by Chris Bahn on Monday, Jun. 24, 2013 12:00 am
Nearly 300 incoming freshmen gathered at Centenary College in Shreveport in 2008 for a welcome address from one of the tiny liberal arts school’s success stories.
New York City investment banker James Van Doren, a 1998 Centenary graduate and former student body president, served as keynote speaker that day. Van Doren, who grew up in Jonesboro and went on to graduate from both the London School of Economics and the University of Virginia Law School, outlined what he believed to be the true measures of success.
“Life is not about the degrees you hold, the name of the company on your business card, how big your house is, or how much money is in your bank account,” Van Doren said from the podium. “It is a set of experiences, ... the people you meet, the things you learn, the places you go and the relationships you build along the way.”
Relationships can, as Van Doren suggested to the Centenary freshmen, be an integral part of a person’s accomplishments.
Relationships also can prove detrimental, as suggested by federal indictments against Van Doren and others with ties to former northwest Arkansas real estate developer Brandon Barber. Van Doren is one of five men charged as co-defendants with Barber in a pair of fraud and money-laundering cases filed in the Western District of Arkansas.
Van Doren, Barber and Fayetteville attorney K. Vaughn Knight are scheduled for trial Sept. 16 before U.S. District Judge P.K. Holmes in Fort Smith.
Jeff Whorton, Brandon Rains and David Fisher face an Oct. 21 trial with Barber on separate fraud and money laundering charges.
Another northwest Arkansas developer didn’t live long enough to be indicted. Gary Combs, who died last year in California at age 59, was the individual described in the Barber, Whorton and Rains indictment as “a person known to the grand jury,” documents suggest and sources have confirmed to Arkansas Business.
Each of the five co-defendants became acquainted with Barber at different times in the years leading up to the alleged crimes. Their relationships with Barber, who is in the Washington County Detention Center awaiting trial, have been under investigation since at least 2011.
Through interviews, research of public records, online profiles and past articles, Arkansas Business looks at each co-defendant’s role in the case and their lives before the charges.
James Van Doren
Exactly when James Van Doren and Brandon Barber became personally and professionally connected is unclear, but their acquaintance may date back to high school. Both graduated high school in 1994 and were class presidents in the Jonesboro area — Van Doren at Nettleton High and Barber at Jonesboro High.
Sources who were promised anonymity told Arkansas Business that Van Doren and Barber had business dealings before the activities that led to government investigation and the filing of charges. The extent of their prior involvement is not known.
What can be pieced together from the indictment is that Barber and Van Doren allegedly engaged in a scheme to hide money from Barber’s creditors between April 1, 2008, and Nov. 9, 2010. Barber filed for Chapter 7 bankruptcy in 2009, claiming $47.8 million in debts and no assets.
Van Doren, who recently told the court that his employment with CitiGroup ended in May because of the charges against him, is alleged to have accepted a briefcase containing approximately $30,000 in cash from Barber in 2008.
Barber, on another occasion, allegedly signed over a $64,000 check payable to himself to Van Doren.
Van Doren acknowledged under oath in a 2010 deposition that he knew of Barber’s pending bankruptcy proceedings when he took the money from his friend: “I knew he had creditors after him, so I did know there were probably people that were trying to recover it,” he said.
Federal prosecutors allege that Van Doren committed a crime by knowingly shielding the money to help Barber pay for personal expenses. While Barber was charged with 26 counts, Van Doren was charged with seven: three counts of money laundering and one count each of bankruptcy fraud, conspiracy to commit bankruptcy fraud, wire fraud and conspiracy to commit money laundering. Each count carries potential prison time of between five and 20 years and fines up to $250,000.
S. Lance Cox, an attorney with Cox Cox & Estes of Fayetteville, represents Van Doren. An email with questions about Van Doren was submitted to Cox, but a response was not delivered by press time.
Van Doren, who no longer practices law but has been a regular donor to the UVA School of Law, is free on $25,000 cash bond. He is the only defendant who has asked to be tried separately from Barber. Cox requested in a separate filing that the charges against Van Doren be dismissed.
Neither motion has been granted.
K. Vaughn Knight
On its website, the Knight Law Firm of Fayetteville claims expertise in “organizational structures, business operations, mergers, acquisitions, divestitures, financing transactions and contractual issues.” Real estate matters and tax planning are also focal points for the firm, founded in 2005 by K. Vaughn Knight.
Clients of the firm include, the company bio explains, “high net worth individuals and several large farming operations” throughout the state.
It’s a former client, one who once fit the category of a high net worth individual, whose business resulted in Knight facing charges that he laundered money and helped defraud creditors. Knight represented Brandon Barber when he filed for bankruptcy in 2009, and he faces 11 counts: six of money laundering and one each of conspiracy to commit bankruptcy fraud, bankruptcy fraud, conspiracy to commit money laundering, conspiracy to commit wire fraud and making a false statement.
Knight received his law degree from the University of Arkansas in 2001 and passed the bar exam in 2002 after receiving an master’s in taxation law from the University of Missouri-Kansas City. He is accused of aiding and abetting Barber when he filed Barber’s bankruptcy petition on July 31, 2009, after Legacy National Bank of Springdale obtained a $9.9 million judgment against Barber.
According to the indictment, Barber, in an effort to conceal assets, opened a pair of bank accounts at First Security Bank and Bank of Arkansas within one year of filing the bankruptcy petition. Money was transferred to and through those accounts, with help from Knight, to “avoid collection and garnishment and conceal Barber’s true financial condition.” Those accounts were not disclosed to the bankruptcy court and, in addition, $1.35 million was deposited into Knight’s client trust account to further conceal money from creditors.
The trust accounts — called IOLTA, Interest on Lawyers Trust Accounts — are intended to keep client funds separate from a lawyer’s personal funds and, according to IOLTA.org, the interest they earn is used “without taxing the public, and at no cost to lawyers or their clients … to provide civil legal aid to the poor and support improvements to the justice system.”
Money from Knight’s IOLTA account was allegedly funneled to Barber, who used nearly $1 million to pay living expenses, despite listing on a bankruptcy filing that his income for 2008 was less than $3,500.
Knight also is alleged to have failed to disclose the existence of EIA International LLC, a company owned and used by Barber to sell real estate over a 15-month period prior to his bankruptcy filing. Income generated through EIA International was not disclosed as part of Barber’s income.
Before opening his own firm, Knight worked for Matthews Campbell Rhoads McClure Thompson & Fryauf. Now two lawyers from that firm, David Matthews and former Assistant U.S. Attorney Kim Webber, are defending Knight in his criminal case.
Knight, according to the bio on his firm’s website, has also operated a 17,000-acre farming operation in east Arkansas.
Matthews declined to discuss the case or his client with Arkansas Business. “It would not be appropriate for me to comment on a pending case in the press,” he said.
Knight is free on a $25,000 property bond, using his home for collateral. Every count against him carries the possibility of prison time and a hefty fine.
The Metropolitan Council that governs the city-county government of Nashville, Tenn., approved a 19-story, $105 million Westin Hotel project to be built on historic Broadway in 2007, but it didn’t come without a fight. As the Nashville Business Journal described it at the time, the “project’s height is out of sync with the low-rise honky-tonks and Western wear and other independent retail stores that pepper Lower Broad.”
At the heart of the push for that Music City development and a similar one in Fayetteville was 26-year-old Brandon Rains, project manager for the Barber Group. It was Rains who received credit in published reports for convincing Nashville to approve the massive hotel.
Rains worked alongside Brandon Barber during the developer’s brief heyday, even garnering a spot on the Northwest Arkansas Business Journal’s 40 Under 40 list in 2007.
Rains, a 2004 University of Arkansas graduate, told the NWABJ that he was working for a title company when he became acquainted with Barber. That interaction led to Rains joining the Barber Group and eventually becoming one of the key figures in the company’s effort to drastically alter the skylines in Fayetteville and Nashville. (Neither project ever got beyond the planning stages, although a separate development group announced late last year is considering the same Nashville location for its own hotel.)
During his time working with Barber, Rains co-founded the Fayetteville Chamber of Commerce’s Young Pro-fessionals Group and served as a mentor to other local business people, according to his 40 Under 40 profile.
But Rains’ ties to Barber, federal prosecutors allege, didn’t dissolve along with the Barber Group.
Rains, now 32, is charged with being part of “a multi-party, multi-property set of real estate transactions” that led to money loaned by First Federal Bank of Harrison being divided among himself, Barber, Jeff Whorton and “a person known to the grand jury” — that is, Gary Combs. Properties involved include homes owned by Barber and Whorton, property at Market Square in Springdale and the Old Missouri Office Building in Springdale.
On Oct. 1, 2008, Rains applied for a loan in the amount of $1 million to cover the $745,000 purchase price and then to finish construction of a property located at Market Square in Springdale. Rains personally guaranteed the loan and transferred $100,000 from an account with Arvest Bank to First Federal to cover interest and other costs associated with the loan.
But, according to federal prosecutors, the purchase price was actually lower than the $745,000 represented to the bank, and excess funds from the loan went into a pool that was divided up by the co-defendants. While the indictment gives little detail, it suggests that the $100,000 that Rains transferred from his Arvest account to First Federal was actually money derived from the fraudulent loan from First Federal.
For his part in the scheme, Rains is charged with one count of bank fraud and one count of money laundering. Bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, while the maximum penalty for money laundering is 10 years in prison and a $250,000 fine.
Rains, who currently operates a property management company in Springdale and has at least seven assorted businesses incorporated with the Secretary of State’s office, is free on a $10,000 cash bond. Little Rock attorney J. Blake Hendrix is representing Rains and did not respond to questions submitted via email.
Through Whorton Construction of Northwest Arkansas Inc. and several limited partnerships that are no longer in good standing with the Secretary of State’s office, Jeff and Marshawn Whorton were involved in a number of notable real estate transactions in 2006 and 2007.
In 2006 came the purchase of 40 building permits for a new subdivision on 20 acres in Springdale. A year later came the purchase of 49 lots in the Brentwood Subdivision of Cave Springs, just a few miles from the Northwest Arkansas Regional Airport.
But it was the purchase of a 5,000-plus-SF home in Fayetteville from Brandon Barber that caught the attention of white-collar investigators. Jeff Whorton and his wife, Marshawn, purchased the Barber home in 2008 at a price of $1.5 million. Approximately two years later, they sold it for a reported $2 million to 3122 Township LLC, an entity that listed K. Vaughn Knight — the attorney who was by then representing Barber in his bankruptcy petition — as its registered agent and incorporator.
Buying and selling high-end homes is not, of course, a federal crime. But the indictment alleges that Jeff Whorton — like Rains and Combs — was involved in inflating the purchase prices in order to get bigger loans from First Federal Bank. The extra money was then divided up among the participants.
For allegedly transferring $550,000 to Combs’ Signature Bank account from Legacy Bank, Whorton faces a money-laundering charge in addition to a charge of conspiracy to commit bank fraud.
Whorton is free on $50,000 cash bond. Attorneys W.H. Taylor and Stevan Vowell are representing Whorton in the fraud and money laundering case. “I have a long history of no comment in criminal cases,” Taylor said in an email to Arkansas Business.
Whorton Construction of Northwest Arkansas Inc. is incorporated with the Secretary of State’s Office listing Marshawn Whorton as incorporator.
Most of Jeff Whorton’s business ventures, including LLCs like Whorton Development, Whorton Properties and Whorton Realty, appear to be incorporated by his wife.
And it is Marshawn Whorton whose name appears on a lawsuit filed against Jonathan Shane Smith, owner of Wireless One Stop of Northwest Arkansas LLC, for an alleged breach of contract. At the heart of the lawsuit, filed in October 2011 and set for trial Aug. 28 is a claim that Smith did not live up to his end of the deal after obtaining a $480,000 loan from Marshawn Whorton so he could purchase a chain of local wireless stores.
Included in the back-and-forth between attorneys is a Dec. 4, 2012, attempt by Smith’s lawyer, J.R. Carroll of Kutak Rock, to get Marshawn Whorton to admit that the money for the loan was “obtained illegally” and then to specifically admit that it had been earned “through bookmaking, i.e., accepting wagers for sporting events.”
Whorton’s attorney, Marshall Ney of Mitchell Williams Selig Gates & Woodyard, responded on Jan. 2 by saying that the request for admission that the money was obtained illegally exceeded “the scope of proper discovery to the extent that it seeks information not relevant to any issue in the pending action. Plaintiff further objects to this request for admission to the extent it seeks a legal opinion, and therefore seeks information that is protected by the attorney work-product doctrine.”
As for the request for admission that the money was obtained through bookmaking?
“Plaintiff objects to this Request for Admission on the basis that it exceeds the scope of proper discovery to the extent that it seeks information not relevant to any issue in the pending action.”
David Fisher has been involved in northwest Arkansas real estate matters in one way or another for at least a decade.
Fisher graduated from UA’s law school in 2001 and, according to his LinkedIn profile, worked at a Fayetteville title company from 2003-05. While there he “closed over $1.4 billion in commercial transactions,” his profile said. Fisher later transitioned into working for local law firms, first with a 23-month stint with Warner Smith & Harris. Then in November 2008 he opened his own practice, David Fisher PLLC. Complex commercial and real estate transactions, construction law and lender representation were among his specialties at Warner Smith & Harris. Currently, Fisher focuses on bankruptcy, estate planning, real estate, banking, lender liability and other business transactions. He also lists himself as owner of Boost Capital Funding LLC.
At some point, Fisher came to represent Gary Combs, a developer and owner of Basic Construction and brick and concrete producer Basic Block. Fisher, 38, is listed in a pending lawsuit against Combs as the executor and personal representative of the Combs’ estate.
Combs and a group of developers, through Fisher, once put in a bid to purchase Fayetteville High School, according to the Arkansas Democrat-Gazette. Their $60 million offer was withdrawn by Fisher, according to the July 24, 2008, article, the day before a school board meeting to evaluate the potential sale.
Fisher, the government alleges, represented the unnamed conspirator — Combs — in dealings with First Federal Bank related to the purchase of lots within Executive Plaza.
Barber, Rains, Whorton and Fisher (along with the unnamed Combs) are alleged to have knowingly inflated purchase prices for the “Barber House, Old Missouri property and Executive Plaza.” Fisher, according to the indictment, drafted an agreement designating the kickbacks of excess cash to Barber, Whorton, Rains and the unnamed Combs, and Whorton allegedly followed Fisher’s outline to distribute the money.
In a late addition to the indictment against Barber, Rains and Whorton, Fisher was accused of conspiracy to commit bank fraud. His attorney is Shelly Hogan Koehler, of the Snively Law Firm in Fayetteville.
She did not respond to questions emailed about the case.
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