Budget & Finance

Ark. Boards’ Group Wins Restitution In Kickback Case

By Karla Scoon Reid — September 12, 2001 3 min read
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An Arkansas jury has ordered an influential former state senator to pay about $1.2 million to the Arkansas School Boards Association for his role in a scheme to defraud the group’s workers’ compensation insurance trust.

Nick Wilson’s lawyer did not dispute that his client conspired with the association’s former executive director, Tommy Venters, and Burton Elliott, the state’s former education director, to rig the insurance bidding process in return for kickbacks.

But lawyers for the association and for Mr. Wilson, a Democrat who is now in federal prison, differed on how much financial harm he caused.

“When we decided to pursue the lawsuit, we did so with great conviction because this was public money that should have gone to public school students,” said Dan B. Farley, the current executive director of the Arkansas School Boards Association.

When the Arkansas legislature, at Mr. Wilson’s urging, allowed school districts to find their own insurance for workers’ compensation claims in 1993, the school boards’ association formed an insurance trust on behalf of all but one of the districts. (The Little Rock school district opted for arranging its own coverage.)

The association alleged that Mr. Wilson arranged for the Little Rock office of Sedgwick James Co., which has since closed, to be awarded the bid in exchange for 8 percent of the fees. Mr. Venters, who was then the executive director of the association, allegedly kept the lowest bidder out of the process and recommended that the trust’s board members award the contract to Sedgwick James, said Nate Coulter, the lawyer who represented the association in the suit, which was filed last year.

Mr. Wilson’s lawyer, John C. Everett, contended that his client owed the association about $226,000—the total for the 8 percent fee Mr. Wilson collected each year from 1994 until 1998, when another insurance company was awarded the contract. The association, however, sought about $441,000—the difference between Sedgwick James’ contract and the lowest bidder’s contract, along with kickbacks Mr. Wilson collected from attorneys to whom he steered workers’ compensation business.

Mr. Everett also argued that the federal court had already punished Mr. Wilson, who has admitted his role in the conspiracy.

On Aug. 24, a Pulaski County Circuit Court jury in Little Rock found the association was owed $220,812 in compensatory damages and $975,000 in punitive damages. Mr. Wilson will not appeal the jury’s decision, Mr. Everett said.

"[The case] sends a message to anyone who would contemplate diverting public funds for personal gain,” Mr. Farley said, “especially in a state strapped for cash for schools.”

Collections Uncertain

While Mr. Coulter said the school boards’ group would “make every effort” to recover the funds, though that may prove hard.

Mr. Wilson has been serving a 70-month term at a Florida federal prison since June of last year, after pleading guilty to one charge of racketeering for defrauding state programs. He also was convicted of tax evasion and sentenced to 18 months in prison. Mr. Everett said his client has paid about $150,000 in restitution so far.

Still, the association has managed to recover $163,000 from Mr. Venters, Mr. Elliott, and William Charles Thomas, the former chief executive officer of Sedgwick James. Mr. Venters, who also is a former state education director, and Mr. Thomas pleaded guilty to mail fraud and were both sentenced to probation.

The case against Mr. Elliott, who had received money from the scheme from Mr. Wilson, was dismissed. Mr. Venters did not receive any money, authorities say.

Although the association was rocked by the scandal and some school boards raised concerns about the safety of their money in the trust, those fears have been allayed, said Mr. Farley. He replaced Mr. Venters as the group’s executive director in 1999.

The workers’ compensation trust, which now has more than $20 million, is financially sound and has saved districts money despite the cost of the fraud, Mr. Farley said. For the third consecutive year, the state Workers’ Compensation Commission has recognized the trust as the outstanding self-insured group in Arkansas, he added.

None of the state’s 309 participating school boards has dropped out of the trust, which ran a surplus that resulted in $11 million going back to them last spring, Mr. Farley said.

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