08/17/11 — LaRoque addresses allegations about business dealings

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LaRoque addresses allegations about business dealings

By Matthew
Published in News on August 17, 2011 1:46 PM

KINSTON -- Looking to tell his side of the story, state Rep. Stephen LaRoque held a press conference open to the public at the Kinston/Lenoir County Visitors Center Tuesday to address allegations that he was improperly managing two economic development non-profits.

The allegations, raised by the online publication N.C. Policy Watch, an arm of the left-leaning progressive N.C. Justice Center, include his $195,000 contract, the presence of family members on his board of directors, giving federal loan money to close associates and making loans above the USDA cap.

On Tuesday, LaRoque sought to explain what exactly his for-profit company, LaRoque Management Group, does --which is to manage, on a contract basis, East Carolina Development Co. and Piedmont Development Co.

These organizations, he explained, take loans from USDA, and in turn, loan that money out to small businesses in rural areas. It is then the non-profits responsibility to pay back the federal government, with interest. And when businesses pay their loans back, that money is then loaned back out to other businesses, hence the term "revolving loan."

Addressing the allegations, he explained that it was the nature of the revolving loan program and some confusion as to how those secondary loans work that led him to make loans above cap. However, as he pointed out, even an audit of his and several other agencies by the Office of Inspector General found the regulations surrounding such loans to be unclear and did not find any impropriety.

He also pointed out that USDA and IRS rules do not prohibit family members -- currently his brother, Walter, a real estate expert and his wife, Susan, a former small business owner -- from serving on the board, particularly when they recuse themselves from voting on issues like his contract.

"I'm just trying to find the best qualified people I know," he said.

Similarly, he said he likes to have people on the board who have previously received and repaid loans because they understand how the process works.

He also said that he has no problem making loans to anybody, even if it's somebody he has a relationship with, as long as they meet the USDA guidelines and will create or save jobs -- including people he does business with, as well as fellow or former lawmakers.

"Why shouldn't members of the legislature qualify for loans like anyone else? We are a citizen legislature," he said. "If I loan money to a dry cleaner, would I be precluded from taking my clothes to them? Do business with those who do business with you."

However, he acknowledged, he has made loans in the past -- loans that were not repaid -- particularly during the heady days of the mid-2000s, that he regrets. Among those, he said, is one to former board member Mark Pope, owner of New Horizon Partners, who was quoted repeatedly in the Policy Watch piece as being uncomfortable with how things were being run. However, LaRoque said, not only is that loan currently in arrears, but Pope also voted, while on the board, to give money to a business partner without disclosing their relationship.

But LaRoque's main point was that over the last 16 years, with about 100 loans made and about 500 jobs created or saved, he has run a successful program -- "managing more assets at a much lower cost" than other comparable agencies.

He explained the contract for services -- none of which comes from taxpayer dollars -- includes his compensation, as well as that of his employee, though he would not disclose the exact split because LaRoque Management Group is a private business.

Overall, though, he is confident in his management of the economic development agencies.

"I feel good about it," he said. "It's a program that you can see its purpose -- you can see its results. These are small businesses that are not going (to receive loans and create jobs) if not for us."

And so the allegations of wrongdoing he said, are simply "false and misleading," and he accused N.C. Policy Watch of being a "liberal propaganda tabloid" attacking him for his stance against one of N.C. Justice Center's board members -- the Rev. William Barber, president of the state NAACP and a man whom LaRoque has repeatedly called a racist.

It's a charge, however, that Policy Watch writer Sarah Ovaska denied.

"It has nothing to do with Rev. Barber," she said.

She explained she began her two-month investigation after multiple comments on message boards and others mediums raised questions about LaRoque's management of the agencies.

"In this case, I felt looking into Rep. LaRoque's management of the two non-profits was important enough for the public to know," she said.