Heard on the Street Posted: Thursday, September 17th, 2009 Court to Governor: No more raiding
Tuesday`s landmark ruling by the NC Court of Appeals is just now being understood by many. To be sure the court said that former Governor Mike Easley was wrong in transferring money from the Highway Trust Fund to the General Fund in order to balance the budget. But this ruling goes far beyond that verdict. The NC Constitution states pretty clearly in Article 3 that the governor`s authority is to ensure that the state doesn`t run a deficit in any fiscal year and is to monitor revenues so as to “effect the necessary economies in state expenditures…”
Judge Robert N. Hunter was pretty clear in saying that there are any number of things the governor can do in administering the budget but essentially he or she must either increase the revenues or decrease spending.
Governor Perdue has indicated that the state will appeal. AG Cooper hasn`t publicly said anything yet. To be sure the state doesn`t like losing lawsuits, especially another one to lawyer Gene Boyce and son, Dan. But some are questioning how wise such an appeal might be.
The court ruled on one essential element of the lawsuit but it basically avoided another. The plaintiffs wanted the court to rule on Article 5, Section 5 that says, “Every act of the General Assembly levying a tax shall state the special object to which it is to be applied, and it shall be applied to no other purpose.” The Supreme Court might rule on this argument.
For more discussion about this significant ruling be sure to catch this week`s NC SPIN.
Hunter v. Hunter
We heard rumor this week that Appeals Court Judge Robert Hunter is considering a challenge to Judge Robert Hunter for the Supreme Court. Judge Robert N. Hunter, Jr. won a seat on the court in last year`s elections and has been serving in that capacity since January of this year. Since 1998, Judge Robert C. Hunter (Bobby) has also served on the Court of Appeals. Hunter served 18 years in the House and was known to have wanted to have been Speaker.
We often talk about the fact that voters don`t know the candidates in judicial races. Can`t you just imagine the confusion when Hunter runs against Hunter?
Calabria won`t run
Speaking of the Court of Appeals, Judge Ann Marie Calabria says she won`t see re-election. Wake District Court Judge Jane Gray said she would be a candidate for the post. Longtime government observers well remember Gray when she served ably in the Attorney General`s office. Before becoming a District Court Judge she served as legal counsel for former House Speaker Jim Black.
Giving a friend a BIG gift
If you wanted to give a sitting governor a large gift, of say $135,000, and make it appear legal how would you do it? You certainly wouldn`t want it to look like an outright gift, right? Maybe you could make it look like a business transaction, like maybe a real estate deal?
Mike Easley`s Cannonsgate land purchase reeks. Here are the facts as uncovered by Don Carrington at Carolina Journal, as well as Jay Price, Andy Curliss and Joe Neff in the News and Observer and our own sources. You form your own conclusions about what happened.
On June 8, 2005, the Department of Environment, Health and Natural Resources granted a wastewater treatment permit to R.A. North, the development company headed by Randy Allen and his brother Gary Allen. Raleigh real estate broker and investor Steve Stroud had owned the parcel for some years and complained he was unable to get needed permits to move the project to development. Stroud is a Republican and claimed he was unsuccessful because he didn`t have the right political connections. He sold the property out of frustration. McQueen Campbell brokered the transaction and later bragged about helping to expedite permits for the development.
June 20, 2005. Mike and Mary Easley pay $5,000 as an earnest money deposit toward the purchase of a lot at Cannonsgate. Not just a lot, mind you. This is the prime lot in the development.
August 31, 2005, the Easleys` pay $49,988 as a down payment on the lot. The two checks together amount to $54,880, exactly 10 percent of the amount reported as the listing price for the lot they purchased. Carolina Journal reported that nearby lots that were not nearly so attractive sold for $699,000.
November 30, 2005, the Easleys` sign a contract to purchase the lot for $549,880.
December 22, 2005, the Deed of Trust indicates the sales price of the lot at $549,880 with a loan amount of $494,892 (the sales price less the deposit). The settlement statements filed with the Registrar of Deeds indicates that a sellers` discount of $137,470 has been allowed and the Easleys` took $135,039.97 in cash from the closing.
We ask again. If you wanted to give a sitting governor a gift of $135,000, most especially if that sitting governor had been helpful to you, how would you go about doing it?
There is all appearance of fraud here. One has to question why a normally conservative bank was willing to finance 90 percent of the purchase price of a lot being bought for speculation. Most all institutions require 20-30 percent down payment. Considering the Easleys` took out cash at closing, they had no skin in the game. It was all blue sky. Either the bank was in on the deal or they were duped.
Two more wrinkles. Associated Press reported Wednesday that two DEHNR regulators were called before the Grand Jury, reportedly to answer questions about the permitting process for Cannonsgate. Are there memos, phone records, e-mails, money changing hands or other indications of undue influence we don`t yet know about? We found out last year about one DEHNR official who accepted $100,000 to expedite permits. Has it happened again?
This story has more threads than an Armani suit. When the Allens bought the Cannonsgate property, Wilmington`s Lanny Wilson provided a $12.5 million loan to them. Wilson is another longtime Easley crony and was appointed by Easley to the DOT Board, along with Campbell`s father. Randy Allen was appointed to the Wildlife board by Easley. The Allens` had contributed more than $200,000 to Easley, other Democrats or the Democratic Party.
But we may be missing a larger part of the story, we`re told. The Grand Jury we should be watching more closely is meeting in Northern Virginia and is reportedly investigating mortgage fraud, especially fraud surrounding Cannonsgate in Carteret County, Everett Bay in Onslow County and Craven`s Grant in Georgetown, South Carolina.
In addition, a lawsuit being brought by almost 200 plaintiffs in the U.S. Eastern District Court of North Carolina asserts these plaintiffs were victims of fraud, purchasing grossly overpriced property in the three developments because of false appraisals, falsified HUD Settlement Statements, misrepresented financial incentives to induce buyers to purchase lots for minimal investments, corrupt lenders who participated in fraud, falsified loan applications, false and deceptive testimonials and invented values for properties that were impossible to support. Not only do they want to be released from their purchases but they want more than $100 million in damages
This lawsuit stems, in part, from stories reporting the sale and re-sale of lots to officers, family members and friends of those in the development and marketing company of the properties, as reported in a May expose in The News and Observer.
Appearances can sometimes be deceiving. Most often they aren`t. Things smell funny and appear dirty at Cannonsgate. And they have from the get-go.
Meeting of the great minds?
Sunday`s News and Observer reported that the boards of trustees of NC State University and UNC Chapel Hill are talking about holding joint meetings to develop closer working relationships and networking.
Other than the fact these two are bitter rivals, the story about State and Carolina making nice seemed innocent enough. But it has raised eyebrows. In what areas do these two need closer working relationships? What other topics do they want to discuss? And if this collegiality is such a good idea why not also invite the Duke neighbors across town? Or if this is just a meeting for public universities why not invite the folks at Central? And why just trustees? If such a meeting of great minds is desirable why not include faculties, administrators and students? And, by the way, are these meetings going to be open to the public and the media?
Pardon us for being a bit skeptical but it just feels like there`s more here than was reported. We know, for instance, that these two flagship universities have had some desire to be treated differently from the rest of the schools in the system. There was even a hint they might want to separate from the university system. They both have developed big-donor support groups to lobby the legislature and contribute to legislative candidates.
Look for a discussion on this next week on NC SPIN.
Community Colleges to admit illegal immigrants
Today`s policy committee meeting of the State Board of Community Colleges will have more interest than normal. The group will consider recommendations for the admission of undocumented immigrants to the 58 schools in the system. If, as expected, the recommendations are approved the full board will address the issue at its meeting tomorrow and is also expected to approve the recommendations. Governor Perdue has made it clear she opposes illegal immigrants attending community colleges.
The issue has generated a firestorm of criticism on both sides. The admissions policy has been changed back and forth several times. The new recommendation, we understand, will say that undocumented immigrants can be admitted but must pay out-of-state tuition costs, about $7,000 per year. They must have graduated from a North Carolina high school. If classrooms are full, lawful citizens will get priority for admission.
Education cabinet meets
Governor Perdue revived the Education Cabinet by assembling the heads of k-12 public education, the Community Colleges and the University. The meeting focused on public k-12 education, specifically on the 30 percent dropout rate and data indicating high school graduates can`t read on grade level.
UNC President Erskine Bowles said it was clear that we must fix the state`s elementary, middle and high schools. As to what the universities must do, Bowles said, "No. 1 is going to be to produce not just more teachers but better teachers. You`ll also see us strengthen our master`s in school administration program so we produce better principals."
Bowles also challenged all those present to come up with a list of 4 or 5 things they had to do to come up with a unified education system. Again, a topic for discussion next week on SPIN.
Bowles announces 900 cuts
Buried deep in the story about the education cabinet meeting was UNC President Erskine Bowle`s comment that he couldn`t help provide staff for the education cabinet because he was announcing 900 cuts in the university system today. It will be interesting to see where cuts are being made.
Were the books cooked?
The North Carolina Institute for Constitutional Law announced that they are suing the state of North Carolina, challenging the $10 million pledge former House Speaker Jim Black made to Johnson and Wales University.
The basis of the suit involves the public purpose clause in the Constitution which says it is illegal to give money to anyone or any organization that does not achieve a public purpose. Since Johnson and Wales is a private school. Former Supreme Court Justice Bob Orr, head of the institute says, “This is simply a gift from Jim Black to the school. Unfortunately it is one the taxpayers are footing the bill for. This is the kind of abuse of the public`s money that the constitution forbids.”
Not so, says Dennis Wicker, attorney for the school. The gift had bipartisan support in both houses and does serve a public purpose….educating students.
Tuition for the private culinary school is $23,000 per year.
We will talk about this soon on NC SPIN.
ABC Appointments
Governor Perdue`s appointment of Jonathan Williams to take over as head of the ABC Board has met with disapproval from at least two sections of the state. We reported some months ago that Senator David Weinstein (D-Lumberton) was interested in the post. Many thought it was a done deal. Weinstein was a big campaign worker for Perdue, helping to deliver Roberson County to her in the primary. Perdue must now deal with him in the Senate.
Cammy Harris, big Democratic donor and mover and shaker from Charlotte also had a candidate and was reportedly unhappy over Williams` appointment.
Williams was formerly the Chief Deputy at Crime Control and Public Safety and some see his appointment as a “status quo” nominee who will do the governor`s bidding. A growing number believe North Carolina`s ABC system is badly in need of reform. Some are saying they don`t see Williams leading any reform movement.
Harrel vows to fight
Representative Ty Harrell has reportedly told House leadership that he will not step down from his position, even as an ethics probe in the legislature and a State Board of Elections investigation look into his handling of funds. We hear the investigations may be expanding beyond just the use of campaign funds and may include handling of state funds. Sources say this investigation was the result of information provided by Harrell`s former wife.
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