GREENVILLE — Bert Diener’s law firm is being audited by the IRS.
The longtime legal counsel of former state Rep. Stephen LaRoque found his business, Diener Law Firm, under the IRS’ microscope after receiving a letter from the agency April 25.
During cross examination in LaRoque’s fraud trial Thursday, Joe Cheshire — representing LaRoque in the current matter — asked Diener about previous conversations with federal investigators.
Diener said the questioning became contentious, later alleging Assistant U.S. Attorney Dennis Duffy accused him of lying, to which Diener took offense.
Both Diener and Duffy agreed they “butted heads” at the meeting.
After a series of meetings, Diener said he received a letter from the IRS.
“There were questions and documents were requested from me and my wife” regarding his representation of LaRoque, including checks, Diener said.
“The reason I was being audited was because of this case,” Diener said. “That was my assumption.”
He said he came to that assumption after consulting with his attorney, who is handling his side of the audit. The process officially began on May 20, the first day of the LaRoque trial.
Following the audit announcement, Duffy asked Diener why he hadn’t told prosecutors of the audit when they met on May 9, as the audit request came from the IRS’ civil division. Diener admitted he told the defense about the matter and would have told the prosecution, but he said he thought it was already aware.
In addition to representing LaRoque and his family in personal matters, he also provided counsel to LaRoque’s East Carolina Development Company. His firm acquired loans from ECDC, as well.
Duffy presented evidence that Diener’s firm shouldn’t have received the loans because it moved its Snow Hill headquarters to Greenville, which Diener said was news to him.
Early on, with offices in Greenville, Kenansville and Snow Hill, the firm took out a $100,000 loan from ECDC to expand, under the requirement of retaining six jobs and adding two new jobs.
In addition to that loan, Diener Law Firm took several loans — paying them back on schedule, Diener said — and adding what Diener said amounted to 27 new jobs.
The firm has since expanded to Clinton, Mount Olive and Smithfield. Diener said the U.S. Department of Agriculture knew everything that was going on and he wasn’t aware anything was wrong until the investigation and trial.
Under prosecutors’ allegations that bills for services rendered may have been inappropriately cut for LaRoque and entities he was involved with, Diener said it was common practice, and none of his clients paid full price.
Diener also represented LaRoque in his defamation case against then-Rep. Van Braxton in 2010. Diener said he told LaRoque to be careful, but that LaRoque said he had nothing to hide.
Following the election, Diener said the momentum behind the case fell apart and both sides wanted it to end, but that Braxton and the N.C. Democratic Party received documents through discovery that were not public records and were not otherwise available.
He testified it was his opinion at the time that the information was leaked by less than honest means to N.C. Policy Watch, which published an in-depth piece alleging misdeeds by LaRoque with ECDC.
The prosecution countered and Diener said he never saw the checks from ECDC to LaRoque Management Group that were part of the defamation allegation.
At the end of his testimony, Diener said the audit struck home.
“Oh, yeah — I’m still scared,” Diener said. “I don’t know what’s going to happen after this trial.”
Decker testimony
The prosecution called up Teresa Decker in the afternoon, initially running through seven fiscal years of financial documents. Decker testified she’s worked for Kinston-based Lloyd Moody, CPA for 37 years and prepared the ECDC financial documents.
Duffy asked her if, from the 2002-03 fiscal year to the 2008-2009 fiscal year — running from Oct. 1 through Sept. 30 — if there were any line items relating to accrued earnings or deferred compensation, and she replied no.
In the ‘08-’09 year, Decker confirmed it was the first time there was a line item for “other loans,” saying LaRoque asked her to make it separate from the intermediary relending program loans.
Under questioning from the prosecution, Decker said she was instructed on Aug. 23, 2011 — one week after LaRoque’s news conference about Braxton’s allegations — to change the compiled statement from FY 2009-10.
While saying it was not an unusual practice to receive notice to go back and make changes, Decker said she was told by LaRoque and auditor Angie Johnson to add $192,257.92 in accrued contracted services — money owed to LaRoque.
On cross examination, the defense entered into evidence 40 pages of bank reconciliation documents that were understood to have been handed by LaRoque to Decker for use in compiling the financial statement, going from June 2009 to August 2011.
Defense attorney Elliot Abrams pointed out, and Decker confirmed, checks from ECDC to LMG showed the notation “loan against current earnings,” done at zero percent interest, beginning on June 26, 2009 with a $150,000 check.
Further checks, as the defense presented and Decker confirmed, were similar in nature.
Tax records
Lloyd Moody’s wife, Susan, who also works with the firm, finished up the day’s testimony with a discussion of LaRoque’s personal and ECDC’s tax records that at a number of times led to confusion on both the part of the prosecution and the witness. Her testimony should conclude today, along with the testimony of Lloyd Moody.
Moving on
Following attorneys’ discussion with U.S. District Judge Malcolm Howard, it’s anticipated the prosecution will wrap up its case today. Cheshire said to The Free Press he intends to call LaRoque to the stand Monday.
Cheshire said his case should only take a couple days, but he couldn’t comment on the length of the prosecution’s questioning of witnesses.
Wes Wolfe can be reached at 252-559-1075 or wes.wolfe@kinston.com. Follow him on Twitter @WolfeReports.