Carolina Journal News Reports
RALEIGH — A subordinate of N.C. Commerce Department official Henry C. McKoy was serving as president of a nonprofit organization when, acting in her official capacity as a state employee, she applied for and received a $150,000 grant for the nonprofit from the Z. Smith Reynolds Foundation.
Libby Smith, senior adviser to McKoy, headed the North Carolina Sustainability Center at the same time McKoy was serving as chairman of the private organization and as director of the Community Development Division in the North Carolina Department of Commerce. Smith told Carolina Journal Wednesday that she was acting in her official capacity as a Commerce employee when she applied for the grant last year.
CJ reported last week that McKoy in November began an effort to direct more than $2 million in federal funds he controlled to the NCSC, a small Raleigh-based organization. The money would be a windfall for an organization that appeared largely to have been dormant for the previous two years.
The arrangement under which high state government officials serve as officers of a nonprofit to which they, as state employees, are trying to funnel taxpayer funds has raised some eyebrows. State Sen. Neal Hunt, R-Wake, told CJ that he has been following the news stories about the sustainability center grants and feels McKoy has a conflict of interest in the matter. “This doesn’t pass the smell test,” Hunt said.
Z. Smith Reynolds Foundation Executive Director Leslie Winner told CJ that her board approved a $150,000 grant to the NCSC on May 13, 2011. “Libby Smith was listed as the president and contact person. Henry McKoy was involved in the pre-grant discussions with the ZSR about the grant request,” Winner said.
She also said Commerce Secretary Keith Crisco served as an interim board member of the sustainability center. Winner, a Democrat, represented Mecklenburg County for three terms in the N.C. Senate.
Contacted Wednesday at her Commerce Department office, Smith confirmed to CJ that she applied for the grant in her official capacity at the Commerce Department and that she is a senior policy adviser for McKoy. She said further questions should be directed to Commerce spokesman Tim Crowley.
Smith’s official title is senior policy adviser for community development, sustainability, ARRA recovery, and assistant ARC program manager. ARRA is the American Reinvestment and Recovery Act, commonly called the stimulus act, and ARC is the Appalachian Regional Commission.
The NCSC received its first payment from the Reynolds Foundation in October 2011, about the time McKoy launched his efforts to funnel more $2 million to the organization using four counties as a conduit.
Under McKoy’s plan, formally submitted to Crisco (PDF) Jan. 6, Buncombe, Edgecombe, Orange, and Yadkin counties would receive funds for a “Community Capacity Building Program.”
McKoy visited at least three of the counties, CJ has learned, and in each case he notified the county that if it applied for $600,000 under his program and agreed to funnel 90 percent to the NCSC, the county could keep the remaining 10 percent for handling the grant.
Each county then would be required to transfer the remaining $540,000 to NCSC for planning and research activities. NCSC would receive a total of $2.16 million. McKoy’s office contacted Yadkin County about the plan on Jan. 9 (PDF of memo here.)
Yadkin County Manager Aaron Church told CJ that even though McKoy selected Yadkin County, the board of commissioners did not pursue the funding actively. “We thought it was odd that we never applied for the money and we never asked for the money,” Church said.
Apparently sometime in January, McKoy’s plan died. “Like many ideas, the proposal was put forward to Secretary Crisco but was not approved and no money was disbursed,” Crowley said last week.
McKoy failed to note his affiliation with the NCSC on statements of economic interest covering the years 2010 and 2011. It is a Class 1 misdemeanor “to knowingly conceal or fail to disclose required information” on the form. McKoy was serving on the NCSC board as chairman during 2010 and at least through July 8, 2011 — nearly a year after he began his current position with Commerce.
Following the initial CJ report, the News & Observer published a story after talking with McKoy. McKoy told the N&O that Crisco asked him to resign after the CJ story was published, but McKoy said he declined.
“The matter remains under internal review,” Crowley wrote CJ in an email Wednesday. “Mr. McKoy’s status is unchanged, he is an employee of the Department of Commerce.”
Don Carrington is executive editor of Carolina Journal.