A federal judge denied former state lawmaker Stephen LaRoque’s requests this week to dismiss charges related to $300,000 that federal prosecutors believe he stole from two federally-funded non-profits.
The orders issued Monday and Wednesday by Senior United States District Court Judge Malcolm J. Howard clear the path for LaRoque’s May 20th trial at the federal courthouse in Greenville, where a jury will decide his guilt or innocence on the allegations.
N.C. Policy Watch first raised questions about LaRoque’s excessive compensation from the non-profits in an August 2011 investigation, “Public benefits, personal gains,” and a federal grand jury began its own probe a month later by issuing subpoenas to LaRoque for records. The two non-profits were part of a U.S. Department of Agriculture program seeking to combat poverty by creating a mechanism to offer loans to small business owners that traditional banks shunned. Instead, the investigation found LaRoque received generous salaries from a board of directors that consisted of his immediate family members while close associates of LaRoque’s received loans.
Howard’s orders to uphold the charges were filed on Tuesday and Wednesday, and let 10 of the 12 charges LaRoque faces stand. He also ordered that witnesses for both the defense and prosecutions except for the two FBI case agents be sequestered during the trial, meaning they can’t talk be in the courtroom during testimony nor share their own testimony.
Howard has not yet ruled on a final motion from LaRoque to dismiss two additional counts of falsifying tax reports.
Preceding his orders was a flurry of motions and responses between federal prosecutor Dennis Duffy and Joe Cheshire, a prominent Raleigh criminal defense attorney hired by LaRoque.
Cheshire, in court filings, asked that the charges against LaRoque be dismissed because LaRoque was owed the $300,000 in question as compensation at the small economic development non-profits.
“[T]he contracts are valid, and entitled Mr. LaRoque the funds he is charged with wrongfully obtaining,” Cheshire wrote, referring to retroactive contracts issued by the non-profits to pay LaRoque. “Because he was the ‘rightful owner’ of the funds, he did not steal them and the prosecution’s theory is insufficient to state an offense.”
But Duffy responded that wasn’t the case, and that LaRoque dipped into the bank accounts of East Carolina Development Company and Piedmont Development Company to finance his personal lifestyle, using the money to purchase jewelry and replica Faberge eggs for his wife, buy a Greenville ice-skating rink and Zamboni for ht rink, as well as purchase a rental home to be used by LaRoque’s stepdaughter.
From a response filed today by Duffy:
“The Defendant’s claim that he left hundreds of thousands of dollars of his annual earnings in ECDC and PDC’s bank accounts in order to ensure that such nonprofits did not run short of funds is absurd,” Duffy wrote. He added, “The Defendant’s decision to withdraw the money under the guise of zero-percent interest, unsecured, sham loans was an attempt to conceal his theft and avoid taxes, not an altruistic attempt to help two nonprofits.”
To get an idea of what the trial will be like (both Duffy and Cheshire are known as being top attorneys in the state), below are some of the motions each have filed in the case.
Below is LaRoque’s motion to dismiss counts 1 through 8, as well as the prosecution’s responses.