Whistleblower vs. enabler? Traitor vs. loyalist?
It’s rare to see such a stark contrast in candidates in any election. But it’s the choice state workers and retirees will consider in the contest for president of the State Employees Association of North Carolina.
The election Friday at SEANC’s annual convention in Greensboro will follow the most traumatic event in the history of the association, the resignation and subsequent indictment of longtime Director Dana Cope, who was charged in August with looting $570,000 from SEANC and its members.
The outsider candidate is Art Anthony, one of two former board members who blew the whistle by bringing evidence of misconduct to The News & Observer.
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The insider candidate is Ross Hailey, SEANC’s first vice president and sole member of the committee that initially investigated allegations of misconduct.
Hailey absolved Cope of any wrongdoing, a finding that Cope and SEANC’s executive committee wielded as they repeatedly urged the newspaper not to publish results of its investigation this year. The N&O published its story Feb. 8; it led to a State Bureau of Investigation probe and Cope’s indictment.
Hailey is the first to admit that he botched the investigation and has repeatedly apologized to fellow SEANC members as he runs for president.
“If there was a better candidate, I’d step aside,” he said in a recent interview. “I know I can do a better job of running this organization.”
Anthony disagrees, saying Hailey and other board members ignored evidence and failed to do their jobs.
“Their job was to do an investigation and find the facts,” Anthony said. “How they could say they did an investigation and all was fine, when the SBI found a half-million dollars missing? They have good intentions and they are good people, but they didn’t understand their responsibilities and their fiduciary duties.”
Soon after he replaced Cope as SEANC director, Mitch Leonard decried the “culture of subservience, deliberately built over time by Mr. Cope, and maintained for his own financial benefit.”
In a recent interview, Leonard said the organization is bent on fixing serious shortcomings. SEANC has not had an audit committee, which would examine the organization’s books and spending, for 31 years, he said. The organization had policies and procedures in place that were not followed.
“There was not enough oversight,” Leonard said. “From my view, it was too lax.”
As executive director, Leonard oversees a $14.5 million organization with 53,000 active and retired public employees. SEANC’s primary mission is advancing the bread-and-butter issues of state employees at the General Assembly: pay, health care, pensions, and due process rights in hiring and firing.
A 59-member board oversees the organization, but most operational decisions are made by the 12-member executive committee, led by the president, a part-time, unpaid position with a one-year term.
Landscaping, flight lessons
The scandal at SEANC started to crack open in late 2014 when Anthony and Betty Jones, another former board member, shared their concerns and documents with The News & Observer. They had attempted to question Cope about his spending, but instead both were voted off the board last September.
On Jan. 9, The N&O met with Cope and members of SEANC’s executive committee and presented evidence that Cope appeared to have used SEANC funds on flight lessons, home landscaping, entertainment and eyebrow waxing, among other items.
In particular, The N&O raised questions about an invoice to a defunct Washington, D.C., computer company justifying a check cashed by the landscaping company. The two companies had nearly identical names.
“I am very concerned about this,” Hailey said at the end of the meeting. “I am going to get to the bottom of this.”
SEANC President Wayne Fish, in consultation with staff lawyer Tom Harris, appointed an investigative committee with one member: Hailey. The investigative committee immediately found evidence that there was no misappropriation of funds, according to a letter from SEANC’s executive committee.
Over the next month, Fish and SEANC’s executive committee relied on Hailey’s investigation to release letters that unequivocally stated “we have found no misappropriations of funds and no improprieties by Dana.”
A forensic audit found that Cope had fabricated the invoice and misspent almost a half-million dollars in a 28-month span; the grand jury indictment has alleged $570,000 during four years.
Regardless of the final figure, Hailey is the first to admit that he botched his investigation. He said that Cope and Harris, the SEANC lawyer, provided him with documents that were “handpicked,” “incomplete” or “fabricated.”
“My biggest mistake was trusting them,” Hailey said. “It was not my finest moment. ... I felt really foolish.”
Harris, who retired in March, declined to comment but noted that a thorough SBI investigation concluded with no charges against him.
‘They are wrong’
Hailey is a 65-year-old civil engineer who retired from the state Department of Transportation and lives in the Beaufort County town of Washington. He has spent the past months apologizing for his actions. But he is adamant that Anthony and Jones should apologize for bringing public embarrassment to SEANC.
When news of Cope’s misconduct broke, SEANC attacked the whistleblowers in a letter, accusing Jones and Anthony of trying “to publicly embarrass and discredit our association.”
Six weeks later, the executive committee reversed course, apologizing and thanking the two for their willingness to stand up for the organization.
Hailey said he opposed that, saying Anthony and Jones should apologize for taking their complaints outside SEANC. “I still think they are wrong,” Hailey said. “It brought further embarrassment to the organization.”
Anthony, 63, a social science researcher at N.C. State University’s McKimmon Center, said Cope would probably still be running SEANC if they had taken that course.
Anthony pointed to Hailey’s botched investigation and an audit hampered by deleted emails, shredded documents and a computer hard drive that went missing in the days before Cope’s resignation.
“It would be fruitless to go internally, because Dana had such a hold on the organization,” Anthony said. “He would have corrupted the process and taken over.”
Slight drop in membership
Leonard, the new SEANC director, cannot take sides in the board election. He had reservations about the whistleblowers going public but said they had performed a good service to SEANC.
“I would hope they could find a way to go in-house, to try to address those problems inside the organization,” he said.
Leonard also said the association is well on its way to preventing future misconduct by setting up an audit committee, staggering the terms of officers and ensuring that employees follow policy.
He said he’s pleased and surprised that membership didn’t fall off more in the course of the scandal: Current membership is 52,926, down about 300 from a year ago.
Asked to grade themselves for their handling of the Cope affair, the two presidential candidates gave differing marks.
“Between an A and a B,” Anthony said.
Hailey paused for a long time before answering.
Neff: 919-829-4516, @josephcneff
A board member’s duties
The board of directors is the ultimate decision-making body of a nonprofit organization. Board members are fiduciaries – they have a relationship of trust and must take care that the nonprofit is well-managed and fiscally sound. This relationship is one-sided: The board members must act to meet the needs of the organization and without regard to their own needs.
The main legal responsibilities of a nonprofit board are known as the “three D’s”:
▪ Duty of care: Board members actively participate in planning and decision-making and make sound, informed judgments.
▪ Duty of loyalty: Board members avoid potential conflicts of interest and put the interests of the nonprofit first.
▪ Duty of obedience: Board members must ensure that the organization complies with all laws and regulations and remains committed to its mission.
Sources: Guidestar, Midwest Center for Nonprofit Leadership