In February, the executive committee of the State Employees Association of North Carolina was adamant: Thorough investigation proved that Executive Director Dana Cope had not misappropriated SEANC funds and had not committed any improprieties.
When The News & Observer wrote about Cope’s questionable spending, the head of the executive committee said the story was “quite simply, not true.” The following day, the committee approved a $148,000 severance payment to Cope, who resigned the next day.
Fast-forward two months to April. An audit found that Cope had misspent $494,000. The new director said Cope had “grossly misused SEANC credit cards and misappropriated SEANC funds for personal gain.” The State Bureau of Investigation is in the midst of an extensive investigation.
How did the executive committee get it so wrong?
Thomas Hazen, an expert on finance and nonprofits at the UNC School of Law, said the problem is common to too many nonprofits.
“It tells me the board was this guy’s captive,” Hazen said. “How could they fail to find what the auditors found in a few weeks?”
The buck stops at a nonprofit’s board, which has the fiduciary and legal duty to monitor how the organization is managed.
“All directors should be asking questions and reviewing finances,” Hazen said. “I would think the entire executive board should step down.”
Trisha Lester of the N.C. Center for Nonprofits said board members must actively oversee their organizations.
“There is sort of a lemming mentality,” Lester said. “It falls into groupthink, where people may be thinking, ‘I’m uncomfortable with this, but no one else is asking questions, so I won’t.’”
Cope resigned two days after The N&O’s February story, which revealed that SEANC had paid $109,000 in unbid work to a landscaping firm that was also doing work at Cope’s home.
The full SEANC board has now hired a new executive director, Mitch Leonard, who worked 38 years for SEANC before retiring at the end of 2014. He said he learned about the mess at SEANC at the same time as his members.
“That Sunday morning when I picked up the paper, it was just as much a shock to me as it was to our members,” he said.
In releasing the audit last week, Leonard decried “the culture of submissiveness” at SEANC that allowed the financial abuses to go unchecked.
One big problem was personnel policy. Cope had the untrammeled power to fire any SEANC employee he wished.
Leonard said Cope slipped that authority into SEANC policy in 2001, soon after he took the job. Cope asked the executive committee to ratify the personnel policy as a routine matter. Cope told the committee there were no changes, Leonard said, but in reality, he had written a clause giving himself absolute power to hire and fire.
Fear of Cope
Employees feared losing their jobs and “were scared to death,” Leonard said, so much that the sight of Cope’s SUV in the parking lot was terrifying to some employees.
“First thing we did was to get rid of that vehicle,” he said. “It was still traumatizing.”
Cope’s latest contract, signed in 2012, gave him sweeping powers to run SEANC as he saw fit. That contract set his salary at $97,614, but it was raised last fall to $134,000, records show.
Former executive committee members Betty Jones and Art Anthony said they never saw the contract. Charles Johnson, who was president at the time and whose signature is on the contract, did not return phone calls for explanation.
Leonard said that clause has been removed from his contract. And at his request, the board changed the policy on hiring and firing.
“We lobby for due process rights (for state employees) at the General Assembly,” Leonard said. “It’s not fair for us to deny that to our own employees.”
Leonard said his comments on the “culture of submissiveness” does not extend to the executive committee.
“Did they get duped?” Leonard said. “Absolutely.” He said the executive committee has been supportive of all the changes being made.
SEANC President Wayne Fish of Buncombe County, who heads the 11-member executive committee and chairs the 59-member board of governors, did not return phone calls.
First Vice President R. Ross Hailey Jr., a retired DOT employee, owns up to making big mistakes.
“I wanted Dana to be innocent,” Hailey said this week. “I didn’t want our organization to take the hit.”
‘I got an awakening’
When The N&O first contacted SEANC about possible wrongdoing, Hailey said, he was assigned to review whether an investigation was warranted. On Day 2, Hailey said he continued his investigation with Fish, the SEANC president.
Hailey said Cope and another SEANC employee he won’t name assured him that Cope had repaid his personal spending on SEANC credit cards. Hailey said he was troubled by a phony invoice accompanying a check to a defunct computer company in Washington.
The check was cashed by the landscaping company working on Cope’s house, which had a name very similar to the computer company’s. Cope and the employee assured him it was being looked into. Hailey said his investigation ended after two days.
“It was not thorough, and I’ve been apologizing ever since,” he said. “I thought we were clean, but God Almighty, I got an awakening.”
Hailey said he and other executive committee members are trying to change the culture.
According to Leonard, SEANC wasn’t following its own policies and procedures.
“When Dana wanted a check, he got a check,” Leonard said. “There were no checks and balances.”
SEANC has also commissioned an audit of its political action committee. Leonard said he does not expect any damaging revelations but has his fingers crossed. He admitted that the PAC’s expenditures outside of the state House and Senate campaigns made no sense.
The PAC spent money in the campaign for Wake district attorney, for example.
“It does not pass the smell test,” Leonard said.
Changes at SEANC
Here’s a quick look at changes made at SEANC and others that are planned:
▪ All purchases of $1,000 or more must have three bids.
▪ Credit cards now have a $5,000 limit and are limited to fuel and hotel expenses.
▪ Employees can no longer charge purchases on another employee’s credit card.
▪ The elected treasurer must personally sign all checks. No more use of signature stamps.
▪ Checks cannot be issued without a detailed purchase order request and check authorization form.
To be voted on by board
▪ Establish a “do-not-shred, destroy, remove or otherwise deface SEANC property” policy.
▪ Establish an audit committee.
▪ Post all items according to their actual budget line items; travel to travel, maintenance to maintenance, etc.
▪ Adopt “no tolerance” policy for using company card for personal spending.