GREENVILLE — The contract exists.
Or, at least, it did at one time.
Often fought over in the fraud trial of former state Rep. Stephen LaRoque is a contract allegedly entered into in 1999 that set his rate of compensation from the East Carolina Development Company.
That contract entitled him to 3 percent of the amount of assets managed, or the amount of loans managed, depending on whose narrative you believe.
Angie Johnson, who resumed her testimony Monday, said she began auditing ECDC in 2001.
“In 2001, you got a folder with the September 1999 contract,” defense attorney Elliot Abrams asked.
Johnson replied that she did, and was confident that it was a signed version. The only copies entered into evidence are unsigned — one dated for September 1999, and the other undated.
According to Johnson, the dated, but unsigned copy in evidence was like the one she saw in 2001. She said the contract provided LaRoque compensation, as executive director, equal to 3 percent of the total assets managed by ECDC.
The amount of the assets managed is a larger sum than the amount of loans received.
Earlier in the trial, the prosecution presented evidence and questioned witnesses disputing that any signed contract existed before 2009.
Johnson said she checked the creation date of the contract file on LaRoque’s computer, and discovered it was time-stamped for 1999.
Whether there was money left from that 3 percent in ECDC as deferred pay, and whether it was OK for LaRoque to accept loans against that alleged deferred income, was another matter addressed.
Under direct examination from Assistant U.S. Attorney Dennis Duffy, Johnson admitted she did list deferred compensation or any accrued payments in her audits.
She further admitted there were oversights on her part for not being more specific in how she referenced the loans to LaRoque Management Group in the audits, including noting a $150,000 loan as “organizational costs,” which she said was a mistake.
Around mid-2009, Johnson said, LaRoque told her he would be taking out a loan against his earnings. She told prosecutors she didn’t see the need to look closely at the loans because she saw LMG, the company that got the loans, and LaRoque as the same, and that the money was his.
Spreadsheets provided to Johnson by LaRoque after the July 11, 2011, audit showed an amount owed to him of more than $192,000 over the pay he’d accepted while heading up ECDC. Documents provided by Lloyd Moody, CPA revealed similar statistics.
In regard to the loans against that money, Johnson said, “He told me he was supposed to get an inheritance and was going to pay it back.”
The defense later presented copies of checks from LaRoque to ECDC, totaling $200,000, from September 2011.
The prosecution countered with copies of tax documents showing that places that should have listed deferred income, if there was any, had nothing listed. Prosecutors also questioned why line items that should have showed LMG receiving loans from ECDC were not properly marked.
The expert
Monday afternoon, the prosecution called Paul Carnetzki to the stand as an expert witness in forensic accounting. Carnetzki spent about 25 years at Arthur Andersen in Chicago, leaving as a partner, and started on a number of accounting ventures with longtime colleagues.
He’s currently managing director of the firm Natoma Partners.
Carnetzki said that if there was deferred compensation, and LaRoque wasn’t going to pay taxes on it yearly, it needed to be set up in a deferral plan that would detail how much money to defer and at what time to receive it.
Under questioning from Duffy — the first time Carnetzki ever testified for the prosecution in a case — Carnetzki said without such a plan, LaRoque had to pay taxes on the money.
“If those contracts are valid, he has to pay taxes on that, that year,” Carnetzki said.
He went on to confirm the prosecution’s question of LaRoque understating his 2009 taxes, and in 2010.
“In my opinion, he should have reported the amount of the $150,000 loans as income,” Carnetzki said, adding the same thing applied in 2010 for loans that year.
Motion to acquit
After the prosecution rested its case and the jury left the courtroom, Abrams asked U.S. District Judge Malcolm Howard to acquit LaRoque on all charges, beginning with the statement that two CPAs took the stand and determined the money LaRoque took he was owed, and he couldn’t steal from himself.
He further said there’s no evidence LaRoque purposefully misled the U.S. Department of Agriculture in reference to the loans made to ECDC as an intermediary, and disclosed everything he believed he had the legal duty to do.
Abrams stated the evidence shows the matter to be complex, that LaRoque isn’t trained in accounting and trusted his accountants to do the right thing.
The prosecution’s case, Abrams said, is “pure speculation.”
“I’m going to reserve judgment on that matter,” Howard said, noting to the attorneys that he must do so in light best favorable to the prosecution.
Today
Howard advised both parties to be ready to go this morning at 9 a.m. It’s anticipated the defense will place LaRoque on the stand, and that he will be the only defense witness of the trial.
Howard said if testimony wraps up by noon, the case will go to the jury today. If not, it will likely be handed to the jury for deliberation Wednesday morning.
Wes Wolfe can be reached at 252-559-1075 or wes.wolfe@kinston.com. Follow him on Twitter @WolfeReports.