District attorney: Chowan county budget a legal morass

By Connie Sage

EDENTON

After meeting with officials from three state agencies, District Attorney Frank Parrish is now wading through what he called a myriad of "legal issues" to determine the next steps in an investigation of Chowan County's budget crisis.

Parrish said that at his request he met with representatives of the state's Local Government Commission, the Office of the State Auditor and the State Bureau of Investigation's Financial Crimes Unit. The meeting was held on Nov. 4 at the SBI's office in Raleigh.

The purpose of the meeting was to "clarify the issues and to look at the big picture," Parrish said in an interview Wednesday.

Parrish said he is "looking at a whole range of things" that deal with the structure of county governments, issues of governance, financing and budgets, as well as criminal law.

"There are multiple issues," he said. "There is no one thing."

Because the three-month probe is on going, Parrish said he could not comment further or define "action steps" he said he is now taking.

Parrish said the county's "tremendous deficit" and the overriding question of "how did the county come to this place?" are factors that make the current investigation different than other probes in which he's been involved.

"There's nothing like this that has come across my table with these kinds of issues in play," said Parrish, who has been district attorney for seven North Carolina counties since 1994 and a prosecutor since 1979.

"This is very nuanced and it's quite involved," he said. "I wish it were something clean and simple, but there's nothing clean or simple about it."

When County Manager Peter Rascoe took over as the county's chief executive in June, he said he learned the county had a cash-flow problem and was unable to pay all its bills. A reserve fund of more than $20 million was nearly depleted, he said.

Former County Manager Cliff Copeland, who retired after 29 years, said the reserve funds were borrowed internally and are still on the county's books as assets. He called the borrowed money a receivable and said the amount is supposed to be paid back to the county once the economy improves.

The Local Government Commission, the state's fiscal watchdog, told the county in a July 24 letter that it was in violation of state law by overestimating its budget by $4 million and that the country was subject to takeover by the state.

As part of the probe, state auditors have asked the county for invoices of payments to Capstrat, a Raleigh lobbying firm that was paid nearly $260,000 from spring 2004 to March 2008 as part of an agreement with the Edenton-Chowan Development Corp., apparently without the ECDC board members' knowledge.

"We're certainly aware of it and it's in the mix," Parrish said.

Parrish called for the probe the first week of August. Since then, a state auditor's office investigator has been looking into whether there was any criminal misconduct surrounding the fiscal crisis. If investigators identify possible crimes, the case would then shift to the SBI.

Then "ultimately, the decision whether or not to initiate or pursue prosecution comes to rest here," Parrish said. He would not speculate on when the Chowan County investigation would be completed.