Carolina Journal News Reports
RALEIGH — Newspaper editorial writers across North Carolina and law enforcement officials reacted swiftly to a state auditor’s report Oct. 22 that confirmed U.S. Rep. Frank Ballance operated a personal and apparently political slush fund behind the facade of a nonprofit humanitarian organization.
The nonprofit, the John A. Hyman Foundation of Warrenton, has received $2.1 million in state funds since 1994 to treat drug addicts and alcoholics. Much of the money, however, never found its way to the intended purpose, the audit said. Instead, as chairman of the foundation, Ballance wrote checks to relatives and people who contributed to his political campaign.
“This program is riddled with conflicts of interest in providing contracts and services,” State Auditor Ralph Campbell said at a press conference to announce the audit’s findings. Also in the room was Raleigh criminal defense lawyer Joe Cheshire, who had been retained by Ballance. The 1st District Democrat had said that “public monies have always been used for the public good for which they were authorized.”
Because of time constraints and shoddy record-keeping by foundation officials, Campbell’s investigative team limited its examination of the nonprofit’s records to a period from July 1, 2000 through April 30, 2003. The audit called for the foundation to immediately return to the state $239,000 in unspent funds it has in three bank accounts.
The day after the audit was released, N.C. Attorney General Roy Cooper’s office sent a letter to foundation officials demanding that they put the $239,000 into an escrow account until the State Bureau of Investigation examines allegations of mismanagement, conflicts of interest, and misuse of funds. Cooper also said his staff had been investigating the foundation before the audit was completed.
The FBI also is investigating whether Ballance and other foundation officials were involved in any criminal wrongdoing. The day the audit was released, Ballance told the Rocky Mount Telegram that he had not been contacted directly by the FBI. But, he said, “I am aware they are moving around.”
In response to the audit, the foundation blamed its mistakes on overworking of its staff and “regulatory interpretation.”
“In conclusion, the JAHF is proud of its charter and the work it has done. Having read the report, however, it is chagrined at its administrative shortcomings and what, at times, can only be characterized as shortsightedness. It will work hard to learn from its mistakes and will take corrective action. It appreciates the opportunity to address the issues raised by the special review and looks forward to continuing in its efforts to serve the public at large.”
A barrage of harshly critical editorials followed Campbell’s press conference. In a strongly worded editorial, the Wilson Daily Times called on Ballance to resign: “No one involved with the John Hyman Foundation funding controversy comes away looking good. They all look pretty awful, in fact, with financial chicanery tarring U.S. Rep. Frank Ballance most of all.
“We believe the congressman should give up his seat now and give the people of the 1st District a spokesman with untainted credentials.”
The Durham Herald-Sun’s editorial writers expressed outrage at Ballance’s conduct. “What auditors found at the Hyman Foundation was, to be charitable about it, a train wreck,” an editorial said.
“The red meat in the audit came in conflicts of interest. It turns out the Hyman Foundation was what its critics had charged all along, a conveyor belt of money to Ballance’s political interests…”
“Ballance is issuing a standard defense, accusing unnamed individuals of a political vendetta against him and the Hyman Foundation. The paper trail laid out by the state auditor’s office reveals not a political vendetta but rather a clumsy political machine operating under the guise of good works. Sure, Frank Ballance is spitting mad about all this — he got caught.”
The Wilmington Star-News, likewise, published a scathing editorial:
“If you want to get your hands on money from the taxpayers, start a charity with a noble purpose. You can get by with a lot — particularly if you’re an elected official.
“Frank Ballance can show you how it’s done. True, the doings of the congressman and former state legislator have now been exposed, but it’s anybody’s guess whether he and others who benefited will endure more than embarrassment. Of course, that’s assuming they’re capable of embarrassment….”
“What’s sadder is that for 18 years a prominent elected official got away with taking money from people he was claiming to help and giving it to others who mattered more: his mother, his daughter and people who could help him stay in office, to collect a salary from the taxpayers he was chiseling.”
The News & Observer of Raleigh and other newspapers faulted the General Assembly for creating and nurturing a environment that allowed nonprofits such as Ballance’s to receive and spend public monies with little, if any, legislative oversight.
“Meantime, the General Assembly must treat the black eye it has received at the hands of Ballance’s foundation. For it was state lawmakers who went along with allocating money for the foundation from the Department of Correction budget. They acquiesced even though the foundation’s chairman, Ballance, also sat on a Senate appropriations subcommittee that was responsible for oversight of correction spending,” the N&O editorial said.
“More legislative interest in where the money was going would have helped. Evidently, in 18 years, a question never surfaced about why the foundation wasn’t sending to the IRS the annual spending reports required of tax-exempt groups.
“When the foundation failed to file state reports with the Department of Correction for two straight years, the department halted the cash flow last March. But the legislature didn’t get the word, and the House approved another appropriation this year. Taxpayers have a right to expect more effective oversight from their elected representatives.
“The legislature ought to seize the opportunity to improve its credibility next year when it takes up the issue of some $760 million appropriated annually to nonprofit organizations…”
Ballance filed the articles of incorporation of the Hyman Foundation in June 1985. He has been chairman of its board since that time. The stated purpose of the foundation was to facilitate the development of young people in Warren, Halifax, Northampton, Bertie, and Martin counties and to recognize the contributions of John Adam Hyman, who became North Carolina’s first black congressman in 1874.
The organization was essentially inactive until 1993, when Ballance first secured state funds for the foundation to run a substance abuse program. Ballance, a Warrenton lawyer, served two decades in the North Carolina legislature before he won a seat in Congress in 2002.
Consistent with earlier news stories, the audit confirmed that Ballance maintained custody of the checkbook and authority over the foundation’s bank accounts. He also was chairman of the Board of Deacons of Greenwood Baptist Church, which leased space to the foundation.
Eddie W. Lawrence, pastor of the church, was paid $30,000 per year as director of the foundation. He also was paid $66,351 for his full-time state job as director of the Human Relations Commission until Gov. Mike Easley forced him to resign for failing to disclose secondary employment.
Melinda Solomon-Harris, assistant principal of Weldon High School in Halifax County, was paid $24,200 per year as director of the foundation’s Halifax County substance abuse program. She also was the Democratic Party’s 1st District chairwoman in the 2002 primary, which Ballance won.
Joyce L. Bullock was paid $14,400 per year as administrative assistant of the foundation. She is also a member of the foundation’s board, and on one financial report cosigned the cover letter as treasurer of the foundation. She has been the treasurer of Ballance’s state Senate and congressional campaigns.
The audit also found that in February 2001 Ballance wrote a $5,000 check to his daughter’s company for services that were not completed. The money was returned after the auditors began their investigation.
In 2001 and 2003, Ballance awarded grants of $20,000 and $12,500 to the Bertie County Rural Health Association, an organization that employed his mother, Alice Eason Ballance, as director. After the auditor’s review began, the $12,500 grant was returned. She received $5,544 in salary from the $20,000 grant.
While not covered in the audit period, Carolina Journal previously reported that the Hyman Foundation gave Alice Ballance’s business, Kiddie World Child Development Center, $3,000 in 1995 and $4,250 in 1997.
Bertie County tax records show that Ballance and his wife, Bernadine, have owned the land and building occupied by Kiddie World since 1986.
The audit also found that the foundation did not follow “best practices” in providing grants to other organizations. In response to supporting documentation for the grants, Ballance said the documentation had been lost or destroyed.
Another finding in the audit and previously reported by CJ and other newspapers dealt with Ballance’s political donors, who received payments from the foundation. The audit identified 21 such individuals.
The audit also found that the foundation spent funds for purposes outside the scope of substance abuse programs. The spending through checks signed by Ballance included $2,500 for the Warren County High School Band Boosters Club, $1,700 for a NAACP banquet meal sponsorship, $1,000 for a Shirley Caeser Concert, and $1,200 for a banquet at his own church.
In August 2000, Ballance wrote a $35,000 check for rent to his church without any supporting documentation. During the time covered by the audit he also wrote two checks totaling $30,000 for administrative costs, which were actually transfers from one account to another. But as the audit pointed out, the specific purpose of the state funds was general and only stated as to fund “substance abuse programs.”
Don Carrington is the associate publisher and Richard Wagner is the editor of Carolina Journal.