Lobbyist questions findings in Chowan finance audit

By Connie Sage

Correspondent

EDENTON

The lobbying firm that auditors said provided "questionable" benefits to Chowan County never was contacted by the state during a year-long investigation, its chief executive said Friday.

Auditors looking into the county's financial problems recommended in a report released July 17 that the county try to recoup nearly $260,000 it paid to Capstrat Inc., unless it could prove the money was well spent.

"We're puzzled because nobody from the auditor's office ever called us," said Ken Eudy, CEO of Capstrat, a Raleigh lobbyist and communications company. "I don't know what they're basing it on."

Eudy said he will "share more information" with local officials on Monday about his company's four-year role with Edenton Chowan Development Corp.

A preliminary investigation by the Office of the State Auditor began Aug. 5 after revelations that the county's $29 million in cash reserves had been drained and its budget revenues overstated by millions. The county was unable to pay its bills and faced a possible state takeover.

The report showed bad judgment and poor management by former County Manager Cliff Copeland and commissioners, but found no major criminal wrongdoing.

In one of nine findings, the state recommended that the county "pursue recovery of funds paid to the lobbyist" if "no possible benefits are discovered."

Capstrat was paid $259,493 for "questionable benefits between May 2004 and March 2008, at the monthly rate of $6,000 plus expenses," according to the report.

Copeland hired Capstrat on behalf of the Edenton Chowan Development Corp., "but without the knowledge or approval" of the ECDC board or county commissioners, the report concluded.

The ECDC is the equivalent of an industrial development authority. The nonprofit is funded by both the town and county.

The report said a Capstrat lobbyist told the media he worked with the ECDC to help obtain $10 million in financing for a new public safety center and $1.5 million for the regional airport's instrument landing system.

County Manager Peter Rascoe, who succeeded Copeland, and Edenton Mayor Roland Vaughan, who chairs the ECDC, refuted the claims.

They "have been unable to determine any specific assignments to Capstrat or benefits derived from ECDC's contracts with Capstrat," the report said.

Richard Bunch, who serves as director of both the local Chamber of Commerce and the ECDC, also reportedly had no knowledge of Capstrat until recently, according to the findings.

But Edenton Councilman Steve Biggs on Friday said Bunch knew about Capstrat as early as May 2005.

"He told me four years ago in an informal conversation that $6,000 a month was being spent on Capstrat," Biggs said.

Bunch on Friday declined to comment. He said last November that he first learned about Capstrat when outgoing ECDC board member Bill Gardner raised questions.

Gardner, a former county commissioner, said he asked Copeland about the payments in the spring of 2008. "Isn't it amazing that the payments stopped right after I asked?" Gardner said Friday.