News: CJ Exclusives

Investigation of Ballance Intensifies

Questions surround foundation and campaign finance reports

A few months after being sworn in to Congress, Rep. Frank W. Ballance, Jr. (D-1st District) is trying to answer questions about accounting procedures of a nonprofit foundation of which he is the chairman.

In addition, the State Board of Elections is investigating Ballance for his failure to respond to requests that he explain discrepancies on his 1999 and 2000 Financial Disclosure Reports.

The John A. Hyman Memorial Youth Foundation, which claims to run substance-abuse programs, is totally funded through the state budget. Ballance helped start the foundation, and as a state senator arranged about $2 million in funding, which it has received since 1993. The foundation’s top three staff members have close relationships with Ballance.

The foundation failed until recently to file financial statements required by the state and the Internal Revenue Service. The State Auditor and the IRS are investigating the organization and its substance-abuse program.

Officials are also investigating the foundation’s driving-while-impaired treatment program for possible violation of state laws.

Stories first published by the Littleton Observer reported that Ballance and other foundation officials did not provide information on the program or return phone calls. Carolina Journal then reported that the foundation failed to file state and federal financial reports. Ballance acknowledged the failure and foundation officers submitted the state reports, but at press time they had not filed federal reports.

CJ has also uncovered a close correlation between pastors that gave to Ballance’s 2002 campaign for Congress and the churches that received “prevention mini-grants” from the foundation.

DWI treatment violations

The foundation runs a state-approved DWI program free at the Greenwood Baptist Church in Warrenton. While the program itself may conform to state guidelines, offering it for free is a violation of state law.
A DWI offender must attend a class to get a driver’s licence reissued. The foundation’s program is licensed by the state as an outpatient substance-abuse facility. The program’s original license was issued in 1994 and the DWI classes were authorized in 1998.

Lisa Hayes, the instructor at Green wood Baptist Church, is paid $10,000 per year directly from the foundation. Director Eddie Lawrence told CJ that Hyman students pay nothing. State DWI program officials said the foundation does not have a waiver to exempt enrollees in DWI classes from paying for the class. They noted that paying for a DWI class is part of the punishment for receiving a DWI conviction.

First- or second-time offenders are typically required to have from 10 to 40 hours of class. The going rate for the instruction across the state is about $10 per hour, so a 20-hour course would cost each person $200. State law requires a student to pay a minimum fee of $75 for the class.

Spencer Clark, the DWI section’s director of operations and clinical services in the Division of Mental Health, told CJ he initiated a review of the Hyman program after he was first informed by CJ that the foundation’s students were attending class for free.

Frank’s foundation

The articles of incorporation for the Hyman Foundation were filed with the North Carolina secretary of state June 28, 1985. Ballance, in his second term in the state House, was one of the 24 founding board members. The stated purpose of the organization was to engage in activities designed to facilitate the physical, mental, and intellectual development of young people, with a particular emphasis on residents in Warren, Halifax, Northampton, Bertie, and Martin counties. The address for the foundation was 113 West Market St. in Warrenton, the same address as Ballance’s law office.

On Dec. 9, 1985, the IRS approved the foundation’s application for tax-exempt status as a 501(c)(3) organization. In the approval letter, Ballance, or whoever was reading the found-ation’s mail at 113 West Market St., was notified that the foundation was required to file a Form 990, Return of Organization Exempt from Income Tax, if annual gross receipts were more that $25,000.

CJ has obtained information that indicates the organization has had gross receipts of more than $25,000 for at least the past nine years. Ballance recently admitted that the organization has never filed a Form 990 and has promised to file the forms.
Records indicate that Ballance played a major role, if not the sole role, in securing state funding for the foundation.

In 1996, the foundation received $140,000 from a Health and Human Services discretionary fund controlled by Sen. Marc Basnight. Before receiving payment, the foundation had to submit information to the agency’s chief budget officer. A January 1997 transmittal letter accompanying the information was signed by Ballance as chairman of the board.

According to minutes from a March 7, 2001 Joint Appropriations subcommittee on justice and public safety meeting, Ballance introduced Eddie Lawrence and Melinda Solomon-Harris, the top two staff members of Hyman’s substance-abuse program, to the committee to make comments about the program and make the case for continued funding. Ballance was vice chairman of the committee, but according to the minutes, he did not reveal his role as chairman of the foundation.

Friends of Ballance

The three top paid staff members of the foundation have close ties to Ballance. The salaries of the staff members were based on information Ballance released to the Roanoke Rapids Daily Herald.

Eddie W. Lawrence was paid $30,000 per year as director of the foundation. He was also paid $66,351 for his full-time state job as director of the Human Relations Commission. The foundation’s office for the last several years has been at Greenwood Baptist Church, where Lawrence is also the pastor.

Financial statements, belatedly submitted by Lawrence on April 28, 2003, state that for the year ending June 30, 2002 the foundation paid $1,800 in rent. For the previous year the foundation paid his church $35,000 in rent, with a note saying that it was for the period March 1, 1996 through Aug. 31, 2000. Balance is chairman of the church’s Board of Deacons.

Lawrence, at Gov. Mike Easley’s request, resigned from his state government job April 22 after news reports revealed that he had not listed his income from the foundation on economic interest statements.

Melinda Solomon-Harris was paid $24,200 per year as a director of the foundation for Halifax County. She was a public schoolteacher until July 2002, when she became assistant principal of Weldon High School in Halifax County. Her salary at the school is $41,970.

Principal David Jones said that he was unaware of her role with the foundation, but that his school system did not have a policy regulating secondary employment.
She is also the Democrat Party’s First Congressional District Chairwoman and held the position during the 2002 Democratic primary, which Ballance won.

The Ballance campaign paid Solomon-Harris $500 for Get-Out-The -Vote activities in that primary.

Joyce L. Bullock was paid $14,400 per year as an administrative assistant for the foundation. She is also a member of the foundation’s board and on a report submitted April 28 to the Department of Correction she cosigned the cover letter as treasurer of the foundation.
She worked as a secretary at Ballance’s Warrenton law office and was his legislative assistant in the General Assembly. She has been a secretary at Warren County High School since 1997.

Bullock was the official treasurer for all of Ballance’s state Senate and congressional campaigns, but her real role is not clear. She recently told the Rocky Mount Telegram that she had no knowledge of the reports. “You need to call the congressional office. I didn’t directly do them. My name is just on them,” she told the paper.

“Faith-based initiative”

A “faith-based initiative“ is how Ballance described the foundation’s substance-abuse program when he was defending it to The Wilson Daily Times on April 18.

While Ballance admitted paying churches to deliver services, he said there is no relationship between those payments and campaign contributions from several pastors.

“There is absolutely no connection, because there is no way I could have dreamed up that one day I would need these monies for an election,” Ballance told the Rocky Mount Telegram.

Ballance received at least $25,000 from 23 pastors and their families for his 2002 election. At least 12 of the pastors received grants for their churches from the foundation. More connections may surface when the foundation files the required reports with the IRS.

CJ compared Ballance’s Federal Election Commission report with the foundation’s grant information that Ballance released to the Roanoke Rapids Daily Herald, which reported it May 2. Among the givers whose churches also received funding from the foundation are:

• United Solid Rock Church in Norlina received $6,500 from the foundation, and its pastor, Moore Bynum, gave Ballance $1,000.

• White Oak Baptist in Enfield received $7,500, and Pastor Ray E. Bynum gave $1,500.

• Nebo Baptist in Murfreesboro received about $70,000 over the past five years, and pastor Robert Holloman and his family gave Ballance $4,000.

• Greenwood Baptist received more than $30,000 in rental payments for office space. Lawrence gave Ballance $2,000.

• Oak Grove Baptist in Littleton received $7,500, and Pastor David Moore and his wife gave Ballance $2,400. Ebenezer Baptist in Rocky Mount received $7,500, and Pastor Thomas L. Walker gave $1,500.

Ballance also directed money to other organizations. The Warren Record reported in December 2002 that the Norlina Public Library received a $5,000 grant from the foundation “through the efforts of Congressman Frank Ballance.”

The library donation was not listed with the information the foundation released to the Daily Herald.

Financial discrepancies

CJ also found several discrepancies between the unaudited statements on file with the General Assembly for the past two years and audited financial statements submitted to the Department of Correction April 28.

Among the discrepancies for the year ending June 2001 were $228,951 for salaries in the first report versus $101,670 in the audited report; and $2,871 for contractual services versus $12,393 on the audited version. For the year ending June 2002, the first report stated $75,346 for “prevention mini-grants,” while the audited version stated $47,500. Also appearing on the audited report was $25,000 for “administrative fees” — a category not listed on the original report.

The audited report also noted that as of June 30, 2002, the foundation had a $100,000 certificate of deposit held in reserve for future expansion.

Campaign finance violations

Ballance’s failure to report extends beyond the Hyman Foundation to his last campaign for state Senate.
On March 29, 2001, Joyce L. Bullock, treasurer of the Committee to Elect Frank W. Balance, Jr., received a letter from the State Board of Elections asking her to clear up several problems with the 1999 and 2000 campaign finance reports.

One specific problem was a $2,473 contribution from Solomon-Harris and a matching refund that was not explained.

The board’s records indicate that Bullock did not respond. On May 14, 2001 the board issued Bullock a final notice threatening to issue a letter of noncompliance after May 29, 2001. Bullock did not respond again.

On July 30, 2001 the board’s general counsel Don Wright wrote directly to Ballance at his legislative office and gave him one more chance to respond. Ballance did not respond.

Election board Deputy Director Kim Westbrook told CJ that she is now pursuing the matter.

Carrington is associate publisher of Carolina Journal.