The State Bureau of Investigation is looking into accusations that a former state senator's consulting firm submitted falsified applications for federal money meant to help low-income homeowners in Yadkin County make emergency repairs.
Former Democratic state Sen. Fred Hobbs' engineering and planning company - Southern Pines-based Hobbs, Upchurch Associates - is suspected of faking homeowners' signatures, failing to inspect their homes and claiming that the applicants were selected by a committee that never existed. Among the suspected phony signatures were those of two people who had died. Another involved a house that had been destroyed by fire and its lot sold to someone else.
The allegations, which involve a $100,000 grant, are contained in documents the state Department of Commerce provided in response to a public records request from The News & Observer.
Hobbs' lawyer, Michael L. Weisel of Raleigh, issued a statement Wednesday afternoon saying all Hobbs knows about the accusations are what he has learned from media reports. The N&O posted a story about the investigation on its website at midday Wednesday.
"We categorically deny all Yadkin County's allegations as totally baseless and false," said the statement attributed to Hobbs. "... We will issue a full and complete refutation of these unwarranted and unfounded allegations at the appropriate time and place."
Michael Walser, the regional grant manager for the company who reportedly handled the applications, could not be reached for comment.
Yadkin County is about 140 miles northwest of Raleigh. County manager Aaron Church called the discovery of the alleged improprieties this year distressing.
"Yadkin County has many residents who are in desperate need of the home repairs that could be provided pursuant to this grant," Church said in a written statement he released Wednesday. "The false or misleading information contained in the grant application has hampered the county's ability to provide our residents with those repairs."
The situation raises concerns about how closely counties and the state monitor these federal grant applications. In this case, the company allegedly sent the application to the state without ever sharing it with Yadkin County officials.
Gary M. Wilson, president of Benchmark CMR, the Kannapolis consulting firm that discovered the discrepancies, warned in a letter sent in May to Yadkin County's planning director how easy it is to scam the system.
"No local auditor, state monitoring team or other normal oversight efforts can detect forgery of critical grant documents if such did occur," Wilson wrote in the letter.
Tim Crowley, chief spokesman for the state Department of Commerce, which handles the federal grants, said the department is aware of the broader implications of the situation.
"Certainly that is a concern, and the department is looking at that as an issue," Crowley said Wednesday. "County governments certify the details of the grants as to the accuracy. The Department of Commerce doesn't have law enforcement resources. When we become aware of something, we look into it."
Hobbs, Upchurch was authorized by the Yadkin County Board of Commissioners in September to prepare the grant application. The firm did the work without compensation. It's common for consultants to prepare block grant applications in hopes of also winning a contract to administer the grants. But that contract went to Benchmark this spring. When Benchmark began administering the grant, it discovered inconsistencies in the application and informed the county.
County officials notified the state Department of Commerce, which on June 7 sent two employees to investigate. Two days later, Commerce froze Yadkin County's block grant funds until further notice.
Yadkin officials hired the Charlotte-based law firm of Parker Poe Adams & Bernstein to investigate further. The law firm's Brian Cromwell, a former white-collar crime federal prosecutor, found that several homeowners said the signatures did not appear to be legitimate.
Cromwell also questioned documentation Hobbs' firm submitted that indicated county and city officials had met and approved the applications, including what was purported to be minutes of the selection committee's meeting. Those officials told the law firm they never attended such a meeting.
Hobbs, Upchurch had prepared applications for stimulus grants issued in 2009, but those applications were not funded. An additional $100,000 became available in 2010 for applicants who didn't receive money in the first round of funding. Homeowners told Cromwell no one from Hobbs, Upchurch had visited their homes in either year. In the interim, two of the homeowners had died, and one of the houses had been destroyed by fire and the lot transferred to a new owner.
Among Parker Poe's other findings:
Applicant forms for the 2009 grants were all dated June 3, 2009. All the 2010 applicants were dated Sept. 3, 2010. It would be "highly improbable" for the firm to visit all eight homes in a single day, the report says.
Signatures on several forms didn't match signatures on the homeowners' deeds.
Ages of the occupants of the houses were about 1-1/2 years younger than they would have been on Sept. 3, 2010.
None of the homeowners or relatives interviewed recalled completing a specific document required for the application but said they had provided the information by phone or in writing.
Crowley, the Commerce spokesman, said the funds were never released to Hobbs, Upchurch. Commerce last month referred the matter to the SBI, he said.
Commerce receives about $45 million in federal Community Development block grants each year. The money comes from the U.S. Department of Housing and Urban Development.
Hobbs, 58, of Pinehurst was a one-term state senator in the 1990s. Last year he agreed to pay a $150,000 civil fine for making illegal campaign contributions to Gov. Bev Perdue, former Gov. Mike Easley, former Senate President Pro Tem Marc Basnight and former Lt. Gov. Dennis Wicker.
In March he pleaded guilty to a misdemeanor violation of campaign finance law and was fined $20,000 and ordered not to make any political contributions for the duration of his one-year probationary sentence.
News researcher Peggy Neal contributed to this report.
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