Judge holds LaRoque’s non-profit in contempt

N.C. Rep. Stephen LaRoque’s non-profit failed to turn over documents detailing the inner workings of the federally-funded organization in an ongoing defamation lawsuit, a Superior Court judge ruled this week.

The East Carolina Development Company, a non-profit that LaRoque has been executive director of since 1997, will have to pay $250 a day in fines until it turns over the documents requested by lawyers for Van Braxton, the former Democratic legislator that LaRoque beat in last year’s elections.

The contempt order came in a case that LaRoque initiated, when he filed a defamation lawsuit last October against Braxton and the state Democratic Party. LaRoque had taken issue with a campaign mailer which accused him of stealing a popular Kinston barbecue restaurant owner’s house and home by foreclosing on the properties for non-payment. (For background, see this Kinston Free Press article about the dispute.)

Lenoir County Superior Court Judge Paul Jones issued his civil contempt order Thursday, and found that the non-profit had only turned over minutes from 26 board meetings  (most of which were unsigned) and no documents that showed how LaRoque’s pay was determined to be reasonable. The non-profit also refused to indicate whether there were documents that didn’t exist, Jones ruled.

“ECDC’s misrepresentations contained in its Response, ECDC’s failure to produce existing documents especially financial information and ECDC’s failure to specifically follow the terms of the Order with respect to the existence of records, constitute a willful noncompliance,” Jones wrote.

The civil contempt order is the most recent blow to LaRoque, a GOP legislator from Kinston and topic of a recent N.C. Policy Watch Investigation “Public money, personal gains.”

The investigation found that LaRoque reported taking in plump six-figure salaries (up to $195,000 in one year) for running the two small economic development non-profits without the knowledge of some board members; his wife and brother joined both boards of directors; and loans were given to several close associates of LaRoque, including his future wife, personal attorney Bert Diener and two GOP legislators. The non-profits were funded with $8 million in loans taken in from the USDA, for a program that was supposed to fight poverty by lending money to small business in rural areas that couldn’t get funding on their own.

LaRoque, who refused to speak with NC Policy Watch for the investigation, has since defended the management of his non-profits by saying he was using portions of his salary to pay employees of his for-profit management company contracted to run the non-profits. He’s done that while refusing to provide any documents that would back up his assertions, and has refused to provide copies of the contracts he had with his non-profit.

He said at a press conference held last week that he had a right to profit from running the public charities.

“If the profits increases, do I make more money? Absolutely,” LaRoque said. “But this is America and I don’t think profit is a crime.”

LaRoque also thinks he was a target because of public comments calling the Rev. William Barber, the head of N.C. NAACP chapter,  a “racist” and a “thug.” Barber serves on the board of the N.C. Justice Center, the parent organization for N.C. Policy Watch. Barber has had no role in the investigative reports about LaRoque.

Diener, LaRoque’s attorney, said he wasn’t aware of the judge’s contempt ruling, but said that it would likely be appealed.

“Everything’s been turned over,” Diener said. “All the files were given to us and everything’s been done in good faith.”

Jones also took issue with Diener not coming to a scheduled court hearing, and ordered that the non-profit pay the attorney’s fees for Braxton and the N.C. Democratic Party, whose attorneys did show up for the Aug. 3 hearing.  Diener represents both LaRoque personally as well as the East Carolina Development Company and did business with ECDC when his Snow Hill law firm took out a federally-backed $150,000 loan in 2008 and 2009, according to USDA records.

Diener declined to talk about the loans for his law firm.

The IRS, which is tasked with granting and revoking tax-exempt status for non-profits, would not say whether recent publicity of LaRoque’s non-profits caught its attention.

The questions raised in the N.C. Policy Watch investigation have been reported in media outlets around the state and have caught the attention of national outlets like the Non-Profit Quarterly, which called for the USDA and N.C. Attorney General Roy Cooper to look into LaRoque’s non-profits.

But there’s little indication if either of those agencies, or the IRS, have any interest in LaRoque.

Attempts to reach the USDA’s Rural Development division this week for reaction have been unsuccessful, though the agency previously said it was addressing several issues with LaRoque’s non-profits.

“The IRS is not permitted to discuss a particular or specific taxpayer’s tax matter or their taxes based on federal disclosure regulations and federal law,” IRS spokesman Mark Hanson said in a written statement.

Cooper’s office had similar sentiments.

“It’s not appropriate for us to comment at this time,” said Noelle Talley, a N.C. Justice Department spokeswoman.


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Judge holds LaRoque’s non-profit in contempt