FAYETTEVILLE – Two Arkansas men were sentenced today to federal prison for Wire Fraud, Aiding and Abetting Wire Fraud, Money Laundering and Aiding and Abetting Money Laundering in connection with the development of a wind turbine that was never operational and a proposed wind farm project in Elm Springs, Arkansas, that was never constructed. The Honorable Judge Timothy L. Brooks presided over the sentencing hearings in the United States District Court in Fayetteville.
Jody Douglas Davis, 47, of Searcy, Arkansas, was sentenced to 180 months in prison followed by three years of supervised release and ordered to pay $1,138,845.28 in restitution and Phillip Vincent Ridings, 64, of North Little Rock, Arkansas, was sentenced to 97 months in prison followed by three years of supervised release and ordered to pay $1,138,845.28 in restitution.
“This case represents some of the most important work that we do,” said United States Attorney Clay Fowlkes. “These defendants developed a scheme for the purposed of stealing large sums of money from innocent investors. The defendants in this case used lies and misrepresentations to trick investors into paying them large amounts of money that they converted for their own, personal use. We will continue to work with our Federal Law Enforcement partners at the FBI and the IRS to investigate and prosecute cases like this. We will also continue to work tirelessly to protect others from similar schemes to defraud.”
"Mr. Davis and Mr. Ridings callously defrauded members of our community through a fictional investment opportunity," said FBI Little Rock Special Agent in Charge James A. Dawson. "Even after being federally indicted, these men continued to advance their criminal scheme through blatant falsehoods and deceit. Today's sentencings send a clear message to other fraudsters: preying upon our Arkansas communities will not stand."
“Davis and Ridings stole money from investors and used it for their personal use with no intention of building the wind farm project.,” said Special Agent in Charge Christopher J. Altemus Jr., IRS-CI Dallas Field Office. “This sentencing should detour criminals from committing similar crimes.”
According to court documents and evidence presented at trial, Davis, and Ridings, formed a limited liability company in Texas in 2014 called Dragonfly Industries International, LLC (“Dragonfly”) and Arkansas Wind Power (“AWP”), an Arkansas limited liability company located in Springdale, Arkansas, to develop what they told investors was a revolutionary wind turbine design that was to be installed on a 311-acre wind farm proposed for construction in Elm Springs, Arkansas.
According to the superseding indictment, Davis and Ridings conspired with Cody Fell of Springdale, Arkansas, and others, beginning as early as June 2014 and continuing through and including March 2018, to obtain money from investors who were told that the investors’ money would be used to build a prototype of the wind turbine and develop wind farms in Elm Springs, Arkansas, in Iowa, and other states. The evidence presented at trial showed that Davis and Ridings used most of the $700,000 they obtained from investors for Davis’ and Ridings’ personal use. Specifically, evidence at trial revealed that investors were told that Dragonfly’s wind turbine could produce more energy than the traditional three-blade wind turbines commonly used on existing wind farms; that nationally recognized engineering firms and a University of Memphis mechanical engineering professor had “validated” the Dragonfly wind turbine’s design; that the Department of Defense has expressed strong interest in acquiring Dragonfly’s wind turbines for use in combat zones; that a prototype of the wind turbine was nearing completion; that leaders of underdeveloped countries were ready to buy Dragonfly’s wind turbines; and that a $10 million grant from the Department of Energy was soon to be awarded to Dragonfly, when in truth and fact, none of these representations were true.
A federal jury convicted Davis and Ridings on September 3, 2021.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation.
Assistant U.S. Attorneys Kyra Jenner and Kenneth Elser prosecuted the case.
Fort Smith, Arkansas - Kenneth Elser, United States Attorney for the Western District of Arkansas, announced that Samuel Bowron Phillips, age 41 of Fort Smith, Arkansas, was sentenced yesterday to 60 months in federal prison followed by three years of supervised release on one count each of Mail Fraud, Wire Fraud, and Money Laundering; the sentences are to run concurrent with each other. Phillips was ordered to pay approximately $1,600,000 in restitution to his victims. The Honorable Chief Judge P. K. Holmes, III presided over the sentencing hearing in the United States District Court in Fort Smith.
According to court records, Phillips devised and executed a scheme to defraud customers of his insurance business by withdrawing funds from their annuity and insurance policies without their consent and knowledge. He then used that money for his own personal benefit and gain. The investigation began after a complaint was filed in October, 2015, with the Arkansas Insurance Commission by business owners and residents after discovering the annuities Phillips sold them were nonexistent, statements he had given them were fabricated, and the money they had given him to invest for their retirement was gone. Evidence gathered by investigators revealed that from March, 2013, through November, 2015, twenty-one (21) of Phillip’s customers lost a total of over $1,600,000 they had invested in annuity contracts and insurance policies purchased from him.
Phillips admitted that he had created two sham companies, Stevens Financial Asset Management and Paradigm Financial Partners LLC, and opened accounts for those entities. He used a fake name to conceal his connection to the fraudulent transactions and admitted he rented post office boxes in Fort Smith and Barling to receive mail for the two bogus companies he created to steal his customer’s money. Phillips was indicted by a federal grand jury in March, 2016 and pleaded guilty in June, 2016.
"Illegal activity involving the investment industry has brought financial ruin to many Americans,” stated Tracey D. Montaño, Special Agent in Charge. “IRS Criminal Investigation is committed to using our forensic accounting skills to help unravel complex fraud and money laundering schemes. We are proud to work with our law enforcement partners to investigate and prosecute individuals who attempt to enrich themselves by fraudulent means, and to help put a stop to this and other types of white collar crime."
“Today’s sentencing of Phillips reflects a fitting punishment for an individual who committed wire fraud, mail fraud and money laundering. Phillips deceived and stole from his customers who trusted him and believed in him,” stated L. Diane Upchurch, Special Agent in Charge of the FBI’s Little Rock Field Office. “We appreciate the hard work that brings about successful outcomes and the commitment of our partners at the United States Attorney’s Office for the Western District of Arkansas, the IRS, the Postal Inspection Service, the Arkansas Department of Insurance, and the Fayetteville Police Department.”
This case was investigated by the FBI, the IRS Criminal Investigation Division, the Postal Inspection Service, the Arkansas Department of Insurance, and the Fayetteville Police Department. Assistant United States Attorney Kyra Jenner prosecuted the case for the United States.
FAYETTEVILLE - An Alexandria, La., physician pleaded guilty today to having conspired to violate three different federal statutes in connection with a scheme to defraud both federal and private workers’ compensation insurers.
U.S. District Judge Timothy L. Brooks presided over the plea hearing, in which Robert Clay Smith, 60, waived indictment by a grand jury and pleaded guilty to a criminal information charging him with conspiracy to commit health care fraud, wire fraud, and illegal remunerations (taking kickbacks).
Court documents allege that the basic premise of the scheme, which ran from 2013 until 2017, was that individuals associated with a Rogers-based medical supply and billing company recruited Smith to dispense pain creams and patches to his workers’ compensation patients by offering him a split of the profits. The Rogers company acted as the billing agent for Smith, handling all the paperwork and submitting the allegedly fraudulent claims to both the U.S. Department of Labor, Office of Workers’ Compensation Programs, which covers all federal employees, and to private insurers as well. In exchange, Smith admitted, the company paid him 50 to 55 percent of the profits collected from successfully billing insurers, at markups of 15 to 20 times what the medications actually cost.
According to court documents, Smith, a Louisiana physician, made more than $650,000 from the scheme. Smith admitted that in addition to receiving illegal kickbacks, he knew he did not have a license to dispense medications from his clinic, required under Louisiana law, and nonetheless bought topical medications from the Rogers company and dispensed them to his workers’ compensation patients from his clinic.
Smith is the second physician to plead guilty in connection with the federal investigation. In July 2021, Dr. Robert Dale Bernauer Sr., another Louisiana doctor, pleaded guilty to conspiring with the same individuals, in a scheme similar to the one for which Smith has accepted responsibility. Additionally, in October 2021, the company’s former billing director, Amanda Dawn Rains, pleaded guilty to participating in criminal conspiracies with the two doctors, and others.
As a result of his guilty plea, Smith may be sentenced to up to five years in prison. The court will determine his sentence at a later date, after reviewing a pre-sentence investigation report prepared by the U.S. Probation Office and considering the U.S. Sentencing Guidelines and other statutory factors.
U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.
The case is being investigated by the Department of Defense, Defense Criminal Investigative Service, the Department of Labor Office of Inspector General, the Department of Veterans Affairs Office of Inspector General, and the U.S. Postal Service Office of Inspector General, with the assistance of the Louisiana Department of Justice, the Louisiana State Board of Medical Examiners, and the Louisiana Board of Pharmacy.
Assistant U.S. Attorneys Hunter Bridges and Steven Mohlhenrich are prosecuting the case for the United States.
FAYETTEVILLE – A federal jury convicted two Arkansas men today for Wire Fraud, Aiding and Abetting Wire Fraud, Money Laundering and Aiding and Abetting Money Laundering in connection with the development of a wind turbine that was never operational and a proposed wind farm project in Elm Springs, Arkansas, that was never constructed.
According to court documents and evidence presented at trial, Jody Douglas Davis, 46, of Searcy, Arkansas, and Phillip Vincent Ridings 64, of North Little Rock, Arkansas, formed a limited liability company in Texas in 2014 called Dragonfly Industries International, LLC (“Dragonfly”) and Arkansas Wind Power (“AWP”), an Arkansas limited liability company located in Springdale, Arkansas, to develop what they told investors was a revolutionary wind turbine design that was to be installed on a 311-acre wind farm proposed for construction in Elm Springs, Arkansas.
According to the superseding indictment, Davis and Ridings conspired with Cody Fell of Springdale, Arkansas, and others, beginning as early as June 2014 and continuing through and including March 2018, to obtain money from investors who were told that the investors’ money would be used to build a prototype of the wind turbine and develop wind farms in Elm Springs, Arkansas, in Iowa, and other states. The evidence presented at trial showed that Davis and Ridings used most of the $700,000 they obtained from investors for Davis’ and Ridings’ personal use. Specifically, evidence at trial revealed that investors were told that Dragonfly’s wind turbine could produce more energy than the traditional three-blade wind turbines commonly used on existing wind farms; that nationally recognized engineering firms and a University of Memphis mechanical engineering professor had “validated” the Dragonfly wind turbine’s design; that the Department of Defense has expressed strong interest in acquiring Dragonfly’s wind turbines for use in combat zones; that a prototype of the wind turbine was nearing completion; that leaders of underdeveloped countries were ready to buy Dragonfly’s wind turbines; and that a $10 million grant from the Department of Energy was soon to be awarded to Dragonfly, when in truth and fact, none of these representations were true.
Cody Fell pled guilty to Wire Fraud and Tax Evasion in December 2018 and will be sentenced on September 17, 2021. A sentencing date for Davis and Ridings has not yet been scheduled.
Acting U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation.
Assistant U.S. Attorneys Kyra Jenner and Kenneth Elser prosecuted the case.
Related court documents may be found on the Public Access to Electronic Records website at www.pacer.gov.
Fayetteville, Arkansas – David Clay Fowlkes, First Assistant United States Attorney for the Western District of Arkansas, announced that Melvin Stout, age 40, of Fayetteville, AR, pleaded guilty today to making a false statement on a loan application to obtain money through the Small Business Administration’s Paycheck Protection Program (PPP). Earlier this month, Stout’s wife, Tiffany Acuff, age 36, of Fayetteville, and sister, Valarie Watson, age 43, of Fayetteville, also pleaded to charges in connection with obtaining loans through the PPP, which is intended for businesses struggling through the coronavirus pandemic.
The program, which provides low-interest, forgivable loans for businesses who use the funds for essential business expenses, such as payroll, is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020.
According to the plea agreements in each case, Stout, Acuff, and Watson submitted PPP loan applications that falsely represented their ownership of small businesses, which they alleged were eligible for PPP funds. Stout, was approved and received $9,400.00, Acuff, was approved and received $20,800.00, while Watson, applied for $20,800.00, but was declined. Along with the applications, the defendants submitted falsified tax documents and business receipts. None of the defendants owned the businesses listed in the applications.
Stout, Acuff, and Watson’s sentencings will be determined by the court at a later date, following the U.S. Probation Office’s completion of a presentence investigation. Based on their guilty pleas, the maximum penalties for each defendant include imprisonment for up to five years and a fine of up to $250,000.
The case was investigated by IRS, the FBI, and the Treasury Inspector General for Tax Administration (TIGTA). Assistant United States Attorney Hunter Bridges is prosecuting the case for the United States.
FAYETTEVILLE — Robert Clay Smith, age 61, an Alexandria, La., physician was sentenced yesterday to 48 months in prison, followed by three years of supervised release, and ordered to pay more than $800,000 to workers’ compensation insurers, for his role in a conspiracy to commit wire fraud, health care fraud, and violations of federal anti-kickback laws. U.S. District Judge Timothy L. Brooks presided over the sentencing hearing in Fayetteville, Arkansas.
According to court documents, from 2013 until 2017, Smith conspired with a Rogers-based company to dispense pain creams and patches to his workers’ compensation patients, for which he received a split of the profits. The company acted as the billing agent for Smith, handling all the paperwork and submitting the claims to both the U.S. Department of Labor, Office of Workers’ Compensation Programs, which covers all federal employees, and to private insurers as well. In exchange, Smith admitted, the company paid him 50 to 55 percent of the profits collected from successfully billing insurers, at markups of 15 to 20 times what the medications cost.
In addition to receiving illegal kickbacks, Smith did not have a license to dispense medications from his clinic, required under Louisiana law, but nonetheless dispensed the medications to his workers’ compensation patients from his clinic.
Smith’s role in the scheme was found to have caused $1,476,383.47 in losses to workers’ compensation insurers, and Smith was ordered to repay $827,083.40 to identified victims.
U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.
The case is being investigated by the Department of Defense, Defense Criminal Investigative Service, the Department of Labor Office of Inspector General, the Department of Veterans Affairs Office of Inspector General, and the U.S. Postal Service Office of Inspector General, with the assistance of the Louisiana Department of Justice, the Louisiana State Board of Medical Examiners, and the Louisiana Board of Pharmacy.
Assistant U.S. Attorneys Hunter Bridges and Steven Mohlhenrich prosecuted the case for the United States.
FORT SMITH – A Fort Smith man, Neil Ravi Mehta, age 32, was sentenced today to 57 months in federal prison followed by three years of supervised release and ordered to pay $659,825.52 in restitution, on one count of Possession of an Unregistered Firearm that was a Destructive Device, one count of Fraud and False Statements related to Tax Returns, and one count of False Declaration Before a Court.
In a separate case, Federal Armament LLC, which was owned by Neil Ravi Mehta, was sentenced to five years of probation and ordered to pay a fine of $500,000.00 on one count of Unlawfully Importation and Receipt of Firearms and one count of Filing False or Misleading Electronic Export Information. Federal Armament LLC was also ordered to forfeit the illegally imported firearms.
The Honorable Judge P.K. Holmes, III presided over the sentencing hearings, which were held in the U.S. District Court in Fort Smith.
According to court documents in the Neil Ravi Mehta case, on January 31, 2023, federal law enforcement officers executed a search warrant on Mehta’s residence in Fort Smith, Arkansas. Mehta was present at the residence when officers announced their intent to enter the residence but fled from the residence prior to officers making entry into the residence. Mehta was later arrested after a six-day manhunt, in which the public’s assistance was solicited in locating the defendant, who was assumed to be armed and dangerous.
During the execution of the search warrant, officers discovered and seized a destructive device located in the top left corner of the kitchen island of the residence. The destructive device was not registered as required by law and therefore unlawfully possessed by Mehta.
As to the tax charge, Mehta substantially underreported his income by failing to report millions of dollars of business activities for Federal Armament LLC, a business headquartered in Fort Smith, Arkansas which engaged in the manufacturing and selling ammunition, firearms, and other related items. None of the gross receipts of Federal Armament LLC were reported on any of Mehta’s IRS Forms 1040 for 2018, 2019, 2020, and 2021.
As to the charge of False Declaration Before a Court, on December 14, 2021, a deposition under oath was taken from Mehta in connection with a civil suit brought against Mehta and Federal Armament LLC by the United States Department of Labor alleging violations of the Fair Labor Standards Act. During the deposition Mehta made false statements under oath regarding matters that were material to the civil suit.
According to court documents in the Federal Armament LLC case, on January 31, 2023, federal law enforcement officers executed a search warrant on Federal Armament LLC in Fort Smith, Arkansas. During the search warrant officer located and seized 3,185 firearms that Federal Armament LLC unlawfully imported due to excess magazine capacity or because the firearms lacked required engraving marks.
As to the export charge, on June 27, 2022, Federal Armament LLC submitted to the U.S. Department of Commerce a license application for approval to export certain firearms to Poland. The export license application contained false and misleading information by naming an individual as contact person who was neither employed by nor acting as the contact person for Federal Armament LLC.
U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.
This was a joint investigation involving the following federal law enforcement agencies: the Federal Bureau of Investigation (FBI); the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); the U.S. Department of Commerce (DOC), Bureau of Industry and Security (BIS), Office of Export Enforcement (OEE); the Internal Revenue Service-Criminal Investigation (IRS-CI); and the U.S. Department of Labor, Office of the Inspector General (DOL-OIG).
First Assistant U.S. Attorney Kenneth Elser and Assistant U.S. Attorney Steven Mohlhenrich prosecuted the case.
Related court documents may be found on the Public Access to Electronic Records website @ www.pacer.gov
FORT SMITH — On August 6, 2024, the U.S. District Court for the Western District of Arkansas ordered $180,886 in cash seized from three Nashville men to be forfeited to the United States, upholding a civil complaint by the U.S. Attorney’s Office. The complaint, filed on Jan. 31, 2024, alleged that the funds, seized in an Arkansas State Police traffic stop, should be forfeited because they were the proceeds of or were involved in drug crimes.
According to court documents, this case began the afternoon of Jan. 17, 2023, when an Arkansas State Police trooper stopped a gray Nissan Armada for a traffic violation as it traveled westbound on I-40 in Crawford County, close to the Oklahoma state line. During the stop, the Nissan’s three occupants were visibly nervous and made inconsistent and contradictory statements about where they were going and what they planned to do. All three denied having any drugs or large amounts of cash in the vehicle.
However, 13 minutes after the initial stop certified police canine “Beau” arrived on the scene, and in an “open air sniff” alerted on the vehicle—indicating the odor of illegal drugs. During the subsequent probable cause search, Arkansas troopers found two semi-automatic handguns, one of which had been reported stolen, personal-use quantities of illegal drugs and $180,886 in cash—most of it bundled for ease of counting. The driver, Shapour Saberi, and his two passengers, Redeer Ali Haji and Aryan Rasul Ibrahim, were arrested by the troopers and interviewed by agents of the U.S. Drug Enforcement Administration. The guns, drugs and cash, along with seven cell phones, were seized from them as evidence.
Further investigation by the DEA revealed that Saberi, Haji and Ibrahim operated a thriving mail-order drug business in which they solicited customers to order high-grade marijuana and marijuana “edibles” through Snapchat, Instagram, and other social media platforms. Customers placed their orders and paid for the orders in advance. Once a customer’s payment was received, often another co-conspirator in California would send that customer’s order by way of a common carrier such as UPS or FedEx, or via the U.S. Postal Service. On other occasions, the three transported the high-grade marijuana and edibles from California to Tennessee using common carriers and, on at least one occasion, a rented cargo van filled with trash bags full of marijuana.
The three individuals also memorialized many aspects of their illegal enterprise on their cell phones which contained pictures of internet advertisements for known strains of high-grade marijuana, close-ups displaying the marijuana, pictures of price lists for known strains of high-grade marijuana and marijuana edibles, photos of packages and mailing labels, records of conversations with customers and suppliers, photos of drug ledgers, text exchanges with co-conspirators that included arguments over business matters and selfies taken by all three subjects.
Significantly, one of Ibrahim’s phones had photos of drug ledgers that included one dated “1/15.” In this photograph, the total profit shown on the drug ledger was $178,450—only $2,436 less than the amount seized from Saberi, Haji and Ibrahim on their Jan. 17, 2023, road trip.
According to court papers, Saberi, Haji and Ibrahim filed administrative claims with the DEA seeking the return of their seized funds, alleging “ownership of the assets were obtained legally without felonious conduct,” and claiming most of the cash came from car sales rather than drug distribution. However, once the U.S. Attorney’s Office filed a formal complaint for civil forfeiture of the funds, complete with pictures of evidence gathered in the investigation, none of the subjects chose to challenge the forfeiture in court. Under the Department of Justice Asset Forfeiture Program, the funds—now in the custody of the U.S. Marshals Service—will be used to compensate crime victims, support law enforcement efforts, and support communities.
U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.
The U.S. Drug Enforcement Administration and Arkansas State Police investigated the case. The U.S. Marshals Service manages the Department of Justice Asset Forfeiture Program.
Assistant U.S. Attorney Steven Mohlhenrich civilly prosecuted the case for the United States.
The Department of Justice Asset Forfeiture Program
The Asset Forfeiture Program was created in 1984 when Congress passed the Comprehensive Crime Control Act, which provided federal prosecutors and agents the legal and regulatory tools necessary to keep up with, and ahead of, those who commit crime for economic benefit. The U.S. Marshals Service plays a critical role in identifying and evaluating assets that represent the proceeds of crime as well as efficiently managing and selling assets seized and forfeited by Department of Justice.
The Marshals manage a wide array of assets including real estate, commercial businesses, cash, financial instruments, vehicles, jewelry, art, antiques, collectibles, vessels and aircraft. Proceeds generated from asset sales are used to operate the program, compensate victims and support various law enforcement efforts. The Marshals manage the distribution of proceeds and payments to victims of crime and other innocent third parties, all of which helps to mitigate the financial damage inflicted by criminal activity. The agency employs best practices from private industry to ensure that assets are managed and sold in an efficient and cost-effective manner.
The Asset Forfeiture Program also supports communities by transferring certain types of forfeited assets to state, local and nonprofit organizations. Through the Operation Goodwill program, forfeited real or personal property of marginal value can be transferred to state or local governments in support of drug abuse treatment, drug crime prevention and education, housing, job skills and other community-based public health and safety programs.
Related court documents may be found on the Public Access to Electronic Records website at www.pacer.gov.
