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In late 2005, the Scotts were assigned e-mail addresses linked to Parton's management and production company, Moonlight Bandit. In addition, Ernie Pearson, an attorney who represented both the Northeast Partnership and Parton, sent a fax to people involved in the project that mentioned the need for "management/retainer agreements" for the Scotts.

All that happened while the couple was also employed by Roanoke Rapids to advise on economic development projects. From July 2004 to March 2007, the city paid their company $61,703.

Mike Scott, in an interview at his home Thursday, said he understood that the various income sources might draw attention. But he insisted he and his wife did nothing wrong. "We tried to be overly careful," he said.

By the spring of 2007, the Scotts had quit working for the city and for the Northeast Partnership, Mike Scott said. That's when the couple were hired to manage the theater at annual salaries of $125,000 apiece.

The Scotts had no experience managing a theater, but their individual pay was more than that of Jim Lavery, general manager of Raleigh's Progress Energy Center for the Performing Arts. He is paid $99,502 annually to oversee a much larger venue.

Mike Scott said that he and his wife earned "every penny" while working at the theater.

"It's the hardest work we've ever done," he said.

It was clear to at least one employee that the Scotts weren't actually running the theater.

Maria Hurst was hired about a week before it opened to manage the box office. She left within 10 weeks, frustrated that she couldn't get permission for basic needs -- printing brochures, for example.

"There was no management there," said Hurst who, with her husband, now manages the Lakeland Theatre in Littleton. She added that she "adores" the Scotts and that they are strong business people. But something didn't click at the theater. "I think they were a little intimidated working for Randy Parton. Their answer was always, 'It's got to be approved by Randy.' "

Combined, the Scotts received $78,526 from the theater payroll. Parton took back the reins as manager in September.

The couple did not earn money from Moonlight Bandit before taking on managerial duties at the theater, Mike Scott said Thursday. A separate business owned by the Scotts, a UPS Store in Roanoke Rapids, received money from Moonlight Bandit.

'We were sensitive'

Mike Scott said other theater employees approved those expenditures. "Cathy and I didn't direct purchases at the store," he said. "We were sensitive to those type of things."

He further said their Moonlight Bandit e-mail addresses and the management agreement mentioned in files were set up in anticipation of a business relationship that never materialized.

In late 2005, the Partons approached the Scotts about taking an ownership stake in his company. The couple declined.

"We had a severe amount of heartburn" about the offer, he said. "We said, 'We'll help you, but we don't want any part of your company.' "

Watson, the former head of the Northeast Partnership, did have an interest in Moonlight Bandit. He agreed to go to work for Parton while keeping his leadership role at the partnership.

In 2006, the state auditor found Watson in violation of conflict-of-interest rules. The partnership's board of directors ousted him.

Asked this week about the role of the Scotts and whether they violated any rules, the state auditor e-mailed a statement.

"We have an open investigation into this issue," Merritt's statement read, "and we don't comment on the specifics of open investigations." The auditor has authority to investigate because state funds were directed to the project, including an appropriation by the General Assembly to market the theater.

The Scotts probably did not run afoul of any laws because they were independent contractors, not government employees, said A. Fleming Bell II, a government professor at UNC-Chapel Hill who studies ethics issues. The question is whether everybody involved knew of all the connections.

"I think you're dealing with a situation where people have to decide whether the contractor they're dealing with has too many bosses and is actually representing their interests," Bell said.

Since leaving the Parton Theatre in the fall, the Scotts have been working to rebuild their business. PRO does work on an as-needed basis for the Northeast Partnership, which is now called the Northeast Commission.

The organization has paid PRO $16,153 since July 2007.

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