Jones Trust is suing Frost for $6.6 million.
The lawsuit, filed Aug. 19 in Washington County Circuit Court, accuses Frost of forging Bernice Jones' signature on checks to his company as well as falsifying ledger entries, lying to auditors, making false and fraudulent statements under oath, and destroying original documents, including all canceled checks of the trust. His actions, according to the complaint, were "deliberate, intentional, and reprehensible" and deprived the trust of money that otherwise would have been available for charitable and philanthropic purposes. He is accused of "surreptitiously, secretly, and feloniously" diverting for his own use money from the trust while at the same time being paid for fees and expenses by Bernice Jones from her personal and business accounts.
Frost, a longtime friend of the Joneses, resigned from the trust May 19 after being removed from his responsibilities as accountant a month earlier. Trust officials have never publicly explained Frost's removal, nor has Frost, a Little Rock accountant and business consultant, responded to repeated requests for an interview.
However, the Northwest Arkansas Business Journal and Arkansas Business subsequently learned from tax filings that Frost paid himself more than $350,000 in salary and consultation fees for fiscal year 1994, the last year for which the flies were available.
The lawsuit details exactly how much Frost allegedly paid himself - $1.4 million - beginning in 1993, when his company, Jack Frost Management Consulting Co., received $67,452. In the years since, according to the suit, Frost paid himself or his company the following amounts: $339,600 in the calendar year 1994; $354,441 in 1995; $478,514 in 1996 and $170,118 in 1997. The suit also mentions a $33,000 wire transfer made on an as-yet-undetermined date.
In addition, Frost is accused of converting another $182,873 through oil drilling operation investments purchased in his name. The lawsuit says Frost transferred by wire $55,146 to Murco Drilling in Shreveport on Nov. 12, 1993. Subsequent investments to Murco included $14,650 on Feb. 14, 1994; $61,649 on Aug. 10 and $51,427 on April 27, 1995. No account for the trust was ever established with Murco, nor did the trust receive royalties from the company, according to the suit.
The trust was established Dec. 19, 1988, for charitable purposes with Frost and Bernice Jones as the original trustees. Frost was responsible for maintaining the trust's bank accounts, stock portfolios and managing its assets.
By mutual agreement, neither trustee was to be compensated by the trust, according to the suit. But Bernice Jones agreed to pay, from her personal or private business funds, Frost's "reasonable fees and expenses" for work as a trustee and as business adviser and consultant for her private business pursuits.
Mrs. Jones honored that commitment, the suit states, paying Frost "significant sums" between Dec. 19, 1988, and May 19, 1997. "Specifically, Frost was paid by Jones Investment and Trust Company and Jones Investment Company the sum of $1,103,711 during the period of time from January 1, 1994, through March 21, 1997," according to the suit.
Since Frost's resignation, Dr. Joel Carver, a Springdale cardiologist and friend of Mrs. Jones, and Dan Ferritor, former chancellor of the University of Arkansas at Fayetteville campus, have been named co-trustees for the trust.
The suit asks for a jury trial and contends Frost's actions harmed the trust as well as its beneficiaries and future beneficiaries. The plaintiffs ask for restitution of $1.6 million plus interest and attorney fees and punitive damages of not less than $5 million "in order that Frost may be punished for his conduct and that others will be deterred from similar conduct."
The Northwest Arkansas Business Journal and Arkansas Business learned recently that the FBI is investigating Frost for criminal fraud in connection with the trust. Sources close to the case say that at least one and possibly two subpoenas - probably related to bank records - were issued in the case by the federal grand jury in Little Rock.
The FBI declined comment.
The investigation apparently began about three months ago with a tip and gained steam a couple of weeks later when a representative of the Jones estate called the FBI to complain that funds were missing from trusts overseen by Frost.
Recently, a bust of Frost disappeared without explanation from the grounds of the Harvey and Bernice Jones Center for Families in Springdale.
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|Title Annotation:||Harvey and Bernice Jones Charitable Trust; H.G. Frost|
|Date:||Aug 25, 1997|
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