Midtown Raleigh News

Fraud investigated at Raleigh business-development center

An audit by the City of Raleigh shows widespread financial mismanagement at the nonprofit business incubator supported by city money, including loans to top staff and more than $100,000 in payments that cannot be explained.

Police confirm they are investigating reports of fraud at the Raleigh Business and Technology Center. Executive Director Robert Robinson has resigned.

The nonprofit center, which has three full-time employees in Southeast Raleigh, opened in 2000 with nearly $1.5 million in grants from the city and federal government. Raleigh gave $149,000 to the center last year for training purposes. In 2006, the center accepted 59 small businesses into its Pacesetters program and now helps 22 clients, said board Chairman Lawrence Wray.

Last year, the center lost its nonprofit status because it did not file required 990 disclosure forms with the Internal Revenue Service for three years.

Wray said he first noticed problems at the center in 2011, around the time he retired from his post as Raleigh’s assistant city manager. Shortly after the center hired a new accountant, he said, the city began its own audit. Robinson resigned in late June after reading it. He could not be reached.

“I had no idea what stuff was going on,” Wray said. “You need to understand the personality of the person who was here. We trusted him. We thought he was doing a good job.”

The city’s audit covered financial management and two incubator programs between July 2010 and December 2012.

It tested 57 payments the center made between 2011 and 2013 and found either insufficient or missing documentation. Those payments totaled $101,700.

The audit also showed:

• $3,846 in loans made to the executive director, Robinson;

• $13,000 in loans to a church at which a board member is pastor;

• $290,000 in payments for services to a group co-founded by the executive director;

• $500 donated to an agency for which a board member is the registered agent;

• $66,000 in short-term financial support from a board member.

The audit also showed that RBTC owes $57,500 in payroll taxes to the IRS.

As a result, the city has declined to renew its contract with RBTC as a business incubator and has asked that it vacate its premises on South Wilmington Street by July 31.

“The city also will begin a review of future uses of the facility that are consistent with the original city objective for a business incubator that is of value to the overall economic development of the city as well as the stakeholder community interest,” Mayor Nancy McFarlane said.

Wray said Wednesday that he knew of no instances of board members receiving loans. He said RBTC provided funds to Grace AME Zion Church, but that its pastor is not a board member. He also said that both he and board member Joseph Sansom have loaned personal money to the center to keep it going, but they did not collect any interest.

On the $66,000 loan, “That was me,” Wray said. “Bob (Robinson) said they needed some money. I had property. That property was guarantee to a loan.”

Wray said he hopes the city will give the center another chance. He said RBTC did not receive due process because it never got the chance to discuss the audit with City Council members, which he would like to do.

“That’s a real problem,” he said. “Just about everybody I know has their day. I believe this program is entirely too great for the city to close it down.”

He conceded the center could have had better oversight.

On RBTC’s Web site, Prezell Robinson is still listed as board chairman. Robinson, president emeritus of St. Augustine’s University, is 92 and suffering ill health.

“They still have me as board chairman?” he said. “I haven’t been to a meeting in five years.”

Others in the business community felt relieved that the audit is complete and doubts about the center are resolved.

“I’m just as pleased as I can be with how the city handled it,” said Wallace Green, director of the Raleigh Area Development Authority. “They answered a lot of questions.”

He added that the program has a solid past of helping businesses improve.

“Every year they had a graduating class,” Green said. “Mayor (Charles) Meeker attended every one of those graduations.”