McIntosh pleads guilty

Former Marmaduke school superintendent Jerry Don McIntosh pled guilty Tuesday in U.S. District Court at Little Rock to a single felony count of wire fraud conspiracy relating to an attempt to defraud the Arkansas Teacher Retirement System (ATRS).

Immediately following his plea, McIntosh, 63, was sentenced to two years of probation. Due to his health -- McIntosh is recovering from a stroke suffered in October 2007 -- he will not be required to perform any community service. According to the U.S. Attorney's office, McIntosh's record will permanently reflect his status as a felon.

Following an investigation by the Federal Bureau of Investigation (FBI) and the Arkansas State Police which began in 2005, McIntosh and brothers Ray Mike Graham and James Mark Graham were indicted in May 2008 by U.S. Attorney Jane Duke for conspiracy to commit mail and wire fraud.

The indictments against the Grahams were dismissed in August of last year at the request of the prosecution. The deal required the Grahams to make full restitution of the benefits received. Payments were required in lump sums, with Mark Graham repaying $121,098.38 and Mike Graham $106,450.60 to the ATRS.

Terms of the agreement also require the Grahams to have mandatory contact with a probation officer for 18 months.

According to a statement Tuesday from the U.S. Attorney's office, McIntosh was superintendent of Marmaduke schools from 1973 to November 2004 and, in that role, recommended persons for employment to the school board. The statement then outlined these details of the case:

"In 1993, Mike Graham retired from teaching at the Marmaduke School District and Mark Graham retired from teaching at the Greene County Tech School District in order to run their farm on a full-time basis. At the time of their retirement, the brothers had not acquired enough years of service to be able to begin drawing retirement benefits from the Arkansas Teacher Retirement System; therefore, unless they drew out their contributions, they would have to wait until age 60 to begin receiving any benefits.

"The ATRS was created to provide retirement benefits to the employees of the state's education community. Under the system, school personnel accrue years of service and, during those years, retirement benefits accumulate, either with or without contribution by the employees. After a certain number of years of service, the employees can retire and apply for benefits. The amount of those benefits is formula-driven, taking into account the amount of employee contributions and the years of service.

"In the fall of 1993, Jerry Don McIntosh approached the men about getting under contract to drive buses for the school district. Both men had been told by a representative of ATRS that they could accrue additional years of service for driving buses. Each agreed and entered into contracts with the school district, although both men told the defendant (McIntosh) they would not be able to drive every day. The contracts were renewed each year upon the recommendation of the defendant (McIntosh) and continued through 2001 for Mark Graham and 2002 for Mike Graham.

"Under ATRS guidelines, in order to accrue a year of service, the employee must work at least 120 days ni a school year. The first few years the Grahams had the contracts, they drove the buses on a regular basis. However, beginning in the late 1990s, it is estimated that they only drove the buses at most 30 days per year. Each quarter, McIntosh would certify or cause to be certified reports to ATRS showing that the Grahams had worked 30 plus days a quarter when he knew they had not worked those days.

"On May 8, 2001, Mark Graham submitted an Application for Teacher Retirement Annuity to ATRS. Part 2 of that form contained a false certification by Jerry Don McIntosh that Mark Graham had worked 178 days in the previous year. On May 9, 2002, Mike Graham submitted an Application for Teacher Retirement Annuity to ATRS. Part 2 of that form contained a false certification by Jerry Don McIntosh that Mike Graham had worked 178 days in the previous year.

"From the dates of their retirement until 2008, the Graham brothers received benefits from ATRS through electronic funds transfers. In 2008, pursuant to Pre-trial Diversion Agreements, Mark Graham repaid ATRS $121,098.38, which is the money he received plus 8 percent interest, and Mike Graham repaid ATRS $106,450.60, which is the money he received plus 8 percent interest. Both have also agreed to not receive any further payments until they are entitled at age 60 and have agreed to disclaim and relinquish the years of service for the years they were under contract to drive the buses."

Duke stated, "Our hard-working school administrators, teachers and other school district employees deserve to know that they will have financial support during retirement. What happened in this case was a fraud. If such actions were to occur repeatedly, it would seriously jeopardize the integrity and longevity of ATRS. School administrators like Mr. McIntosh are charged with making sure ATRS is operating from correct information in granting and calculating retirement benefits."

Prosecuting the case along with Duke was Assistant United States Attorney Karen Whatley.