(Source: By David Anderson, The Free Press, Kinston, N.C. (MCT) – A federal grand jury has issued an eight-count indictment against Rep. Stephen LaRoque, R-Lenoir, for theft and misuse of funds from his small-business lending organizations.
The office of Thomas G. Walker, U.S. Attorney for the Eastern District of North Carolina, issued a 72-page indictment Tuesday detailing the 15-year history of the East Carolina Development Company Inc., headquartered in Kinston.
LaRoque founded the ECDC in 1997 to loan federal funds to people in Eastern North Carolina who want to start a business but have been turned down by private lenders.
The money comes through the U.S. Department of Agriculture’s Intermediary Relending Program and the Rural Business Enterprise Grant program.
Walker’s office accused LaRoque of taking funds meant for operating the organization and making new loans, and purchasing thousands of dollars worth of jewelry for his wifewho was also a board member and had received a business loan from the ECDC before they were marriedas well as vehicles, attorney’s fees, purchasing a house for one of his stepdaughters and helping his wife purchase a Greenville skating rink, as well as equipment to maintain the rink.
Each criminal count comes with a sentence of up to 10 years in prison if convicted.
“These are extremely serious charges and they certainly give me a reason to pause and reflect on his capacity to serve effectively from his district,” said N.C. Sen. Floyd B. McKissick Jr., D-Durham, who also serves as head of N.C. Legislative Black Caucus. “It’s very difficult when you have charges that are this substantial and severe coming forward in federal court to be able to continue to be able to provide effective public service for your constituents.”
McKissick added: “My thoughts and prayers are with him at this time.”
LaRoque served in the N.C. House of Representatives from 2003 to 2006, and was elected to a third non-consecutive term in 2010. He was named as co-chair of the House Rules Committee in 2011.
LaRoque lost his re-election bid this year in the May primary to John Bell of Wayne County.
Bell is the current Republican nominee for the House District 10 seat serving Lenoir, Greene, Wayne and Craven counties. He declined to comment.
LaRoque’s fellow local legislator, Sen. Brent Jackson, R-Sampson, said he had little information on the charges against LaRoque as of Tuesday evening, but said he was surprised about the situation.
“Stephen and I have worked together fairly well the whole (legislative) session, and I was surprised by this,” said Jackson, whose district includes Lenoir County.
Jeff Nice, current chairman of the Lenoir County GOP, declined to comment.
“I’d prefer to let the justice system play its course,” he said.
Gov. Bev Perdue and House Speaker Thom Tillis, R-Mecklenburg could not be immediately reached for comment.
Walker also declined to comment.
Allegations of LaRoque’s mismanagement of the ECDC and the Piedmont Development Company, a second nonprofit lending firm he founded in 2003 to serve Western North Carolina, have swirled for about two years.
LaRoque’s opponent in the 2010 election, former Democratic Rep. Van Braxton, accused him of mismanaging the federal funds and using the loans as leverage to take the restaurant and home of Bruce Patterson of Lenoir County.
The tactic backfired, and LaRoque filed a defamation suit against BraxtonWalker’s report accused LaRoque of using ECDC funds to pay the attorney who represented him in this suit.
The attorney had also received a loan from ECDC to expand his practice from Snow Hill to Greenville.
The suit was ultimately dismissed, but LaRoque was also the subject of a 2011 investigative piece by N.C. Policy Watch. LaRoque dismissed the story as a hit piece against him by the left-leaning organization.
Walker’s report affirmed many of the allegations raised by the N.C. Policy Watch piece, such as paying himself a six-figure salary, and making loans to fellow sitting legislators who had served on his boards.
LaRoque could not comment, and referred The Free Press to his attorney, Joe Cheshire of Raleigh.
“Representative LaRoque has fully cooperated with the Government in its investigation and is very disappointed in the indictment that was handed down today,” Cheshire stated. “He believes that when this matter is fully aired, it will be shown that he did not violate the laws of the United States and he looks forward to presenting his case in court.”
LaRoque’s attorney described the U.S. Attorney’s report “as much of a piece of advocacy as it is a charging document.”
LaRoque is charged with four counts of theft concerning programs receiving federal funds, and four counts of engaging in monetary transactions involving property derived from certain specified unlawful activity.
The following information and allegations are included in the indictment of Stephen LaRoque by the U.S. Attorney’s Office
? From 2001 through 2011, compensation paid to LaRoque by East Carolina Development Company (ECDC), a nonprofit that he created as a provider of federally-back loans to business, totaled $1,804,311. Additional reimbursements during that period totaled $113,311. In 2008-2009, compensation and reimbursements totaled $337,561; in that year, ECDC managed a loan portfolio of $2.39 million.
? In December 2008, LaRoque used his credit card to purchase $15,168 worth of jewelry and covered the expense by issuing a check from ECDC for $50,000 to LaRoque Management Group (LMG)which “never had a contractual relationship with ECDC”and then deposited a check for $30,000 from LMG into his personal bank account.
? In January 2009, he structured a compensation package that paid him 3 percent of the assets of ECDC and Piedmont Development Company, a firm LaRoque created to provide loans in the western part of the state; a half-percent of all loan fees collected and 10 percent of annual profitsretroactive to 1999 in the case of ECDC and to 2004 in the case of PDC. The management contract was approved by a board composed of LaRoque, his wife, his brother and an unnamed “former director”; LaRoque reported abstained from the vote.
? In funding the purchase of Bladez on Ice, a Greenville skating rink, LaRoque asked ECDC’s boardhimself, his wife and his brotherto approve a loan to LMG “based on earned income not yet distributed.” The loan was approved at zero percent interest. In June 2009, ECDC issued a check for $150,000 to LMG, which LaRoque deposited before writing a check from LMG to Bladez on Ice for $141,500.
? In January 2010, LaRoque and his wife, “in their capacities as President and Chairman of ECDC,” issued a check from ECDC for $50,000 to LMG before LaRoque issued a check for $66,000 in connection with the skating rink purchase. The transaction allegedly violated ECDC’s bylaws, USDA regulations and applications for federal loan funds.
? In March 2010, LaRoque allegedly misapplied $89,482 in federal loan funds to purchase a house for LaRoque to rent to his step-daughter.
? The amount allegedly misappropriated and identified in the eight counts totals $557,582.
? All property specified in the indictment is “subject to forfeiture.”
Free Press Editor and Publisher Patrick Holmes, and Managing Editor Bryan C. Hanks contributed to this report. David Anderson can be reached at 252-559-1077 or danderson@freedomenc.com. Follow him on Twitter at DavidFreePress.
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