Policy Watch Investigates

LaRoque loans his company $200K from nonprofit, interest-free

N.C. State Rep. Stephen LaRoque tapped a federally-funded non-profit he ran to loan his own company money, according to documents filed in the Lenoir County Courthouse this week.

LaRoque Management Group, the for-profit company LaRoque owns, received a $200,000 loan at zero-percent interest in July 2010 from East Carolina Development Company, according to a promissory note found in court records.

The promissory note doesn’t specify what the money was for, but does indicate LaRoque Management Group paid back the no-interest loan in May. (Click  here to see the loan document.)

LaRoque refused to comment about the loan.

“I’m not talking to you about anything,” he said.

The loan may run afoul of the IRS rules that govern tax-exempt public charities like East Carolina Development Company and Piedmont Development Company, both of which are based in Kinston.

“An arrangement like that is highly unusual and suspect,” said Thomas Kelley, a UNC-Chapel Hill law professor that specializes in non-profit management.

LaRoque, a Kinston Republican serving his third time in the state legislature, has come under public scrutiny following N.C. Policy Watch’s investigation “Public money, personal gains” into LaRoque’s two non-profits, the East Carolina Development Company and Piedmont Development Company. Among the investigation’s findings were that LaRoque received generous salaries of to $195,000 a year; stacked the boards with immediate family members like his wife and brother; and arranged to loan federal money to close associates, including two GOP state legislators and a woman he later married. (To see the relationship between LaRoque Management Group and the non-profits, click here.)

The U.S. Department of Agriculture, which has given $8 million to LaRoque’s two non-profits since 1997 as its only funder, did not immediately respond to requests for comment about the 2010 loan. Messages left for DeLane Johnson, the spokeswoman for the agency’s North Carolina Rural Development Office, were not returned.

The $200,000 loan that LaRoque gave to his company has not previously been disclosed.

Documents describing the 2010 loan were filed at the Lenoir County Courthouse this week as part of an ongoing defamation lawsuit filed last October against Van Braxton, the Democratic incumbent LaRoque beat in last year’s election.

LaRoque filed the lawsuit against Braxton over a campaign mailer attacking LaRoque’s management of the non-profits. In the months since the election, Braxton’s lawyers have fought the lawsuit and requested documents from LaRoque and his non-profit. Braxton’s lawyers included a copy of the promissory note in a court filing this week.

LaRoque’s non-profit was held in contempt in late August for not complying with a Lenoir Court Superior Court judge’s order to turn over documents. The federally-funded non-profit was ordered to pay $250 a day until all the documents are turned over. LaRoque’s lawyer is appealing the judge’s contempt order and asking to delay paying the contempt fines until the N.C. Court of Appeals makes a ruling, which could be months from now.

A hearing about the contempt order will be held Wednesday afternoon at the Lenoir County Courthouse.

 

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