DOJ: Former Executive Director of Nonprofit Sentenced for Illegally Diverting Charity Funds to Unnamed State Senator and Convicted Lobbyist

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A former executive director of South Arkansas Youth Services (SAYS), an Arkansas-based nonprofit, was sentenced today to 30 months in prison followed by three years of supervised release for conspiring to unlawfully divert over $380,000 from the charity to an Arkansas state senator and the lobbying firm of a convicted lobbyist.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Acting U.S. Attorney David Clay Fowlkes for the Western District of Arkansas made the announcement. 

U.S. District Judge Susan O. Hickey sentenced Jerry Walsh, 72, of Magnolia, Arkansas, who previously pleaded guilty to one count of conspiracy to misapply the nonprofit’s funds without authority from the board of directors.  Judge Hickey also ordered Walsh to pay $515,631.56 in restitution.

As part of his plea, Walsh admitted that beginning in 2013, while serving as executive director for SAYS, he agreed to divert SAYS funds to convicted lobbyist Milton “Rusty” Cranford and an unnamed Arkansas state senator in exchange for the state senator’s influence in protecting the nonprofit’s state contracts with the Arkansas Department Health Services (DHS) and DHS’ Division of Youth Services (DYS).  As part of that agreement, Walsh was to provide a monthly “legal retainer” to the Arkansas state senator without the expectation that the senator ever provide any legal work.  Instead, the purpose of the payments was to obtain the senator’s assistance in preserving the contracts by influencing DHS and DYS officials.  According to the plea, Cranford negotiated the amount paid to the senator, which amounted to over $120,000.

Additionally, as part of the conspiracy, Walsh admitted to paying Cranford’s lobbying firms above-market prices and employed a relative of Cranford who had a “no-show” job with SAYS.  In total, Walsh illegally diverted approximately $262,000 in charity funds to Cranford’s lobbying firm and relative.

The FBI investigated this case along with the assistance of the Magnolia Police Department and the 13th Judicial District of Arkansas Prosecuting Attorney’s Office.  Senior Litigation Counsel Marco A. Palmieri of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Ben Wulff of the Western District of Arkansas are prosecuting the case with the assistance of Deputy Prosecutor Ryan Phillips with the 13th Judicial District Prosecuting Attorney’s Office.  This is a combined investigation with the Public Integrity Section, the Eastern District of Arkansas, the Western District of Arkansas and the Western District of Missouri.  

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