Missed warnings at Raleigh business incubator

August 20, 2013 

Martin Petherbridge, Raleigh’s lead auditor, must have felt like a voice in the wilderness in 2011 as he tried to warn city officials that there were problems with a business incubator in Southeast Raleigh, which was getting a combination of federal and state dollars and grants.

The incubator, called the Raleigh Business & Technology Center Inc., has been through a whirlwind of problems including eviction, money moving around without much oversight – including to an organization founded by the center’s director – and people in its building not paying rent.

Following an audit showing some of the problems – including the fact that Bob Robinson, the longtime director, had drawn $65,000 in teller checks from the incubator – the city cut ties to the organization.

That brings things back to Petherbridge’s warning. In a November 2011 email, he told the city’s chief information officer, Gail Roper, of financial troubles at the center, but the city continued its support, even working at one point with IBM to develop a long-term strategic plan for it. Even before that, Wallace Green, director of the Raleigh Area Development Authority, worked with the incubator and wrote a memo to Roper in April 2011 warning that the city’s funds “are not benefitting small business.” He saw the need for changes and he did the right thing to alert others.

Roper apparently sent a copy of Green’s memo to Eugene Weeks, who represents Southeast Raleigh on the council, but other council members say they didn’t find out about the problems until this year.

As late as June 2012, the city approved $162,000 for the center, $12,000 more than the center was paid the previous year, according to budget documents.

Mayor Nancy McFarlane says, rightly, that there should be more oversight of outside agencies that get city funds.

Some council members put responsibility for the breakdown on former city manager Russell Allen. Certainly the scenario raises questions about why he didn’t intervene or speak up directly. But Allen, after 12 years of otherwise commendable service, left in June at the behest of the city council. Responsibility for all the lapses can’t be ushered out with him.

Either internal communications broke down or people just weren’t paying attention. And all the while, Lawrence Wray, a former assistant city manager who has chaired the incubator’s board, has continued to defend it.

It is somewhat disturbing that Perry James, the city’s chief financial officer and interim city manager, told The News & Observer’s Colin Campbell that he thought the city handled concerns about the incubator properly.

“I feel,” he said, “like the city acted in a businesslike way to re-look at that organization and the city’s contract with that organization. It all was fitting in a series of steps the city was taking, apprising the people who needed to know. ... There needs to be a due process.”


James’ comments sound a little overly defensive or incredibly naive. The story is simple: An organization got public money, didn’t manage it well – actually, it appears to have managed it with a reckless disregard for the fact that it came from taxpayers – and in the end the mismanagement ruined the organization. Police now are investigating the organization for possible fraud.

City officials need to learn a lesson here about the importance of oversight, and they need to resist, from now on, the idea of giving money to any organization that does not report, in detail, its activities and spending to City Hall.

Problems with this center lingered for too long. The City Council needs to explore not only what went wrong with the center, but why all council members weren’t made aware of the troubles sooner and in more detail. A council can only oversee what it knows is there.

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