The Curious Case of Bob Ballinger’s Side Hustle [UPDATED]

It is probably unsurprising that the multiples stories over the past few days of widespread bribery and corruption in Arkansas politics made me think about David Ramsey’s May 15 story about Rep. Bob Ballinger and Ecclesia College. Specifically, I found myself wondering how Ballinger was able to be so closely tied to Ecclesia College and Ecclesia President Oren “Chip” Paris in 2013 and 2014 without getting some of that kickback cash that was flying so fast and loose during those years.1

Re-reading the Times article, this caught my eye:

The property acquisition that Ballinger directed money toward would have been familiar to him. In December of 2013, he did the legal work, through his closing company Integrity Closing, to close the sale on that tract, 23.2 acres in Springdale.

[***]

Ballinger told me that he could not disclose precisely how much he was paid to do the closing on the deal for Ecclesia but described it as a “huge discount. … It’s not like I was gaining anything.” The few other land transactions made around this time by Ecclesia, according to county property records, were closed by local title companies in Springdale or Fayetteville; this land deal, the largest, was the only one for which the college used Ballinger’s closing company, based an hour away in tiny Berryville.

A few things jumped out about Ballinger’s comments here. First, as with many of the answers he gave, Ballinger continued to hide behind confidentiality when there were questions he did not want to answer. Had he wanted to answer–say, to clear up issues related to the money and show that it really was just a tiny amount as he claims–he could have asked Ecclesia to waive confidentiality as to that payment.

Second, and far more importantly, by setting up a separate company and handling the closing in this manner, Ballinger unwittingly created a new paper trail that we could look at and see if anything looked odd with it or the transaction itself.

So I started by pulling Ballinger’s Statements of Financial Interest, which he (like all legislators and many other government officials) is required to file each year.

His first SFI was filed in 2012 to cover the 2011 calendar year. In it, his only listed source of income is through Robert A. Ballinger, Attorney at Law. The same was true for the 2013 SFI (covering 2012). At that point, Integrity Closing, LLC, did not yet exist. Curiously, Ballinger Real Estate Exchange, Inc. was not on his SFI, even though that company was formed July 31, 2012.

In 2014, Ballinger filed his next SFI, covering the 2013 calendar year, which is the same year that Ballinger says he began representing Ecclesia College as an attorney. That 2014 SFI shows the private law firm as a source of income, as well as Integrity Closing and Ballinger Real Estate Exchange. According to the Secretary of State’s Office, Integrity Closing was formed by Ballinger on February 4, 2013, though it wasn’t opened for business until September 2013. The Ecclesia property that he was involved with closed in early December of 2013, and Ballinger’s 2014 SFI lists his 2013 income from Integrity Closing as “More than $12,500.”

In 2015, Ballinger filed an SFI covering all of 2014. That document showed Ballinger’s income sources as the law firm, Integrity Closing, and Ballinger Real Estate Exchange. As with the previous year, Ballinger’s 2014 income from Integrity Closing is listed as “More than $12,500.”2

By the end of 2014, Integrity Closing had existed for just under two years about 16 months and had given Ballinger at least $12,500.01 in income in both 2013 and 2014. That is pretty impressive for a little closing company operating out of a law office in Berryville, AR (pop. 5,377). Assuming Integrity Closing was in fact a legitimate business and was not some sort of shell or pass-thru for Ecclesia or Paris to pay Ballinger for other reasons, one might expect that the third year of Integrity Closing (2015) would be at least as good, if not better, than the first two years.

According to Ballinger’s 2016 SFI, which covered 2015, however, Ballinger’s income from Integrity Closing fell to greater than $1000, but less than $12,500. Also listed as sources of income that year were Ballinger’s private law firm, the real estate exchange company, and (new for 2015) employment with Story Law Firm in Fayetteville, where Ballinger apparently began working at some point in 2015.3

It appears that Ballinger’s private law firm, Integrity Closing, and the real estate exchange company all ceased to exist in any profitable form in 2015, as none of them are listed on the 2017 SFI, which covers the 2016 calendar year. Instead, Ballinger’s only source of income in 2016 is listed as Story Law Firm. This is true for 2017 as well.4

What we have, then, is a closing company (Integrity Closing) that sprung into existence in 2013 — the year that the Jon Woods GIF/kickback scheme began, according to court documents — and that was owned only by the guy (Ballinger) who allegedly did legal work for the entity in the middle of the kickback scheme. For two years (2013 and 2014) during the peak of the Woods/Neal/Paris/Cranford stuff, Integrity Closing made “More than $12,500” per year. Then, in 2015, as the GIF scheme was apparently running its course (again, according to court documents), Integrity Closing’s profits fell off, and the company made Ballinger somewhere between $1,000 and $12,500.

Keep in mind, too, that Integrity Closing was a very part-time gig for Ballinger. 2013 was his first year in the legislature, and there was a full regular session and an emergency extra session that year. Plus Ballinger was (allegedly) still a full-time attorney in 2013. Assuming Integrity Closing was a full-service closing company,5 how much time could Ballinger have really put toward it in the three months that it was actually open in 2013 or in 2014 generally? Integrity Closing was, by all measures, a very profitable job that took comparatively little time and had minimal overhead (since it was run from Ballinger’s existing office).

Nevertheless, despite this roughly two years of success, Integrity Closing simply closed up shop at some point in 2015.

Also ending around that time? The GIF kickback/fraud scheme.

***

If that was the end of this story, it would still be worth telling due to the apparent scope of corruption in Arkansas over the past half decade. That is not the end, however; on top of the overlapping timelines between the GIF scandal and Ballinger’s business interests, there are some other lingering questions about Ballinger’s involvement with the land-purchase transaction.

Said Ballinger,

“The closing that I did was actually a loan closing and there was no GIF money that was used for it.”

As noted above, Ballinger claims that he did the closing, through Integrity Closing, for Ecclesia College’s purchase of land in 2013. And if you look at the documents, Ballinger’s “prepared by” address block and notary stamp are right there in plain sight.

On the deed. 6

If you aren’t familiar with real estate transactions, the short version is that mortgages are the conveyance documents associated with a loan, and deeds are the conveyance documents associated with buying or selling the property. In the case of this particular loan closing, the mortgage clearly states at the top it was prepared by Centennial Bank. It is standard for a lender to prepare their own loan documents. So what work did Ballinger actually do?

Perhaps what he meant was that he did a purchase closing that included a loan with the transaction (as opposed to closing the transaction with GIF funds), or that he simply closed the loan side of the transaction. But, if that’s what he meant, things suddenly get exceedingly more confusing.

Every lender requires a title insurance policy for their loans. Ballinger was the Operations Manager at King’s River Title Company from 2006 to 20117, and he was a licensed title insurance agent–right up until his license expired on January 31, 2013, some 11+ months before he did the “loan closing” for Ecclesia College.

This lack of a license would be easy enough to get around if Ballinger had a licensed title agent working for Integrity Closing. But, not only did he not have a licensed title insurance agent working for Integrity, the company itself was not a licensed title insurance agency. This is most likely because having his home go into foreclosure early in 2013, which appears to be a recurring problem8, would make getting an agency contract with any title insurance underwriter impossible.9

Going even deeper into the rabbit hole: every lender requires a closing protection letter (“CPL”). A CPL is issued by a licensed title insurance agent on behalf of a title insurer. It protects the parties to the transaction from fraud committed by the closing agent. In other words, if someone at the title company takes your money that is in escrow and skips off to Morocco, or just pays their mortgage with it instead of yours, the title insurer will make you whole. The catch here is that Ballinger did not have an agency contract with a title insurance underwriter, which means he couldn’t issue a title insurance policy or a CPL for the lender (or buyer and seller if they wanted a CPL).

So for a quick recap:

• Ballinger did not prepare the loan documents.
• Ballinger could not issue a title insurance policy.
• Ballinger could not issue a CPL, and therefore could not handle disbursement of funds from escrow.

WDBD?

What. Did. Bob. Do?

Well, we know for certain that he prepared the deed, which typically costs $50-$100, and he notarized the signatures on both the deed and mortgage, a service no title company ever charges separately for. It is possible that Ballinger did the title search, from which a licensed title insurance agent could prepare a commitment and issue a title insurance policy, but most title companies prefer to do their own work, especially on large transactions.

So…how did the lender (and Ecclesia College) get a title policy? How did funds in escrow get disbursed? Normally such a thing could not be known by public records. Luckily, in this case, there were two details on a recorded document–the perfunctory real estate transfer tax stamp document on the last page of the deed–that provide a clue.

The transfer tax stamp is customarily generated by the company representing the seller, as it will be attached to the deed that they have prepared for filing. The system used by every title company to generate and pay for the real estate transfer tax allows the title company to put in their file number for reference, and it prints it on the document. In this case it was file number W4182-030. That would be a curious numbering system for a new company that had just started out in the sticks of Carroll County.

The second detail was that the person who printed the stamp and/or made sure it was for the correct amount put her name and address on it, and the listed address was 1521 Merrill Dr, Suite D-220, Little Rock, AR 72211. That turns out to be the address of Wilson and Associates, one of the largest foreclosure firms in the state, located in Little Rock, which was also a licensed title insurance agency at the time.

So the buyer and seller are in Springdale. The attorney who is (allegedly) closing the deal, who just happens to also be a state legislator who directed GIF money to the buyer, is an hour and a half away in Berryville. And a foreclosure firm in Little Rock somehow gets brought into the transaction to generate the transfer tax stamp. Perhaps the foreclosure firm even handled disbursement of escrow and issued the title insurance policies. After all, Ballinger would have had to bring in someone to do that, since he literally could not do it through Integrity Closing.

As with so many turns in this story, questions abound here. Specifically, why not keep it local? Why did a Little Rock firm get brought into this deal in Benton County, rather than using one of the local title companies in Northwest Arkansas, where Ballinger surely had multiple connections due to his previous work in the industry?

As noted in the Times article, of the four other Ecclesia transactions in this time frame, three were handled by Realty Title and one by City Title. Both are highly reputable title companies in Northwest Arkansas. This one strange, Ballinger-cenric transaction is the only one that stands out as not being handled (at least in full) by a licensed title insurance agency.

What does all of this mean? 10 Well, Ballinger is being disingenuous when he claims that he and Integrity Closing handled the closing for Ecclesia. At most, he had an ancillary role and did almost none of the stuff you would expect from a closing company. For him to claim over and over in David Ramsey’s interview that he (Ballinger) did not make any money from the closing sounds almost believable, given the lack of work he could have actually done on the closing.

This raises a host of other questions, however: if Integrity Closing could not have handled the Ecclesia (or any other) closing on its own, how in the world did that limited little side business make over $12,500 per year for two years of very part-time work?

What service was Integrity Closing providing to Ecclesia (or anyone) that could have generated that kind of income?

Why did those services, and the lifespan of Integrity Closing, appear to coincide with, and last only as long as, the fraud/kickback scheme that Woods, et al., were engaged in?

Perhaps the next round of indictments will bring some answers to these and other questions.

***

UPDATE: Certain references to Integrity Closing’s opening were changed throughout, as it was discovered that Integrity was formed in February 2013, but did not open for business until September 2013. This is interesting for a couple of reasons:

1. That means Ballinger earned over $12,500 from Integrity Closing in 2013 in roughly 3.5 months of business, which is amazing, given the lack of services Integrity Closing could actually provide.
2. Integrity Closing opened for business about 35 days after the first GIF application from Ecclesia to Jon Woods, which was specifically for the 23+ acres that Ballinger later “did the closing” on.

Curiouser and curiouser.