Arkansas Business' 25 Outlaws, Scoundrels & Posers (25th Anniversary)

by Arkansas Business Staff  on Monday, Mar. 23, 2009 12:00 am  

Arkansas Business has covered its share of characters during the past 25 years. Some were outright criminals, while others pushed the boundaries but were never convicted of stepping over the line. Here's a roster of memorable names that drew our attention, in something approaching chronological order.

1. Paul L. Simmons
Paul L. Simmons came to Arkansas in 1984 with grand plans for BioPlex International, the state's first high-tech industrial park in Maumelle. Simmons touted himself as a nationally known consultant to major pharmaceutical and biotechnology firms.

However, a closer look at his résumé and name-dropping claims revealed a checkered past seasoned with a heavy dose of overstatements and outright lies.

Arkansas Business exposed Simmons in coverage that horrified "pro-business" types at the time, but who were later relieved his dealings didn't prove more embarrassing and costly to the state.

Among the phantom achievements listed among his inflated professional credentials were not one but two bogus engineering degrees. Though long overdue, we hereby award Simmons an honorary BS.

2. Hugh O'Neal
Arkansas Business followed its reporting on Paul Simmons with not-so-charitable coverage of Hugh O'Neal and his Sequoia Foundation, leading some readers to wonder if our upstart publication was on a mission to run opportunity out of town.

O'Neal was selling his "non-profit" foundation as an international clearinghouse for research data and for biological studies aimed at conquering the aging process.

Yeah, we're talking high-tech fountain-of-youth stuff, a $15 million complex overlooking Lake Maumelle that included an executive health spa. Gaping holes in his story and plans couldn't be filled with good answers.

In 1987, O'Neal didn't have any good answers for a Pulaski County jury that sentenced him to 10 years in prison for swindling investors of more than $150,000 in connection with suspect oil and gas leases in Ohio.

Coverage of O'Neal and Simmons established AB 's reputation for exploring beyond the surface and not shying away from controversy.

3. David Kane
The business affairs of David Kane were already in turmoil when Arkansas Business hit the scene, what with bankruptcy filings for himself and about a dozen firms he led in July 1982. His courtroom drama continued through our early years and extended beyond bankruptcy court.

Old Worthen Banking hands remember Kane with disdain for filing a shareholder lawsuit in 1985 alleging corporate negligence when the Little Rock bank began enduring losses from bad investments.

Kane even sued his lawyers in 1993, claiming he was promised 10 percent of the $2.3 million settlement with Worthen. One of his lawyers, Ted Skokos, described the unsuccessful suit as a shakedown, noting that it was filed six years after the settlement.

But our favorite is the 1985 U.S. Tax Court ruling that disallowed $29 million in tax breaks in western Arkansas coal mining ventures organized by Kane. The IRS said the operation, set up in 1976, was designed solely to generate paper losses for investors in the 50 percent federal income tax bracket.

4 .Doug Brown
It was the nearest thing to a snake oil pitch we'd ever seen when Doug Brown and his Superior Marketing Research Corp. medicine show rolled into North Little Rock's Riverfront Hilton on Feb. 5, 1986.

Brown was hawking a self-cooling beverage can, a gas-filled apparatus that instantly chills a drink by releasing carbon dioxide when the top is popped. Shares in the penny-stock venture soared from $2.75 to more than $7 in the days following his dog and pony show.

Problem was the cool-can wasn't the next sliced bread, and Brown's claims that firms like U.S. Steel, Alcoa and Pepsico loved the innovative product were so much fizz.

Oh, the cool can worked. But the prototypes cost $100 to produce by hand and $20 to refill. Corporate America had rejected the concept as impractical as early as 1946, but Brown conveniently left that history out of his presentation.

5. Ray McClain
We're not sure what it is about Arkansas, and the Ozarks in particular, that has given rise to dreams of Disneyesque theme parks. Ray McClain was one of the first dreamers.

McClain was attempting to raise $35 million for the purported launch of his 650-acre White Winds project near Gateway (Benton County). One of its five themed areas was the Wizard of Oz.

"White Winds will be a brand new world ... a pristine, magical city 'way up high,' beyond all space and time ... It is not without significance that L. Frank Baum's Oz is also the first two letters of Ozark, an enchanted area rich in folktales, magic, and witches."

It also is not without significance that Baum advised us to pay no attention to that man behind the curtain and watch out for winged monkeys. Arkansas Business busted out McClain on his unrealistic financial statements and false claims of support from legitimate consultants and more in our Aug. 4, 1986, issue that pondered: "$400-million theme park for Ozarks? Not likely."

6. Collins Locke & Lasater
The Little Rock investment firm of Collins Locke & Lasater (aka Cocaine Ludes & Ladies) was a poster child for the go-go '80s in Arkansas.

The firm was blown apart during a four-year cocaine investigation that produced jail sentences for its namesake partners: David Collins, 24 months; George "Butch" Locke, 15 months; and Dan Lasater, 30 months.

They were part of a line of about 25 people who were prosecuted in connection with the firm, known as Lasater & Co. when indictments began flowing in October 1986.

The high-profile case is as much remembered for speculation over who didn't get named and who received immunity from prosecution as those who did jail time.

Locke also was fighting allegations of bankruptcy fraud, and Collins was getting sanctioned by securities regulators.

Lasater, who had bought out Collins and Locke, sold the firm a few weeks ahead of the indictments for $15.5 million to William "Billy" McCord and Richard Gene Smith. The venture was renamed United Capital Corp.

7. Roxanne and David Hamilton
Young and smart, Roxanne and David Hamilton were cutting a swath through the Little Rock investment community on their way to the top. He made senior vice president at Dean Witter Reynolds in four years. She was a vice president in charge of trading hundreds of millions of dollars in securities at First Commercial Bank.

But the party was over in June 1986, when First Commercial Bank stumbled across a problem with a client's account. That began the unraveling of a complicated fraud scheme by the couple, who were using bank assets for their own trading activities.

How complicated? First Commercial claimed a $4 million loss at the time, but the Hamiltons' activities also generated lots of profit for the bank along the way as well. A final reckoning was an accountant's nightmare.

Roxanne Hamilton, 27 and destined to give birth to her first child in prison, was sentenced to 50 months, and David Hamilton, 29, was sentenced to 40 months for bank and wire fraud.

8. Lynn Lloyd
High-flying CPA Lynn Lloyd set a new Arkansas record for personal bankruptcy when he listed debts of $24 million in his Chapter 11 filing in November 1986. His money troubles were compounded when perjury and bankruptcy fraud crept aboard, for which he was convicted in December 1990 and sentenced to 41 months in prison.

At the time of his financial crash, Lloyd was majority owner of Little Rock's Savers Federal Savings & Loan when it became insolvent. His Lynxx Banking Corp., which secured loans to Pine Bluff's FirstSouth and was taken over by federal regulators, owned the $80 million Farmers & Merchants Bank of Rogers and the $60 million First National Bank of Bentonville.

Lloyd's Lambda International owned Little Rock Air Center, which was sold to Midcoast Aviation for $3.5 million. Lloyd Arms Inc. and Iver Johnson Arms of Jacksonville were two other Lloyd investments that were liquidated.

His storyline of lawyers, guns and money reminded us that life really does imitate art.

9. Reed, Weichern and Cox
The wheels of criminal justice were put in motion when federal regulators declared FirstSouth of Pine Bluff insolvent in December 1986. The crash of the $1.68 billion-asset public company was the nation's largest savings and loan failure to date.

The case against Roderick Reed, First-South's president, was the first to reach resolution when he pled guilty to bank fraud in October 1989 and was sentenced to 30 months in prison.

Howard Weichern, FirstSouth's chief executive officer, was convicted of one count of bank fraud and conspiracy in October 1990 and sentenced to four years in prison.

Harley Cox, general counsel for FirstSouth and a board member, was convicted on 15 counts of making false statements and taking other action to conceal the true financial condition of the thrift from its board and from regulators.

Cox was sentenced to four years in prison in August 1991 but received a pardon in January 2001, part of the roster signed the day before President Bill Clinton left office.

Much of the investigation centered on FirstSouth's Texas real estate investments that were listed as loans.

10. Karl Bernhardt
Ford-New Holland Inc. landed a $1.2 million judgment against Karl Bernhardt in January 1990, but tracking down the globe-trotting Bernhardt and collecting the judgment was another matter.

Bernhardt turned Twin City Ford Tractor Inc., with lots in North Little Rock and Alexander, into the largest dealership in North America through creative use of price breaks from Ford. Example: Bid on state contracts with volume discount prices, agree to buy back the equipment at the original cost after one year and resell it at a higher but still below-market price for good used equipment.

Ford decided Bernhardt was breaking the rules. Bernhardt responded by abandoning the dealership in June 1987, taking $605,000 of his "cash equity" when he returned to his native Germany. When Ford finally tracked him down there to serve court papers, Bernhardt relocated to Costa Rica.

11. W.A. "Tony" Rand
Little Rock businessman W.A. "Tony" Rand thought he had a happy-ending script for building a lucrative regional move theater chain. However, federal authorities rewrote Rand's story in March 1991 with a 26-count indictment on interstate transportation of money taken by fraud, money laundering and bank fraud.

Uncovering false statements to lenders and the tax man provided the plot twist, with Rand receiving about $17 million in financing through a pattern of deceit that dated back to 1987. Rand was filing tax returns showing no profit at the same time he was telling creditors that his business was very profitable indeed.

In February 1992, Rand was convicted and sentenced to seven years in prison for his misdeeds. His holdings in Arkansas, Texas and Tennessee were sold to pay taxes and creditors.

The tale began taking a felonious turn in December 1990 when Rand was convicted and sentenced to three years of probation for passing bad checks.

12. John McClellan
Mercy was mixed with less admirable qualities when John McClellan was sentenced to four years of probation, 40 days of weekend detention and a $10,000 fine for bank fraud on May 14, 1993.

The grandson of the late U.S. Sen. John L. McClellan received loads of letters of support from family friends. The same couldn't be said of well wishes from business associates and partners.

If the truth, the whole truth and nothing but the truth is supposed to be an accurate depiction of reality, there were two realities portrayed under oath in Little Rock District Court that day. Was McClellan an angelic and sorrowful developer who made a mistake, or a sociopath who slipped in and out of the truth as easily as drawing a breath?

McClellan was indicted on 10 counts of defrauding Richardson Savings & Loan of Dallas in connection with a $519,819 kickback scheme on the construction of west Little Rock's Market Street Plaza. He and his McClellan Development had been the subjects of an FBI investigation since 1987.

13. Ronald Whitlow
The tiny town of Alicia made the map of global commerce when Ronald Whitlow popped up on our radar screen in July 1993.

Whitlow claimed the Lawrence County community as the home of his one-man headquarters for CrossParex International, a private company that seemed to come out of nowhere with reported sales of $648 million in 1992.

Except for his home office, CrossParex operations were said to be based in Panama on 2,000 acres Whitlow owned and on which he harvested cut flowers sold in Europe, Central America, South America, Mexico, Canada and the United States.

There was a good reason no one had ever heard of CrossParex, too. Whitlow's tale of being a flower plantation owner and greenery exporter extraordinaire was so much barnyard fertilizer.

But it was a tale that for a couple years fooled Dun & Bradstreet Information Services, which dutifully published information on his phantom enterprise. His related would-be venture to set up hundreds of retail outlets for his Panamanian flower farm withered and died.

14. John W. "Jay" DeHaven
If controversy were a drink, then Jay DeHaven qualifies as a straw that stirred it during Arkansas Business ' 25 years.

And controversy was never swirling more for DeHaven than when he was hit in August 1993 with a 32-count indictment in connection with Maumelle's Dogwood development.

But a year later, DeHaven emerged from Little Rock's U.S. District Court a free man, acquitted of all charges of alleged conspiracy, bank fraud and illegal monetary transactions.

No stranger to legal action, DeHaven hasn't kept count of the times his business adventures have taken him to the edge while battling with lenders, buyers, bond trustees, partners, bank regulators and others.

Much of that courtroom drama revolved around 3,250 acres in Maumelle that he and partner Michael Todd bought in 1988 for $11.1 million. Residential lots were sold like hot stocks, and the Maumelle Co. office at times resembled a frenzied trading floor.

15. L.J. Davis
You can't let the facts get in the way of a good story, and freelance writer L.J. Davis had a whopper of a story to tell. Davis delved into the world of Arkansas' political and business elite and penned "The Poisoned Rose," published in April 1994 by The New Republic.

Some found the factually challenged piece, which played off real and imagined connections to Little Rock's Rose Law Firm, an entertaining read. Unfortunately, some took it as legitimate reporting, which it wasn't. One Arkansas scribe noted his work "might be the single most inaccurate piece of reporting to be published in a serious journal in a generation."

Davis claimed someone conked him on the noggin while he was staying in Little Rock's Legacy Hotel and implied the unknown assailant made his move because he was getting too close to the truth. It was later reported that Davis had knocked back way too many Valentine's Day martinis, offering an alternative explanation for the knot on his head.

16. Nick Wilson
The transition from the most powerful state senator in Arkansas to federal inmate in Florida began with questions about awarding state contracts without competitive bids. Along the way, there were allegations of kickbacks portrayed as real estate finder's fees – illegal commissions, as it were, since Nick Wilson didn't have a real estate license.

When investigators finished, Wilson was at the center of a 133-count federal grand jury racketeering indictment in April 1999. The Pocahontas legislator resigned from office five months later and received a 70-month sentence for racketeering that overlapped with an earlier 18-month sentence for tax transgressions.

Wilson abandoned efforts to reduce his sentence when prosecutors revealed that he attempted to hide assets and was not truthful.

Joining Wilson in defrauding the state was Mike Todd, Paragould lawyer and former state senator. Todd was sentenced in 2000 to 46 months in prison on two counts of mail fraud and two counts of money laundering and disbarred.

17. Newton Don Jenkins Sr.
Newton Don Jenkins Sr. of Jonesboro was a fraud conviction waiting to happen when we first reported on his questionable business activities in April 1988.

Eleven years later, a jury made it official by convicting Jenkins of one count of fraud and 25 counts of making false statements to a lending institution. It took the jury less than an hour to return the verdict. Jenkins chose not to testify.

These days, Jenkins is back in federal court after choosing not to respond to an Internal Revenue Service summons. The IRS is investigating him for the tax years 2005 forward.

Jenkins came to our attention way back when investors across Arkansas began accusing him of defrauding them of hundreds of thousands of dollars in elaborate investment schemes. Those civil lawsuits by angry investors drew the attention of criminal investigators, which culminated in Jenkins receiving a 27-month prison sentence following his August 1999 conviction.

18. Mike McNewand Joe O'Banion
Allegations that Funding Support Services Inc. and Southwest Financial Inc. bilked investors of $12 million resulted in a 75-count indictment against Joe O'Banion in February 2001.

The Maumelle businessman was charged with wire fraud, bank fraud, mail fraud, conspiracy and making a false statement. O'Banion was sentenced to 15 months in prison in October 2002 after pleading guilty to one count of failing to notify authorities after learning of illegal activities.

Prosecutors backed off on the charges against O'Banion, convinced that his partner, Mike McNew, was the driving force behind the scheme. McNew pleaded guilty to conspiracy and eight counts of fraud in December 2000, which led to a 20-month prison sentence.

The Arkansas Supreme Court in 2002 reversed a $50 million ruling that P.O. Marketing Inc., another O'Banion enterprise, landed against Wal-Mart Stores Inc.

The duo's criminal activity involved fabricating and selling bogus invoices to investors in the factoring business they operated during 1992-99.

19. George Hardy
George Hardy traveled a memorable career path at the nation's largest retailer. Hardy sailed from loss prevention division staffer at Wal-Mart Stores Inc. in May 1992 to assistant director of the executive security detail, the company's equivalent of the Secret Service.

Wal-Mart thought it had a former U.S. Navy SEAL helping manage security for its top executives and members of the Walton family. And who wouldn't want the lethal protection of a man who killed 16 men when he was a SEAL, including the dispatch of one with a rolled-up newspaper?

Unfortunately, Hardy never was a SEAL (although he may have stayed at a Holiday Inn Express). In fact, he didn't even have a concealed handgun permit – at least not in Arkansas.

Hardy didn't list having been a SEAL on his résumé when he was hired, but he boasted of his SEAL service during his employment. Hardy had served in the Navy, and it was fellow sea-faring veterans who torpedoed his phony SEAL claims in 2001.

20. H.G. "Jack" Frost
His legacy lived on after H.G. "Jack" Frost left his namesake Little Rock accounting firm. His professional reputation was hammered when the courtroom gavel fell on the 70-year-old businessman in December 2001.

Frost was convicted of stealing more than $1.8 million during 1993-97 from Springdale's Harvey & Bernice Jones Charitable Trust. He was paid $1.1 million for managing the trust finances during that time.

Irregularities in his handling of the trust led to his dismissal and a civil suit in March 1997 followed by a criminal indictment two years later.

Frost was found guilty of one count of mail fraud, two counts of wire fraud, 61 counts of money laundering, three counts of filing a false tax return and one count each for making a false declaration before a grand jury and obstructing a grand jury investigation.

Frost was a long-time friend of Jones Truck Line founder Harvey Jones, who died in 1989. He had served as a co-trustee of the couple's namesake trust since its founding in 1988.

21. Jim Bolt, Melvin Robinson, John Dodge & Juan Gomez
For varied investment opportunities backed by litigious zeal, it would be tough to beat the team of Jim Bolt, Melvin Robinson and their energetic lawyer, John Dodge.

They have sued the FBI, the Arkansas Securities Department, the National Association of Securities Dealers – and Arkansas Business Publishing Group, after we put their business ventures under the microscope in 2002.

Bolt, Robinson and Dodge drew the scrutiny of the FBI when they attempted to line up investors in a company that claimed a breakthrough in cancer treatment, but a Fayetteville jury acquitted them of securities fraud in 2007. 

The NASD said Bolt had "been convicted of a string of crimes that evidence a fundamental dishonesty running back 30 years." Robinson, also a convicted fraudster, served federal prison time with Bolt during the 1990s.

And Juan Gomez? Arkansas Business Publishing Group sued him, along with Bolt and Dodge, for infringing on our trademark by incorporating something called Arkansas Business Publishing Group Inc., but we honestly don't know whether he ever existed.

22. Keith Moser
Somewhere between Little Rock and Detroit, Keith Moser took a wrong turn at Albuquerque and ended up in Madagascar. In February 2004, the Little Rock tax lawyer was scheduled to plead guilty in federal court in Michigan to tax evasion, money laundering and obstruction of justice.

Instead, Moser fled to the African island nation famed for its lemurs, where he was captured a month later. His flight only served to delay judgment and add to his charges.

Moser was sentenced to 188 months in prison on May 6, 2005, after pleading guilty to 13 felony counts. He also was ordered to pay $2.25 million in restitution to make amends for his fraudulent schemes during 1996-2004. His crimes included tax evasion, attempted extortion and stealing money from client trust accounts to help support a lavish lifestyle that included gambling, a new house and a pretty, young wife.

His misdeeds brought unwelcomed attention for his former law partner, Barry Jewell, who was convicted of tax evasion in September 2008.

23. Nelson Miller
Known for his late-night TV ads, Nelson Miller and his Freedom Financial built up a profitable book of business offering to help good people with bad credit get loans.

Nelson and his Little Rock financing firm became a candidate for Court TV in December 2004 when a grand jury indicted him and three of his minions each on one count of conspiracy to make false statements to a financial institution and 15 counts of wire fraud. In a plot that foreshadowed the mortgage meltdown of 2008, they airbrushed loan applications to make borrowers appear more creditworthy than they really were.

Miller's first go-round in federal court ended in a mistrial, but he was convicted at his second trial and sentenced last August to one year in prison, a punishment prosecutors have appealed as too lenient.

Along the way, seven employees pleaded guilty, and an eighth was convicted in a separate trial.

24. Sweet Goods Guys
Three California bakery executives were embraced in 2001 as white knights to rescue the failing Koehler Bakery in Sherwood. But Robert Statman, Joel Rund and Gary Kleinman of Sweet Goods Inc. were nothing more than rogues intent on spoil.

The trio obtained a $1.7 million loan from the Arkansas Development Finance Authority to help save Koehler. Instead of buying new equipment to turn the business around, they doled out the money to family members and associates and paid personal expenses.

The three were indicted in March 2005 on charges of conspiracy, wire fraud and money laundering. Robert Statman, 69, was sentenced to 33 months in prison last month for defrauding the ADFA. Kleinman, 55, was given three years' probation in recognition for helping prosecutors. Rund's sentencing was still pending, after the 75-year-old couldn't make a hearing for "medical reasons."

After looting Koehler Bakery, Statman visited Iowa where he allegedly left two sacked and pillaged bakery projects in his wake.

25. Frank Whitbeck Jr.
Financial cracks began showing in Frank Whitbeck Jr.'s world in 2002 when we noted a growing line of disgruntled creditors, from bankers holding past-due loans totaling tens of thousands of dollars to retailers owed a few hundred dollars.

The money woes escalated to seven digits in September 2003 when Metropolitan National Bank of Little Rock filed a $4.5 million foreclosure suit against the Little Rock businessman and his Winrock Grass Farm.

Events turned toward the criminal after the state Insurance Department seized Whitbeck's Signature Life Insurance Co. of America. Ensuing actions revealed that he managed Signature Life to the point of insolvency through a bookkeeping charade of unsecured IOUs masquerading as real estate loans.

Whitbeck began serving a six-year sentence in December after pleading guilty to one count of mail fraud. The sale of his country club home helped bring him current on his delinquent $3.7 million settlement with insurance regulators.

(Click here to see all the stories in our anniversary edition. Or click here to flip through each page of the edition in this special free electronic version.) 



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