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LaRoque’s defense on federal charges: He was owed the money

Court documents filed this week indicate that former state Rep. Stephen LaRoque will defend himself against charges he stole from his federally-funded non-profits by saying he deserved the money.

“Mr. LaRoque was entitled to the funds he is charged with stealing, so he did not steal them,” wrote Joe Cheshire, LaRoque’s attorney, in a response filed Monday with the federal court seeking to have the prosecutor’s 70-plus “introduction” section of the indictment stricken from the record.


Attorney Joe Cheshire addresses media outside the federal courthouse last August after Stephen LaRoque’s first court appearance. Stephen LaRoque is standing on the left of Cheshire.

LaRoque, a Kinston Republican, resigned from his legislative seat last year, after a federal grand jury indicted him on charges from using the federal funds in the East Carolina Development Company and Piedmont Development Company to enrich himself. He had already been defeated in the Republican primary that spring by state Rep. John Bell.

The federal indictment accuses LaRoque of taking $300,000 in additional compensation from the non-profits, and using the money to buy jewelry for his wife, an ice-skating ring and replica Faberge eggs for his wife.

The federal probe appears to have began after the publication of a 2011 N.C. Policy Watch investigation “Public money, personal gains [2]” that found LaRoque was paid generously while running the small non-profits, which were supposed to spur economic growth in rural areas by lending money to small businesses. LaRoque’s non-profits, which were controlled by a board made up of LaRoque’s immediate family members, also lent money to close associates of LaRoque’s, including two state lawmakers and his attorney.

The N.C. Policy Watch investigation also found the U.S. Department of Agriculture had lax oversight of the Intermediary Relending Program that LaRoque’s non-profits were funded through. USDA officials in Raleigh told N.C. Policy Watch that they were unaware of LaRoque’s high salaries.

The agency neglected to conduct required annual field visits of LaRoque’s non-profits for four years. Audits submitted to the USDA each year raised concerns about LaRoque having sole control over the organizations’ finances and records, but USDA officials never appeared to have demanded or sought changes.

In court filings this week, Cheshire asked that the charges against LaRoque be dropped because the wrongdoing alleged didn’t amount to a crime. The USDA rules were confusing, Cheshire wrote in court documents, and any money LaRoque took was money he was owed.

“[T]he rule of levity should prevent Mr. LaRoque from being criminally prosecuted for violating such grievously ambiguous and uncertain regulations,” Cheshire wrote.

Federal prosecutor Dennis Duffy, in a separate motion, indicates that he plans on arguing in court that LaRoque stole money from the non-profits on top of an already-generous salary and hatched a scheme to hide the theft by creating retroactive contracts with the non-profits.

“In January 2009, the Defendant stole $300,000 from two federally-funded non-profits for whom he served as Executive Director,” Duffy wrote in the motion. “In order to conceal his theft, the Defendant chose to extract the fruits of his crime under the guise of loans from the non-profit to his private company.”

As Craig Jarvis of the News & Observer’s “Under the Dome” blog notes here [3], LaRoque’s attorney mentioned N.C. Policy Watch in the court filings, referring to us as “Democratic-leaning” and suggesting the probe was politically motivated.

For readers who are interested, here’s a link [4] back to the piece we published with the 2011 investigation detailing how the piece was reported and written.

LaRoque’s trial is slated to begin May 20 in Greenville, and N.C. Policy Watch will have coverage of the trial.