering, and sentenced to federal prison. Jeremy Hutchinson, Senator, was convicted of felony bribery and sentenced to federal prison. An FBI agent located in northwest Arkansas was convicted for tampering with evidence during the investigation into Woods. Other current and former legislators were also convicted of various crimes during this time frame.
Jon Woods sponsored the legislation that would effectively capture and enslave Arkansans to unscrupulous criminal enterprises. The legislators in office did not perform their due diligence, and both the House and the Senate approved this measure to be placed in front of Arkansas citizens for a vote. Despite the criminal convictions of multiple individuals associated with this ballot issue, there has been no effort to undo what was done and to correct the injustices done to the people.
Every Arkansas legislator still in office who approved Issue 3 or did not stand against it, needs to be voted out in the next election. Here is a link to the Arkansas General Assembly page on SJR 16 of the 2015 legislative session with the history of the bill, and the roll of both the House votes and the Senate votes.
To add insult to injury, the legislators also embedded language into the law which exempts records of economic development projects, including bids, from being disclosed under the Arkansas Freedom of Information Act. Arkansas Code § 14-176-105 states the following:
1. (1) The following are exempt from the Freedom of Information Act of 1967, § 25-19-101 et seq., as related to economic development services:
A. (A) Files and materials that if disclosed would give advantage to the competitors or bidders; and
B. (B) Records maintained by an economic development service provider for a municipality or county related to any economic development project.
Not only did our legislators pass an egregious ballot issue, but they ensured that the back-door dealings would be concealed from the public and beyond the reach of the one and only law that gives Arkansas citizens any mechanism for accountability and transparency.
In an op-ed piece published in the Democrat-Gazette by Dr. Kalulu, Policy Analyst for the Arkansas Center for Research and Economics at University of Central Arkansas, he lists transparency as a critical component in fighting corruption in Arkansas government, by promoting access to information, and empowering citizens.
“Easy access to financial information allows residents to be better informed, but also to be watchdogs as well. Elected officials will be more prudent when taxpayers are on the lookout.
We need transparent processes in addition to knowing outcomes. Transparency helps with detection as well as deterrence of corruption. It's important to catch and punish those who abuse public resources and trust, but it's far better if it doesn't even occur in the first place.
Fighting corruption requires a concerted effort. Those who abuse their positions should be found and punished. Processes should be improved to minimize the opportunities for abuse. Ensuring public information is easily accessible by the public informs and empowers them.”
This full article can be viewed here. ACRE’s research on transparency in Arkansas counties can be viewed here. Baxter County government scored well for posting county budgets online for the public to view. The City of Mountain Home does not make their budgets available to the public.
Though a special interest group was able to pull one over on Arkansas using big money, big advertising firms, deceptive ballot titles, bribery, kickbacks, money laundering, and passing legislation to further weaken the Arkansas FOIA, this does not mean that our local governments must do the same in our community and cannot hold to a higher standard. They can refuse to participate in these types of shenanigans and draw a line to protect us and our community from becoming prey to these predatory practices.
INTER-MINGLING ENTITIES
There are three separate legal entities connecting the local chamber of commerce business enterprises.
Mountain Home Chamber Foundation, Inc. is a 501(c)(3) created in 1989, and presently in “good standing” with the Arkansas Secretary of State. The IRS has published MHCF tax filings for 2018 and 2019 and published 990-N tax reports for 2012, 2013, 2014, 2015, 2016, 2017, 2019, 2020, 2021, and 2022.
Officers
The Arkansas Secretary of State’s annual filing lists the officers as Jacklyn Morrison - Director; Roger Morgan - Director; Patrick Ballard - Director.
The most recent IRS filing for 2019 shows the officers as Patrick Ballard - President, Jackie Morrison - Treasurer, Roger Morgan - Vice President
ProPublica lists the officers as Patrick Ballard - President, Jackie Morrison - Treasurer, and Roger Morgan -Vice President.
Mountain Home Area Chamber of Commerce is a 501(c)(6) created in 1993 and presently “not current” with the Arkansas Secretary of State. The IRS has published MHACC IRS tax filings for 2016, 2017, 2018, and 2019.
Officers
The Arkansas Secretary of State’s annual filing lists the officers as Cari White - Incorporator/Organizer, Allen Moore - Director, David Fox - Director, Jennifer Seaman - Director.
The most recently published IRS filing for 2019 shows the board as Christy Keirn-Chairman; Hillrey Adams - Director; Clint Czeschin - Director, Jaren Beavers - Treasurer; Jim Whalen - Director; Lorna Dixon - Treasurer; Kevin Beckham - Director; Mickey Pendergrass - Director; Kate Wright - Director; Jennifer Seaman - Director, David Fox - Director; Debbie Wamock - Ambassador.
The chamber website shows the current President/CEO as Dani Pugsley, and the board includes Russell Tucker - Board Chair; Sarah Edwards - 1st Vice Chair; Anthony Reed - 2nd Vice Chair; Tammy Barrow - Secretary; Shelly Hill - Treasurer; Jennifer Crawford - Ex Officio; and Mark Bertel, Lucinda Blair, Chris Carter, Grace Crownover, Allyson Dewey, Julie Haney, Tom Kiley, Matthew Leiboult, Eric Lunnen, Steve Reeves, Kris Steelman, and Bob Zdora as Directors.
North Central Arkansas Chamber Foundation a 501(c)(3) created in 2012 and presently “not current” with the Arkansas Secretary of State. The IRS has published tax filings for 2019, 2020, and 2021, and published 990-N tax reports for 2013, 2014, 2015, 2016, 2017, and 2018.
Officers
The Arkansas Secretary of State’s annual filing lists the officers as Elain Morris - Principal; Scott Copeland - Director; John Montgomery - Director; Robin Myers - Director; John Conner - Principal; Eddie Majeste - Principal; Eddie Majeste - Incorporator/Organizer.
The most recent IRS tax filing for 2021 shows the officers as Mike Beam - Chairman; David Fox - Treasurer; Allen Moore - Chairman; Jennifer Seaman - Secretary.
ProPublica lists the officers as Tami Barrow - Secretary; Jennifer Crawford - President; Shelly Hill - Treasurer; Allen Moore - Ex-Officio; Russell Tucker - Vice President.
The Secretary of State filings can be viewed here and the IRS filings can be viewed here. They are also available in a shared folder here.
A review of these filings will show the various board members or board of directors for each entity. There are many connections with local elected or appointed officials. If time allowed for more in-depth research, there are likely many more current and past connections between the city government and these chamber of commerce entities.
As previously mentioned, there are many citizen concerns regarding the city’s partnership with the chamber, with many questioning the potential conflicts of interest and commitment between members of the city’s governing body, elected administration, and the city attorney, and many close ties to either the Mountain Home Area Chamber of Commerce, the Mountain Home Chamber of Commerce Foundation, or the North Central Arkansas Chamber Foundation.
The motion to approve the contract was made by Council member Jennifer Baker, a former Director of the Mountain Home Area Chamber of Commerce, and a current, long-time Chamber Ambassador. Mayor Adams has been a member of the board for the Mountain Home Area Chamber of Commerce in recent years. City Attorney Roger Morgan was a founding director of the Mountain Home Chamber Foundation in 1989 and has remained a Director of this foundation at least through the organization’s most recent filing with the Arkansas Secretary of State and the most recently published tax return.
Economic development, as defined in the law and in Amendment 97, is focused on attracting industry, manufacturing, research, and other similar facilities, to create new jobs. Tourism is not economic development. Tourism is dependent on low-paying jobs, such as cooks, servers, cashiers, housekeeping, etc., often with no benefits and only part-time employment opportunities. These jobs rarely provide a living wage, which is why local restaurants and resorts often struggle to find long-term, dependable workers. North Central Arkansas needs genuine economic development that creates higher paying, blue-collar jobs with good benefits. To attract and retain young families, they must have access to job and career opportunities that give them the hope for owning a home, having health insurance, and a retirement plan with an employer match.
The chamber’s proposal of a pay-to-play is alarming. The local entity charged with promoting our area and leading economic development efforts has proposed a strategy that benefits only those who can afford to pay for a position. This is an extremely questionable practice that could hint of ethical issues even in the private sector but is completely unfit for any public business arrangements.
Hopefully, the Chamber of Commerce Board will reconsider whether they want to step into the lane of public government and drag their private organization and personal businesses into that arena. Have they contemplated the impact this could have on their personal businesses or any potential repercussions to or from their membership partners? They are attempting to use the strong arm of government to benefit private business endeavors and are proposing a pay-to-play scheme using our money to benefit a select few. I doubt these business owners want to find themselves sitting in opposition to the quiet majority who sent a resounding message in the school millage election about the use of tax funds. Hopefully, the chamber enterprises will revisit their primary function and get back on track with their mission and purpose.
The Baxter County Quorum Court heard the chamber’s presentation on Tuesday, July 11th. Thankfully, the Quorum Court provided a public notice and assured the public they would not be taking a vote at that meeting. They are also planning an information work session to discuss the proposal and will provide the public with an opportunity to share their perspective at some point. Hopefully some of this research will help inform them and the public on these issues.
SUMMARY
On the national level, we can easily see how monolithic corporations have exerted far too much influence on our elected officials, lobbying for legislation that favors big money interests at the demise of the working class. We can see the corruption and kickbacks and back-door deals. It is ironic how much more difficult it is to see the same actions on a micro-scale when it is present in our own state, or to see the same forces at work in our community. These locally elected officials and business owners are people that we know. They may be our family, our neighbors, our friends. Most of them are likely good people at heart with good intentions. The mechanism, the structure, and the outside influences on our government systems is so great, that even well-intentioned people who just go along for the sake of going along, can quickly find themselves mired in questionable activities. They become complacent and complicit. They become subject to the real puppet masters, the big money players, who you never see on any of these public boards or foundations, but who wield the real power and influence over our elected officials.
I appeal to anyone who is currently in an elected position or has any political aspirations, please take a long look inside and out. Become aware of the landscape, choose your path carefully, and walk cautiously. Please find the right path to ensure you do not become a victim of deceit and inadvertently become a perpetrator of malfeasance. Find your internal compass through a value system that will not bend or break when faced with pressure or temptation.
I saw a quote once, and I haven’t been able to trace down its source, but it said, “Evil systems make evil people out of good people with good intentions.” As a community, city, county, state, and nation we must change the mechanism, the machinery that runs every construct around us. The love of money truly is the root of all evil. It’s an insidious, enticing temptation and the pursuit of it can lead to the greatest atrocities and most horrendous acts against humanity. Those most egregious offenses all start with a small seed of greed somewhere in a person’s heart. We each must examine ourselves and pluck them out before they take root within us. We also must diligently guard our common public interests by plucking out any seed of greed that has taken root within the public arena. We are the garden keepers, and what grows and flourishes among us, is our responsibility.
So true. The system is broken and good people with good people with good intentions get crushed by the greedy
Thank you for tying all the loose ends together in this very complex situation. You’re absolutely right about the same mechanisms being used at all levels and why would we be seeing such a clear disregard for the law?