Policy Watch Investigates

A more subdued LaRoque in court on embezzlement charges

Photo by Ricky Leung / NC Policy Watch

Stephen LaRoque, a sharp-tongued former state lawmaker who often railed against wasteful government spending, had little to say Monday as he sat in a defendant’s chair for his first court appearance on charges of stealing federal funds.

LaRoque, 48, of Kinston, was named in an eight-count federal indictment last month, accused of money laundering and embezzling hundreds of thousands of dollars from two economic development non-profits, the East Carolina Development Company and Piedmont Development Company.

The non-profits took in $8 million since 1997 as part of a U.S. Department of Agriculture program to seek to combat rural poverty by offering loans to struggling small businesses. The non-profit serves as middle man for the anti-poverty program and manages the loans to businesses on behalf of the USDA.

But LaRoque is instead accused of using the non-profits to partially finance his own lifestyle, including buying $5,000 reproduction Faberge eggs for his wife, an ice-skating rink, a car and a Zamboni ice resurfacer. (Click here to learn more about the indictment.)

Photo by Ricky Leung / NC Policy Watch

In the federal courtroom Monday morning, LaRoque spoke few words other than to answer U.S. Magistrate’s Judge James Gates questions about whether LaRoque understood the charges he faces.

The relative silence at Monday’s court hearing was a big departure from a press conference LaRoque held a year ago in Kinston to dispute an N.C. Policy Watch investigation. The N.C. Policy Watch articles found that the former lawmaker received generous salaries, of up to $195,000 a year, off the public charities that were supposed to be spurring economic growth in one of the state’s most impoverished regions.

“No taxpayer money has been used to pay for any of my salaries,” LaRoque said at his 2011 press conference.

He also defended his right to make money off of the non-profits, saying, “If the profits increases, do I make more money? Absolutely. But this is America and I don’t think profit is a crime.”

Federal prosecutors now believe that LaRoque only managed a handful of loans and kept the non-profits flush with cash from the USDA in order to reap big paychecks, according to the indictment. For several years, LaRoque’s brother and wife were the only board members for the charities and approved the generous compensation.

The N.C. Policy Watch investigation, “Public Money, Personal Gains” also found LaRoque’s non-profit also gave out loans to close associates, including two fellow GOP legislators, and LaRoque loaned his own for-profit business $200,000 from the non-profit, a potential violation of IRS tax laws that prohibit non-profit leaders from receiving personal or excessive benefits from tax-exempt charities.

LaRoque was indicted on July 17 by a federal grand jury that had been investigating his actions since September 2011, a month after N.C. Policy Watch reported its investigation.

Photo by Ricky Leung / NC Policy Watch

His attorney Joe Cheshire, one of the state’s top criminal defense lawyers, said after Monday’s hearing that LaRoque planned on fighting the charges at trial.

“The work he did was good work,” Cheshire said to a group of media assembled in front of the federal courthouse in downtown Raleigh.

Cheshire also said the federal agriculture department had intricate and confusing rules about how to manage the loan program, and that the agency’s lack of oversight of the rural lending program will come into play at the trial.

“That will fit into Representative LaRoque’s defense,” Cheshire said.

No trial date has been set, but Cheshire said he expects it will be within the next year.

Senior U.S. District Court Judge Malcolm Howard, who is based out of the federal courthouse in Greenville, will preside over LaRoque’s case and any future court hearings.

As a condition of his release, LaRoque will only be able to travel in the 44 counties from Raleigh to the coast that make up Eastern District of North Carolina, a normal restriction following criminal indictments.

He was also ordered not to converse or interact with any potential witnesses in the case, except for his wife Susan LaRoque and stepdaughter who both live with him.

LaRoque can also speak to his brother Walter LaRoque, but can’t discuss the criminal case.

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

Photos by Ricky Leung / NC Policy Watch