Company's owner claims pressure by Rand to sell

He says LEA wanted firm

Staff WriterApril 11, 2010 

  • Michael Biesecker, 37, covers state government for The News & Observer and The CharlotteObserver. His previous stories have highlighted more than 100 questionable deaths in state-run mental institutions and prisons, as well as dozens of cases of abuse and neglect involving patients or inmates.

— The owner of a company that sells devices to thwart drunken drivers says former Sen. Tony Rand tried to use political muscle to buy the business in 2004 for Law Enforcement Associates, a firm whose stockholders included Rand and several other high-ranking North Carolina politicians.

Rand, then the Senate majority leader, also served as co-chairman of the Governor's Highway Safety Program at the time. The Fayetteville Democrat was in a strong position to draft legislation governing the use of ignition interlocks and directly influence who got the lucrative state contract to sell the devices, which detect alcohol on a driver's breath and prevent the car from starting.

"He wanted my company," said Larry "Jerry" Mobley, the founder and sole owner of Monitech, based in Morrisville. "He's the guy in charge of writing the laws that deal with drunk driving. You couldn't ask for a clearer conflict of interest, and yet he assumed I'd be cool with that because we could make money."

Rand said last week that he has no memory of meeting with Mobley or making an offer to buy Monitech.

"I have no recollection of that," said Rand, who resigned from his Senate seat in December and now is chairman of the state Parole Commission. "For him to say I offered to buy his company is sort of ridiculous."

In addition to Mobley, three of the company's workers said Friday that they remember the day Rand visited.

"I shook his hand," said Jim Lewis, Monitech's director of manufacturing. "I took [Rand] around and showed him some of the things we were doing. There's no doubt in my mind."

Mobley's accountant and stockbroker also said he told them in 2004 that Rand had offered to buy his company.

Rand's role as chairman of the board at Law Enforcement Associates, a Raleigh company that makes electronic surveillance equipment, has been under scrutiny since two former executives told federal officials last fall that the senator had engaged in an insider trading scheme. Federal officials are investigating.

More than a dozen elected officials and their family members have owned LEA stock, including former Gov. Mike Easley, current Gov. Bev Perdue and her husband. Records also show that state agencies purchased at least $192,683 in surveillance equipment from the small company, much of it bought without seeking competitive bids.

LEA's former chief executive officer, Paul Feldman, also said last week that he remembers conversations in 2004 about plans for absorbing the company. Feldman is one of the former executives who have accused Rand of insider trading.

Exclusive contract

Based in an industrial park near the Raleigh-Durham airport, Monitech for two decades has held the exclusive state contract to sell the ignition locks to North Carolinians seeking to regain driving privileges after a DWI conviction. Mobley declined to disclose how much his business earns, but in a recent lawsuit a competitor estimated the value of Monitech's state contract at $10 million a year.

Mobley said Rand called and asked to come out and tour his plant in October 2004, as approval of another three-year contract with the state Division of Motor Vehicles was pending.

After the tour of the manufacturing area, Mobley said Rand asked if they could talk somewhere private. Once in his office, the senator said he was impressed by Monitech's technology and began talking about Law Enforcement Associates, which Mobley had never heard of.

"He said, 'John Carrington and I have started a company, and it's already on the American Stock Exchange,' " Mobley recalled. "He said, 'Your product and our company would be a good fit. We'd like to fold you in to LEA.' "

State Sen. John Carrington, a Wake County Republican, spun off LEA in 2001 from another company he owned, Sirchie Fingerprint Laboratories in Youngsville. Mobley said Rand didn't name a price for the proposed purchase of Monitech, saying he'd need access to Mobley's books to determine a value.

"He said that he knew people from all over the country through his associations in the legislature and we could make a lot of money," Mobley recounted. "He said it was going to be a big deal."

Mobley told Rand he'd need to think about the proposal and call him later. "It put me in an extremely difficult position," he said. Mobley said he was aware of Rand's close relationship with then-DMV commissioner George Tatum, the official with the ultimate authority to renew Monitech's contract with the state. Tatum was the former register of deeds from Rand's home county.

A competitor arrives

At the time, state records show another manufacturer of ignition interlock devices, Smart Start, was competing against Monitech to enter the North Carolina market. Though Mobley said he had been assured by DMV staff that the other company's product had failed to meet the state's standards, he feared potential retaliation if he refused to sell to LEA.

What Mobley didn't know was that Tatum and his wife owned at least 24,000 shares of LEA stock, according to records from 2004 obtained by The News & Observer, even as DMV bought $64,124 in equipment from the company.

Tatum's boss, Department of Transportation Secretary Lyndo Tippett, was also an LEA shareholder, owning at least 63,500 shares. Tippett's son and daughter-in-law also owned LEA stock, according to records.

During that period, LEA stock soared from pennies a share to a peak of $12.70 on claims that the company was about to release a stun gun to compete with Taser. The highly touted product was never released, and the company's stock soon took a dive. LEA's stock closed Friday at 18 cents a share.

Mobley was also unaware that Rand had been talking to his competition. A memo sent to Tatum by Lamar Ball, Smart Start's CEO, recounts how a representative of the Texas company met with Rand in the spring of 2004, months before the senator contacted Mobley, to express its interest in doing business with the state.

Rand said last week that he doesn't remember that meeting either, though he couldn't say for sure it never happened.

Feldman, who was ousted as CEO of LEA by Rand last year, said last week that he remembers a conversation with Carrington in 2004 about plans to buy Monitech. Carrington was then LEA's board chairman and largest shareholder.

Carrington said he has no memory of any conversation about Monitech.

"I've never even heard of that company," Carrington said. "That was a long time ago."

Carrington was forced to resign from his position with LEA in 2005, shortly before pleading guilty to federal felony charges for orchestrating the illegal sale of sensitive law enforcement equipment to China. Rand, a member of the LEA board since 2003, then took Carrington's place as chairman.

Mobley said he never responded to Rand's offer to buy his company. He said Tatum soon put a hold on Monitech's contract renewal and reopened the bidding process, allowing his competitor to reapply. Records on file at DMV confirm that the contract approval process dragged on for more than a year but provides no details about why the process took so long.

By the summer of 2005, Monitech was once again the only company in the competition for DMV's business after, records show, Smart Start's device was determined by an outside tester not to have met the state's requirements. But Mobley said Tatum refused to sign a contract with his company.

Tatum, who resigned as DMV commissioner in 2007 amid a corruption scandal, could not be reached for comment.

In October 2005, Mobley said he requested a meeting with Hal F. Askins, a special deputy attorney general acting as DMV's lawyer. Mobley said he recounted the encounter with Rand and troubles with Tatum before informing the state lawyer that he planned to go to the U.S. Attorney General's Office in Raleigh and ask for a criminal investigation into bid rigging.

Noelle Talley, spokeswoman for Attorney General Roy Cooper, said Friday that Askins does not recall the meeting but that he also "can't swear it didn't happen."

Mobley said Tatum signed the three-year contract extension within days of his threat to go to the feds, though on terms he saw as being very unfavorable to Monitech.

"They wanted me to walk away," he said. "But I worked hard for many years, invested my life savings, to build this company."

Rival sues DMV

After Monitech won the bid process over Smart Start this year, Monitech's contract with the state is imperiled. The Texas rival sued DMV this year, alleging that the state bid requirements were written in a way that only Monitech could win.

The lawsuit from Smart Start asserts that Mobley is a fishing buddy of the independent tester hired by DMV to assess interlock devices and that the local businessman enjoys friendships with several high-ranking administrators at the state agency.

Rand pointed to those close associations and stressed that Monitech did eventually get a renewal of its sole-source contract with the state.

"Hell, he had a monopoly," Rand said of Mobley. "He was better connected at DMV than I was."

As a result of questions raised about the fairness of DMV's contract approval process in Smart Start's lawsuit, current DMV Commissioner Mike Robertson invalidated Monitech's successful bid and reopened the approval process. Robertson said he would like to see more than one company approved to sell ignition interlocks in the state.

In an appeal filed March 31, lawyers for Monitech said Robertson should recuse himself, citing the commissioner's "long history of personal and professional ties with person(s) shown to intentionally do harm to Monitech for personal financial gain."

Robertson has previously described himself as a close friend of Rand's, going back to the commissioner's time as a highway patrolman in Fayetteville in the 1970s. Rand is a lawyer.

In a written statement, Robertson was dismissive of claims, from Monitech or Smart Start, that he isn't impartial.

"The personal innuendos disseminated by the companies, their attorneys and their lobbyists are untrue and will be ignored," the DMV commissioner said.

michael.biesecker@newsobserver.com or 919-829-4698

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