News: CJ Exclusives

Easley Ethics Forms Omitted Rental Income

More than two years’ income on his Raleigh home was never reported as required

Former Gov. Mike Easley failed to list income from the rental of his Raleigh home on at least three consecutive annual economic interest statements — a violation of state ethics laws.

The home on East Lake Drive was rented for $1,500 a month for three years while Easley served as governor. Concealing income or failing to fully disclose it on a Statement of Economic Interest is a misdemeanor. Providing false information is a felony.

Top state officials must complete the statements and submit them to the State Ethics Commission, which was created in 2007. Before that, officials submitted economic interest statements to the N.C. Board of Ethics.

The statements Easley signed in 2007 and 2008 required him to list each source of income of more than $5,000 he or his wife had received in the previous year calendar year. The form he signed in 2006 required him to report each source of income larger than $10,000 for the previous year. In each case, he listed his salary, the salary of his wife Mary, and income from stocks they each held. He did not list any rental income.

Easley signed each statement certifying that he had read it and that to the best of his knowledge and belief that it was “true, correct, and complete.”

The economic interest statement also included this highlighted text on the same page of the document with Easley’s signature:

North Carolina law establishes a fine of $250 for failure to file a complete Statement of Economic Interest. In addition, it is a Class 1 misdemeanor to knowingly conceal or fail to disclose required information, and a Class H felony to provide false information on a Statement. Such actions can also subject you to disciplinary action in connection with your employment.

Failure to fully accurately disclose economic interests was one factor in the federal prosecution of former state lottery director Kevin Geddings. Geddings, convicted by a jury in 2006 for depriving the public of honest services, is now serving time in a Georgia federal prison.

Easley and his wife Mary bought the Raleigh home on East Lake Drive in 1993 after he was elected to his first term as the state’s attorney general. They moved into the Governor’s Mansion in 2001 when Easley became governor. The Easleys remodeled the home in 2008 and moved back in after his term as governor ended in January 2009. In addition to the Raleigh home, the Easleys also have homes in Southport and on Bald Head Island. They also own a lot in the Cannonsgate, a Carteret County waterfront development.

A Raleigh man who rented the Easley home in 2004 told Carolina Journal that he paid Barker Realty, Inc., a Raleigh-based property management firm, $1,500 per month for a period that included the entire calendar years of 2005 through 2007. Barker Realty’s website lists a monthly charge of 8 percent of the gross rent. Barker’s payments to Easley would have exceeded the $5,000 income-reporting threshold for 2006 and 2007 and the earlier $10,000 threshold for calendar year 2005.

Beth Carpenter, an assistant to Ethics Commission Executive Director Perry Newson, told CJ that rental income above the $5,000 threshold needs to be included for each property. She said her office does not distinguish between gross income and net income. When CJ informed her that Easley did not declare any rental income on three consecutive statements she said, “That would have been something that should have been included.”

Campaign rented home first

Information about Easley renting his home first surfaced in October at the State Board of Elections hearing investigating the finances of Easley’s 2000 and 2004 campaigns for governor. Multiple witnesses confirmed that Easley was renting his home to his political committee. That rental was also done through Barker Realty.

Easley’s campaign expenditure report lists payments of $1,600 paid to Barker Realty in March 2003 and $1,750 paid to Barker in September 2003.

Michael Hayden, Easley’s finance director for the 2004 campaign, testified to the elections board that he lived at the Easley house for several months in 2003, then moved to an apartment complex in late 2003.

Neither Hayden nor any other witness who testified at the elections board hearing explained how rental payments flowed between the campaign, Barker, and Easley’s personal accounts. Barker Realty owner William Barker was reluctant to discuss details about the Easley home and told CJ he turned over his files on the home to the U.S. Department of Justice.

During Easley’s tenure as governor, his assistant Beverly J. Walker, a state employee, handled some personal finance matters. Walker testified to the election board that she handled rental income checks for Easley’s home. Walker also notarized Easley’s signature on his economic interest statements filed in 2006 and 2007. Easley’s general counsel Ruffin Poole notarized Easley’s signature on the statement filed in 2008.

Home repairs

Another controversy involving the Easley home arose after McQueen Campbell testified to the election board that he personally paid for repairs at Easley’s home. Campbell, a pilot with access to several aircraft, had already testified that he frequently flew Easley to campaign events at no charge, a violation of campaign finance laws.

Campbell said that when he sought reimbursement from Easley for the repairs, the governor suggested that Campbell bill the Easley campaign for aircraft flights to disguise the nature of the transactions. In 2005, Campbell submitted bills totaling $11,077.50 to the campaign committee; the committee then paid Executive Aircraft Services, a company owned by Campbell and his family.

Statements matter

The importance of honest and complete answers on economic interest statements came to light in 2006 during the Geddings prosecution. A federal grand jury indicted Geddings in May 2006 for illegal activities associated with his successful quest to gain an appointment to the newly established North Carolina Education Lottery Commission.

In October 2006, the trial jury found Geddings guilty on six counts of depriving the public of his honest services. The charges were related to the use of mail and wire communications as part of a fraud.

Among the specific counts was the charge that Geddings submitted a Statement of Economic Interest that failed to disclose recent income he had received from lottery vendor Scientific Games.

A federal judge sentenced Geddings to four years in federal prison, two years probation, and a $25,000 fine. He is serving a sentence in at the Federal Correctional Institution in Jesup, Ga. He is expected to be released from prison in late 2010.

Don Carrington is executive editor of Carolina Journal.