Ex-state senator's company fined over grant; 2 governments admonished

cjarvis@newsobserver.comAugust 22, 2012 

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Fred Hobbs says he is 'regretful.'

1995 NEWS & OBSERVER FILE PHOTO

— One of North Carolina’s most successful community planning and design firms has been formally reprimanded and fined for submitting an application for a federal grant to repair low-income homes in Yadkin County that contained signatures of deceased homeowners and other inaccurate information.

In addition, the state Department of Commerce has put that county and the Town of Haw River in Alamance County on notice that they risk losing additional funds unless they do a better job of verifying the work of contractors who prepare grant applications. Haw River had authorized a contractor to apply for funds to rehabilitate several houses – including one that was scheduled to be demolished to provide canoe and kayak access to the river.

In both cases, the contractor was Hobbs, Upchurch Associates, the Southern Pines business co-owned by Fred Hobbs, who served one term as a Democratic state senator in the mid-1990s. The company has designed and consulted on some of the largest municipal and county projects in the state over the past 26 years, including water, wastewater, golf course and other developments. Hobbs, Upchurch has handled scores of federal Community Development Block Grants administered by the state commerce department.

Last year, a competitor raised concerns about a preliminary application the company had prepared to repair and renovate eight houses in Yadkin County with a $100,000 block grant. The application included signatures of two people who had died and for a house that had burned down. The application included minutes of a site-selection committee meeting that never took place.

Yadkin County hired a law firm to investigate whether the signatures were forged and the minutes fabricated, and asked the commerce department to review the application process. Commerce agreed and, as required by law, referred the matter to the State Bureau of Investigation to determine whether there were criminal offenses. The SBI conducted what it describes as a limited inquiry, and this week began providing records to District Attorney Tom Horner, the chief prosecutor for Yadkin County. Horner said Thursday it was too soon to know whether he would pursue the matter.

Last year Hobbs produced voluminous records to show that there was no fraudulent intent. He said there were misunderstandings about how the grant requirements were interpreted.

Hobbs said the applications submitted in 2010 contained information that had been collected in 2009 and re-submitted because of a short turnaround time to apply for a new grant that suddenly became available for projects that hadn’t been funded the previous year. He said the information would have been updated after the grant had been awarded. Sometimes relatives signed homeowners’ applications in their absence, he said.

Hobbs said an employee, grant manager Michael Walser, should have been clearer when he included in the application what were described as minutes for a loan committee meeting to select the houses to be repaired. There was no actual meeting. Walser said he called or visited the committee members.

Records obtained this week show the N.C. Board of Examiners for Engineers and Surveyors last month reprimanded Hobbs, Upchurch and fined it $5,000 after investigating the Yadkin County allegations. The board concluded it had “sufficient evidence which supports a charge of gross negligence, incompetence or misconduct.”

Hobbs said Wednesday the Board of Examiners’ finding was “a little bit perplexing” since the issues raised were not about engineering standards. He said the board thought re-submitting the 2009 application in 2010 was an inaccuracy.

“I don’t necessarily, to be candid, share that interpretive view, but I’m not going to criticize them for having that view,” Hobbs said.

As part of its review, the commerce department told all the counties and cities that had projects managed by Walser to verify that their grant applications were accurate. Earlier this month, commerce issued the report putting Yadkin County and Haw River on notice, saying using a contractor to prepare grant applications “does not absolve the local government from its liability to the state in any way.”

Haw River Town Manager Jeffrey Earp said Wednesday that town relies on contractors for numerous services, noting it has only 19 employees, 11 of whom are police and firefighters; five are in public works.

Haw River had hired Hobbs, Upchurch to prepare a grant application in August 2008 to rehabilitate 11 low-income homeowners’ houses, resurface a street, install water lines and make drainage repairs. But four months earlier, the town had sold one of the houses to Alamance County, which was applying for another grant from a different state agency to develop a water park and planned to demolish the house for a river access facility.

In addition, the homeowner whose signature was on the 2008 rehab application had died in 2001, the commerce review found. Hobbs said Wednesday the signature had been obtained for a previous application; the validity of the signature would have been checked along with other information on the application once the grant was awarded, he said.

Hobbs said his firm didn’t know there were other plans for the property. Earp agreed.

“It was an issue with the right hand not knowing what the left hand was doing,” Earp said.

Jarvis: 919-829-4576

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