by George Waldon on Monday, Oct. 18, 2010 12:00 am
And that Sept. 28 insurance fraud conviction has set the stage for the gavel to fall a second time against the 34-year-old lawyer and real estate developer in Little Rock's U.S. District Court.
Standard Insurance Co. of Hartford, Conn., will be pressing for a seven-digit summary judgment against Jones. The company intends to recover more than $1.2 million paid on an insurance claim after the arson of his west Little Rock home on May 30, 2008.
An all-female jury deliberated four hours before finding Jones guilty of all charges: three counts of mail fraud and one count of using fire in the commission of a felony. Lawyers for Standard Insurance believe this verdict all but sealed a favorable ruling in their civil claim against Jones.
"There's a higher burden of proof in a criminal case than in a civil case," said Matt Ponzi, partner in the Chicago law firm of Foran Glennon Palandech & Ponzi. "We think the criminal conviction precludes the civil action, so we will be filing the appropriate motions.
"If we get a judgment, we will seek a counterclaim for the amounts paid out."
Jones initiated the legal battle with Standard Insurance in Pulaski County Circuit Court on April 1, 2009, after the company refused to pay on a $1.1 million personal property loss claim from the arson.
That civil dispute shifted to federal court, and Standard Insurance filed a counterclaim to recoup $1.2 million paid Dec. 18, 2008, to cover the first mortgage held by Countrywide Home Loans of Calabasas, Calif.
With Jones' criminal trial looming at the time, the Oct. 18 start of the civil trial before U.S. District Judge D. Price Marshall Jr. was postponed. For now, a jury trial remains scheduled for March 28, 2011.
Danny Crabtree, representing Jones in the criminal and civil trials, hopes to stave off Standard Insurance's expected summary judgment motion.
"Our plan is to ask the court to hold the motion in abeyance until our appeal is resolved in the criminal case," the Little Rock lawyer said.
Jones was taken into custody after a detention hearing on Oct. 4 and awaits sentencing from the criminal conviction.
Federal prosecutors haven't filed a written response to motions for an acquittal or order a new trial as of Oct. 13. After an official ruling, a sentencing hearing will be scheduled.
"We expect that to be expedited, during the next 30 days," Crabtree said of sentencing.
At the Oct. 4 hearing, U.S. District Judge Brian S. Miller indicated that he would not grant an acquittal or order a new trial.
To do otherwise, Miller said, he would have to find the jury had no basis for its decision. From where he sat, the judge indicated, evidence was presented to support the guilty verdict.
"It came down to what the jury believed," Miller said at the hearing.
The jury didn't believe Jones and his account of armed intruders binding him with duct tape and setting his Chenal Circle home ablaze. Nor did jurors believe his claim that he didn't have a financial motive behind the arson.
Tim Dudley, lead defense attorney in the criminal trial, made an impassioned plea at the Oct. 4 hearing in hopes of convincing Judge Miller the evidence didn't portray Jones as "a man in financial distress."
"I earnestly argue that proof of motive was insufficient," Dudley said.
Opening the Door
The issue of motive opened the door for a closer look at the business affairs of Jones during the seven-day insurance fraud/arson trial.
The prosecution wasn't required to prove motive in its circumstantial case, only that Jones was responsible for the fire as supported by evidence that refuted his version of what happened.
"Credible evidence was present to support the verdict," Assistant U.S. Attorney Julie Peters said at the Oct. 4 hearing. "There was no miscarriage of justice here."
The defense team tried to convince jurors that Jones had no financial motive for burning his house because he and his wife, Abigail, had personal net worth of $4.7 million at the time of the fire.
The net worth they claimed was amassed largely through residential real estate projects in Saline County, in developments such as New Centennial Valley and The Woodlands in Benton and Prospect Park in Bryant and Midtown Bryant.
The prosecution countered with evidence that financial statements Jones submitted to area lenders didn't represent a true picture of his financial condition.
On paper, Jones and his wife appeared to be asset rich. However, their bank statements in the 13 months preceding the fire reflect a poor cash position, unable to sustain monthly expenses that averaged $100,000 for the period.
Jones didn't provide direct testimony, but Abigail Jones did.
"You look terrified," said Judge Miller, as she took the witness stand on Sept. 27. He allowed Jones a few moments to gather her composure before questioning began.
During her testimony, Dudley uttered the burning question regarding motive.
"Were you and Aaron in financial trouble?" he asked.
"No, sir," said Abigail Jones.
Testimony during the trial indicated the Joneses avoided consumer debt. They paid off their credit cards every month and paid cash for her 2007 Mercedes-Benz E-Class and his 2008 GMC Yukon Denali.
Real estate was another matter.
The Chenal Circle home was leveraged to the max, and this is where the first crack in their fiscal façade appeared less than four weeks before the 2008 fire. Jones missed a May 5 deadline to repay the second mortgage held by the former owners, Little Rock insurance executive Mark Brockinton and his wife, Kim.
Mark Brockinton was called to the witness stand on Sept. 22.
Peters: "The amount of the balloon payment was $331,000?"
Peters: "And did Mr. Jones timely make that payment?"
Brockinton learned of the missed payment from his accountant, whom he dispatched to collect the money. Contact with Jones was made on May 16, two weeks before the fire, and Brockinton later spoke with Jones.
Peters: "And what happened during your conversation with Mr. Jones? Please tell the jury."
Brockinton: "Sure. Of course, he knew why I was calling. And he was very forthcoming and just said, 'I know the payment's due. I'm not in a position to make that payment today.'
"And I said, 'Okay, what would you like to do?'
"And he suggested that he could - was in a position to pay $50,000, and he would like to meet to extend the note for another year at an appropriate interest rate, and that he thought he would be able to make good on that within that year."
According to testimony, the $50,000 Jones paid Brockinton to buy more time came from his mother-in-law, Nancy Reaves, courtesy of a cashier's check from Pulaski Bank & Trust.
During closing arguments on Sept. 28, Daniel Stripling, assistant U.S. attorney, hammered home the incongruity of a man worth a purported $4.7 million who was unable to pay off a $331,000 debt.
Stripling also underscored that Brockinton had to contact Jones to find out why he missed the final payment.
"He had to track Jones down to talk with him," said Stripling. "And Aaron Jones told him, 'I don't have the money.'"
Brockinton was repaid the remaining $281,000 plus interest in March 2009.
Peters: "And do you know where the proceeds came from to pay that?"
Brockinton: "The sale of the lot and what was left of the house ..."
Bank records indicate Jones didn't have the cash to repay the Brockintons. Nor did he have the cash when Centennial Bank of Little Rock called a $245,000 loan due after the fire.
Centennial officials didn't know about the Brockinton mortgage when it agreed to lend Jones the money to buy a $1.2 million home in Florida. The Centennial loan was secured by the Chenal Circle home.
However, the $1.6 million house was carrying $1.7 million of debt, and Centennial was last in line, behind Countrywide and the Brockintons, with what amounted to a largely unsecured mortgage.
The existence of the Brockinton mortgage should have been noted by real estate title work on the property, required as part of the loan process. Spears & Jones Title Co. of Benton, owned by Jones and his business partner, Donald Spears, did the title work that overlooked the Brockinton loan.
The defense portrayed the oversight as an innocent mistake by an employee. Innocent or not, the omission allowed Jones to receive a loan based on an inaccurate picture of his equity position in the house.
Although Jones didn't take the witness stand, media interviews he gave after the fire were introduced as evidence. On more than one occasion, Jones said he only owed about $1 million on the house although real estate documents indicated otherwise. The actual figure was more like $1.6 million.
Before an on-camera interview, Arkansas Business suggested that its news partner, KTHV-TV, Channel 11, ask Jones if the Brockinton loan was indeed paid off as his statements implied.
Jones twice told KTHV-TV reporter Ashley Blackstone that the Brockinton mortgage was repaid and indicated the documents releasing the debt should soon appear on the public record.
But that wasn't true.
"People who don't have financial problems don't have to tell stories like that," Stripling said during closing arguments on Sept. 28.
In an interview with Arkansas Business after the KTHV interview aired, Jones explained. "I guess I just got mixed up in the interview. I was just trying to communicate that the loan was taken care of, that it wasn't overdue."
But the loan had been overdue until Brockinton agreed to extend the terms to give Jones more time to come up with the needed cash to pay it off.
Al Hamilton, a forensic accountant hired by the prosecution, determined that the Joneses were having liquidity problems no matter what their personal financial balance sheet said.
"I don't care how much you're worth [on paper]," Hamilton said. "If you can't make a payment the next month, you're in dire straits."
His investigation uncovered 59 instances of a negative daily balance on personal bank accounts for the Joneses and 69 instances of late fees charged on Jones accounts in the months preceding the fire.
Loans from relatives and partners are what kept the Joneses solvent during 2008, according Hamilton's testimony.
Spears, Jones' law and business partner, testified under cross-examination by the prosecution that he lent money to Jones before and after the house fire. Spears described a real estate market that had slowed, causing their projects to generate much less cash.
"Aaron really wasn't doing anything else to make income at the time," Spears said. "Things had turned down substantially."
Testimony revealed that Jones had a $400,000 line of credit with Summit Bank of Arkadelphia. Jones used $300,000 to buy a certificate of deposit, which he pledged as security for the line of credit. According to testimony, Jones had tapped the $100,000 balance by February 2008, three months before the fire.
Some of his close relatives shook their heads in disbelief at the couple's claim they didn't have money problems and therefore had no motive.
"Don't ask me what I think about all this," one said. "If he has all this net worth, why was he asking to borrow money from his family after the fire? That doesn't make sense."
Another blood relative who wants to believe Jones' story spoke of troubled sleep in the months after the fire, of being awakened in the middle of the night haunted by a voice of nagging doubt: "What if? What if?"
What if Jones, an Eagle Scout and former city court judge in Saline County, did it?
The jury believed he did.
Or what if Jones is wrongfully convicted?
His family is offering a $50,000 reward for information leading to the arrest and conviction of the unknown intruders who Jones said set the blaze.
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