Both Ernie Pearson and Rick Watson, respectively the lawyer and the executive director for North Carolina’s Northeast Partnership, say Watson is not subject to the nonprofit’s conflict of interest policy because he is a contractor and not an employee. But Watson is on the board of directors and as president is an officer, and the Partnership’s ethics policy treats employees, officers and directors the same.

A dispute arose over Watson’s status at a Jan. 13 meeting in Edenton of the county managers who are represented by the Northeast Partnership. Members of the Northeast County Managers Group are concerned about the lack of public accountability that Watson’s employment arrangement represents. The agreement allows Watson to personally invest in businesses that the Northeast Partnership recruits.

News of the meeting was reported by The Daily Advance of Elizabeth City on January 22.

Watson and Pearson also claim that the partnership is not subject to the state’s public records or open meetings laws, because of its private nonprofit status. The partnership operates as a separate entity from the Northeastern North Carolina Regional Economic Development Commission, which was established as a public economic development agency by state law in the mid-1990s. The partnership was spun off from the commission in 1994, and exists to “implement the mission” of the commission.

“It is confusing,” said Bertie County Manager Zee Lamb. “They’ve created these entities to shield themselves from certain public requirements.”

Watson and Pearson did not return phone messages from Carolina Journal last week. Jack Runion, chairman of both the commission and the partnership, did not return a call either. Runion is an appointee to the commission of Gov. Mike Easley’s.

The Northeast county managers are concerned about potential and real conflicts of interest posed by Watson’s and Pearson’s involvement in a Roanoke Rapids theater project fronted by Randy Parton, head of Moonlight Bandit productions and brother of country music singer Dolly Parton. Watson plans to work both for Parton and on contract with the Partnership until sometime in 2007, when the proposed music theater is expected to open. Watson has also made or sought personal investments in other businesses that he has tried to recruit as the Northeast Partnership’s director.

At the Jan. 13 meeting, according to The Daily Advance, partnership officials told the county managers (including Lamb) that because Watson is a private contractor with the partnership and not an employee, he is not subject to the nonprofit’s ethics and conflict of interest policy. They reportedly said Watson is therefore able to invest in projects that he also helps recruit.

However, partnership officials and the Northeast Managers failed to address Watson’s status as one of the partnership’s 11 directors. The Web site for the Northeast Partnership also identifies Watson as “President and CEO.” The partnership’s ethics policy addresses its employees, officers and directors the same with regard to conflicts of interest. Watson appears to fit the role both as a director and an officer.

The policy addresses the following:

* “A conflict of interest involves any situation in which the private interest, usually of a financial or economic nature, of any director, officer or employee of the corporation (partnership), conflicts or raises a reasonable question of conflict with such director’s, officers or employee’s public duties or responsibilities”

* “Any director, officer or employee of the (partnership) who identifies a potential or actual conflict of interest shall disclose the same in writing…to the chairman of the board of directors….”

* “As provided by North Carolina General Statute(s)…, no director, officer or employee of the (partnership) shall accept or approve any contract, which shall benefit himself or herself….”

* “No director, officer or employee…shall accept any business or professional opportunity when such person knows or reasonably should know that the opportunity is being afforded…with the intent to influence the performance of any director, officer, or employee of his/her official duties.”

* “No director, officer or employee shall request or receive any gift or favor from any…business entity or individual which has a present, past or future financial interest in any matter concerning the (partnership).”

In addition, the policy states that employees, officers and directors must wait at least one year following their service to the partnership before they can accept employment with entities that have been assisted by the partnership. Watson told the Washington Daily News that he has not yet signed a deal with Parton.

“I am going to sign it at the proper time,” Watson told the newspaper in an article published yesterday.

The conflict of interest policy could also affect the relationship between the Northeast Partnership and the Northeastern Economic Development Commission. The fact that a pact exists between the nonprofit and the state agency might mean the employees, directors and officers of both are in conflict, because of financial benefits derived from the agreement between the two.

Watson has been alleged in the past to have sought personal benefit from companies that have received help — supposed to be provided for free — from the Northeast Partnership. In 2001 and 2002 Watson proposed that biotechnology company CropTech give ownership equity to the partnership in exchange for helping the now-defunct business get financial incentives. The partnership would put up little, if any, of its own money in exchange for a significant ownership stake. The company rejected the proposal.

Carolina Journal reported two years ago that Watson and others sought a personal stake in an ethanol plant in 2002 that a Raleigh businessman wanted to build in Martin County. And in a series of articles in The Daily Advance in May 2003, officials of DataCraft Solutions alleged that partnership representatives tried to get a 15 percent stake in their company in exchange for services from their side business. The DataCraft executives claimed they were told that Watson owned 50 percent of the side business and would “close deals” for DataCraft — which would have been an apparent violation of Watson’s contract with the partnership.

Last year CJ reported that Watson was an investor in a fingerprint technology company that received funding from the state’s Tobacco Trust Fund, according to sources with direct knowledge of the project. Watson worked on obtaining the funds for Privaris, Inc., despite his personal financial stake in the company, creating an apparent conflict of interest.

The CropTech, ethanol, DataCraft, and Privaris deals all preceded Watson’s conversion from employee status to contractor, which the board of the Northeast Partnership implemented in 2004.

Paul Chesser ([email protected]) is associate editor of Carolina Journal.