Veteran North Carolina government watchdog Bob Hall — the man who helped bring down former Democratic House Speaker Jim Black — let loose another bombshell this morning. In a meticulously researched complaint to the state Board of Elections (click here to read the complaint and here to read the accompanying documents), Hall details the convoluted and possibly unlawful process by which North Carolina Senate President Pro Tem Phil Berger has been amassing personal wealth through the use of funds from his campaign.
The details of Berger’s operation read like a miniature version of a self-dealing Donald Trump investment scheme, but what they boil down to is pretty simple: Berger appears to have been paying himself “rent” from his campaign funds that he is using to purchase real property — most notably a townhouse in Raleigh on which he took out a mortgage in 2016.
This is from Hall’s complaint:
- On May 19, 2016, Philip E. Berger and his wife Patricia H. Berger purchased a townhouse at 1535 Yarborough Park Drive, Raleigh, for $250,000.
- On May 19, 2016, Phil and Patricia Berger signed a Deed of Trust with NewBridge Bank for a mortgage loan of $224,910 for the Yarborough Park Drive townhouse. The deed says the initial interest rate of 3.875% will become an adjustable rate after June 1, 2023; the full loan, with interest, is payable by June 1, 2046.
- The May 19, 2016, loan agreement with NewBridge Bank includes a “Second Home Rider,” signed by Phil and Patricia Berger, which says, “Borrower shall occupy, and shall only use, the Property as Borrower’s second home. Borrower shall keep the Property available for Borrower’s exclusive use and enjoyment at all times, and shall not subject the Property to any timesharing or other shared ownership arrangement or to any rental pool or agreement that requires Borrower either to rent the Property or give a management firm or any other person any control over the occupancy or use of the Property.” (emphasis added)
- On June 25, 2016, Phil Berger’s attorney Steven B. Long filed Articles of Organization with the NC Secretary of State for YPD Properties, LLC. Its principal office is located at Berger’s law firm office address in Eden. In subsequent annual filings with the Secretary of State, Philip E. Berger is identified as YPD’s manager and YPD’s business is describes as “property management.” YPD apparently stands for Yarborough Park Drive.
- On August 8, 2016, the Philip E. Berger Committee sent $4,500 to YPD Properties at the Berger law firm address for a purpose described as “Holding Public Office Expenses.”
- Thereafter, in the first few days of each month, the campaign sent $1,500 to YPD properties. The payments of $1,500 per month have continued all 12 months of the year, through the most recent campaign disclosure report that ended June 30, 2019. The initial $4,500 payment apparently covered $1,500 per month for June, July and August of 2016.
- The purpose of the 24 monthly payments to YPD Properties in 2017 and 2018 is not provided on the campaign disclosure reports. “Rent” is the purpose given for the most recent six payments of $1,500, from January to June, 2019. (Does the arrangement to have YPD Properties pay “rent” for the townhouse violate the mortgage loan stipulation against renting the property?)
- Thus far, from August 2016 through June 2019, Berger’s campaign has sent a total of $55,500 to YPD Properties.
- It’s not clear whether YPD Properties is paying down the mortgage loan directly, or paying $1,500 each month to Phil Berger, or doing something else. On his Statements of Economic Interests since 2017, Berger lists himself as “Member/Manager” of YPD properties and also says he files a K-1 tax form with the IRS for income received from YPD Properties for “property management.”
Upon information and belief, by following the money from campaign contributors to YPD Properties to Phil Berger, it seems apparent that Berger is using his campaign for personal profit – for substantial financial gain and for acquiring a capital asset.
The bottom line: Berger pretty clearly appears to be profiting directly and personally via the redirection of campaign funds and this ought not to be permitted. As Hall notes,”Unless the State Board of Elections takes action, politicians will continue to profit handsomely by funneling campaign contributions to themselves, directly or indirectly, to pay for inflated expenses and subsidized assets.”
The board should take swift action to investigate such an important and likely, precedent-setting matter.