Two former South Arkansas Youth Services (SAYS) employees, one an ex-executive, pleaded guilty Thursday in Columbia County Circuit to diverting thousands of dollars in funds and property over a three-year period for personal gain from the now-bankrupt Magnolia-based nonprofit.
Jennifer A. Knight, the former chief financial officer, and her husband, Aric S. Knight, a former equipment purchaser at the agency, both 36 of Magnolia, each admitted guilt officially to theft of property over $25,000 – a class B felony in Arkansas, as part of a plea deal with the state. For their crimes, Columbia County Circuit Judge David Talley, in following with the state’s recommendation, sentenced each former SAYS worker to 10 years of probation. Neither defendant, according to their attorney, John M. Pickett of Texarkana, had any prior arrests or convictions before their 2015-17 criminal activity. Both were already free on bond.
Jennifer is also the daughter of former SAYS Chief Executive Officer Jerry Walsh, whom in July pleaded guilty to a federal conspiracy charge for funneling more than $380,000 in company funds in a pay-for-play scheme to now-convicted state lobbyist Rusty Cranford, according to an Arkansas Democrat-Gazette report.
The diverted monies were used to secure preferential treatment for government-issued contracts, according to Walsh’s July 19 plea deal. Walsh also stated the agency’s board had no knowledge of the kickbacks. SAYS in January filed for Chapter 7 bankruptcy in federal court. Since then, a bankruptcy trustee has been appointed to the case and former organization properties have been auctioned for asset liquidation.
The Knights were first taken into police custody Aug. 9, 2017, after an auditor tipped off local authorities on June 14, 2017, of potential misuse of agency funds at the Magnolia-based youth organization.
When Magnolia Police Department investigators looked into the matter, they, according to an MPD probable cause affidavit filed Oct. 3, 2017, in the Columbia County Circuit Clerk’s Office, found multiple instances of purchasing abuse and money diversion for the Knights’ personal gain. Reports stated that thousands of dollars worth of equipment and property paid for with SAYS funds were used as the couple’s own, and in one instance, a company-owned Honda ATV was sold by Aric and the proceeds deposited into a personal bank account.
Aric was first hired by SAYS as a computer tech, but later became a maintenance official and equipment purchasing manager for the nonprofit specializing in troubled or at-risk youths. During that time, the affidavit states, mowing contracts of $276.93 per pay period at the organization’s former Col. Rd. 11 E. rural youth dormitory and Boundary Street office properties were not adequately fulfilled. A 2017 search warrant at the couple’s home also found “tools, a row hipper, a subsoiler, a rifle scope, a bill of sale for a 2000 Honda 400 ATV, Makita impact driver and batteries, a box containing radios, a Jabasco Marine Oil Changer, Warn Winch, computers, keys, and other items” thought to have been purchased with SAYS funds. An electronic control unit for the interior of a personal Dodge truck was also bought with an SAYS American Express card.
The company CFO also issued personal loans from company funds, the affidavit states. Jennifer was said to have used an $18,000 loan to purchase a hauling trailer and made loans to “multiple employees from SAYS funds,” the court document stated. One loan in the amount of $17,000, was issued “years prior,” to a former agency worker but, as of 2017, it had not been paid back.
“Knight acknowledged knowing the company was a nonprofit,” Magnolia Police Cpt. Todd Dew’s affidavit stated.
In Walsh’s federal plea, he stated that most of the annual SAYS budget came through state-issued dollars.
As part of their Thursday guilty plea, all items stolen by the Knights from 2015-17 will be forfeited, including an ATV, trailer, and more. The couple, though, will not be required to pay any restitution in the state criminal case. That aspect will be taken on by Walsh, as part of his federal plea.
“He had agreed to a $100,000 restitution in that case,” said Deputy Prosecutor Ryan Phillips. “That is based almost entirely on the theft involved in [the state] case.”
Phillips in his presentation of evidence, also stated Walsh had in a statement was said to have directed his daughter and son-in-law in their misappropriation of funds.
The information Walsh gave in his federal plea deal, Phillips added, was “relevant” to both the SAYS theft case and the larger federal probe into state senatorial corruption.