We wrote last month
FILES: It was good to be senator — his company got a mysterious check from nursing home executive.
about the mysterious $80,000 wire transfer that was sent from a nursing home executive and key player in the nursing home lobby to a company owned by then-Sen. Jake Files
in 2014. Reporting by the Southwest Times Record
uncovered the wire transfer to Files' Fort Smith company FHH Construction from David Norsworthy
, part-owner in more than a dozen nursing homes in the state with Michael Morton
. The transfer took place at the same time that an effort was underway in the legislature to push a key priority for the nursing home lobby: To send a proposed constitutional amendment limiting civil damages to voters. That measure fell short in 2014; Files was eventually a co-sponsor of the resolution that finally passed in 2018 and will be on the ballot as Issue 1 this fall, the so-called "tort reform" amendment.
Norsworthy — who in addition to his stake in Morton's nursing homes has also been a business partner of Morton's in a health insurance company for Medicare Advantage patients, Arkansas Superior Select — is a board member of Arkansas Health Care Association
, the lobbying arm of the nursing home industry (which is now pushing hard for Issue 1). In 2015, when Morton's term was up for his seat on the state commission that oversees the issuance of permits to nursing homes, Governor Hutchinson tapped Norsworthy to replace him (Morton was under federal investigation at the time). Norsworthy continues to serve on that commission; his term technically ended in April but he is re-applying for the position, according to commission staff. Hutchinson has not yet looked at whether or not to re-appointment him, the governor's spokesperson said.
Neither Norsworthy nor Files would comment on the wire transfer when it was first reported last year; they did not respond to my queries this week.
One thing I didn't mention in my previous item that is worth noting: Files never disclosed receiving the $80,000 on his statement of financial interest that he filed as a legislator. If the money was a gift (which would look pretty damning) or a loan, Files is required to disclose it. He did not. Files did report making income from FHH Construction, and it's theoretically possible that Files worked on a construction project for Norsworthy that was paid for by a secretive $80,000 wire transfer. If that was the case, it would be easy to produce evidence of services rendered.
If it was a loan, it would be part of a pattern for Files: Lobbyist Bruce Hawkins
loaned Files $30,000 in April of 2015, which Files used in part to cover hot checks. At the time, there was nothing illegal about a lobbyist making a loan to a lawmaker, though it was widely criticized, given the appearance of influence peddling (the legislature later passed a law to make such loans illegal).
Files never reported the Hawkins loan on his statement of financial interest. Once the story broke in October of that year, he repaid the loan, according to Hawkins. Because it was no longer outstanding by the end of the year, he was no longer required to include it on his disclosure form.
If the money from Norsworthy was
a loan, it came in
November 24 in 2014. It's hard to imagine Files, struggling financially, could have paid it off by the end of the year. But there is no mention of an outstanding loan on his statement of financial interest for that year:
He also didn't report it as a gift. Such a gift from a lobbyist would be illegal, but Norsworthy is not technically a lobbyist. The Ethics Commission rules state
, "No public servant shall receive a gift for the performance of the duties and responsibilities of his or her office or position. ... A public servant is not prohibited from receiving all gifts. For example, a public servant may accept a gift conferred on account of a bona fide personal, professional, or business relationship independent of his or her official status. In determining whether a gift was conferred on account of an independent relationship, the Commission will consider such factors as when the relationship began (i.e., before or after the public servant obtained his or her office or position), the prior history of gift giving between the individuals, whether the gift was given in connection with a holiday or other special occasion, and whether the same gift was given to other public servants." Maybe Norsworthy and Files were just buddies.
The reason I say that Norsworthy is not technically
a lobbyist is that he operates in a gray area, what some at the Capitol refer
to as a "shadow lobbyist."
"He's out at the Capitol every day," one lobbyist told me. "He goes to all these functions. He's responsible for where the PAC checks go." But because he has a minority interest in Morton's homes, "he gets around the reporting requirement on a loophole, by saying that he's out there advocating on behalf of himself, so he's not a lobbyist."
Whatever role you want to ascribe to Norsworthy, it is eye-opening that he wired $80,000, for whatever reason, to a state senator's company.
Files pleaded guilty in federal court earlier this year to unrelated charges of wire fraud, bank fraud and
money laundering. No one has been charged with a crime in relation to the wire transfer, which is not connected to Files' guilty plea on other charges. But the situation looks smelly enough that a county prosecutor recently wrote a letter to a federal prosecutor asking whether the transfer had been made in "violation of federal law," an FOI request by the Times Record revealed
. (Morton, meanwhile, funneled large amounts of money to the political campaign of defrocked judge Mike Maggio, who pleaded guilty in 2015 to taking a bribe to reduce a verdict by millions of dollars in a negligence case involving one of Morton's nursing homes. Morton denies any wrongdoing and has not been charged.)
Maybe the wire transfer was simply a loan. Again, nothing illegal about that. It would be easier to come up with an innocent explanation if Files had disclosed the transaction on his statement of financial interest. But he elected to keep quiet about it.
There's a saying, perhaps apocryphal, that I've heard Arkansas lawmakers have been known to say: "There's
two kinds of people in this world. The caught and the un-caught."
p.s. I asked Graham Sloan
, director of the Ethics Commission, whether a loan would be considered a "gift" if it was extended at a lower interest than a bank would charge the borrower (or would otherwise not be available to the borrower by a conventional lending institution). His response:
That’s an interesting question. I don’t think it’s ever been answered. An argument could be made that the savings resulting from an interest rate below the market rate constituted a "gift," but that question has never been specifically addressed by the Commission.