Jerry Kennedy Walsh, 72, the former executive director of South Arkansas Youth Services in Magnolia, pled guilty on Thursday to misapply $380,000 from the agency without authority from its Board of Directors.
Duane “Dak” Kees, United States attorney for the Western District of Arkansas, made the announcement.
According to plea documents, the scheme involved steering the non-profit’s funds to an Arkansas state senator, to the lobbying firm of convicted lobbyist Milton “Rusty” Cranford, and to a relative of Cranford.
Joining Kees for the announcement was Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.
Walsh entered his plea before to an information charging him with conspiracy to misapply the non-profit’s funds without authority from the Board of Directors.
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 Rusty Cranford and an unnamed Arkansas state senator in exchange for the state senator’s influence in protecting the non-profit’s state contracts with the Department of Human Services and the Department of Youth Services.
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 payment was to obtain the senator’s assistance in preserving the contracts in his official capacity. According to the plea, the amount paid to the senator was negotiated by Cranford and amounted to more than $120,000.
Additionally, as part of the agreement, Walsh was to lock SAYS into a more expensive contract with Cranford’s lobbying firms and employ a relative of Cranford who would have a “no-show” job with SAYS. Between the new contract with the Cranford lobbying firm and the payment for the no-show job, the non-profit paid out an additional $262,000.
As part of his plea, Walsh admitted that these payments and those to the state senator were not authorized by the SAYS Board of Directors.
“This plea exposes the depths to which ‘pay to play’ politics has corrupted a non-profit organization which was formed with the best of intentions, to help children,” said Kees.
“Unfortunately, there are many victims in a scheme like this. The people of this state were deprived of the uncorrupted functioning of their government agencies, the non-profit was stripped of funds, and now that the non-profit has been shuttered, the community is deprived of a non-profit dedicated to providing services to their most vulnerable children, those who are incarcerated and in state custody. I look forward to a day when all politicians exercising influence do so based upon the best interests of the children in their communities and not on who is paying them for no-show jobs.”
“Jerry Walsh diverted hundreds of thousands of dollars intended to help vulnerable children in southern Arkansas as a part of a corrupt scheme to influence the award of state contracts,” said Assistant Attorney General Benczkowski. “Walsh’s actions ultimately risked destroying the non-profit he helped lead and undermining the public’s confidence in its elected officials. The Criminal Division and our law enforcement partners are committed to protecting the integrity of charitable programs, rooting out corruption, and ensuring that individuals like Walsh are held accountable for their actions.”
The FBI investigated this case along with the assistance of the Columbia County Sheriff’s Office and Sheriff Mike Loe, and the 13th Judicial District of Arkansas Prosecuting Attorney’s Office (Prosecuting Attorney John Shepherd).
Assistant United States Attorney Ben Wulff of the Western District of Arkansas and Trial Attorney Marco A. Palmieri of the Criminal Division’s Public Integrity Section 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 of the Department of Justice, the Eastern District of Arkansas, Western District of Arkansas, and the Western District of Missouri.