Verdicts' dismissal affirmed for lawyer

Barber ally wins appellate ruling

The 8th U.S. Circuit Court of Appeals on Tuesday affirmed a district court's decision last year to throw out the convictions against Brandon Barber attorney K. Vaughn Knight and give him a new trial.

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The three-member panel of Circuit Judge Raymond Gruender, Circuit Judge Duane Benton and Senior Circuit Judge C. Arlen Beam issued the opinion in the appeal by the federal government of U.S. District Judge P.K. Holmes III's June 2014 ruling.

Gruender issued an opinion that concurred in part and dissented in part.

The 8th Circuit ruling overturned Holmes on his decision to acquit Knight of one of the charges, making false statements in relation to Barber's bankruptcy, and ordered that Knight be retried on that charge.

In affirming Holmes' decision, Beam wrote for the majority, "Ultimately, the district court concluded that the government's evidence 'largely invited only speculation and conjecture,' and was fraught with gaps that 'were too large to be reasonably filled by inference without leaving some doubt as to the correctness of the verdict.'

"The district court further expressed concern that, given the short amount of time that the jury deliberated, the jury had not adequately weighed the dense factual and legal issues in the case and had instead convicted Knight because he was Barber's lawyer."

The head of Knight's defense team, David Matthews of Rogers, said Tuesday that he hoped that the U.S. attorney's office would review the opinions by Holmes and the 8th Circuit judges and would give some consideration as to whether to retry his client.

He wouldn't comment Tuesday on what further steps he may take in Knight's case, saying the government has the next move.

"We are going to study the 8th Circuit Court opinion in the Vaughn Knight case and consult with the Department of Justice Criminal and Appellate divisions to determine what the appropriate course of action should be," acting U.S. Attorney Kenneth Elser said in a statement sent by email Tuesday.

The government, led by then-U.S. Attorney Conner Eldridge, tried Knight of Fayetteville in November 2013 on charges accusing him of using his lawyer's trust account to help Barber hide $1.2 million from his many creditors and to use the money for his own purposes. He was also accused of misrepresenting Barber's financial condition to the U.S. bankruptcy court by omitting income from one or more business entities that Barber used for his own benefit.

The 8th Circuit opinion described Barber as a successful Northwest Arkansas real estate developer whose practice crumbled when the real estate market weakened and he made some bad business decisions around 2007.

His plight became public when he defaulted on a $16.7 million loan to finance construction of the Legacy building in downtown Fayetteville. He ended up owing more than $30 million to various creditors.

Barber hired Knight in January 2008 to help him with his financial problems, according to the opinion.

Afte nine days of trial testimony, a federal court jury in Fort Smith took six hours to convict Knight of conspiracy to commit bankruptcy fraud, aiding and abetting bankruptcy fraud, making false statements in relation to bankruptcy fraud and five counts of money laundering.

The 8th Circuit wrote that Holmes found the government did not clearly explain why passing Barber's money through Knight's trust account was fraudulent. Knight had argued there was no obligation to inform Barber's creditors about the money without a writ of garnishment or to disclose it to the bankruptcy court, especially since most of it was gone by the time Barber filed for bankruptcy in July 2009.

The opinion referred to evidence that some of Barber's money from the trust account was used for personal expenses, such as to pay off a $7,500 gambling debt. Barber also put a $314,000 kickback into the account that he received from co-defendant Jeff Whorton in a real estate deal involving the sale of Whorton's Executive Plaza property in Springdale.

The fund also was used to pay many of Barber's business expenses as he tried to work himself out of financial trouble, according to the opinion.

"Viewing the totality of the circumstances surrounding Barber's and Knight's pre-bankruptcy activities, the district court concluded that this evidence tended to show that Knight used his IOLTA [Interest on Lawyer's Trust Account] to help Barber stay in business and avoid bankruptcy, as opposed to using the account to defraud Barber's bankruptcy creditors," the opinion said.

In his dissent, Gruender wrote that the issue of whether Barber used Knight's trust account to conceal his assets in contemplation of bankruptcy was complicated, but it was the jury's decision to make.

"'A district court judge is not a thirteenth juror who may set aside a verdict merely because he would have reached a different decision,'" Gruender quoted from a 2005 appeals court case.

He pointed to emails between Knight and Barber that discussed ways to keep creditors from learning about and pursuing Barber's money.

Knight set up a company called NWARE where Barber initially put the kickback money from the Executive Plaza deal to hide from creditors, Gruender wrote.

Gruender also noted that a government witness, co-defendant James Van Doren, testified that Barber told him NWARE allowed him to conduct business without creditors knowing he had money.

The short time the jury needed to reach its verdicts confirmed the straightforward nature of the charges it had to decide on, Gruender wrote.

"In light of the evidence, I find no miscarriage of justice in the jury's guilty verdict and I conclude that the district court abused its discretion in granting Knight a new trial," Gruender concluded.

Barber was indicted in 2012, along with Knight and Van Doren.

Barber pleaded guilty to conspiracy to commit bankruptcy fraud and bankruptcy fraud in that case and was sentenced in October to 65 months in prison. In January, he was ordered to pay $450,000 restitution.

In a separate case, Barber pleaded guilty to bank fraud involving the Executive Plaza scheme and was sentenced to 65 month in prison, set to run concurrently with the conspiracy and bankruptcy fraud sentences.

Van Doren pleaded guilty to one count of money laundering in August 2013. He was sentenced in November to 15 months in prison.

Also indicted in the bank fraud case with Barber were Whorton of Springdale, Fayetteville developer Brandon Rains and Rogers attorney David Fisher.

Whorton, who pleaded guilty to conspiracy to commit bank fraud and money laundering, was sentenced in November to 14 months in home detention and was ordered to pay a $10,000 fine and $100,000 restitution.

Rains pleaded guilty to lying to federal agents and was fined $5,000 in November.

A federal court jury acquitted Fisher of conspiracy to commit bank fraud in October 2013.

NW News on 09/02/2015

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