News: CJ Exclusives

A.G.’s top deputy supported legislative slush funds

Grayson Kelley's legal memo defended legislators spending money with no oversight, a practice his boss Roy Cooper called 'problematic'

N.C. Attorney General Josh Stein’s selection for chief deputy attorney general wrote a legal memo supporting “contingency funds” that were outside legislative oversight in an opinion that seemed to be at odds with his boss at the time, Roy Cooper, who now is North Carolina’s governor.

More than a decade ago, Grayson Kelley wrote an advisory opinion concluding a special discretionary budget fund controlled by legislative leaders rather than agency officials did not violate the N.C. Constitution’s separation of powers doctrine.

Over a couple of decades, lawmakers used these discretionary funds to spend tens of millions of tax dollars for pet projects.

Kelley noted the General Assembly had never passed a law allowing legislative leaders direct control of the discretionary funds and that executive branch officials were “not required by law to distribute grant funds requested by individual legislators.”

Kelley was responding to a letter from then-State Auditor Les Merritt, who had reviewed a practice established in the 1990s to allow the state’s transportation secretary, Senate president pro-tem and House speaker to control equal shares of the DOT “contingency fund.”

Merritt was concerned that the practice of allowing individual legislators to spend money allocated to executive branch agencies with no oversight violated separation of powers doctrine. He asked then-Attorney General Roy Cooper, now North Carolina’s 75th governor, for a review.

Cooper called the program “problematic for its secrecy, its lack of accountability, and its end-run around the legislative process.”

But Kelley, in his advisory opinion, concluded, “The extent to which the General Assembly can enact laws which interfere with the Governor’s administration of the budget without violating the separation of powers principle, however, has not been clearly delineated by our courts.”

Distribution of grants from the contingency fund was bipartisan, and Democratic and Republican legislative leaders authorized grants from the fund. Carolina Journal first reported on these so-called slush funds, which Kelley’s advisory opinion defended, in 1997.

Kelley was one of a number of senior staff positions announced on Wednesday by Stein.

A 38-year veteran at the Department of Justice, Kelley has been chief deputy since 2003. Before that, he was senior deputy attorney general over the Special Litigation/Education Division, Transportation Section head, and was an assistant attorney general and special deputy attorney general.

In January 2010, on behalf of then-Democratic Gov. Bev Perdue, Kelley offered to settle an open records lawsuit related to former Democratic Gov. Mike Easley’s use of private email to conduct public business for $20,000. The court rejected that proposed settlement.

Kelley is a graduate of UNC Chapel Hill and Georgetown University Law School.

Stein tapped David Elliott to be his deputy chief of staff and special deputy attorney general.

Elliott has been at the N.C. Department of Justice since 1997. Since 2007, he has been director of the Victims and Citizens Services sector, where he fought domestic violence, sexual assault, and human trafficking. He also spent 10 years as a litigator in the Consumer Protection Division and is a graduate of UNC Chapel Hill and Duke University Law School.

Stein on Wednesday also selected Seth Dearmin, who ran his successful campaign for attorney general, to be his chief of staff.

Dearmin previously worked for Cooper on the attorney general’s staff. He managed Stein’s campaign for attorney general. Before that, he worked for Nexus Strategies, a public affairs consulting firm. Dearmin is a graduate of UNC Chapel Hill, where he was student body president.

New faces include Matt Sawchak, who will be the state’s solicitor general, Swain Wood, who will be Stein’s general counsel, Laura Brewer, who’ll be Stein’s communications director, and Candy Finley, Stein’s executive assistant.

Sawchak was a partner at Ellis & Winters before coming to the attorney general’s office. He was twice profiled by Business North Carolina as the state’s top antitrust lawyer. Before entering private practice, Sawchak clerked for Justice Clarence Thomas on the U.S. Court of Appeals for the District of Columbia Circuit. He is a graduate of Harvard University and Duke University School of Law.

Wood was most recently a partner in the Morningstar Law Group. Before that he practiced law in Atlanta and Raleigh. From 1999-2000, he was assistant attorney general in Georgia. He is a graduate of Georgetown University and Harvard Law School.

Brewer has worked for the past six years at Capstrat, a communications agency. Before that, she was press secretary for U.S. Sen. Richard Shelby, R-Ala., and worked in the press office of former U.S. Sen. Elizabeth Dole, R-N.C. She is a graduate of Mary Washington College and Johns Hopkins University.

Finley was Stein’s legislative assistant during his four terms as a state senator. She also worked as AT&T’s liaison to the N.C. Utilities Commission. She is a graduate of Harbarger College of Business.