HATTIESBURG, MS (WDAM) - Trial began Tuesday afternoon for a Hattiesburg pastor accused of defrauding the U.S. government.
Assistant U.S. Attorney Jay Golden made opening arguments around 3:40 Tuesday afternoon explaining the government's position that Rev. Kenneth Fairley defrauded the U.S. Department of Housing and Urban Development (HUD) by misusing grant funds that were supposed to be spent to rehabilitate low-income houses located at 127 E. 5th Street and 202 South Street in Hattiesburg. However, Golden argued the construction work was not completed and said the government was alerted about the two properties' states and possible fraudulent dealings between Fairley and New Orleans business man Artie Fletcher when the houses did not pass their inspections.
Golden said the "case at its core" has Fairley, through his HUD certified Community Housing Development Organization Pinebelt Community Services, receiving a contract through the city of Hattiesburg to rehabilitate low-income homes, allegedly selecting Fletcher's Interurban Development as a contractor, and then being reimbursed by HUD for work that was not completed.
Arnold Spencer, Fairley's Dallas-based attorney, stated in his opening arguments the prosecution is only looking at a very narrow portion of the picture. He said the city was entered into a new type of HUD block grant program, and Fairley was unaware of the financial records and receipts that were necessary to keep under this new program.
"Pinebelt could have done a better job with its financing," Spencer said. "(The) accounting isn't as sharp as we'd like it to be, but that's not illegal."
Spencer also stated he planned to introduce evidence later in the case that HUD was satisfied with the work completed.
Golden also filed a motion to dismiss three counts of Fairley's original six count indictment:
In the original indictment, Count 4 is conspiracy to commit money laundering and Counts 5 and 6 are engaging in monetary transactions through a financial institution, affecting interstate commerce, in criminally derived property.
U.S. District Judge Keith Starrett, who is presiding over the trial, told the jury and Golden reiterated in his opening statements the jury is to only focus on Count 1, which is conspiracy to defraud the United States, and Counts 2 and 3, which are theft of government money.
Golden's motion also states the government will proceed with Count 7, but that count deals with Fletcher's role as Fairley's co-defendant.
Golden called the prosecution's first witness around 4:20 p.m. Tuesday. He is 36-year-old Andrew Ellard, who formerly worked for the city of Hattiesburg from Oct. 2009 to Sept. 2014. Ellard said during testimony he worked in the city's state and federal program's office, mostly in accounting and community development. He said that office was created by Hattiesburg in 2009 to better administer projects that were largely grant funded, like those from HUD.
Ellard said there were four Community Housing Development Organizations (CHDO), which HUD describes as "a private nonprofit, community-based organization that has staff with the capacity to develop affordable housing for the community it serves," he worked with while employed in Hattiesburg, including Fairley's Pinebelt Community Services.
Golden asked Ellard about HUD's integrated disbursement interface system (IDIS), which is an accounting and booking keeping program used by the government agency. Ellard described its primary purpose as performing "drawdowns" when HUD-funded projects were completed. He explained the city would receive invoices for completed work, HUD would directly deposit the appropriate funds into Hattiesburg's account through IDIS, and then Ellard or others in his office would disburse that money among the appropriate entities.
Golden then presented home grant agreements between HUD and the city from 2007-2013 for Ellard's review.
Ellard said he worked specifically with Fairley through Pinebelt Community Services with the two Hattiesburg properties. Ellard said the houses at 127 E. 5th Street and 202 South Street were listed in contracts for rehabilitation. Once Pinebelt Community Services listed rehabilitation work to be completed, Ellard said it submitted reimbursement requests. He said the CHDO submitted one lump sum request for both properties, and Ellard would receive those invoices.
Golden then asked Ellard about a conversation he had with Artie Fletcher after the project had been paid out. Ellard said he met with Fletcher in Hattiesburg City Hall, and found out years later Fletcher was recording that conversation. Ellard said he received a transcript of that conversation. Ellard said during his conversation with Fletcher, he informed Fletcher how he could receive copies of the contracts that should have been associated with the project and that there was no way for the city to directly write a check to a contractor because its relationship was with the CHDO, Pinebelt Community Services in this case.
Ellard was still on the stand when Starrett dismissed the jury for the day just before 6 p.m.
The prosecution will continue questioning its first witness when trial resumes on Wednesday morning.
Motion to dismiss hearing
Monday, Rev. Kenneth Fairley's legal team filed a motion asking for a dismissal of his case in light of new evidence.
Spencer and the rest of Fairley's legal team alleged prosecutorial misconduct, claiming Fletcher and his attorney Clarence Roby were cooperating as government informants.
Starrett presided over a 2 p.m. hearing on the motions to dismiss.
"I, frankly, have never had this come up," Starrett said.
Roby testified via phone Tuesday afternoon and said his focus has always been protecting his client Fletcher. He said he was indigent about the content of the motions and "had not and did not and would not" discuss any conversations he had with other defense attorneys with the government.
"At no time have I had a conversation with the government," Roby said. "To suggest otherwise is an affront to my professional conduct."
Spencer also called Special Agent David Roncska to testify during the hearing.
After over an hour of testimony, Starrett denied Spencer's motion for dismissal, saying the evidence he presented was "exactly opposite" of Fletcher being a government informant.
"This has been a waste of time," Starrett. "I find the motion to dismiss…is not well-taken and overruled."