Politics & Government

SEANC whistleblowers allege hard drive, files destroyed at agency

The two state employees who blew the whistle on financial improprieties at the State Employees Association of North Carolina want the organization and its leaders to apologize for their attacks on the whistleblowers.

And in an 18-page letter asking for the apology, Betty Jones and Art Anthony unloaded a few more allegations about financial activity at SEANC, the nonprofit that represents the interests of about 55,000 state employees and retirees.

Late last year, Jones and Anthony brought their concerns about financial misconduct to The News & Observer, which published an article in early February about Executive Director Dana Cope’s questionable spending on landscaping, flight lessons, entertainment and eyebrow waxing, among other items.

SEANC’s leadership responded by labeling the article “not true” and Jones and Anthony “unethical.” But Cope resigned Feb. 10.

Before Cope quit, SEANC’s 11-member executive committee approved a severance payment to him of between $140,000 and $200,000, according to a letter sent Saturday from Raleigh lawyer Michael Weisel, who represents Jones and Anthony.

The letter was sent to Cope, SEANC leadership and staff. It also alleges that:

▪ In the days before his resignation, Cope removed or destroyed the hard drive from his SEANC computer as well as invoices, receipts and other financial records.

▪ Cope concealed the existence of “secret” bank accounts from SEANC’s auditors, the Board of Governors and SEANC’s elected treasurers. The accounts held millions of dollars, the letter says.

▪  Senior staff and members of the executive committee helped Cope create phony documents to discredit the whistleblowers and mislead the press, public and the board.

▪ Cope had SEANC’s political action committee pay a Massachusetts fund-raising organization more than $118,000 to conduct a raffle that appeared to raise very little money.

Change in culture

Cope used EMPAC to target political opponents such as state Sen. Ralph Hise and support favored candidates such as lieutenant governor candidate Linda Coleman.

In the last campaign cycle, EMPAC paid $118,104.11 to Magnet Direct, a Massachusetts fundraising firm, according to the committee’s finance report. According to a SEANC flier, Magnet Direct ran a sweepstakes as “part of a fundraising campaign for the important works of SEANC-EMPAC.”

All SEANC members over 18 were eligible to enter at no cost. SEANC asked members to send in a donation of $5 with every sweepstakes ticket, but no payment was necessary to win. The contest gave out prizes of $5,000, $1,000, and a third prize of $500.

Chris Noble, senior vice president for the company, said Magnet Direct supported EMPAC on two direct mail campaigns during 2014. The company did the work on a fee-for-service basis negotiated ahead of time, and did not retain or control any of the funds raised by EMPAC.

Hardy Lewis, the lawyer brought in by SEANC to sort out the various troubles, said he knew little about the sweepstakes for the political action fund.

Lewis did say that the whistleblowers will likely be pleased by the way events are unfolding at the organization.

“We are intent on getting rid of the culture that allowed the problems that were unveiled by Ms. Jones and Mr. Anthony,” Lewis said. “We don’t disagree with a lot of their letter.”

Cope has not responded to interview requests since his resignation.

Roger Smith Sr. and Roger Smith Jr., Raleigh lawyers who represent Cope, could not be reached for comment.

Bank accounts look OK

After Jones and Anthony brought their concerns to The N&O, the paper spent weeks reporting, vetting documents and interviewing Cope, SEANC staff and executive committee members.

At Cope’s direction, SEANC spent $109,000 with a landscaping firm that also has done extensive work at his Raleigh home. One check, for nearly $19,000, was made out to a defunct computer company and justified by a phony invoice. The landscaping firm, with a name nearly identical to the computer company, cashed the check.

SEANC also paid for Cope’s flight lessons and credit card expenses that ranged from an upscale Texas beltmaker to a London clothier to eyebrow waxing at the European Wax Center in Raleigh.

SEANC’s 11-member executive committee and SEANC legal counsel Tom Harris tried to dissuade The N&O from publishing the article. They said SEANC had conducted a thorough internal investigation showing that Cope had committed no misappropriations of funds and no improprieties.

After the article was published, SEANC President Wayne Fish said he was disappointed that Jones and Anthony “would take these sorts of steps to try to publicly embarrass and discredit our organization.”

The following day, Wake County District Attorney Lorrin Freeman asked the State Bureau of Investigation to open a criminal inquiry into Cope’s spending. The following day, Cope resigned, saying he had blurred the lines between his personal and professional lives.

Lewis said the dual investigations are taking a hard look at the bank accounts discussed in the letter, accounts that were unknown to Jones and Anthony, who each served terms as SEANC treasurer.

“I think every account has been looked at by the SBI, their purpose was discussed, the balances were analyzed,” Lewis said. “It doesn’t seem as if anything screwy or irregular was going on.”

Lewis said he was constrained in what he could discuss as the investigations continued. He acknowledged that SEANC had paid Cope a substantial severance and was working to retrieve the entire payment back from Cope, but he would not specify the exact amount.

Neff: 919-829-4516