In an apparent violation of North Carolina Public Records Law, an economic development agency refuses to release information on some of its operations.

Carolina Journal has attempted to obtain financial information about the Northeastern NC Regional Economic Development Partnership, but the partnership’s lawyer, Ernest Pearson, said his client is not a public agency and is not subject to the public records law.

Pearson’s statement contradicts the opinions of the attorney general’s office and a lawyer for the North Carolina Press Association.

“This is clearly an agency of the government,” said Amanda Martin, general counsel to the NCPA. “I see no reason that they’re not.”

Similarly, a 1999 opinion issued by the state attorney general, which was requested by NC’s Northeast Partnership (the abbreviated name for the economic development agency), determined that “every item received or generated in the course of (the partnership’s) ordinary business is a public record, and must be disclosed upon request…”

Despite his argument, Pearson said that NC’s Northeast Partnership would respond to some of the requests in accordance with the Public Records Act, but he has set forth significant obstacles for CJ to obtain the information it requested.

Information sought by CJ

The Northeast Partnership is at the center of allegations made by Raleigh businessman William Horton of The DFI Group, who said partnership President Rick Watson conspired to thwart his ethanol projects in eastern North Carolina ( See March, 2003 CJ, “Businessman Sues, Alleges Conspiracy in Government”). In a civil action that has since been withdrawn, Horton claimed Watson wanted to obstruct his efforts because Horton complicated the Northeast Partnership’s attempts to help get public money for a gas pipeline in eastern North Carolina.

Based on information from the partnership’s federal tax returns, CJ requested:
• The itemized payee, pay date, payment amounts, and purpose for a total of $1,095,610 reported in “special projects” in the years 1998-2001;
• Documents that support a reported $80,755 in “Director’s Flex and Sick Leave Payable” — an amount added as a liability in 1997 and removed on the 1998 tax return;
• Documents that support a total of $182,185 in bonuses paid to Watson from 1997-2001.

In a subsequent request, CJ requested documents of all types related to Horton’s ethanol projects, and also asked to view the Northeast Partnership’s records of disbursements (its checkbook ledger, essentially).

Between 1997 and 2001 the partnership received at least 97 percent of its $7.7 million in revenue, not including savings and investment interest, from taxpayer funds —almost all of it from the state — according to its tax returns for those years.

Public records law

North Carolina’s Public Records Statute provides a near exhaustive definition of public records, which includes any material “made or received…in connection with the transaction of public business by any agency of North Carolina government or its subdivisions.” The statute also broadly defines “agencies and subdivisions,” which includes “commissions.”

The Northeast Partnership was established by the General Assembly in 1993 as a commission, to be “located administratively in the Department of Commerce” but to exercise its “powers and duties” independent of the department. Its board members consist of six appointees each by the governor, by the President Pro Tempore of the Senate, and by the Speaker of the House of Representatives. The Secretary of Commerce also serves on the board.

Public records law allows agencies to recover costs for copies of documents requested. In cases where significant clerical or supervisory assistance is required, agencies may charge a “reasonable” fee based on actual labor costs. Also, the law allows that agencies may withhold information if “disclosure would frustrate the purpose of attracting [a] particular business or industrial project.”

The partnership’s response

In a written response to CJ’s requests, Pearson claimed that gathering “special projects” information reported on the partnership’s tax returns requires “a great deal of staff time,” because employees would “have to go to multiples sources on their records and files.” Pearson requested that CJ deposit $1,000 into the partnership’s client trust account before undertaking the work, an amount he estimated would be the labor cost for fulfilling the request.

However, CJ requested only payees, dates, amounts, and purpose of payments — information most organizations keep documented in their accounting ledgers. Also, the General Assembly required the partnership to report its itemized expenditures for 1998-1999 to the Fiscal Research Division and the Department of Commerce.

Pearson also said “there are no supporting documents for ‘Director’s Flex & Sick Leave Payable’” reported in 1997 and 1998. He explained that Watson “typically works 12-14 hour days, every day…” and that “the sick leave payable is sick leave Mr. Watson has accrued, that he has not used.”

Also not available were documents supporting Watson’s bonuses, but Pearson said they are “fixed amounts set quarterly by his executive committee based on the performance of his program.” CJ asked if the bonuses were based on a mathematical calculation, but Pearson said they were paid out at the discretion of the board.

Pearson denied the request for documents related to Horton’s ethanol project, based on the exemption allowed in the public records law about “frustrating the purpose of attracting a particular business.” When Horton filed his civil action, Watson offered to CJ his entire file on DFI if Horton would sign a consent statement. Horton has since said he would do so, apparently rendering the statute exemption irrelevant, but Pearson still denied the request.

“I would tend to think that alleviates the propriety of that excuse,” Martin said. “I don’t think from any public policy standpoint there would be any reason to withhold it, if the proponent of the project has given his consent.”

Pearson maintained that withholding the records was still necessary because “most companies seeking new sites and their consultants will avoid dealing with economic development organizations that do not protect recruitment records during the pendency of the project.”

Finally, Pearson suggested that CJ’s request to view all the Northeast Partnership’s disbursements (its checkbook ledger) would also take a great deal of staff time, and that a significant financial commitment would be required up front.

A little history

In a July 1994 special meeting, the Northeastern NC Regional Economic Development Commission declared “it would no longer be affiliated with the Department of Commerce…but would begin operating on it’s (sic) own.” The attorney general’s 1999 opinion determined that the renamed Northeast Partnership, formerly the Commission, “was not authorized to remove itself from the Department in 1994” and that the organization was subject to the public records law.

Chesser is an associate editor at Carolina Journal.