Rep. LaRoque: Nothing improper with his nonprofits

LaRoque says he runs nonprofits with care

Staff writerAugust 17, 2011 

— Rep. Stephen LaRoque on Tuesday defended his pair of federally funded nonprofits that provided loans to two members of the General Assembly and other associates, put his wife and brother on the board of directors, and brought him a six-figure income.

LaRoque, a ranking Republican in the state House who is on his third term, called a news conference to denounce an investigation published online this month by N.C. Policy Watch, a project of the N.C. Justice Center. He called Policy Watch "a liberal propaganda tabloid."

"It's clear that this has been a political hit piece in response to my statements about one of their board members and his organization," LaRoque said, referring to William Barber, president of the North Carolina chapter of the National Association for the Advancement of Colored People. Earlier this year, LaRoque called Barber a racist. Barber is on the N.C. Justice Center's board of directors.

"Rev. Barber on our board had nothing to do with the story," Policy Watch Executive Director Chris Fitzsimon said later. "Rep. LaRoque has been in the news for a lot of reasons lately. ... We thought it would be interesting to understand his motivation. This is a person who rails against the evils of big government, and it turns out he's paying himself in federal dollars at a salary most people would find interesting."

LaRoque said he decided to address the issues publicly because the Policy Watch investigation was surfacing in mainstream news media reports. He chose his home turf at the Kinston-Lenoir County Visitor Center, where reporters were joined by about three dozen people who applauded him several times.

The veteran lawmaker made a PowerPoint presentation, took questions from reporters and fielded a few queries from supporters. The result was a detailed but not definitive defense: Whether LaRoque is operating his nonprofits with decorum may come down to public opinion, if not law.

James Kennedy, a retired businessman, said afterward that LaRoque handled himself well.

"He tells the truth," Kennedy said. "You can't hide from the truth."

But Isaac Hines, who said that he doesn't often agree with LaRoque, wasn't satisfied. "I don't know the questions were necessarily answered," Hines said. "He answered only what he wanted to. I still have questions."

LaRoque represents Lenoir, Greene and Wayne counties. His two nonprofits - East Carolina Development Co. and Piedmont Development Co. - lend federal money to new or expanding small businesses in rural communities that have not been able to get bank loans. The nonprofits participate in a U.S. Department of Agriculture program that provides 30-year loans at 1 percent interest to intermediaries, which re-lend the money at a higher rate.

He addressed most of the points raised in the Policy Watch investigation:

LaRoque stressed that operational costs only came from interest and fees, not taxpayer money. The Policy Watch story reported that an audit found the program was unclear about which funds are public money.

Policy Watch said the annual compensation as high as $195,000 that LaRoque earned was out of line with other nonprofits in the state doing similar work. LaRoque provided a cost breakdown on two other nonprofits, including one cited in the Policy Watch article, to show that he was managing more assets with lower personnel costs. His assets average $6 million, tax records show. He manages the nonprofits through a one-man private enterprise and has employed few people.

The Policy Watch investigation quoted three former board members saying they didn't know LaRoque made that much money. LaRoque counters that the board approves his contracts as well as all loans. He said his compensation is based on a percentage of assets, and all board members can make that calculation. He said he doesn't necessarily take the amount of pay he is due each month. Asked exactly how much he does pay himself from his private firm, LaRoque replied, "None of your business."

"This is America, and I don't think profit is a crime," he said.

The story said one board member resigned because he became head of economic development in Lenoir County but also because he was "increasingly uncomfortable" with how the nonprofit operated. LaRoque provided the man's letter of resignation, which didn't mention his discomfort and, in fact, said he hoped to return some day.

The legislator defended having his wife and brother on the board by saying there are no Internal Revenue Service regulations against it. The Policy Watch story notes that IRS guidelines say boards shouldn't be dominated by those who are not independent because of family or business relationships. The most recently available federal tax records show five board members: LaRoque, his wife, his brother and two others on one board. The other board has LaRoque, his wife and brother.

LaRoque did not address the story's claim that his wife and a board member received loans before joining the board. He said he didn't see anything wrong with lending to friends and associates.

"If I loaned to a dry cleaner, would I be precluded from taking my clothes there?" He also said he saw no potential conflict in making loans to Sen. Debbie Clary and Rep. Mark Hilton for their small business ventures - calling them "very independent people."

craig.jarvis@newsobserver.com or 919-829-4576

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