FAYETTEVILLE, Ark. — A state senator from Fort Smith is being investigated by the FBI for potential wire fraud and money laundering, court documents state.
An unsealed search warrant affidavit shows the FBI searched an office at 3203 Waco St. in Fort Smith, which is used as a business office by Foster Files Harris Construction, which Sen. Jake Files, R-Fort Smith, owns.
The FBI requested a search warrant for the building and any vehicles there, along with electronic devices and cell phones on the property, court documents state.
The investigation stems around General Improvement Fund money from the Western Arkansas Planning and Development District that Files applied for. The FBI said in December 2016, Files submitted three “materially false and fraudulent bids” as part of an application for $46,500 from the General Improvement Fund to be given to the City of Fort Smith.
Court documents state there’s probable cause to believe Files may have committed wire fraud and money laundering through this process.
The General Improvement Fund was established by the Arkansas Legislature to use surplus state revenue for dispersal to local governments and nonprofits across Arkansas for community development projects. Guidelines state any application requesting more than $10,000 in program money must include three bids to support the request.
The FBI said all three of Files’ bids submitted for the General Improvement Fund money were “fictitious.”
Officials said the $46,500 was to be used for a part of the River Valley Sports Complex, an ongoing project consisting mostly of softball fields at Chaffee Crossing in Fort Smith. Files was part of the construction for that project, which was supposed to have opened in July 2015, but had stalled. It remains unfinished to date.
According to the FBI, the City of Fort Smith eventually transferred $26,945.91 in General Improvement Fund money to a new bank account Files asked an employee to set up for him on December 29, 2016. He told the employee all of his bank accounts were overdrawn, and that’s why they needed the new account, court documents state.
The $26.945.91 of General Improvement Fund money was placed into that new account on December 30, 2016.
Court documents state Files then asked that same employee to get a cashier’s check in the amount of $11,931.91 and withdraw $14,000 in cash. Both were given to Files at the office on Waco Street. Files used $4,805 in cash to pay other employees. He then gave $1,978.42 to the employee who set up the bank account as “reimbursement” and another $1,500 for a “Christmas bonus.” That employee told the FBI, she saw Files put the rest of the cash and cashier’s check into his pocket.
On that same day, Files deposited the cashier’s check into a different bank account for his construction company, the FBI said.
“This constitutes a monetary transaction in criminally derived property of a value greater than $10,000 that was derived from specified unlawful activity, namely, wire fraud,” the FBI wrote in its search warrant application.
Court records state the search warrant was executed on August 10.
To read the FBI’s full search warrant application, click here.
Files released the following statement on the investigation:
“I was recently contacted by law enforcement officials who are investigating allegations of misuse of funds from a GIF grant. I was fully cooperative, and I will continue to be. But I want to make it clear that I have not been charged with any crime and continue to deny the claims that have been alleged. I am confident that when all the facts are brought to light I will be cleared of any appearance of wrongdoing.”