Easley, Rick Hendrick gain from friendship

Relationship includes use of car, tropical trip and tax breaks

Staff WriterMarch 29, 2009 

  • Here are portions of the state's ethics law:

    Ethical standards

    No public servant shall knowingly accept a gift from a person whom the public servant knows or has reason to know any of the following:

    (1) Is doing or is seeking to do business of any kind with the public servant's employing entity.

    (2) Is engaged in activities that are regulated or controlled by the public servant's employing entity.

    (3) Has financial interests that may be substantially and materially affected, in a manner distinguishable from the public generally, by the performance or nonperformance of the public servant's official duties.

    Exceptions on gifts

    Gifts include travel, lodging, dinners, entertainment and anything else of monetary value.

    The law allows the accepting of gifts related to personal connections as long as "[t]he gift is made under circumstances that a reasonable person would conclude that the gift was not given for the purpose of lobbying."

    The term "lobbying" does not include communications or activities as part of a business, civic, religious, fraternal, personal, or commercial relationship which is not connected to legislative or executive action, or both.


    The willful failure of any constitutional officer of the state to comply is malfeasance in office for purposes of impeachment. Nothing affects the power of the state to prosecute any person for any violation of the criminal law. It is a misdemeanor to conceal or fail to disclose required information on disclosure forms. It is a felony to provide false information on a form.

Former Gov. Mike Easley crashed one of NASCAR titan Rick Hendrick's race cars, went with him to receptions and hung around with him at races. But the relationship between the two men goes deeper than public appearances, and it has been good to both.

Records obtained by The News & Observer show that Easley traveled last year on a Hendrick racing team jet to Hendrick's retreat on a Florida island. Hendrick paid for the trip, he says.

The records also show that former first lady Mary Easley has been driving a new $30,000 Honda Accord that the Easleys didn't buy. It belongs to one of Hendrick's Charlotte dealerships, which bought it in the final week of Easley's administration.

Racing businesses owned by Hendrick and others have received tax breaks for corporate jet fuel and other government help, sometimes with Easley's assistance.

Hendrick Automotive Group owns 30 dealerships in North Carolina. A separate company, Hendrick Motorsports, sponsors four NASCAR race teams based near Charlotte. Hendrick is also vice chairman of an industry group that has pushed racing-friendly legislation in Raleigh since 2004.

During the past six weeks, Mary Easley has been observed in the 2009 silver Honda Accord on multiple occasions, mostly while she commuted to an administrative and teaching job at N.C. State University, where she is paid $170,000 a year. Through aides at N.C. State, she declined to comment.

Mike Easley, a Democrat who left office Jan. 10, declined an interview request. He said in an e-mail message and through a former political adviser that the Honda is a "loaner" that his wife was using until "her car comes in." The Easleys declined to provide documentation of that order.

Late Friday, Hendrick said that Mary Easley has been test-driving cars and "is purchasing one."

The manager listed on the Accord's sales invoice, Joshua F. Bradish, said he didn't know all details of the transaction.

"There's a lot of different people that we provide cars for," Bradish said. "I can't really -- especially with him being a former governor -- I can't really get into the personal things."

He said he wasn't aware of any cars that take a long time to deliver to a customer.

The Easleys' son, Mike Jr., has been driving a 2000 GMC sport-utility truck that is also owned by a dealer, this one from the Fayetteville area. [See related story, Page6A.] The former governor said Friday that the truck had been part of a lease all along, but he has now purchased it.

As of Friday, no records were on file with the Division of Motor Vehicles showing the GMC Yukon was being leased, according to DMV officials. The purchase by the Easleys also had not yet been filed. Records show the dealer has owned the Yukon since 2003.

Hendrick would not agree to an interview to discuss the Accord or his relationship with Mike Easley, instead responding to several questions through a spokesman. But the two have been together on many occasions, including one time early last year, when Easley made the trip to Key West, Fla.

Easley has not disclosed that he flew with Hendrick to Key West and stayed with him at a nearby small island off the Florida coast known as Sunset Key, where Hendrick's wife owns a beachfront house valued at $3million. He could have made the disclosure under laws governing ethics and lobbying written to make government more transparent.

In an e-mail message, Easley wrote that he would not talk about the trip with Hendrick.

"I don't discuss personal business on personal vacation on personal time," Easley wrote.

Hendrick said: "The trip you're referring to was personal, and I paid for it personally." He didn't provide the cost and said it was the only such trip the two have taken.

In 1997, Hendrick pleaded guilty to a federal felony mail-fraud charge that stemmed from an investigation alleging he gave cash and cars to Honda executives in the 1990s to secure a larger allotment of Honda Accords to sell to the public.

One executive was asked in court what Hendrick had expected in return for cash.

"Favorable treatment in every way," the executive said.

Hendrick, who was diagnosed with leukemia in 1996, spent a year under house arrest and was later pardoned by President Bill Clinton.

Close ties to governor

Interviews and documents show that while Easley was in office, the governor and Hendrick maintained a close relationship and that Easley helped Hendrick's interests with legislation and other actions. They include:

A law signed by Easley in late 2005 that gave race teams a sales-tax break on corporate jet fuel used flying to and from races. Hendrick Motorsports is a top beneficiary. In his proposed budgets in subsequent years, Easley successfully sought extensions for the tax breaks, which were scheduled to expire.

A law proposed by Easley in his 2006 budget that gives professional motorsports teams a tax break on their car parts and accessories, other than tires and paint. The break was estimated to cost taxpayers $3.2 million a year. It passed, but only after legislators cut it in half. Details on which teams are getting the break are not public.

A $1 million state grant for an auto technician training center at Central Piedmont Community College in Matthews that is named for Hendrick's late father, Joe. Easley stood with Hendrick in May 2007 at the dedication for the center, which is near a planned Hendrick auto mall. Rick Hendrick also contributed $1 million to the center. The state grant was added to the budget late in the process, and its origin is not traceable.

A public appearance by Easley at the grand opening of a new Hendrick Lexus dealership in Charlotte in March 2004 that coincided with lobbying efforts for a new Toyota plant in the Southeast. Three months later, Easley flew to Charlotte to award Hendrick's parents the Order of the Long Leaf Pine, the highest honor a governor gives a civilian. "They actually started the entire business, and I thought it was appropriate to recognize them," Easley said.

In his e-mail, the former governor said he and Hendrick never discussed any of the tax breaks that helped motorsports or the grant for the training center. Hendrick said he wasn't involved with legislation on any level.

Support for NASCAR

Easley's ties to NASCAR as a fan and promoter of the sport are well known; legislators, too, have shown broad support for racing efforts.

In May 2003, while driving laps at Lowe's Motor Speedway, Easley crashed into a wall. The mishap -- in a car owned by Hendrick -- helped solidify his popularity with NASCAR fans. He cultivated an image as a "NASCAR Democrat."

A few days after that wreck, Easley was back at Lowe's for a news conference. Hendrick was there along with Richard Petty, the legendary racer who was then the chairman of a fledgling nonprofit formed to promote racing causes. It is called the N.C. Motorsports Association, or NCMA.

Hendrick would later recall that the Easley visit helped Hendrick see "just how much influence NCMA was capable of," according to an item published in the association's newsletter.

The association had been created specifically to conduct a study of racing in North Carolina and its effects on the economy. In September 2003, Hendrick was made vice chairman of the association, a position he still holds.

A week after Hendrick's association position was made public, Easley flew on the state-owned helicopter to Hendrick's race team headquarters in Concord for a public-service announcement, flight records show. He went back to Hendrick's headquarters the following month on a state-owned jet.

On Dec. 4, the association secured a $100,000 grant from the Golden LEAF Foundation, which is controlled by appointees of the governor and legislative leaders. The group later received a $40,000 grant from the N.C. Rural Center. Both are supported by state money. Leaders at both organizations said in interviews that the grants were made as part of normal applications and that there was no pressure from Easley or people close to him.

11th-hour tax break

By March 2005, Easley appointed a group of 19 people interested in racing, including Hendrick, to advise him on ways to promote and protect the sport.

Toward the end of the legislative session that year, language giving race teams a tax break on their corporate jet fuel was added to a motor fuel tax bill originally sponsored by Rep. Paul Luebke, a Durham Democrat.

Luebke ended up opposing his own bill, which passed at 3 a.m. in the whirlwind of end-of-session deal-making. In an interview, Luebke said the piece of the bill giving jet fuel breaks to race teams prompted his no vote. "Totally unjustified," he said.

It appears that the tax break was inserted into the bill by Senate Majority Leader Tony Rand, a Fayetteville Democrat who is a strong supporter of NASCAR and was Easley's closest ally in that chamber.

Rand said he couldn't recall whom he discussed the item with but said he, Easley and others are big supporters of the industry. He said legislators started paying more attention to motorsports as NASCAR staged its final race at Rockingham in 2004 and other states started wooing teams to relocate.

"I've always thought this is an important part of North Carolina," Rand said. "It was important that we retain our spot as the heart and soul of NASCAR."

Easley signed the bill into law on Sept. 27, 2005.

The tax break saved Hendrick Motorsports $35,079 in 2007, the last year for which state records are available. Hendrick is the single largest beneficiary of the break, although three entities with versions of the Roush racing team name saved more, getting $64,000 combined.

Nine other entities claimed an average of about $7,200 from the tax break.

Flying by private jet

About three months ago, The N&O sought records from the state Highway Patrol that would show details of a flight Easley took to Florida in March 2008. As governor, Easley had refused to provide such records, citing security concerns.

Earlier this year, the patrol insisted for weeks that the record did not exist. The newspaper conducted interviews with Crime Control and Public Safety Secretary Reuben Young, a former lawyer for Easley who oversees the patrol, and with people in the incoming administration of Gov. Beverly Perdue, who ran for public office on a pledge of openness and transparency.

The patrol reversed itself March 19, saying a record existed after all. An internal affairs investigation was launched this past week to determine what happened, said Col. Walter Wilson, the patrol's commander. "I was not only surprised, but disturbed," he said.

The patrol has provided a one-page flight itinerary that shows Easley went from Raleigh-Durham to Orlando on a plane owned by Jimmie Johnson Racing, which is part of the Hendrick organization.

Hendrick was picked up in Orlando, according to the record. The group then headed to Key West.

According to travel records and interviews, Easley stayed March 11 and 12 last year, a Tuesday and Wednesday.

A trooper assigned to protect him stayed at a Westin resort near the Hendrick home. The trooper billed the state $885.28 for the trip. Records don't show any expense reimbursement for airfare.

Easley returned to North Carolina on the evening of March 13, according to the trooper's expense form.

State ethics law prohibits a public servant from accepting anything of monetary value, at any time, from a person whose financial interests could be affected by the public official.

Easley's e-mail message indicates he considers the trip with Hendrick to be personal. The ethics law allows a gift as part of a personal relationship provided that it is not related to the public servant's service or position and is made "under circumstances that a reasonable person would conclude that the gift was not given for the purpose of lobbying."

The motorsports association highlights its legislative efforts and successes in newsletters, releases and on its Web site. The group has not registered to lobby since 2004, but it doesn't have to unless it hires a lobbyist.

A news release distributed by the motorsports association 11 days after the trip describes the group as being "involved in public policy through our work with the North Carolina Legislature; Business development through the North Carolina Department of Commerce; Workforce Development which involves educational institutions statewide, the business community and motorsports organizations."

Hendrick is vice chairman, but he said it is a ceremonial position. The association's executive director is Hendrick's pit crew leader, Andy Papathanassiou, who said in an interview that Hendrick gave money to the group and had "sweat equity" in getting it going. Another Hendrick employee is on the 15-member board of directors.

Perry Newson, executive director of the N.C. Ethics Commission, said the commission conducted an education session with Easley after lawmakers wrote a new state ethics law in 2006. When Easley signed that bill into law, he said: "North Carolina citizens have the right to know that the power they entrust to public officials is not abused for private gain or personal interest."

Easley is a lawyer who was North Carolina's attorney general from 1993 until he became governor in 2001. He is drawing about $71,000 in retirement and has taken a part-time job with an education foundation.

It's not clear that the vehicles or the trip with Hendrick would violate the ethics law. Bob Phillips, executive director of North Carolina Common Cause, worked in 2006 to get the new ethics law passed. He said trips such as Easley's should be disclosed.

"There's always concern any time you have an elected official at the intersection of someone with business interests," he said. "You want to have people going above and beyond" if laws aren't clear on whether disclosures are required.

A new Accord

Hendrick's dealership bought the car being driven by Mary Easley during the final week of the Easley administration.

The sale date was Jan. 7. The price, including fees, was $30,557.

It is not clear when Mary Easley started driving the car. The documents say it was first operated in North Carolina on Jan. 7. Mike Easley left office Jan. 10.

The N&O photographed Mary Easley getting into the Honda on Feb. 18 and had seen her in it before that and several times since. Last week, the car was parked outside her NCSU office during working hours.

It is unusual for a dealer to purchase its own car because the transaction triggers taxes and other fees that dealers typically pass on to customers, said Marvin Shelton, a registration and title supervisor with the state Division of Motor Vehicles. Hendrick is insuring the car as well, records show.

On Jan. 9, Hendrick Honda registered the car with a private license plate, which will result in a property tax bill from Mecklenburg County, not Wake County, where the car has been kept in the Easleys' garage in Raleigh.

Easley said in his e-mail message: "That's the way they do all their loaner cars and the proper way to do 'loaners' according to them."

Bradish, the Hendrick Honda sales manager, said the dealership maintains several service loaner cars for customers who are getting repairs or tune-ups. Hendrick said his dealerships have approximately 1,000 "loaner" vehicles.

Gray areas, omissions

Disclosures under the state ethics law include spouses. But Mike Easley was apparently not required under the law to update his disclosures after the annual April 2008 filing.

It's not clear whether the ethics commission can sanction former officeholders, and there's no mechanism to force disclosures from public officials after they leave office.

"It's a snapshot of where things stand when filed," said the ethics commission's Newson.

Federal authorities have probed ethics issues in recent years using a statute involving a public official's duty to provide "honest services" to the public.

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