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Financial mismanagement and waste are nothing new in government. But it seems that these days, you can’t turn your head without seeing something amiss. Earlier this summer, the Civitas Institute helped to uncover corruption at the Rural Economic Development Center. Shortly after, a highly critical state audit forced Billy Ray Hall, the Rural Center CEO, to resign. Hall’s successor, Valeria Lee, also stepped down — but not before defending Hall’s $242,000 severance package.
City of Raleigh officials appear determined not to let the state government get all the headlines. This month, a city audit uncovered cronyism and possible fraud at the Raleigh Business and Technology Center (RBTC), a nonprofit “business incubator” funded almost entirely by the public. Among the problems identified:
•The RBTC lost its tax-exempt nonprofit status for failing to file with the IRS for three consecutive years.
•Out of 57 disbursements cherry-picked by auditors from the RBTC check register, 51 had inadequate or nonexistent documentation. The 51 disbursements in question totaled more than $100,000.
•$57,500 in back taxes owed to the IRS, the state Department of Revenue, and the Employment Security Commission.
•A former assistant city manager, Lawrence Wray, was the secretary of the RBTC’s board of trustees. Wray claimed to be the whistleblower at RBTC, but the city’s audit appears to show that he might have been actively complicit in wrongdoing at the organization. Wray has retained state Senator Dan Blue as his attorney, and is actively fighting the city’s efforts to cut ties with the RBTC.
•The chairman of the RBTC board, 92-year old Dr. Prezell Robinson, was unaware that he was still a board member.
•Despite the fact that the RBTC has occupied a city-owned building since 2000, a lease agreement drafted by the city was never signed and therefore never officially completed. This, according to the city audit, may lead the city of Raleigh afoul of federal compliance regulations, since the city used federal funds to purchase the facility.
•Bob Robinson (no relation to Prezell), the CEO of the RBTC, resigned when he read the city audit. Robinson repeatedly and actively stonewalled auditors. He ignored multiple requests for documentation by the city, avoided meetings, and even fled from a meeting in progress.
At a private business or nonprofit, this misconduct would be bad enough. But the fact that taxpayers paid for the RBTC — over $1.5 million since 2000 — is nothing short of appalling.
The story of the RBTC is not just about one institution. It is about a pervasive culture of graft and corruption that has entered government in the guise of “economic development.” Utter those magic words, and the public coffers spring open.
But more often than not, schemes to “develop communities” and “spur growth” are ineffective at best and downright criminal at worst.
And yet the cycle continues interminably, because “economic development” is a political opportunity. Organizations like the RBTC give politicians a chance to say that they “created jobs” and “stimulated the economy.” Throw in a press conference and a photo op, and the cycle of graft and back-scratching continues. Politicians win. Enterprising “nonprofits” like the RBTC win.
—Lee Brett is an analyst with the Civitas Institute.