Federal prosecutors finished calling witnesses Monday to testify in the trial against Stephen LaRoque, a former Kinston state representative accused of stealing from two economic development charities he ran.
LaRoque could testify as early as tomorrow, as his defense attorneys begin to make their case.
The 49-year-old Republican that was a co-chair of the powerful House Rules Committee could face more than 90 years in prison if convicted of the dozen criminal charges he faces. Federal prosecutors believe LaRoque used the federally-funded East Carolina Development Company and Piedmont Development Company to buy cars, a rental home, expensive jewelry, replica Faberge eggs and a Greenville ice skating rink. The non-profits had received more than $8 million in funding from a anti-poverty rural lending program run by the U.S. Department of Agriculture, where LaRoque’s non-profits were supposed to be lending out money to needy businesses in rural areas of the state.
LaRoque has plead not guilty to the charges and will likely testify in his own defense today or tomorrow. His attorneys, Joe Cheshire and Elliot Abrams, have argued that LaRoque was owed the $300,000 that prosecutors contend was stolen, and that the USDA had confusing rules about how to handle the publicly-sourced money. Two public accountants LaRoque used have also testified that they felt the state lawmaker had left money owed from his lucrative contract in the non-profit’s bank accounts.
“Basically, you can’t steal your own money,” Abrams said in court Monday.
In court Monday, jurors heard again from Angie Johnson, a Kinston accountant that conducted audits for LaRoque’s non-profits. Johnson said she did not clearly disclose the $200,000 in zero-interest personal loans LaRoque told her he took from the economic development non-profit in annual audits she prepared for the USDA.
LaRoque told Johnson that the loans were for money owed to him. Johnson said she was surprised at first, as she thought LaRoque had been paid exactly what he was owed, but went along with his assessment that he was due a percentage of the total assets of the charities, including large stockpiles of cash.
“I was satisfied that he was owed the money,” she said. Johnson relied on an unsigned 1999 contract, and a 2009 contract applied retroactively that gave LaRoque three percent of all the non-profit’s assets as well as other bonuses. The 2009 contract was signed by Susan LaRoque, LaRoque’s wife who served on his board of directors.
Johnson told jurors that she also reworked past years’ tax forms for the non-profits in the fall of 2011, after LaRoque was facing questions publicly about his management of the non-profits. An N.C. Policy Watch investigation published in August 2011 found that LaRoque received generous salaries, as high as $195,000 a year, from the small non-profits that were run by a board of directors consisting of LaRoque, his wife and his brother. An investigative federal grand jury issued subpoenas for LaRoque’s financial information the following month and ultimately indicted him in July 2012.
Federal prosecutor Dennis Duffy also brought in a Chicago-based forensic accountant to testify Monday about deferred compensation, and how it should be handled for tax reasons. Mark Charnetzski said that deferred compensation can be used for highly-compensated employees, but it always includes documents about when money can be accessed.
Otherwise, people should report their full income and pay taxes on all of it, Charnetzski said.
“When it’s your money, you get taxed on it,” he said.
For his testimony, Charnetzski reviewed tax and financial documents for LaRoque, his company LaRoque Management Group and the two non-profits.
Charnetzski said he felt LaRoque underestimated his taxable income.
The trial is being held at the federal courthouse in Greenville and will resume at 9 a.m. Tuesday.