RALEIGH -- At least four state agencies bought expensive high-tech surveillance gear from a private security firm tied to Senate Majority Leader Tony Rand.
The powerful Fayetteville Democrat has served as board chairman for Raleigh-based Law Enforcement Associates Inc. since 2003.
The state bought at least $192,683 in equipment from LEA during the past five years, including a $2,695 jacket with a hidden camera for undercover stings. In some cases, the purchases were made without seeking competitive bids by agencies led by close associates of Rand who themselves owned LEA stock.
The State Bureau of Investigation was a frequent customer, buying up to $108,321 in video gear and other gadgets since 2006. Records showing purchases in earlier years were not immediately available Friday.
Rand said he was not aware that the government he helps oversee is also a client, but he was not surprised.
"My God, I don't have anything to do with sales," Rand said. "I don't have a clue about that. ... But we are in the business of selling law enforcement equipment. That's what we do. We sell to law enforcement agencies all across the country, and the federal government too."
In a filing with the U.S. Securities and Exchange Commission last month, LEA's former chief executive officer accused Rand of insider trading as part of a scheme to enrich 50 state officials. That executive, Paul Feldman, has not responded to requests for an interview.
Since news of the complaint broke last week, several high-ranking North Carolina politicians have been confirmed as owning or having owned LEA stock, including former Gov. Mike Easley and current Gov. Bev Perdue.
Rand, who unexpectedly announced last month that he will resign his legislative seat to become chairman of the state parole commission, has called the fraud accusation "hogwash" spread by a disgruntled former employee.
The senator has lost money on his investments in LEA stock. Surging above $10 in late 2005, the company's share price closed at 11 cents Friday. Rand owns 140,334 shares, according to SEC filings.
"If I'm an inside trader, I'm the worst one you ever saw," Rand said. "It was fairly widely known that I own stock. My friends and I talk about our financial deals, every once and awhile. Like, 'What are you doing? What are you buying these days?' That sort of thing. And those discussions have absolutely no relation to any insider trading."
DMV purchases
LEA's products are so secret the firm's online catalog can only be viewed with a password. In a presentation meant to woo Wall Street investors this year, an executive boasted that the firm's products are like those designed for James Bond. Items the company makes include recording devices disguised as such everyday items as a $7,995 drinking cup as well as kits to convert surplus police cruisers into unassuming taxicabs with multiple hidden cameras.
Among those who bought LEA stock early was George Tatum, a close associate of Rand's from Fayetteville who was appointed by Easley in 2003 to serve as commissioner of the N.C. Division of Motor Vehicles. During his tenure, the state agency made at least $64,124 in no-bid purchases from LEA.
Tatum said Friday that he has owned more than 30,000 shares of LEA stock since the 1990s -- a potential conflict of interest that he failed to disclose on state ethics forms. Tatum signed the forms, affirming their accuracy under threat of prosecution for perjury. He said Friday that he relied on the advice of legal staff and that his failure to disclose his investment in LEA was an oversight.
State law also forbids state officials from profiting through contracts they administer or influence, a crime punishable by up to 60 days in jail.
Rand said Friday that he didn't even know Tatum was an LEA stockholder and that he never discussed anything involving the company with him.
Tatum, a former Cumberland County sheriff's deputy and register of deeds, said he never discussed LEA with Rand. Tatum had only a vague recollection of the purchases made by his agency, he said, and had no idea LEA was the vendor. He depended on subordinates to make sure everything was in compliance with state law and ethical guidelines, he said.
"I know we bought some video equipment when we were getting into [investigating] identity theft-type stuff," Tatum said. "That would have all been delegated to the director of License and Theft."
DMV purchasing records show it was the head of the agency's License and Theft Bureau's Fayetteville office, Bill Toman, who requested approval for spending $24,019 on LEA pinhole cameras and transmitters in April 2006. Toman, who is under felony indictment for misusing his office on an unrelated matter, could not be reached for comment.
Tatum hired Toman, a longtime political supporter and former Cumberland County sheriff's deputy. The commissioner was so well-known for giving his friends jobs at the DMV that other employees often complained the agency had come under the control of the "Fayetteville mafia."
Tatum was forced to resign in 2007 after revelations that he helped a friend get a vintage truck title for a vehicle that was a replica, a fraudulent move that can save owners hundreds of dollars in taxes. Toman also titled a second replica vehicle owned by Tatum's friend as a genuine 1932 Ford Roadster.
Tatum now works as the risk assessment coordinator for Fayetteville State University, where Rand sits on the board of the institution's charitable foundation.
DOT rules waived
Purchasing rules at the state Department of Transportation, which includes the DMV, require that goods and services costing more $10,000 be publicly advertised for competitive bid. However, Toman's boss, License and Theft director John Robinson Jr., wrote a memo to the DOT purchasing director arguing that the equipment could only be bought through LEA.
"This equipment will enhance our normal investigative activities involving the theft of motor vehicles, fraudulent titles and cases involving driver license fraud," wrote Robinson in the letter, a copy of which was sent to Tatum. "This equipment is also being used by other agencies, i.e. SBI, [N.C. Alcohol Law Enforcement], ... and is compatible when working joint operations."
The DOT's purchasing office approved the request to use LEA as the "sole source" for the equipment, waiving the requirement to seek competitive bids.
The state's secretary of transportation at the time was Lyndo Tippett, another close friend of Rand's from Fayetteville. Tippett, who could not be reached for comment, is Rand's personal accountant. He also owns 36,000 shares of LEA stock, according to SEC filings, and was named to the board of directors this week.
In addition to the DMV purchases, records show the state transportation department spent $15,800 on LEA gear in 2008. A request seeking information from the DOT on Friday as to what exactly was bought received no response, but an abbreviation in an accounting record suggests the equipment may have been destined for the Metrolina Regional Transportation Management Center in Charlotte.
None of the documents made available by state agencies this week mention Rand or provide any indication the senator knew of the services.
'Bona fide' purpose
Mike Robertson, a former SBI agent appointed this year as DMV commissioner, said Friday that he's not happy about the way some of the agency's LEA gear was bought in the past. But the equipment is useful, he said.
An example is a $7,535 kit that includes a baseball cap with a hidden microphone and wireless radio transmitter. DMV bought two of the caps in 2006, using a federal grant.
Robertson said the hats are worn to record conversations when DMV personnel go undercover at private trucking schools posing as students to confirm that driving tests are being properly administered. He requested that The News & Observer not publish any photos of the gear. To do so would jeopardize the safety and effectiveness of undercover officers across the state, he said.
"This equipment has a good, bona fide law enforcement purpose," said Robertson, who was quick to volunteer that he has never owned any LEA stock. "Every court system now, you almost have to have a tape recording or videotape. It's the best evidence you can get."
Robertson said he has known Rand since serving as a young highway patrolman in Fayetteville. "I consider him a friend," Robertson said. "He's never encouraged me to buy anything from LEA or not buy anything from LEA. I've never known Tony Rand to be involved in anything I would consider untoward."
Despite $9.2 million in sales during 2008, LEA is struggling and has lost money. At an annual shareholder meeting last week, Rand was pressed to say whether the company is considering bankruptcy.
Rand said he is becoming more involved at the company. Last month, he helped organize a luncheon attended by about 25 North Carolina sheriffs to showcase the company's high-tech gizmos.
"I'm getting more involved because I don't think we've been doing as good a job as we ought to do," Rand said. "This was kind of a lark when I started out. Believe me, my life would have been a hell of a lot easier had I not done so."
News researchers Brooke Cain and Lamara Williams contributed to this report.
