LaRoque fires back on loan controversy …

NC State Rep. Stephen LaRoque (R-Kinston)  called a press conference this week to counter ethics questions raised against him by a left-leaning public interest group:

Rep. Stephen LaRoque on Tuesday defended his pair of federally funded nonprofits that provided loans to two members of the General Assembly and other associates, put his wife and brother on the board of directors, and brought him a six-figure income.

LaRoque, a ranking Republican in the state House who is on his third term, called a news conference to denounce an investigation published online this month by N.C. Policy Watch, a project of the N.C. Justice Center. He called Policy Watch “a liberal propaganda tabloid.”

“It’s clear that this has been a political hit piece in response to my statements about one of their board members and his organization,” LaRoque said, referring to William Barber, president of the North Carolina chapter of the National Association for the Advancement of Colored People. Earlier this year, LaRoque called Barber a racist. Barber is on the N.C. Justice Center’s board of directors.

A spokesman for N.C. Policy Watch was quick to respond to the legislator’s allegation:

“Rev. Barber on our board had nothing to do with the story,” Policy Watch Executive Director Chris Fitzsimon said later. “Rep. LaRoque has been in the news for a lot of reasons lately. … We thought it would be interesting to understand his motivation. This is a person who rails against the evils of big government, and it turns out he’s paying himself in federal dollars at a salary most people would find interesting.”

LaRoque responded to a number of allegations laid out by the Raleigh-based group:

 LaRoque stressed that operational costs only came from interest and fees, not taxpayer money. The Policy Watch story reported that an audit found the program was unclear about which funds are public money.

Policy Watch said the annual compensation as high as $195,000 that LaRoque earned was out of line with other nonprofits in the state doing similar work. LaRoque provided a cost breakdown on two other nonprofits, including one cited in the Policy Watch article, to show that he was managing more assets with lower personnel costs. His assets average $6 million, tax records show. He manages the nonprofits through a one-man private enterprise and has employed few people.

The Policy Watch investigation quoted three former board members saying they didn’t know LaRoque made that much money. LaRoque counters that the board approves his contracts as well as all loans. He said his compensation is based on a percentage of assets, and all board members can make that calculation. He said he doesn’t necessarily take the amount of pay he is due each month. Asked exactly how much he does pay himself from his private firm, LaRoque replied, “None of your business.”

“This is America, and I don’t think profit is a crime,” he said.

The story said one board member resigned because he became head of economic development in Lenoir County but also because he was “increasingly uncomfortable” with how the nonprofit operated. LaRoque provided the man’s letter of resignation, which didn’t mention his discomfort and, in fact, said he hoped to return some day.

The legislator defended having his wife and brother on the board by saying there are no Internal Revenue Service regulations against it. The Policy Watch story notes that IRS guidelines say boards shouldn’t be dominated by those who are not independent because of family or business relationships. The most recently available federal tax records show five board members: LaRoque, his wife, his brother and two others on one board. The other board has LaRoque, his wife and brother.

LaRoque did not address the story’s claim that his wife and a board member received loans before joining the board. He said he didn’t see anything wrong with lending to friends and associates.

“If I loaned to a dry cleaner, would I be precluded from taking my clothes there?” He also said he saw no potential conflict in making loans to Sen. Debbie Clary and Rep. Mark Hilton for their small business ventures – calling them “very independent people.”

Now, here are my thoughts:

(1) According to the story:

LaRoque represents Lenoir, Greene and Wayne counties. His two nonprofits – East Carolina Development Co. and Piedmont Development Co. – lend federal money to new or expanding small businesses in rural communities that have not been able to get bank loans. The nonprofits participate in a U.S. Department of Agriculture program that provides 30-year loans at 1 percent interest to intermediaries, which re-lend the money at a higher rate.

Senator Clary’s profile on the General Assembly web site identifies her full time job as “president of Millenium Marketing Group Inc.” in Shelby, NC — which is a significant distance outside of “East Carolina.” An online profile of the senator’s business says:

Millennium Marketing in Shelby, NC is a private company categorized under Advertising Consultant. Current estimates show this company has an annual revenue of $500,000 to $1 million and employs a staff of approximately 1 to 4.

Judging by that description, does the senator’s company sound like “a new or expanding small [business] in [a] rural communit[y] that [has] not been able to get bank loans” ?  Are we expected to believe that a powerful, long-serving legislator like Senator Clary was not able to get bank loans?  (Maybe the banks were looking at the out-of-control spending by the legislature during her time in office.)

To Laroque’s defense, he did not try to hide his association with Clary’s company.  In fact, Millenium is featured on the home page of Laroque’s private company web site. Shelby, the hometown of Clary’s company is in Cleveland County.  According to an economic impact chart on the Laroque firm site,  two loans have been made to entities in Cleveland County, from the nonprofits Laroque manages, for a total of $135,500.  According to Laroque’s chart, $35,000 was leveraged and the total project was $170,500.  It is not clear, from the information on the site, whether or not ALL of that money went to Clary’s company.  The site does say that loan accounted for the creation of TWO jobs.

The next big questions that need to be asked:

(1) Did Clary and Hilton have to follow the same rules and procedures as anyone else applying for loans from Laroque’s nonprofits?

(2) Did the two legislators and their companies ACTUALLY qualify for loans under the rules and regulations governing those nonprofits?

(3) Have the two legislators repaid those loans under the same kind of terms anyone else would have to, under the rules and regulations governing the nonprofits?  If full repayment has not yet occurred, is it underway?

Laroque did the right thing by coming out and defending himself.  I am troubled by the shoot-the-messenger tactics he is employing.  I personally disagree with NC Policy Watch on just about everything, but I am somewhat troubled by what they have presented.  When dealing with public money, you need to break your neck and bend over backwards to be completely transparent and erase ANY doubts about the integrity of your financial practices.  This was a good start, but Laroque needs to put some more information out there.  The longer this ‘dead fish” of a scandal hangs out there, the more harm it does to NCGOP efforts to push their agenda of change in Raleigh.  This story makes the current crowd look like ‘more of the same’ and less of a “breath of fresh air.”

Laroque is making progress, but this press conference did not produce a passing grade on the “smell test.”