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Presumed Innocence II (Gwen Moritz Editor’s Note)

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Here’s something I wrote in this space in August:

“When the U.S. Attorney’s Office in Little Rock is involved, the presumption of a defendant’s innocence must be more than theoretic, and confidence that the power of the government is being used fairly and wisely must be tempered.”

At the time, I was specifically talking about the case federal prosecutors working for U.S. Attorney Chris Thyer brought against banker and businessman John Stacks. Stacks was indicted on 11 felonies and convicted of seven related to a Small Business Administration disaster loan he received after a tornado hit his storage barn. But U.S. District Judge Leon Holmes reversed two of the convictions and ordered a new trial on the other five because “the evidence preponderates sufficiently heavily against the verdict that a serious miscarriage of justice may have occurred.”

When judges at the 8th Circuit Court of Appeals agreed with Holmes, Thyer’s assistants finally dropped all the charges in July — but only on the condition that Stacks agree not to sue for frivolous prosecution. After at least four years of investigation and prosecution, the government — represented primarily by First Assistant U.S. Attorney Patrick Harris and Assistant U.S. Attorney Angela Jegley — ended up with a big goose egg.

During much of the same time frame — starting in the fall of 2012 — the feds were also pursuing what prosecutors would paint as rampant crime at One Bank & Trust of Little Rock. The investigation properly centered on Layton “Scooter” Stuart, the CEO who owned virtually all of One Bank’s stock. But he died in March 2013, so attention shifted to his former lieutenants. And especially to one $1.5 million loan, which went bad instantly.

Five men were indicted in connection with that bad loan — a total of 21 counts, if I’ve added them up correctly. And these weren’t chicken-feed charges like structuring financial transactions. These charges included bank fraud and, most ominously, defrauding the federal TARP bank recapitalization program.

After years of investigation and prosecution, the feds came up with slightly more than they did in the Stacks case.

Alberto Solaroli, who borrowed the $1.5 million using a falsified financial statement and then never made a single payment, pleaded guilty to a reduced charge of money laundering and was sentenced to a year and a day in federal prison. (He also agreed to bargain-basement restitution of $120,000.)

Gary Rickenbach, the former EVP at One Bank who failed to tell his colleagues that he had invested in Solaroli’s company before he facilitated the fraudulent loan, had seven counts dismissed (including TARP fraud). He ultimately pleaded guilty to a single count of misprision — failing to report a crime. He has not yet been sentenced. He tried to get a probation-only sentence, but his final plea agreement suggests a guideline range of 10-16 months in prison.

Four counts against Tom Whitehead, the former chief financial officer, were dismissed in exchange for his testimony against the last two: former COO Michael Heald and former EVP Bradley Paul. And last week, as you probably know by now, a jury that heard three weeks of testimony acquitted Heald and Paul completely.

Gary Corum, who represented Heald, was free to complain after the verdict, and he did — to me and to the Arkansas Democrat-Gazette. The jury understood the same defense that federal prosecutors had refused to understand, he said.

He didn’t name the prosecutors, but they were Harris and Jegley.

Federal prosecutors did manage convictions against two mid-level One Bank officers, Kelly Harbert in 2010 and Matthew Sweet in 2015. But Harbert and Sweet pleaded guilty to embezzlement schemes from which they personally benefited. Their crimes were related to the charges against the upper management only in that they underscored the freewheeling, self-dealing culture at Stuart’s bank. (That’s why federal regulators removed him from the management of his own bank back in 2012.)

For Heald and Paul, the jury’s verdicts were victory and vindication. For those of us who want to believe that the awesome power of the federal government is being wielded smartly, the verdicts were disheartening and depressing. If I were Thyer and kept being embarrassed by prosecutorial failures, I’d be looking to see if there were any common factors.

Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.
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