HALF A MILLION DOLLARS FLOWED INTO K-9 FUND

[Telegraph] Editor's Note: First in a two-part series examining
transactions found within Sheriff J.B. Smith's unaudited K-9 and Livestock
Fund.

Over the past 10 years, Smith County sheriff's officials have deposited
more than a half-million dollars into the K-9 and Livestock Fund, including
$46,900 from the county's longtime and current jail commissary vendors,
bank records show.

For months, the newspaper has studied account records after obtaining the
documents through the Open Records Act.

Sheriff J.B. Smith has said the K-9 and Livestock bank account has been a
fund used primarily to support horses and bloodhounds for search and rescue
operations, but a review of account activity by the Tyler
Courier-Times--Telegraph shows money went for more than feed, vet bills,
horseshoes and saddles.

Money from the drug forfeiture account and other audited county funds has
been deposited into this account, records show and officials confirmed. By
law, drug forfeiture money must remain in a separate audited account.

Other money generated from the sale and upkeep of stray livestock was moved
from an audited county account into this unaudited sheriff's fund.

Beginning in October, the sheriff said this account will be closed and its
functions routed through the county's regular, audited ledgers.

"It's a good thing, which is the way it should have been the whole time,"
he said in June.

Although Smith characterized the fund as non-profit, agency officials never
sought a 501(c)(3) status through the Internal Revenue Service, which
grants tax exemptions to qualified non-profit organizations.

Smith confirmed the fund does not have its own tax number.

Instead, agency officials monitoring the account borrowed the county's tax
ID number to start it.

The bulk of the account records that have been provided so far by the
department are the checks and deposits, which show the agency spent
$512,135.09 of the $520,560.43 in checks and cash received from February
1994 through March of this year.

The bank records were released only after a Jan. 23 request was made
through the Open Records Act by the Morning Telegraph, resulting in a Feb.
25 Texas Attorney General's decision (OR2004-1394) that the account was public.

HUNDREDS OF DONORS

After the newspaper received copies of the bank records, Smith agreed in
June to answer questions about its use and purpose.

He said the idea to establish a K-9 fund arose in the late 1980s,
immediately following a search and rescue operation because there was no
money to buy food or relief supplies for inmates and officers involved in
the efforts.

Sheriff's officers initially collected donations from a few private
individuals, but later expanded the solicitation efforts, generating
thousands of dollars by holding gospel concerts, fish frys, raffles and
other fund-raisers.

In spite of its name, the number of animals now supported by the K-9 fund -
at one time showing a monthly balance high of $32,729.21 - has dwindled to
three dogs and three horses, including a geriatric equine named "Eddie."

At one time, as many as a dozen dogs and several horses were supported by
the fund, the sheriff said.

The newspaper's review of thousands of account transactions reveals the K-9
fund has benefited from hundreds of donors, ranging from a few dollars in
pocket change collected by schoolchildren to awards from large foundations.

"Time Out," a topless club, donated $100 to the sheriff's 1998-gospel
fund-raiser.

"Doohickey Ferrett L.L.C.," doing business as "Outlaws," contributed in
1995, 1999 and 2001 a total of $950. Outlaws is a nightclub located between
Tyler and Whitehouse.

Even public entities wrote checks to this account, such as $800 received
from the 9-1-1 Network of East Texas from 1996 through 1999. The 9-1-1
Network is funded in part by tax dollars generated from user fees on
telephone bills.

The city of Tyler issued five checks to the fund for $2,850 between 1995
and 1998, but officials said they were unable to indicate the purpose of
those payments due to the age of the transactions.

"I still get donations," the sheriff said, displaying a $500 check from
Greenbriar Nursing Home.

Bank employees who copied the records noted some of the account
transactions in 1994 and 1999 could not be retrieved due to damaged
microfilm, resulting in a loss of records for $74,515.32, identified only
through bank statements.

Records show 111 different cash deposits made for a total of $58,784.89 -
some amounting to more than $10,000 - with no mention of where the money
came from or why it was given.

Some of the older microfilm transactions are illegible.

VENDOR WAS TOP

CONTRIBUTOR

Smith initially declined to release records of his K-9 fund, saying some of
the donors wished to remain private, but he later relented after the Texas
Attorney General determined the contents were public.

A review of those records shows the largest identifiable contributor to
that account was Hurst-based Mid-States Services, which provides Smith
County Jail inmates with meals and supplies.

Smith selected Mid-States to handle the county's jail commissary business,
an arrangement that grossed the firm an estimated $500,000 per year
providing meals and supplies to inmates.

Over a period of five years, Mid-States gave $46,900 in donations to the
K-9 fund, records show.

Jack Madera, the former head and founder of Mid-States, was indicted in
January by a Dallas County grand jury for falsifying government documents
to obtain a Kaufman County jail contract.

The charges against Madera, as well as charges sought against Dallas County
Sheriff Jim Bowles for accepting cash and favors from the vendor, were
dropped in March.

Evidence gathered by investigators, including copies of the Smith County
sheriff's K-9 account, were passed on to federal authorities.

Madera sold the company to a group of investors in the late 1990s, but he
stayed on as a consultant until February 2002.

John F. Sammons Jr., is the current chairman and CEO of Mid-States.

In interviews with the newspaper, Smith had earlier denied receiving
anything but meals from Madera.

But after the K-9 account was deemed public, he acknowledged Madera
contributed to the K-9 fund.

Records obtained by the newspaper show that Madera's firm began giving
contributions to Smith's K-9 fund in 1996, starting with $10,000 divided
into two payments.

Subsequent donations were made in January and April 1997 when Mid-States
contributed another $6,000, plus another $10,900 the following year.

In 1999, the year Mid-States changed hands, there were still more
donations. Two checks totaling $10,000 were donated to the K-9 fund.

The last known donation came in March 2001 with a single check for $10,000,
for a total of $46,900 in contributions. Sammons' signature appears on that
check.

Mid-States did not contribute any money in 2002, the year Madera left.

Also in 2002, Smith County's new purchasing agent, Jacque Powelson, took
over the bidding process. She recommended cutting ties with Madera and
putting the county's commissary contract out for bid.

Ms. Powelson said no contracts were found documenting Smith's earlier
agreements with Mid-States.

Two years later, Smith County continues to do business with Mid-States, now
under Sammons' ownership.

"We still use Mid-States," Smith said, even though Madera sold the company.
"Jack Madera has made contributions for years - he still comes down here."

Authorities in Dallas said the grand jury probe into Madera's dealings with
several Texas lawmen was halted in March after it was learned the Federal
Bureau of Investigations was conducting its own statewide investigation.

Questions posed by the newspaper in May about exactly where that
investigation stands were referred to the U.S. Attorney's Office.

"Normally we can't answer questions about our investigations," said Davilyn
Brackin, spokesperson for the U.S. Attorney's Office in Beaumont. "We can't
deny there is an investigation, we can't confirm one. We're just not able
to comment."

But Special Agent Lori Bailey, a spokesperson for the FBI, has gone on
record confirming the investigation.

"Our investigation has been ongoing for quite some time now," she said, as
quoted by the Dallas Morning News in April. "It has been independent and it
is going to remain that way."

Records show Madera's company was not the only entity to make sizeable
contributions to the K-9 fund, though none are listed as vendors for the
county.

Records show other large donations came from Tyler charitable foundations,
including the Watson W. Wise Foundation, which donated on six occasions
from November 1994 to June 2002, for a total of $31,000. The Bob Herd
Foundation made four donations, totaling $18,000, from January 2000 to
November 2001.

Two other deposits in 2002 and 2003 for $4,000 each were entered as "Bob
Herd" and "Heard" on the deposit slips.

Wise Foundation board member Will Knight said last week the concept of a
dog and horse patrol is beneficial to the community and should be supported.

"I know the county doesn't pay for it," Knight said. "They need private
contributions, I guess, for them to do it. From what I've seen, I think
they (dog and horse patrol) do a good job, assuming there is no
misapplication of funds. It's my understanding there's been no question of
that. What we think we're contributing to is the horse and dog patrol for
the sheriff's department.

"We're assuming the money is going to the dog food and the horse food and
to keep the animals up, and the veterinary bills and stuff like that ... I
will trust that's where it's going, but I don't have any way of knowing
that," Knight said. "That (dog and horse patrol) is the only thing that
compels me to donate - I always want to know how the money is being spent."

CASH FOR FLASH

Numerous transactions show some people with signature authority on the
account wrote checks to themselves. Most of these checks featured a
notation of "cash" with no explanation made of a specific fund or purpose.

Records show SCSO Lt. Deal Folmar wrote checks totaling $2,749 to himself.
Three checks, totaling $89.79, were labeled "reimbursement" for
expenditures, but the records don't show what he was reimbursing himself
for. One $200 check written by Folmar to himself had the notation "bowling
tournament."

Now-retired Capt. Marvin Wintters, who also had the authority to sign
checks, received a total of $7,200 from the K-9 account.

A 2002 check for $420 was written by Lt. Craig Shelton to Wintters for 18
rolls of hay.

Wintters wrote three checks worth $700 for cash, and six checks worth
$6,080 to himself, including a $300 check with a notation of "TJA Conference."

One $5,000 check written in 1999 by Wintters to himself had a notation of
"F/M." A $5,000 cash deposit was noted a few days after Wintters' check was
written.

Smith said most of the checks for cash were used for "flash money" in
undercover drug operations and later re-deposited into the K-9 fund.

He said narcotics officers were allowed to cash checks for flash money for
their controlled drug buys. Requesting cash through the county could mean a
one or even two-day turnaround time, the sheriff said, adding, "sometimes
they needed the money right then."

Examination of records could neither confirm nor refute the sheriff's
assertion that the flash money was redeposited.

SEIZED MONEY MIXED IN

Although the law requires drug forfeiture and seizure money to remain
separate, Smith County's treasurer's office issued $9,855.89 in checks from
an audited drug forfeiture account to the non-audited K-9 account.

Two of those transactions were made to purchase vehicles, the sheriff
acknowledged.

One was a $3,300 check written in 1997 by former Chief Deputy Johnny
Beddingfield to pay off a lien on a 1988 Jaguar, which was seized from a
drug suspect and later sold for $5,440, allowing a profit to be earned.

Also in 1997, the agency spent $5,701 to purchase a seized used Chevrolet
pickup, which was sold for a profit of $1,311.

In those instances, the sheriff's office purchased these vehicles through
the K-9 account and then was reimbursed by the Smith County treasurer from
the agency's drug forfeiture account.

Department officials said proceeds were deposited into the drug forfeiture
account.

Law agencies can legally seize a vehicle linked to drug offenses and then
pursue a civil judgment, allowing them to purchase vehicles for the amount
of money owed. Vehicles in good condition can be resold for a profit or
used by narcotics officers to develop new cases, officials said.

But drug forfeiture and seizure money must be maintained in a separate
audited account, Texas law states.

Chapter 59, the "Forfeiture of Contraband" section of the Texas Code of
Criminal Procedures, strictly forbids mixing drug or seizure money with
other revenue.

Such money must be audited annually by the commissioner's court and the
findings later reported to the Texas Attorney General's office.

"The budget must be detailed and clearly list and define the categories of
expenditures..." the provisions states.

Further, the funds must be "used solely for law enforcement purposes, such
as salaries and overtime pay for officers, officer training, specialized
investigative equipment and supplies, and items used by officers in direct
law enforcement duties."

Smith has maintained his agency is so cash-strapped deputies are forced to
pay for their own training and equipment.

He referenced their hardships during a February newspaper editorial board
meeting, saying, "These deputies are so dedicated to their jobs, they spent
money out of their own pockets to pay for their schools and their equipment
and gun. They never even had bulletproof vests on the budget until last
year because the county wouldn't buy them. We had to go to the Lions Club
and beg for funds for equipment ... that's sad."

BONDSMEN DONATE

Some Tyler bail bondsmen are also among those making donations to Smith's
K-9 account.

Of those, bondsman Earl Nix contributed $450 in 1997, 1999 and 2000; EZ Out
gave $1,000 in 1999; and Fast Action Bail Bonds gave $100 in 1997.

The largest and most frequent donations came from Strike 3 Bond Service,
which gave six donations totaling $4,500 between 1995 and 1999.

Strike 3 owner Bill Bobbitt, SCSO Chief Deputy Bobby Garmon and the sheriff
were sued unsuccessfully last year in federal court by competitors Angelo
Clark, Terry Henson, Malvin Mills, Robert Courson Jr. and Harold Dean for
an alleged monopoly in the bonding business.

The plaintiffs claimed the sheriff's office allegedly gave preferential
treatment to Bobbitt in exchange for personal favors and gifts.

It is unlawful for law enforcement officials to recommend or promote
bonding companies.

The sheriff and Strike 3 won the suit.

FIREARMS PURCHASED

The issue that initially brought the K-9 account into the public realm was
the purchase of 340 Remington shotguns from the Texas Adjutant General's
Office.

After the sheriff advised Smith County commissioners they should continue
to house federal prisoners or lose the ability to obtain valuable
government surplus, the newspaper attempted to determine exactly how much
property was at issue.

Records were obtained from the Adjutant General's Office and U.S. Marshal's
office to resolve that question. During a review of those records, the
newspaper found that the sheriff's department had purchased 340 new and
used weapons using money from the K-9 fund.

It wasn't until the Texas Attorney General ordered the sheriff to release
the fund records that details of the shotgun purchases were revealed.

Bank records include the names of law enforcement officers and federal
agents, who pooled their money to buy the weapons for about $150 each.

Acting much like a broker, the sheriff's office issued checks totaling
$37,260 within a six-month period to buy 340 Wingmaster models of the
Remington 870 shotguns, which retail for around $600 each.

Checks of $3,000 and $4,500 were written in September 1997 to the Adjutant
General's Office to purchase the weapons, which were deemed surplus and
offered for sale to Texas lawmen. Two other checks for shotguns - one for
$27,000 and another for $2,760 - followed in December.

Although the weapons were intended for law enforcement use only, some of
the 340 guns were sold to former County Judge Larry Craig, a certified
peace officer; and former County Commissioner Andrew Melontree, according
to Smith.

Four weapons went to the district attorney's office and two went to area
police chiefs, with the remaining guns sold to various law enforcement
officers and agencies, including former Tyler police detective and
commissioner-elect Bobby Van Ness, Tyler Police Chief Gary Swindle and
former FBI special agent Jim Wilkins, now police chief in Marshall.

The city of Tyler paid the sheriff's office $2,250 to purchase 15 weapons
for its inventory.

Agents with Alcohol, Tobacco and Firearms, who investigated the
appropriateness of those sales earlier this year, have now concluded their
probe.

ATF special agent Bill Neuell said in May the federal agency later advised
Smith in writing the transactions did not comply with the required
provisions on sales and purchases.

Federal authorities said a firearms license is required to conduct repeated
sales.

"Basically, it was a note to the sheriff, saying that should he want to do
it again, he should first contact the ATF," Neuell said. "It was an
advisement."

No penalties were assessed, the agent said, noting the statute of
limitations expired.

Sheriff's officials did not comply with a request by the Morning Telegraph
for serial numbers of those weapons, claiming the records were incomplete.

ACCOUNT TO DISSOLVE

Smith County sheriff's officials have pledged to abide by an attorney
general's opinion released in August requiring the agency to deposit all
collected funds into audited county accounts.

This ruling was issued in response to questions of whether the sheriff's
department can collect and dispose of government surplus, but the directive
mirrors the earlier opinion on what should happen with the sheriff's K-9 fund.

The quest for a complete inventory list began last fall after the state
ordered Smith County to immediately reduce its jail population or farm out
inmates to other counties.

Commissioners asked in November whether the county should rethink its
contract with the U.S. Marshals Service to house up to 50 federal prisoners.

Smith urged them to keep the contract, saying otherwise the county would be
forced to relinquish about $1 million in "valuable" surplus property.

He later described the surplus as mostly "trash" when the commissioners
asked for a complete listing.

Smith in late December delivered 500 pages of assorted documents to the
commissioners court and to the newspaper, but no inventory list.

The Morning Telegraph ultimately obtained 400 pages of inventory from the
USMS, which stated the sheriff's office took possession of 69,107 different
items valued at more than $2 million.

An audit conducted by the county auditor shows some of those items remain
unaccounted for, records show.

The second part of the series will appear in Monday's paper.

Roy Maynard covers local government.

Jacque Hilburn covers police, fire, and public safety organizations.