Policy Watch Investigates

Indictment accuses LaRoque steered federally-sourced dollars to luxuries, campaign

N.C. Rep. Stephen LaRoque, a polarizing Kinston Republican who railed in political speeches against excessive government spending, now stands accused of using his federally-funded economic development non-profits to fund his political campaigns and a lavish lifestyle.

A Raleigh-based federal-grand jury indicted LaRoque Tuesday and accused him of stealing $300,000 from a federal program and then making financial transactions of more than $316,000 in criminally-derived money.

Each of the eight counts appears to carry a punishment of up to 10 years in federal prison and fines. The indictment also seeks to seize LaRoque’s properties and assets if he is convicted.(Click here to read the indictment.)

No arrest warrant was issued for LaRoque, but a judge issued a summons for him to appear in court at 10 a.m. Aug. 6 at the federal courthouse in Raleigh, according to court records.

Joe Cheshire, a Raleigh criminal defense attorney, could not immediately be reached for comment, but told the Kinston Free-Press that LaRoque would fight the accusations in court.

Representative LaRoque has fully cooperated with the Government in its investigation and is very disappointed in the indictment that was handed down today,” Cheshire told the Free-Press. “He believes that when this matter is fully aired, it will be shown that he did not violate the laws of the United States and he looks forward to presenting his case in court.”

The $7 million in federal money that LaRoque’s two non-profits received over the last 15 years as part of the U.S. Department of Agriculture’s Intermediary Relending Program was intended to create jobs in low-income and rural areas, by offering loans to struggling business owners shunned by commercial banks. Eastern North Carolina, where LaRoque was based, faces some of the state’s highest unemployment rates and has long struggled to attract sustainable businesses to employ its residents.

But the grand jury indictment instead charges that LaRoque used the federal money to buy thousands of dollars in diamond jewelry and highly-priced Faberge eggs for his wife; “Bladez on Ice,” a Greenville ice-skating rink for his wife and stepdaughter, an $89,000 house for another stepdaughter and a $21,000 Zamboni, according to the charges in the 72-page indictment issued by a Raleigh-based federal grand jury.

He did so by placing his brother Walter LaRoque and wife Susan LaRoque on the boards of the East Carolina Development Company and Piedmont Development, leaving the three LaRoques to make all the decisions about where the federal money should go and how much money Stephen LaRoque should get paid for serving as executive director of the small economic development non-profits.

In all, the grand jury found he took in $1.9 million in compensation from 1998 to now. At one 2008 board meeting, Susan and Walter LaRoque approved a $180,000 salary despite federal tax and USDA rules that bar immediate family members from taking part in decisions they could directly or indirectly benefit from.

During the meeting, the board reviewed a budget which included $180,000 to be paid to LaRoque,” the grand jury indictment reads. “The budget was unanimously passed by LaRoque, LaRoque’s wife Susan and LaRoque’s brother Walter.”

N.C. Policy Watch first raised questions about LaRoque’s management of the non-profits, the East Carolina Development Company and Piedmont Development County, in August 2011 with the publication of “Public money, personal gains.” The investigation found that LaRoque took in plump salaries of up to $195,000 while using the federally-funded non-profits to offer loans to his close associates. His wife and brother served on his board of directors, and LaRoque also gave himself an interest-free $200,000 loan, which runs afoul of IRS and USDA rules that prohibit LaRoque and the non-profit board of directors from raking in personal benefits.

Tuesday’s indictment shows the grand jury served LaRoque with a subpoena in September 2011, a month after N.C. Policy Watch published its investigation. The indictment goes far beyond the N.C. Policy Watch investigation, which leaned on publicly-available documents from USDA and the non-profits’ yearly tax filings.

The grand jury indictment peels back more layers of LaRoque’s financial dealings, and accuses him shuffling money between his economic development non-profits, a private company he owned called LaRoque Management Group and his personal bank accounts, with federally-sourced funds eventually going to fund his campaign and put gold necklaces around his wife’s neck and diamond rings on her fingers.

The indictment also accuses LaRoque of funneling $28,000 of the non-profit’s money to his campaign account in 2008, and then lying to the N.C. State Board of Elections about the source of the money.

It was also the federally-funded East Carolina Development Company that ended up paying the bulk of LaRoque’s attorneys bill when he filed a defamation lawsuit he filed against his Democratic opponent in his 2010 campaign, according to the grand jury indictment. The non-profit covered $58,047 out of $78,216 in legal bills charged by Snow Hill attorney Bert Diener for the defamation case filed by LaRoque. Diener was also mentioned multiple times in the indictment for receiving several loans from the non-profit to expand his law practice.

The defamation lawsuit was eventually dismissed, after East Carolina Development Company agreed to pay more than $17,000 in contempt of court charges for not turning over documents.

NC. House Speaker Thom Tillis, who chose LaRoque as a member of his leadership team, also did not respond immediately to a request put into his spokesman for comment Wednesday. Tillis had told this N.C. Policy Watch reporter last August that he would look into allegations of misconduct by LaRoque.

What I’m trying to do is get my facts straight beginning with confirmation of your information, talking with the federal agencies that are involved, and we’ll continue that process,” Tillis said.

LaRoque is continuing serving in the N.C. House of Representatives, but was defeated in the May Republican primary by challenger John Bell, a Wayne County banker. Bell faces Democratic opponent James “Jim Babe” Hardison in November’s general election.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

 

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