Golden LEAF: A Web of Political Cronies and Corruption

Broken Promises
When Golden LEAF was created, then-Governor Mike Easley (D) declared that the foundation will be “one that operates outside the grasp of political pressure.” Likewise, Senate Majority Leader Tony Rand (D – Cumberland) stated: “A charitable trust shouldn’t have anything to do with politics.”

These proclamations quickly proved to be a sham. For starters, the foundation’s 15-member board is comprised entirely of political appointees, with the governor, president pro tem of the Senate and speaker of the House each responsible for five selections.

The flow chart included below symbolizes the intricate web of political cronyism surrounding Golden LEAF, which includes a healthy dose of “pay to play” treatment of board assignments and highly questionable connections between board members and outside interests that received Golden LEAF funding. Observing the highly politicized nature of Golden LEAF’s existence leaves little doubt as to why Rep. Paul Stam (R-Wake) recently labeled it “a patronage organization.”

Golden LEAF’s web of connections: click to see the large version.

Todd Cohen, editor and publisher of the Raleigh-based Philanthropy Journal, observed, “the political make-up of the board has saddled the foundation with the perception that it is a political tool.” Cohen further concluded, “Golden LEAF is by definition and nature a political creature subject to the whims and agendas of politicians.”

Pay to Play
Given its inherently politicized nature, it should come as no surprise to learn Golden LEAF is a breeding ground of political cronyism. The Golden LEAF board has a history of being packed with generous campaign contributors, partisan fundraisers, party operatives, and even a close relative of Marc Basnight.

Indeed, a noticeable pattern emerges when one examines the timing of board appointments and the appointees’political contributions:

• Lisbeth “Libba” Evans was Chairwoman of the state Democratic Party from 1996-98. She also donated $20,000 to the state Democratic Party and the legal maximum check for $4,000 to Easley’s campaign in 2000. Easley appointed Evans to the Board in 2001.
• John D. Merritt gave the legal maximum donation of $4,000 to Easley’s campaign in 2004 and totaled contributions of $12,000 to Easley between 1999 and 2005. Easley appointed Merritt to the board in 2005, for his second stint on the Golden LEAF board. Merritt also served as a senior aide to Easley during his tenure as Governor. Merritt’s first term on the Board was courtesy of a 1999 appointment by Marc Basnight, whom Merritt donated the legal maximum $4,000 to during the 2000 election cycle.
• David T. Stephenson III gave $20,000 to the state Democratic Party in 2003. Basnight, who yielded considerable influence over how state party funds were allocated, appointed Stephenson to the board in 2004.
• Wade Barber donated the legal maximum $4,000 to Hackney in 2007. Barber was appointed to the board by Hackney in 2008.
• H. Kel Landis donated $3,000 to Easley in the 2000 campaign cycle. Easley appointed Landis to the board in 2000.
• Edgar Roach donated $3,000 to Easley’s campaign during 2004. By the end of that year Roach was sitting on the board – appointed by Easley.

For a more complete listing of these “pay to play” arrangements, click here for the excel file.

“Multi-Million Dollar Slush Fund”
The political nature of Golden LEAF’s Board of Directors has corrupted the foundation’s grant-making process and investment decisions.

Rather than an objective analysis of which projects will best advance the “economic well being of North Carolinians,” grants have all too often been decided by political turf wars and power plays. A review of pet projects and questionable items funded by the foundation, in fact, prompted the Capital Monitor to state, “many are concluding that Golden LEAF has been nothing more than a multi-million dollar slush fund.”

Similarly, former and now again current Representative Stephen LaRoque (R-Lenoir) proclaimed, “In Raleigh, Golden LEAF is known as the governor’s slush fund.” LaRoque seemingly came to this conclusion after one of his favored projects was denied funding after being promised support, while the Black Heritage Society received $50,000 for a museum in Kinston. Not coincidentally, the BHS included a number of Easley campaign contributors.

Following are a few instances of the political favoritism surrounding some of Golden Leaf’s grants and investments.

• John C. Crumpler, partner in Catalysta and a principal of BioVista Management LLC, and his wife gave $10,000 to Easley’s campaigns up to and including May 2002. Shortly thereafter, Catalysta and BioVista put together an investment fund of $120 million, and convinced Golden LEAF to invest $30 million of its assets – with a 2% management fee going to BioVista/Catalysta. Were more qualified firms bypassed for the investment? According to news reports, Catalysta had lacked “experience in fundraising and investing compared to many venture capitalists across the state. Some of the larger venture capitalist firms ….were not even contacted, Golden LEAF officials acknowledged.” Crumpler had also been appointed by Easley to the NC Economic Development Board in 2001.
• According to an audit performed by the Office of State Auditor Beth Wood, Golden LEAF invested $6 million with Charlotte-based Carousel Capital, co-founded by UNC system president Erskine Bowles – who used to serve on Golden LEAF’s board.
• Billy Ray Hall currently sits on the Golden LEAF board, and previously held a seat on the board from 1999 to 2003. Hall has also been president of the NC Rural Economic Development Center since its inception in 1987. Similarly, Valeria Lee served as president of Golden LEAF from its inception in 1999 until late 2008. Lee also was an incorporating member of the Rural Center’s board, and has served on its board ever since.
  • Golden LEAF has granted more than $6 million to the Rural Center for various programs in the last decade
• Lisbeth “Libba” Evans, a former Chair of the state Democratic Party, was appointed as Secretary of Cultural Resources by Gov. Easley in 2001. Evans served in that capacity until 2008. Easley also appointed her to the board of Golden LEAF in 2001, where she served until 2009. During her time as both Secretary of Cultural Resources and board member of Golden LEAF, Evans helped direct several Golden LEAF grants to the Department of Cultural Resources totaling more than $830,000 – the smallest of the grants coming in at $111,000.
  • Since Evans’ departure from both Golden LEAF and Cultural Resources, Golden LEAF has only awarded one grant to Cultural Resources, in the amount of $35,000.

The Spirit Aerosystems/McGuire Woods $100 Million Boondoggle
McGuire Woods Consulting, a firm that proudly declares it has “negotiated millions of dollars in economic development incentives for our clients,” is deeply entwined in the Golden LEAF web of cronies. McGuire Woods represented Spirit Aerosystems during negotiations of the incentives deal that eventually landed a $100 million grant from Golden LEAF. The grant was officially awarded to the NC Global Transpark Authority in Kinston. But it was openly acknowledged that the $100 million was dedicated to building a 500,000 square foot plant for Spirit AeroSystems.

At the time, John D. Merritt, a former senior aide to Easley, was both on the Golden LEAF board and an employee of McGuire Woods. Edgar Roach, Golden LEAF Board Chairman and also an Easley appointee, likewise sat on the Golden LEAF board while being employed by McGuire Woods.

Moreover, Easley’s counsel and chief aide Ruffin Poole was appointed by Easley to the Golden LEAF board in 2009. At the same time, Poole worked for McGuire Woods. Poole of course was indicted by a federal grand jury on 51 counts of corruption for violations committed as a key player in the Easley administration. Poole left the Golden Leaf Board and after refusing to testify at a State Board of Elections campaign finance hearing was no longer employed by McGuire Woods.

And topping it off, Easley himself was employed by McGuire Woods. While Easley is no longer listed as an employee, his son, Michael F. Easley, Jr., is employed by McGuire Woods.

Does it even need to be asked whether this presents any conflict of interest issues when those deciding to award $100 million in state money also work for a company that stands to make millions off of the deal?

Golden LEAF or Golden Parachute?
Finally, there was the highly politicized process by which current Golden LEAF president Dan Gerlach was awarded his position. A recent Philanthropy Journal article recounts how Easley, along with Senate President Pro Tem Marc Basnight, delayed for several months the hiring of a new foundation president to replace outgoing Valeria Lee. The reason – Easley wanted to find a position for his departing top economic advisor, Dan Gerlach.

According to the article, “Eleventh hour requests from Governor Mike Easley and state Senate President Pro Tem Marc Basnight have extended by three months the search for a new leader for the Golden LEAF Foundation, laying the funder open to charges of political meddling.” Golden LEAF received hundreds of applications for the position, hired a consulting firm to aide in the process, narrowed the search down to four finalists who were all interviewed by the full board, but yet Easley still managed to convince the foundation to delay their decision until Gerlach was freed up from his duties negotiating the state budget throughout the summer of 2008.

Gerlach, it should be noted, did not submit an application prior to the initial application deadline.

In spite of the extensive search efforts already undertaken by the Board, political cronyism won out – as is so often the case with Golden LEAF. Gerlach was awarded the position, along with its hefty $189,000 annual salary.

“Easley’s intervention seems like the clumsy move of a lame-duck governor to find an exit strategy for a top aide,” noted Cohen.

Unsurprisingly, one of Dan Gerlach’s first acts after being implemented by Easley as Golden LEAF president, was to secure a $100 million loan for Golden LEAF to make the grant to Global Transpark for Spirit Aerosystems.

This online story was updated with more accurate information on Ruffin Poole and Former Governor Easley.