State relies on corporate ‘Friends’ for some bills

Published 12:00 am Saturday, January 5, 2013

RALEIGH (AP) — Top officials at North Carolina’s Department of Commerce have for years been accepting cash sponsorships from some of the state’s biggest businesses, including regulated utilities and firms that lobby the agency for corporate incentives.
Since 2009, more than $1.5 million — about $400,000 a year — has been donated to The Friends of North Carolina, a nonprofit corporation controlled by state Commerce Secretary Keith Crisco and his staff, according to financial documents and emails obtained by The Associated Press through a public records request.
The program has paid for cocktail parties in Hollywood and Manhattan, rounds of golf at Pinehurst, and expenses on overseas trips to Shanghai and Bangalore, all intended to help woo new employers to the state.
State law generally bars public officials from personally benefiting from gifts from lobbyists or other private interests, but the Friends payments appear to fall under a broad exemption. Still, ethics experts questioned whether the use of corporate sponsorships could fuel a perception that the government’s friendship is for sale.
“There can be no doubt that these kinds of donations lead to the appearance of conflicts of interest,” said Wayne Norman, a professor at the Kenan Institute for Ethics at Duke University. “The Department of Commerce needs outside funders to help it finance this nonprofit entity, and for that reason the public will worry that officials could feel indebted enough to give the donors special treatment.”
When asked last month, Crisco could not name a specific economic development project the state landed as a direct result of Friends-funded events. But he said the socializing is needed to keep North Carolina competitive.
“We’re just trying to stick out from other states,” Crisco said. “We’re trying to be the ones they think of rather than Tennessee or Georgia or Alabama. It’s all about relationships. … That’s how it’s been done in business for years. That’s what business people in America are quite used to.”
Public-private partnerships are increasingly common as states struggle to create jobs in a tough economy and budgets for travel and entertaining have been cut, according to Jeff Finkle, president and CEO of the Washington, D.C.-based International Economic Development Council.
In North Carolina, some of the biggest energy and communications providers have given to the Friends effort, including AT&T, Duke Energy, Progress Energy, ElectriCities of North Carolina and PSNC Energy. All are regulated by the North Carolina Utilities Commission, whose members are appointed by the governor, with Commerce staff providing administrative oversight. In 2011, as the commission reviewed the mega merger of Duke and Progress, both companies bought their annual platinum Friends sponsorships for $25,000 each — the highest level available.
Duke Energy spokesman Tom Williams said it is in his company’s interests to contribute.
“When North Carolina is successful, we are successful,” he said. “Supporting economic development is good business for us.”
Some of the state’s largest law firms — Womble Carlyle, Smith Moore Leatherwood, Nexsen Pruet and Smith Anderson — also are Friends sponsors.
Womble Carlyle is known for representing corporations seeking government incentives deals in North Carolina, which require approval from Perdue and Crisco.
Until his retirement this week, four-term former Democratic Gov. Jim Hunt helped lead the firm’s economic development team in Raleigh. Womble also employs lawyer Garrett Perdue, the son of outgoing Gov. Beverly Perdue, to help recruit economic development prospects as clients.
Don Donadio, one of Womble’s principal lawyers for economic incentives, said he sees no ethical issue with the firm’s voluntary donations to Friends. The firm is a silver-level sponsor, giving $5,000 a year.
“We’re actively involved in representing clients that are either looking to expand or locate a site in the state,” Donadio said. “It would be probably not in our best interests not to be supportive of state organizations that are actively involved in the same process.”
Gov. Perdue, who has hosted or attended numerous events paid for through Friends, said the companies give to the effort because they want to help the state’s brand remain strong.
“I think it’s wonderful, frankly, that business leaders would choose to write a check to help us do that kind of work,” Perdue said last week. “They do not benefit themselves individually.”
Friends of North Carolina was created in 1998 under Hunt, but the program’s role in economic development efforts was expanded after Perdue took office in 2009. Crisco said budget cuts prodded his department to step up efforts to raise private money, including revamping the Friends website and hiring a full-time state employee to plan events and solicit corporate donations.
Federal tax records for Friends list Crisco as board chairman, with Deputy Secretary Dale Carroll and Assistant Secretary Lynn Minges as board members. Crisco signed the tax returns, with the Raleigh street address of the Commerce Department listed as the headquarters of the nonprofit entity.
But when the AP filed a request for financial records and emails related to the program in September 2011, the agency initially claimed Friends was an independent operation not subject to public disclosure. The state agency eventually released thousands of pages of records related to the program, though it took more than a year to do so.
The records show that the nonprofit spent nearly all of the $1.5 million raised over the past four years on events in North Carolina and around the world, from hosting an evening reception at the upscale Bangalore Club in India to a two day, all-expenses-paid golf outing for 39 site-selection consultants and 23 state employees at Pinehurst.
The event at Pinehurst — the golf resort in the North Carolina sandhills scheduled to host the U.S. Open for the third time in 2014 — cost $105,000, according to an internal Friends budget. That included airfare for the out-of-state guests, more than $14,000 in greens and caddy fees, nearly $26,000 on hotel rooms, and more than $24,000 for food, beer, wine and liquor. State law forbids taxpayer money from being spent for alcohol, but there is no such restriction on Friends money.
For a 2009 event in Dallas, the nonprofit rented the garden at the Nasher Sculpture Center and hired the catering company of chef Wolfgang Puck. An open bar served top-shelf liquor and the evening’s theme cocktail, the “North Carolina Coastal Breeze.”
The next year, Friends rented out the rooftop Skybar and pool at the posh Mondrian Hotel in West Hollywood for a reception intended to highlight the state’s tax incentives for film productions. Gov. Perdue hosted, and special guests included “NYPD” actress Sharon Lawrence, who was born in Charlotte. Those in attendance were surrounded by fresh flowers and served beer shipped in from a North Carolina microbrewery.
Perry Newson, the executive director of the State Ethics Commission, said he could not comment on whether the agency had ever received a complaint or been asked to provide an informal opinion on the Friends. Those are confidential, and the commission — whose members are appointed by the governor and legislature — has never issued a formal opinion on the issue.
But the exemption that Friends appears to fall under cites travel or meals occurring during “the public business of industry recruitment, promotion of international trade, or the promotion of travel and tourism.”
Assistant Commerce Secretary Tim Crowley said his department has not sought an ethics review of the Friends program.
A spokesman for Gov.-elect Pat McCrory said the incoming Republican administration will review Friends before deciding whether to continue it. He will take office Saturday.
McCrory, the former Charlotte mayor, worked for Duke Energy for 29 years, including a role as a senior manager for economic development and industrial recruitment, before leaving to run for governor in 2008. On Thursday, he named another former Duke executive, Sharon Decker, as his commerce secretary.
Crisco, who has made 16 overseas trips as commerce secretary, brushed off concerns the sponsorships may have influenced his decisions on economic recruitment or incentives. He said he has intentionally never asked how much the corporations give.
“I know Duke Energy and Womble Carlyle are Friends,” he said. “I choose not to know what they pay. I have no idea. It could be $300,000. It could be $2,000. I don’t know.”
Citing a recent event at the Biltmore resort in Asheville that included a whitewater rafting outing, Crisco said what’s important is that those who attend have a good time. That creates buzz about the state as a great place to live and do business, he said.
“I hope it is fun. I hope it’s enjoyable,” he said. “I hope they go back and tell 25 others, `You should have been there. It was a blast.”’
The cost was estimated at $100,000, paid for by the Friends of North Carolina.