Pressure mounts for formal ethics investigation of LaRoque

By: - November 16, 2011 11:07 am

Lawmakers should conduct a bipartisan ethics investigation  into the business dealings of state Rep. Stephen LaRoque, a top Republican in the legislature said today.

House Minority Leader Joe Hackney, the Democratic leader in the Republican-controlled N.C. House of Representatives, wants a bipartisan committee to look into Stephen LaRoque, an embattled Kinston Republican lawmaker facing scrutiny over his management of two economic development non-profits.

Hackney sent a letter this morning to N.C. House Speaker Thom Tillis asking for an independent investigation into LaRoque. (See below for text of letter.)

“(W)e should hold the members of our chamber to a higher standard of behavior to help build public faith in government,” wrote Hackney. “An open, bipartisan review of the allegations against Rep. LaRoque best serves the people of North Carolina and our fellow House members.”

LaRoque, a Republican serving his third term after a four-year hiatus from the state legislature, could not immediately be reached for comment. He’s previously defended his pay at the non-profit, which was up to $195,000 a year, and having his immediate family on his board of directors as an acceptable way of doing business.

Tillis could not be reached for immediate comment Wednesday morning, but has previously said his staff was looking into the matter and taking it seriously.

LaRoque, a Kinston Republican serving as a member of Tillis’ leadership team, has faced tough questions in recent months about two economic development non-profits he runs, the East Carolina Development Company and Piedmont Development Company. The non-profits, both based out of Kinston, have taken in $8 million from the U.S. Department of Agriculture as part of the agency’s Intermediary Relending Program that aims to combat poverty by loaning money to struggling entrepreneurs in rural areas. Neither non-profit has received money from the state. A USDA inspector general’s report in 2010 also found that more than $4.5 million was improperly lent out by the non-profits.

An August investigation by N.C. Policy Watch, “Public money, personal gains,” found the federally-funded-charities paid the sole employee Laroque generously, as high as $195,000 a year, without the knowledge of several board members; his board of directors included his wife and brother; and the non-profit gave loans of federal money to close associates of LaRoque – including his wife (his girlfriend at the time); two fellow GOP legislators and his lawyer.

NC Policy Watch also found a for-profit company owned by the lawmaker, LaRoque Management Group, took a $200,000, no interest loan in July 2010 from the non-profit, a potential violation of IRS tax laws that prevent non-profit insiders from personally benefiting from their charities.

LaRoque failed to report the loan on the non-profit’s most recent tax return, despite questions that specifically asked about personal benefits from the charity’s coffers.

Hackney called for the investigation after LaRoque dismissed a defamation lawsuit last week filed against the N.C. Democratic Party and Van Braxton, the Democratic opponent LaRoque unseated in  the 2010 election.

LaRoque took issue last fall with campaign fliers that accused him of stealing the home and business of a well-known Kinston barbecue restaurateur by foreclosing on the properties after a loan between the two went bad.

The only monetary settlement in the dismissal was $17,250 the East Carolina Development Company paid in contempt of court fines to Braxton for not turning over key documents in the lawsuit.

Decision in Tillis’ hands

The decision about whether to appoint a separate commission or send it the N.C. legislative Ethics Committee is up to Tillis, who gave LaRoque a leadership role this session as the co-chair of the powerful House Rules Committee.

Bob Hall, director of the government watchdog group Democracy NC, said an investigation could be conducted behind the scenes or out in the open, depending on the decisions made by legislators.

“It would be to the benefit of everyone if (an investigation) was aired, and it would be best if it were aired in the light of day,” Hall said.

The last high-profile ethics inquiry looking at the behavior of a legislative member was in 2007, when Hackney, then the House Speaker, formed a commission to looking into Thomas Wright Jr., a Wilmington Democrat eventually ousted from the legislature because of improprieties in his campaign finances and with a non-profit. Wright is now serving a six to eight year sentence in state prison.










Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or [email protected].


Text of letter sent by Hackney to Tillis

Source: Joe Hackney’s office 

November 16, 2011



The Honorable Thom Tillis

Speaker of the House

North Carolina General Assembly

Raleigh, North Carolina 27601


Dear Speaker Tillis:

Several recent media reports have raised questions about the business practices of our colleague Rep. Stephen LaRoque. The reports appear to point to a pattern of violating several guidelines for nonprofits as well as the rules for the U.S. Department of Agriculture loan program that provides the capital for Rep. LaRoque’s business.

I understand that you and your staff are monitoring this matter and I appreciate your attention. However, I believe the House of Representatives and the public deserve a fuller examination of the allegations made against Rep. LaRoque. I am asking that you appoint a bipartisan commission to independently review the matter and make recommendations about the best course of action in this case. The leadership of this commission should also be bipartisan — as is the leadership of our Ethics Committee — to assure the public that political gamesmanship is not a factor in this review.

No member of the House of Representatives should be exempt from the laws and regulations of our government. In fact, we should hold the members of our chamber to a higher standard of behavior to help build public faith in government.  An open, bipartisan review of the allegations against Rep. LaRoque best serves the people of North Carolina and our fellow House members.

I would be pleased to consult with you about the membership, duties and procedures for this proposed committee and I hope we will discuss this matter soon.

Thank you for your serious consideration of my request and please let me know if I can be of any assistance to you as you move forward.


Very truly yours,

Joe Hackney

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Sarah Ovaska-Few

Sarah Ovaska-Few, former Investigative Reporter for N.C. Policy Watch for five years, conducted investigations and watchdog reports into issues of statewide importance. Ovaska-Few was also staff writer and reporter for six years with the News & Observer in Raleigh, where she reported on governmental, legal, political and criminal justice issues.